Gold Hits All-Time Highs, Stablecoin Adoption, and Historic Liquidations | Roundup

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What we are starting to get to is data points and evidence that prove even further than what we've been talking about which is uh for the last six months which is that we are not in a four-year cycle and the further and closer that we get to the end of the year without BTC going parabolic I think we're we're you know it's proof positive that we have broken out of the four-year cycle and everybody should probably readjust their expectations in a good way because ultimately what that means means and and my guess is that we will end 2026 much higher than we started.

>> Quick shout out to today's sponsor, Katana. We'll hear more about Katana's 1 billion CAT campaign later today, but for now, let's get into the episode. Hey everyone, quick disclaimer before we get into today's episode. Nothing said on Bell Curve is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only, and the views expressed by anyone on the show are solely our opinions, not financial advice. Our guest and I may hold positions in the companies, funds, or projects discussed. All right, everyone. Welcome back to another Bell Curve roundup. You got Michael's one and two, Vance. Fellas, how we doing?

>> Good. I'm uh I'm reading some dude who tried to vibe decode Hyperlid. Do you see that, Michael? >> Yeah. >> What is that? >> I don't know. >> What is Vibe decode? I don't >> reverse engineer. He asked Claude to rewrite Hyperlid and I've literally just read the TLDDR session. So, uh that's as far as I got right now. It's saved on my desktop. Um but I I think he found some interesting things. Um Rejie on our team was was saying it was interesting.

>> What any any notable findings or >> You're going past my understanding. Yeah, maybe you shouldn't have brought that up on the pod, but I think >> let's let's put a pin in that one. Maybe pod. All right, welcome back to >> uh missed you boys in uh London this week. Uh it was a fun one. It was >> very British, might I say. >> Yeah, I got the uh people tell I got the turtleneck. Uh have I ever told you guys my turtleneck story? It's a dash London classic.

Well, I don't know. Well, yeah, I guess I started it, so I got to finish it. But yeah, one one of these times when when we had D London, it was over the guilt crisis, if you remember that. So, the pound, it was basically a parody with the dollar. And I was like, you know what? I should take advantage of this and go get a suit. And uh, you know, I had this kind of European sales guy who was kind of got me feeling myself when I was picking the suit out. And he was like, you should get this turtleneck. I was like, no, I'm staying in my lane. I'm not a turtleneck guy. Thank you, but no thank you. And he's like, "No, no, you should do it." And I was like, "Yeah, maybe give it a little try." And uh yeah, so I got this turtleneck and I

wore it for the you know how you know how when you you you try something new and you're a little sensitive to it and it's Yeah, I just got roasted and one of our employees photoshopped a photo of me in this turtleneck with like a white cat, you know, like looking like Dr. Evil. Uh anyway, so I I've been off the turtleneck game for a long time, but >> I'm glad you brought it back out. You look like a a young Steve Jobs. >> I appreciate I appreciate that. Thank you. Um well, >> now that we've gotten off to a really hot start, >> start the pod for the third time.

>> Good. Uh you know what? Actually, it's been a while since we've been a macro pod. I would love to get your guys' take on gold here. So, gold is trading at just under $4,300 an ounce. And you know there were all these I'm sure you guys probably saw this on X over the weekend but there are these cues around you know in banks around the world people trying to you know lining up to get gold out. And you know this is a part of me thinks this is this is like real fodder for the gold bugs who are like you know just when you need the gold it's not going to be there. And uh but I will say for the last about year or so, you know, gold was trading around uh 1,800 between 1,800 and 2400 an ounce and it's really broken out. And uh I guess I'm just

curious to get your guys' thoughts on this and what the implications are for crypto because Vance, I saw that you you retweeted something from back in April that the bull market doesn't start until gold tops. So this could either be, you know, the signal that the gold bugs have been looking for for a long time or it could be the start of the rotation away from gold back into Bitcoin and hence, you know, the rest of the coin. So I'm just curious to get your guys >> I have do we have like a long-term gold chart we can throw up some sort? >> Yeah, let me see if I can find one here. Uh, so I found one, but I mean the long-term gold chart is uh this one I found goes back to the 1920s. So I don't think it's gonna be that. But

>> uh, basically gold was a was a thing uh, after 2008 with a lot of big macro investment managers. And I was listening to this podcast or not a podcast because those didn't exist at the time, but this interview with uh Stan Ducken Miller uh at the Chicago Economic Club in 2009 and his big thing was like we're super long gold. And in 2011, I believe gold peaked at 1629 and it started in 2000 at 267. A bunch of stuff happened in between those two dates like the gold uh you know the physical market really opened up like there was futures there's all these ETFs

um those all opened up and it went up kind of 6x but it kind of didn't do anything for basically 10 years like it kind of breached that high in 2020 um of uh you know the the COVID kind of crisis and so I think if you kind of zoom out the chart that goes from 2001 to 1,700 looks a lot like the chart that goes from a,000 to kind of 4,200. >> Mhm. >> Probably like, you know, the that first period is like a five or 6x and kind of like from the lows after COVID to the highs today. That's like probably a 4x.

So that's kind of that move. But I think if you're buying gold here, it's like buying real estate in 2022. >> Like a lot of the juice has been squeezed. We're at 4,300. But after it tops, that's kind of when everything else can go nuts. Like the the the gold, the debasement trade, what is it debasing? It's debasing money. What is money going to debase? If you look at a KPI, like a way to evaluate stocks, it's going to debase the PE. The PE will just go up, right? Because if like nothing matters, then you know, and if like funny money is better than actual USC bills, like the PE will go up. I think this is a harbinger of of kind of a risk rally.

Maybe a blow off top. We'll see. Um but Trump's still got three or four years as president and he's going to be cooking that whole time. >> Yeah. Only thing I'd add is what we've historically seen is gold run and then Bitcoin follow. And I I think that as the narrative of debasement is obviously hitting harder with people who maybe remember times where we had higher inflation and debasement, which is the older populations. And so, of course, gold is going to be the thing that moves first. And as the younger generation kind of gets off their AI, you know, growth stock craze, I think they're going to look to debasement um in the form of Bitcoin. And so my expectation is that what you're seeing with gold

right now is probably a you know forward-looking two to three month uh chart for Bitcoin. Al also the uh the other thing I would say is so the backdrop of what macro or at least US specific news has been is this first brands thing which is this automotive part supplier that just had like $6 billion of debt or money just disappear and that ensuing bankruptcy like Jeffre holds a bunch of it. They were their main financing partner. People are kind of waiting to see what happens there. KRE, which is the regional bank index, is down 7% today, you know. Can we pull up KRE?

>> Yeah. Yeah. Well, I got you. I mean, the the the last time it was I mean, it's kind of bounced around 40 to 60 for like five years, but there was this big drop from 60 to 43 when SP blew up and we're we're at 57 right now. So, people are nervous about that. The 10 years below four, people looking at that and they're like, "Okay, the Fed is going to start have to cutting." people are nervous about the labor market which is another thing. Um so like gold is is the view that this is pretty unstable first brands is pretty unstable

they're going to cut rates um and the dollar will go down which the end part of that is bullish the rest of that is kind of like just need everyone needs to sit with that for a little bit. the the other element we had um some bankers in our office yesterday that I was talking with got a lot of tidbits interesting tidbits um they one of the things that they said um is that you're going to start to see banks actually take back commercial real estate that they own uh the debt on and so what you've had over the last three years is commercial real estate we're talking about San Francisco in particular but it's the case in Boston New York you know any of these areas that have gotten hit with um even like two to three days less per

week uh employees coming into offices means that you're going to value your property 20 to 40% less than what you did previously and these commercial owners real estate owners have been extending and pretending for years >> and now so capitalized the the large old bracket banks I'm talking about not not the regional but because the banks are so well capitalized now they can take on their commercial real estate where they own the debt and they're not going to let the these owners just kind of like roll their debt. They're going to say, "Hey, you you actually owe us this debt.

Like, we're calling your your debt now, and if you can't pay it, we're going to take the keys and we're going to start operating this this property." Um, so I I think that commercial is also something I mean, in their eyes, commercial is something to be watching out for as well. Um, it'll be a canary in the coal mine, but there's trillions of dollars of commercial real estate that's that's, you know, underwater right now. Um and and that could be an interesting element driving this further as well. >> Yeah, two-year fell about um 25 points today too. Uh I saw >> Yeah, I mean there there's a the cohesive story here, right? Is gold doing very well. Uh you know, banks um suffer. I don't know if you saw there were a couple of uh like smaller regional banks which probably is

informing this um you know this KRE index that we're looking at advance that you called attention to. they're they flagged that they might be having trouble and actually bad debt uh due to uh you know fraudulent loans. So yeah, I mean I think it's it's definitely an interesting time and at the same time there's this idea of the debasement trade which you know if you've been in crypto or following anything related to Bitcoin for the last you know five or 10 years you've seen lots of people tweet out charts around you know S&P performance not denominated in dollars but in gold or in Bitcoin and I started to see like guys like Muhammad Alan tweeted this out a couple of weeks ago and again if you've been in the space if you're listening to Bell Curve you've

probably seen these things a hundred times. It's just interesting in the last I don't know couple of weeks it's really picked up steam on on Wall Street. So these are >> here here's one more fun fact um that that uh this bank and and these bankers who very you know investment bank but also the wealth management um or asset management division um we um were talking with them about crypto products and how you know this is uh this is a two-letter bank one of the largest in in the world and has the largest um or the most amount of assets under management that's managed uh wealth. So you can assume who this who this is, but the just this past week or in the past week,

the bank uh shifted its allocation to 2 to 4%. And what they told us is that they now officially have the ability to not require clients request specific crypto products, but they can advise their clients to invest in crypto as well. And so previously what you had to do is you basically had to have a client who was you know knocking on the door saying hey I want to buy IBIT and then you have to go get special approval to do that. Now these these bankers these asset managers can suggest to clients hey you should have a 2 to 4% allocation. Um so their prediction is that these crypto products these that run through brokerages particularly IBIT um are going to run off the shelves with

this platform turning that on. Let's go. >> Yeah. >> And and I think like at different parts in in the in the rally and and just so everyone knows like yes, we are permables, but we've been bullish since basically at the bottom. Like you're going to have these things you're going to have these two assets, Bitcoin and ETH fueled by different parties. Like the lows on ETH were, I would think, put in by the American VCs back in the day. >> Then it was kind of the ETF catch-up flow that were cryptonatives. Then it was the ETFs themselves. Then it was Tom Lee. And then I think there's this whole other leg of demand that people can't really see because frankly a lot of crypto people are not private wealth

management customers of a place like Morgan Stanley. But that is where the big money is uh really kind of the only money that that tends to matter. I do think also just talking to not just these bankers but other ones everyone's you know pretty I wouldn't say freaked out but a little nervous about just how much some things like some stocks specifically are up things like Ollo or things like even even things like Broadcom from the date that chatb was released to today Broadcom is up over 10x >> look at Oracle >> look at Oracle look at AMD look at Nvidia look at Nebius all these things and and generally there hasn't been a lot of money to be made in public markets. But this year has kind of been one where retail things like Rocket Lab

that Tyler Neville talks about um the core like they've been on just this absolute tear because it is like this net new theme for the first time reflected in public equities. So I think everyone's on bubble watch even like Andrew Ross Sorcin writing a book about the 1929 crash. I'm sure he didn't start writing it like two months ago, but everyone is just very nervous it feels like and all of this stuff is coming out at the same time, which means that it kind of can't possibly be the top. >> Yeah.

>> There was also a fantastic tweet um by uh Nathaniel I think Whittenhouse. I can't >> Whitmore. >> Whitmore. That's that's it. um where you said the big short uh created a decade of people trying to spot bubbles. Like we have there's an entire industry of people and everybody is always constantly trying to just call the top >> and and run over >> and do you guys listen to the BG2 podcast? >> Yep. Mhm. >> Brad and and uh and Bill Gurley. It like I'm sure Bill Gurley is actually going off to promote his book and do whatever.

But I also think it's like, bro, you're too bearish for the show. Like we're talking to Jensen last week. We're talking to the Iron Cloud, you know, in two week. Like there's no like he's trying to get in there and be like, "Hey, these transactions are circular." Just like I don't want to listen to that podcast and I don't think anybody else does either. >> This episode is sponsored by Katana. Katana is a DeFi first chain built for deep liquidity and real yield by redirecting chain revenue back to active DY users. The 1 billion KAT campaign is live. Bridge and deposit directly into vaults in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. As always, investments in blockchain

technology involve risk. Terms and conditions apply. Do your own research. The the other interesting part of that podcast though was Bill Gurley who's been a skeptic on crypto for a long time, but he has been unhappy with the uh with how public markets are functioning in the US um and has been very critical of companies staying private for longer and of mechanisms like IPOs. He's been like a huge proponent of direct listings, that type of thing. Uh he's finally switching over to he's jumping on the crypto bandwagon, his in his own words, which was pretty interesting. And you know, the thing that has gotten him just like like just about everything else is stable coins.

And you know, he expressed surprise. By the way, I I know it's easy also to kind of poke fun at people who took this long, but it's a it was a very reasonable perspective to say that the US wouldn't be, you know, open to this kind of stuff. Um, I don't think that's totally unreasonable, but many people now are seeing it's just got critical mass. It's happening. And yeah, he's it he he actually pointed out in that interview, you know, he was discussing the real now payment system that exists in Brazil, um, which has been very successful implemented in other countries as well. But, you know, his hope was that, you know, stable coins can actually achieve this in a, you know, in a more with a, you know, system that has more markets forces attached to it. And yeah, I thought it was super

cool at least that he was really positive on crypto coming around. And you know just coming back from D this week and all these conversations it's really stable coins that has meaningfully you know turned a lot of sentiment around at least in the institutional corner for crypto. I don't know if you guys feel the same but I think it's >> great to see them coming around. I I do think there is like a conflating of what the opportunity is versus what the industry needs. Like if your first take is that um we need faster blockchains for the stable coins. like if the if the blockchains weren't fast enough, the stable coins wouldn't be on them and there's 300 billion of them. So, I think like it's it's not about remittances.

Maybe part of it is, but a lot of it is about capital formation and lending and things like that. I think the other kind of take that I disagree with is just like the hyperscalers going to get involved here. >> I don't think they will. >> You know, it's such a fail. >> Yeah. I think there's the first part of groing why it's powerful and then there's the second part of of going deep from first principles about what what is happening today and and why that is not just it's it's not a it's not an existing industry. It's almost like a new customer basis as well. Um and it's a really complex topic with nuance. Um I don't I don't know how to people get people the last mile. I think the only way you can do it is really just kind of

being on the bleeding edge of this technology and doing it yourself. Like a lot of the stuff we do with Sky I consider to be just like actual bleeding edge. Um so hopefully more people recognize it. >> How do you guys think Zach feels about watching stable coins rip post Libra back in 2020? >> I mean he got shut down. It wasn't his choice to to kill it. And >> I know but he's got to feel a little raw about that. He was just completely right. Just you know timing was tough. >> Yeah. But at the same time, he's focused on a bigger platform which is AI.

>> Yeah, I would say equally sized. Um, >> in his mind, he thinks I think that that applies more um it's a bigger opportunity for Meta. >> I I I don't think it's a foregone conclusion that they would have been successful though. >> Yeah, I agree. >> It would have everyone deserves the right to try it if you're if you're properly regulated. I think that was like the real tragedy is just Was that was that Biden or was that Meta or was that >> that was uh that was Elizabeth Warren, >> right?

I have so much PTSD from from like that. It's just like I don't even remember what happened. >> Yeah. I I've got a question for you because it's been in, you know, to your point. It's not a foregone conclusion that they would have won and there are some very big entrance already in the stable coin market that haven't really done anything. >> Look, look at PayPal who printed 300 trillion PIUSD yesterday. Um, look at look at them. They're they're just soaring. No, in in reality, I think you can't necessarily force your customers to use a stable coin unless they really want to. it's kind of it's got to be a natural conclusion and unless you're doing it on the back end and it's something that isn't consumerf facing at all. Um so it's it remains to be seen

whether or not any of these platforms that have mass appeal and and adoption from a consumer perspective are actually going to be the use case that people want stable coins for uh or if it's going to be some organic kind of natural crypto-led cryptonative approach that wins. Yeah, go Vince. It >> it's going to be cryptonative and futuristic in in ways that people will not understand in the same way that they do not understand what Tether is doing. And they kind of almost make fun of it for having like 13 employees. It's not a traditional business in the way that they've been described. It's somewhere between like a mutual fund, a PE shop, something that has multiple doiciles and maybe something that never goes public either.

In in all technology markets and with all new technology products, it is never sometimes it can be but is not usually the incumbent who wins. It is usually and this is this is called the innovator's dilemma but it is usually uh some new approach that happens outside of the incumbent just because the incumbent can't cannibalize its own business to move in this direction. >> This is why this is why the startup ecosystem exists. So, so for for instance like daylight, this is an example of something that you are powering with a stable coin. You are taking battery and solar deployments at a time where basically all government funding has been pulled for this. It's still a viable energy source. It's still

cost-effective. It's still profitable. You wrap it in a stable coin and then you finance it with traditional private equity, other stable coin, other asset manager balance sheet. like that concept like think about like USDA wrapping GPUs in stable coins. This is so far away from the remittance use case that people think like people think we're sending around these $300 billion of stable coins every day to like our our families in other countries. Maybe some of it, sure, but like most of it is this interesting capital formation idea that has not been even like adequately named yet. The one that I've been playing with the branding is just agentic lending.

Like if you're able to print currency, manage risk, manage complexity in real time. That's like we're starting to get into orbit with like how interesting stable coins are. >> But but as an example with daylight, the reason why you you wouldn't be able to have that exist by an incumbent is because they would a utility would have to destroy its own business to build daylight. And and this is this is where the rub is. You can't have something that you have a core business. It's making money. It's paying everybody. You've got shareholders. You've got maybe you're publicly traded. You're reporting that out. You can't say, "Hey, we're going to get rid of this this business that we're doing. Our entire purpose to do something new." Or if you do, it's it's insanely difficult and you

probably have to be a founder to do it. Look at what uh AI and Gemini is happening with with Google. You're gonna kill the search business unless you can slowly integrate AI into the core business of Google. And the core business of Google makes tens of billions of dollars of profit each year. I think it's about 75 billion. So it is extremely difficult if not impossible for you to disintermediate yourself in lie of something new and and this is why PIUSD doesn't have any volume. >> Yeah.

>> Okay. I I've got a question for you guys. So, I completely agree that it's innovator's dilemma. And well, one thing that I was uh trying to reason with is there's a there's going to be a whole bunch of new issuers that come and try to issue stable coins and win market share. And the natural thing that it seems like all of these new entrance are doing is I'm going to give away all of the yield that I'm currently earning. Um, and they have different strategies about how they want to do that. They want to find clever ways of rebating it to the holders of the stable coin. They are trying to give some of that to lending protocols to incentivize them to distribute it. But all of it has the same kind of net effect of driving down borrowing costs. And you know, if you

think about $3 trillion of this is Scott Besson's line, right? Let's just say $3 trillion or so uh 2.7 trillion of net new stable coins coming on chain uh in the next couple of years. Shouldn't that almost like that should drive down borrowing costs on chain just because of the the amount of rebates that people are getting, right? I hadn't really put two and two together uh until this conference, but it was just a conclusion that I had coming out of it. >> It depends though because if you've got the $3 trillion, they have to be backed by something. If this is a genius, you know, compliant, which we would assume a genius compliance, >> that's just yield that's on chain. Why why does it h why does it have to compress? I think what actually matters

is where is Fed funds because that's what determines what the the yield is that you can earn with these stable coins. >> Yeah, that's a good point. >> I mean, the the hopeful long-term view is uh we can actually build out a yield curve that the Fed uses on chain where they sell new issues, retire existing ones, and raise capital for the US government. I think you can do interesting things with incentives like like what if you gave all the stable coin issuers additional units of yield to stay at the short end of the curve. Okay, what if you then redirected that to the long end of the curve? You could do like when you hear about how uh people who trade uh government fixed income, especially US, uh it's just like five or 10 dudes. Like you could

probably fit all of the people that trade these things in a small conference room versus putting that all on chain. Like there's a there's efficiencies that you can squeeze out of this system by adopting it. Is that going to look like a business to a lot of people? I don't know. But like there's there's a huge amount of consumer surplus you can generate with stable coins. And also what that that backing eventually gets put into is interesting. Is it things like daylight or things like USDA or financing uranium carry trades? Like there's a world of also other uh countries currencies you could do this with. I think it's going to get really interesting in the next couple of years as we scale to trillions. That's the base case.

>> Agreed. Uh and I I think a huge part of this depends on what the opportunities are to redeploy that capital. But, you know, Michael, to answer your question about why it might drive down yields dependent on, you know, whatever Fed funds is or, you know, sofur or whatever is, you being able to borrow at sofur, fed funds for most people is huge. Almost no one can do that. And the way that I could see the flow of funds here moving is let's say I'm a new stable coin entrant and you know, I'm trying to win market share. So, I go to a bunch of borrow protocols and I say, I'm just going to kick all of this yield back to you. So, what do you do? Like, what do you charge people to borrow against that? Are you I think most protocols are not going to be super greedy. And if

you're getting all the NIM from that stable coin, you're not going to put a huge margin on top of that. You're probably just going to say, look, I'm getting Fed funds here. I have no costs. I'm just going to let people borrow at this rate. And then I think, you know, big arbitrageers will then borrow that, you know, redeem it or trade into something else that they can, you know, deploy its size and basically uh use it to lower their cost of capital. But it's it's kind of like a long trade that I can see happening over I'm not saying everyone will do this. But yeah, I I hadn't really again put two and two together there that it won't all happen like that. Not everyone's going to do that, but I do think new borrowers or new issuers coming to market kicking back some of those funds to everyone

else, it kind of has this dilutive effect on >> Yeah. more more supply and competition is going to drive down what that nim margin is. Yeah, >> I I and I don't disagree with that at all. I I I just think that, you know, there's a huge there there's a much bigger difference in borrow costs when we're at 5% Fed funds versus 3%. >> Shout out to today's sponsor, Katana. Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR.

Katana is launching with notable ecosystem of primitives, assets, and partners like Morpho, Chainlink, and more. Katana's 1 billion KAT campaign is live. Bridge and deposit directly into Vault in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. Everyone in crypto loves to talk about transparency, but would any serious business publish its payroll for the world to see or hand competitors its contracts? That's not a feature. That's a bug. And it's why most financial institutions can't operate on today's public rails. Canton network is different. It's the only public permissionless layer 1 blockchain built with privacy at its core, sharing data only on a need to- know basis. That's

why Goldman Sachs, NASDAQ, and Broadridge are already building on the network. Only Canton delivers the network effects of a public chain with the privacy and control real finance demands. Learn more about Canton by following the link in today's show notes. As always, investments in blockchain technology involve risk. Terms and conditions apply. Do your own research. >> Can we can we talk about We were supposed to chat about this last week. Uh and we missed last week, but I I would love to get your guys' take on just the the pretty historic liquidations that happened on Friday. So that was October 10th. We saw some $19 billion getting liquidated. Um it seems like it I mean it seems like in in grand

terms the culprit here was just what it usually is which is too much leverage. Zooming one layer down it seems like what Binance ended up doing with several key uh pieces of collateral USD being one of them is they changed the way that their oracle work to only reference their own book. So rather than referring to the cost of or to the you know price of USD where it had the most liquidity which I believe was on curve they only referenced their own book. So you know it kind of caused this negative uh self-reinforcing loop uh to go down and that just kicked off a bunch of selling across a whole bunch of different assets. I think some you guys would know this number better than me but something like 7 billion or something like that

was also liquidated on hyperlquid. a lot of pe people learn the phrase ADL uh for the first time. Um and and now that we've got about a week in between us and this event, we can see initially the markets recovered. Um this also happened on like a Friday night. So the ETFs weren't trading that made it more challenging. It looked like going back into Monday, the market recovered pretty nicely, but it's been you know trading sideways to down. I think Bitcoin's uh you know back under 110K. curious to get your guys take on on the functioning of markets. The the very positive spin would be we liquidated 19 billion and we're all still standing.

That's never happened in crypto's history before. That's really really positive. Uh the negative would be we've still got some ways to go on market structure here and uh yeah, the market hasn't recovered maybe to the degree that we would have liked at least on some alts. So I'm curious what your guys take on all of this stuff. No, no official evidence to suggest this, but it it does feel pretty um if I was a bad actor and wanted to cause cascading liquidations and maybe have some shorts on um seems like a pretty good way and a pretty good time to do it. And I think um so what does that mean? It means it's not, you know, the the organic market saying, "Hey, we're done with crypto. We're selling out."

It's someone who had knowledge about how the oracle works at Binance and wanted to mess with it. Um, and I I do think that it's good that we got all this liquidation kind of over. Um, we were on the rollup earlier this week and one thing that I talked about was you see typically you see like the day after there'll be a retest or like within 24 48 hours there's a retest but then there's also a retest in the in the next week typically. And I think that that's generally what we're seeing right now. Um it's just that there's a lot of I mean and it's not just crypto right now.

It's like all the AI stuff is selling off right now. All the nuclear stuff like anything that's sort of been in a growth trend the last few months is selling today. Um and so maybe it's just a a general derisk. Um I I do think that what we are starting to get to is data points and evidence that prove even further than what we've been talking about which is uh for the last 6 months which is that we are not in a four-year cycle and the further and closer that we get to the end of the year without BTC going parabolic I think we're we're you know it's proof positive that we have broken out of the four-year

cycle. And everybody should probably readjust their expectations in a good way because ultimately what that means and and my guess is that we will end 2026 much higher than we started and 2026 will be a very positive year for crypto as we're talking about and and you know aside from Dan Morehead we expect that we're going into a rate cutting cycle. Um that will widen credit spreads which DeFi will be the biggest benefactor there. Stable coins will be the biggest benefactor there. Um, we think that crypto in in particular Bitcoin will further the debasement trade like we're talking about. Um, and and there's just going to be so many new opportunities with frankly a lot of funds, you know, a lot of our peers uh raising right now and and coming back to market and so

there will be more kind of venture opportunities I'd say um coming soon. Um, so I I would I would generally say like the the world is positive for crypto right now. um and and things like market structure clarity act whenever however that gets done I I think generally um that will be another data point as well but I I think we are getting closer and closer to the end of the year proving that the four-year cycle is done. >> Yeah, I mean there's just absolutely hilarious headlines hitting my timeline as I as I listen and and and uh look at it. Apparently, uh, one Quantum stock today crashed 25% because there was a S4 filed that stated that the CEO had

liquidated all of his ownership of the stock. Like this is kind of the bears Christmas day where you have it's like all all the all the the fixed income goes goes like below four, you know, the tenure goes below four, gold is up, the regional banking index is falling apart, JP Morgan's falling apart. Um, I think the next part of this could be like a slightly hot inflation print and then a cut into that, which will kind of just send the message that like, yeah, inflation will still be below three if this inflation print is where Cleveland Fed, maybe you throw this up, says it's going to be, but like this isn't going to derail any rate cutting. So, it needs like bad news needs to be bad news and

then it can be good news. Oh, Jeffre is down 13% today. >> Wow. um like things are getting. So I mean I said this on the roll up but like the day the day that the selloff happens is not the time to like re-evaluate your portfolio from first principles or like overdeter like or like finally do the research that you've been meaning to do. Um probably not this day. Maybe it is a later day. that I I kind of see this as a garden variety just like correction and I don't think the four-year cycle is necessarily real. I could see it being real, but I ultimately don't think it really matters if these larger trends are playing out. Once gold tops, I would assume that risk assets start to rally.

And and by the way, like we don't really focus that much on the day-to-dayitudes of the market. It's fun to watch. We have a lot of crypto. We think it's going up, but like most of our day is spent doing venture. >> Comment on this stuff because like we don't really kick it around too much internally. Um, but I think things like daylight raising, things even like geo raising, like there is a fundamental bid here for some of these coins at some point. And I think we're approaching the the level of outflow tape that would actually generate bidding in terms of the prices being low enough on most alts. Not sorry, not most alts. those high quality alts.

>> I was speaking to a guy who is very very bright. Um I'm referencing a lot of conversations that I had in London this week, but very very bright, but you would call pure trader. Um and it's been in crypto for eight or nine years. And you you said something which made me think which was it you you didn't actually need to know fundamentals at all for the vast majority of crypto existing. Didn't matter, wasn't relevant, didn't impact price, charts, anything. But now you you kind of do. And if you look at the the coins that bounce back the strongest after that sell-off, it's the ones that do have fundamentals and the ones that didn't, you know, wicked down 80 or 90% and then they only rebounded, you know, back up

20%. So e even even from a trading perspective and if you were very you know you don't care about you know long-term investing and you're only in it for a short period of time that's even fundamentals and real revenue and value capture starting to impact even those uh even those assets and investors with that profile to so >> yeah like back to basics guys build a business >> also like raises 50 million today from Andre and it's up sorry it's down one and a half percent.

>> Like >> but that's as the rest of the market is down so like >> but go for it. No, I I was going to say I think I I I think what that represents is just frankly like there there are um yeah, there there are just a lot more buyers in the market that are going to come out in the same ways that we saw in previous years >> and and I think things that have fundamentals and will have flows back to the token will survive and you're going to get attention and excitement from large buyers like Andre.

>> Yeah. Can I get one one more question for you on just value flowing back to the token? Uh, one something that I saw get brought up on hyperlquid uh over the course of the last week, you know, outside of just FUD was uh there was a there was an idea that okay, so when you're running a perex, you know, you have m multiple different sets of stakeholders. you have your traders, you have in the case of you have the exchange itself, the P&L of the exchange. Um, and then you also have in the case of hyperlquid HLP uh you know the people have LP into that vault and when there's a loss there is to some extent a bit of a decision around who

has to eat that loss because per trading is a little bit zero sum in the sense that it's not real coins being traded. Often times you're kind of zeroing things out. synthetic exposure. And so, uh, there there was a little bit of a a question that I saw a debate around, you know, Hyperlid actually had one of its best days ever, um, on the same days where many of its traders got ADL and HLP vault LPS were relatively protected. And funnily enough, this came back to the buyback. And there was a question of should all of uh, the revenue that Hyperlid generated, should that all go towards buybacks? Uh, should you actually make some traders whole? um with some of the revenue that you earned. Actually, I saw Binance uh not not not a didn't cover everyone, but

they put 700 million or something like that towards uh people that could kind of unfairly or partially liquidated on on their exchange. I'm just curious, you know, what do you guys think about that? Would you be in favor of um redirecting some revenues towards making traders whole? And how do you view about that trade-off um of those different stakeholders in a perplex? G giving people helicopter money is never the solution. I I think best practice here would be if you know anybody that was directly trading that collateral and could tie them and and tick them to the P&L, sure, maybe do something on a more bespoke basis. Uh like we know has happened in the past by the way. So this isn't like anything new other than they're really kind of publicizing it, making it much larger. But I think the framework for for like good faith acting

in this industry is like think about think about like the the BTC USD cross the there's the numerator and there's the denominator. You should really regulate the numerator. You should uh you know figure out which which assets make sense but you should generally kind of be uh you should allow people to trade whatever numerator they want. When you think about the denominator and you start changing that around, then you get really crazy about like can it be USD1, can it be USD, can it be BN soul, are you trading crosses with, you know, rehypothecated collateral? Like you really kind of need to just not even regulate the denominator, but shut it down such that it's only two or three assets because people can lose tens of billions of dollars in an instant if it's not. And people will ask us too

like why is USCS not uh like a quote asset? It could be, you know, like you'd have to build up a lot of liquidity. Um, it's fairly easy to get these things crosses on these exchanges. Generally speaking, you just have to pay. Um, but the question is not can you, it's more should you. Can you guarantee an environment where your asset does not dep? Do you have enough liquidity? Obviously, if you're a subscale stable coin, you don't. So, you shouldn't. And it's it's not about like your like elite business acumen. It's about the realities of the liquidity around your asset and allowing people to do it doesn't mean you you necessarily should.

So, I think that's kind of more of the long-term lesson for these exchanges. And as Hyperlid gets into different quote assets, it's a big thing. >> Yeah, Mike, to go back to the your question, um I would say it all depends on what happened and and sort of the the cause of the issue. Like in the case of Binance, I think it's clear it was it was their fault, so they're paying. But if it's not something that's driven by an error or an issue with the platform itself, I I don't think I I think you set, you know, potential moral hazard when you start paying back for for losses because then you have to ask the question, what's the defining characteristic?

>> I I think it's the perception of fairness, right? That would be my, you know, kind of o overgeneralization response to that, which is at the end of the day, if your customers don't think it was fair, even if you spelled it out to them, then it's just a business decision. I'm not sure. I don't know. I'd push back a little bit against because against the word uh yeah, I'm not sure it's like as much of a moral thing as it is for like taxpayers picking up the bills for bankers taking too much risk. But I I agree with I don't think you should give handouts to your customers, otherwise they'll expect it. But it seems like in the case of at least Binance, they they had a pretty they explicitly just made a mistake and so yeah, you probably don't want to just

piss your customers off. Um, you know what else I think B might are are in two different situations in this situation. Um, and if it if the tables had been turned and, you know, it was an issue with hype, which which I it wasn't, um, I I think that they, you know, would would ailarate it just like they did with Jelly Jelly. >> I love that we can bring up Jelly Jelly and, uh, just shame Sam Lesson a little bit for his uh, for being. Again, it's a question of you can, should you, should you allow people to trade 50x leverage, and when something happens, you shouldn't be surprised.

Okay, I've got another question for you guys on so I I don't know if this was ever officially confirmed, but what people were talking about was the Athena and Guy procuring ADL exemptions on assets like USDE. And you know, I I think a lot of people have a a pretty gut reaction to this that that doesn't seem fair. Um, but good on guy. Like can't fault him, right? That's just what that's just good strategy here. Um, if if he can get that, he probably should try to. And I I that's generally the camp that I fall into as well. I I am a little bit surprised if that's true that exchanges would comply with this or is there a steel man for

the other side of this that I'm not seeing? Because if you have ADL protected assets, then it should lower the threshold for getting ADL for everyone else, right? because exchanges don't want to, you know, going back to this having to uh, you know, this kind of this hot potato of when there's a trading loss, you have to socialize it somewhere and the exchanges don't want to eat that themselves. So, if you have a bunch of protected assets that can't get ADL, everyone else's threshold has to be lower, right? So, I'm I'm curious. That was the argument that most resonated with me where it's like this just doesn't seem like it's in the business interest of the exchanges to do this. But, I'm curious, what do you guys think uh about depends on what type of business they they're looking to do. Um, we we know that they take massive fees

for listing as was discussed publicly. >> Um, we know that those go to their users as as has been discussed. Um, and maybe it's part of negotiating for those transactions and they and they say we want 5%. And guy from Athena, don't know if this is the case, but let's say a guy from Athena says great, I want to exempt my asset from ADL. if you're going to take that large of a listing fee. I think that the answer here is if this is true, it's just even more dangerous than we previously thought to trade on these centralized platforms.

>> Does everyone have ADL? Let me answer that. Not possible. Okay. Because someone has to have ADL. >> Well, ADL protection, you mean? >> Right. ADL pro. So, does everyone have ADL protection? No, they don't. So, what that means is the people who don't have it are going to get ADL even harder, >> right? pops off. And so, >> right, right, >> you need to disclose that to people, you know, >> because like it's not like you signed up for the junior capital trunch of the perp trade that everyone trades. >> You thought you were just in the same boat as everyone else. It's not the case.

>> Look, I I I maybe just like a broad sweeping statement. It feels like patently obvious to say this. Outside of March 12th, 2020, I feel like it's just DeFi over CFI every single situation since then. You know, that was the one situation where, you know, Maker halted. Uh the the Ethereum wouldn't process transactions. Like that was also five and a half years ago and everything's come much further since from a technology perspective. But every single situation it's like, oh, Binance messed up. Well, hype was fine. Oh, FTX allowed SPF to steal all the money. Oh, well, everything on chain was transparent and and fine. Like, it it's kind of a question in my mind. And one thing I I

was talking about yesterday with our veiners like when is everybody else going to realize this? Like is it going to take truly a thousand paper cuts or like is is there going to be something that flips it eventually? >> I I mean someone just got their head paper cuted off in that fraction cut for sure. >> Like you know what happens when you get liquidated? Nothing. Literally it's just like the money's gone. There's no there's no like customer support. maybe Binance hits you up, but like nothing's going on. There's no recourse. And I think maybe this is the the time where the industry finally kind of says, you know what, that's it. Uh there's been this massive I think it was 27 billion uh came out from Binance. And you know, if I could just like guess about what

was going on, Athena has ADL. I would guess the Jane Streets of the world have ADL protection. You know, like anybody who's like three to five percent of open interest probably has ADL protection. Add all those up. I don't know, maybe it's 50%. So 50% of the OI is just like naked when things really pop off. Uh and absorbs disproportionate amount of losses when they do. I I I think retail maybe doesn't understand that, but the pros do. And I think the pros are not saying, "Oh, we just have ADL protection. We're fine." They're saying, "This is pretty sketch. Do do you remember who also had ADL protection or the equivalent of it on FTX? Alamita.

>> Sam. Sammy Tra. >> One thing that we didn't get to talk about last week, but I'd love to get your perspective on is and and this was a big theme of the conference this week as well, was just combining of equity markets and crypto markets happening in the form of DATs, which Tom Lee has said the DAT bubble has popped, although Bit Miner is still chugging along. Uh we also have >> ladder. He's just like, "Yeah, guys, it's over. You should go home. That's actually I respect that strategy. Um the we've had more IPOs, but also we didn't get to talk about prediction markets. Uh there was a massive investment from ICE, $2 billion into Poly Market. Uh I can't remember the number, three or 400 million from

Sequoia into KHI. Uh Poly Market now has a $9 billion valuation. They've leaprogged. Uh earlier this year there was a raise that valued uh Poly Market at half of Koshi and now it's flipped. KSHI is now five billion, Poly Market's nine billion. >> I don't know if you guys have the scuttle but on what you know is it metrics or whatever it is that underlies that or if it's just they got this unbelievable investment from >> ICE. Um but yeah, just curious. >> I still have serious doubts on whether either of these are are real businesses. I love poly market trade there but like is there fees and earnings and profits and all that stuff like I think it remains to be seen but if you know it gets enough branding maybe it doesn't matter. Yeah, I I I prediction markets are a

fundamental innovation. They're going to be integrated into consumer apps. I I think there's an argument for them to be integrated into news. Like they they will exist. What is the business? We don't know. Is is there, you know, billions of dollars of shareholder value, tens of billions at this point? That remains to be seen. But I I think prediction markets are going to be a really interesting and staying power. Uh and and frankly something that crypto can point to and say we we built this. >> Yep. And and uh I think the same list of questions where it's like Robin Hood, are they going to build their own and kick Cali out? Like is it going to be incumbents or new people? Um >> yeah, >> I I think prediction markets is more of

a commodity product. Like do you care if you're long the Trump market on KHI versus market? Probably not. just like best execution and distribution is what matters. >> Yeah, liquidity is going to be the difference. Um but uh in the same way that I think you're going to see a lot of competitors, I I think you're going to see, you know, routers that can can pull from anywhere. >> Yep. >> Yeah. the the one thing that it seems like Poly Market has and potentially why I think Michael you just said this was brand is look I I'm not a you know uh exchange specialist or anything like that but I do have perspectives on news and I'm very bullish the idea of prediction markets and the role in news

and it's very interesting to lick uh to link liquidity on an exchange with veracity of news that's a cool concept and I can see the winner whoever wins that and has the brand of being truthful by leveraging markets as being potentially enduring. So I I but you're right. Yeah. >> Yeah. >> But but I mean from a news perspective, I guess my question for you is like have you found any enduring use cases of prediction markets? >> I I think it's you can start to see you can start to see glimpses of it but it hasn't materialized in a way which is you know in your day-to-day use yet, right? Like I mean I think people were

following uh Poly Market when the uh you know the Trump election was happening back in uh back about a year ago. Um there have been weird ones that it's gotten right but I agree it's still in it like really early stages. So you know I think if you were underwriting this you would have to take into account exactly what you guys are describing. Is there real value capture here? Is there a massive business that's built on trading fees? I don't know. Um maybe not. Uh I think you also it's unclear what the interaction is going to be even around uh news and who's going to be writing stuff around it. Is it going to be AI or whatever? There there are a lot of questions that you still have to underwrite. And and I do agree too that there's the risk that this could all be

folded into a larger exchange that has liquidity already because this everything exchange model that now has come out of the mouths of every exchange operator, Paul Atkins from the SEC, I I think people do see a convergence in historically separate models of brokerage exchange, different types of exchange, sports gambling. I think people think that's all going to converge into, you know, one brand and and product. So, it's all up in the air. I don't >> doesn't need to be Robin Hood in the same sense that LLMs were a pretty commodified business and it it openai captured lightning in a bottle got distribution and won. Doesn't matter that there's someone else with a better model. It already happened like it's

already on uh uh OpenAI. like maybe that same thing could play out with volume market but I I mean I think Trex said they're at 40 billion of yearly volume annualized if they're taking you know 10 bips or 20 bips that is like 50 to 100 million of revenue um and then that's assuming that you know all of that is fee paying which I don't think any of it is today so lot a lot of distance between here and there but >> I would love for someone who is not uh Robin Hood or JP Morgan or Coinbase to to and that would be great.

>> Uh I was talking to Yano today. He was saying that he's looking at poly market and using um chat GBT to uh look at the odds and see where there are discrepancies and like just do a little punt around money on that. I will say if I had to take a bet on something that's mispriced at the moment is there is you can do odds already for the 2028 election and Trump is at 3%. Um, not that I now not a political podcast, not that I'm voting for this. I think that is the wrong percentage. Uh, and I would bet that at the very least there will be some sentiment increase that he might run or, you know, some people would be worried that he's going to run or whatever. I I don't know. I just think I just want it on the record.

>> Although this is not financial advice. Sorry, let me say that. It's it's not financial advice. I think that would people's brains if if his odds moved to 10% like CNN would be just thrown at absolute cone. So >> I mean yeah in that situation in particular it's like what are the odds that you can get congressional amendment >> will he versus should he? >> Right. Exactly. >> Right. Right. But I haven't even I have the Trump 2028 hat. So >> apparently people have been sending those around.

>> Those really weak people out. Not not that I even want that, but just like people lose it when you have that. It's just >> Yeah. trigger. >> So I went to Turnbury last week, uh Trump Turnberry, the course that he's got out in Scotland. And you know, the Scots just like Europeans in general are, you know, uh very well, they're not uh quiet people, but definitely appreciate old architecture, you know, being proper and all that kind of stuff. And uh yeah, Turnberry now looks almost like you smashed a a Florida golf course down in the middle of Scotland, which is a sight to behold in itself. You go into the the golf store, the pro shop, and it's all just like make America great again hats. And just in Europe, that's a

very funny. It's like USA and Make America like MAGA hats when you walk in. And it's just it's I mean, you just got to laugh, right? It's just uh I'm just imagining what everyone is thinking when they walk into that. Yeah, it's quite funny. >> Pissed. >> Yeah. And and in other pissed uh news, Ron Conway uh stepped down from the Beni off Foundation or the Salesforce Foundation because Mark Beni off came out in support of Trump. >> Just really >> punching air is that >> what happened to you Ron Conway? You used to be based >> I mean in the National Guard to San Francisco which is what's under consideration. I think that would be the

just about the highest ROI investment that you could make as the president of the United States. The people who are building technology, you should like you literally should protect them. >> Yeah. But I mean, as we were just discussing, have you felt unsafe in San Francisco lately? >> No, but that's because we don't live in the shitty parts of San Francisco. There's wild happening in the Tenderloin all the time. They need >> That is literally below your line. >> Literally. I mean, we were just saying crime don't run. >> That has truly been the case since the 70s, >> dude. Since the beginning of the city, but I I think it would be very interesting to see the National Guard in San Francisco. It's first of all, not a very big city, seven miles by seven miles. Like, there's not there's not a

lot of actual space for a National Guard, whatever, like battalion or platoon to just post up. >> I I honestly think he's just working off of information that was probably originated from a perspective of 2022. Yeah, it seems like it's lagging. AI's got to be fully driving that city back. I mean, we didn't talk about this is sometimes a macro and AI podcast. We didn't talk about it, but yeah, it's got to be >> Look, as we were discussing, $6.5 billion of OpenAI secondary. It literally was sold in the last few months and it hit bank accounts two weeks ago.

Like there there are 2,000 people that work at OpenAI in San Francisco. Not bad. >> Yeah, not bad. >> People are feeling good here. >> Feeling good. Feeling great. All right, I gotta I gotta end it. >> All right, fellas. Let's call it. Uh I'll see you boys next week. Have a good one. Bye. [Music]