How To Trade This Solana Rally | Joe McCann

Transcript

all right everyone so on Empire you obviously know that we talk a lot about the institutions coming into crypto and that is why we are super excited to share that we are hosting the digital assets Summit we've hosted this since 2019 it's coming up in London March 18th to 20th don't miss your chance to get ahead of the curve you can get 20% off with code Empire 20 we'll see you in London this episode is brought to you by toku if you are planning to launch a token already have a live token are granting employees or contractors vesting token Awards or just trying to figure out how to take care of taxable token events for your team from easy to use token Grant award templates through tracking vesting to managing tax withholdings make it simple today with

toku all right everyone welcome back to another episode of Empire we have uh Joe mccan founder CEO and CIO of asymmetric joining us Joe welcome to the show man hey thanks for having me glad to be here yeah so I was reading your uh most recent investor letter and you kicked off with this uh concept of short intellectual convexity and I thought uh you started off your investor letter with this idea and I thought it'd be interesting to start the podcast with this with this idea what does that mean to you being short intellectual convexity and why is that important as it relates to crypto investing yeah uh it's a it's a great question and and I I have to credit my colleague uh Chris who works at the firm um with the actual phrase but it's something that has resonated with me for

a while so the easiest way to kind of describe it as an example and I mentioned this in the in the market update as you described so back when you know uh call it the past well up until a couple years ago uh we were in you know I don't know 13 14 years of zero to near zero interest rates and in you know 2020 when the FED cut rates to zero and and the Trey pumped a bunch of stimulus into the system um risk assets went to the moon right can't earn any money on cash so you got to invest in stuff and so at the time people just couldn't invisage a world where rates are all of a sudden at five and a half percent five and a

quarter five and a half the quarters in between right um they were short intellectual convexity meaning they they couldn't see a or or forecast something like 5 and a half% or 5 and a quarter percent rates because they had been in this environment for so long uh they just couldn't see it and naturally what happened the the fastest tightening cycle I think ever or certainly in a generation um you know hits the tape and and and people took it on the chin now uh you know a lot of folks are sort of like well rates are going to just stay higher for longer right the same same thing right now we're in this this

environment where rates have R risen so high that uh why can't they keep going higher why why aren't they going to stay higher for longer so this is not necessarily a forecast for me to say hey the fed's goingon to cut rates next week the net of it is is that you know look um right now people are short intellectual complexity with respect to rates and we you know there's a there's a good chance that rates could be cut for some unforeseen reason um and that applies to crypto right so one of the things that I mentioned in the in the um market update is one of the hardest things about being a really a Trader uh in any asset class but particularly crypto is when the the market structure has changed right and so people have

been beaten up rightfully so mentally and emotionally probably spiritually depending on how strong your maximalism is over the past you know call it 18 20 20 months and uh they couldn't invisage a world where wait actually things are changing things are going to be like you know is coming back into the system or or you know alt coins are going to rise etc etc a lot of folks were uh and still actually right now are offsides meaning they're they're they're not believing this rally they're not invested in this rally uh and they are short intellectual convexity in that regard they can't invisage the world actually changing

because it's been a certain way for so long and the way that you make fortunes as a Trader slash you know investor particularly in liquid assets is is understanding where there's that that inflection point it's really really really hard to do I've been doing this 23 years so I have a little bit of experience I trying to identify these things I've definitely been wrong in the past with identifying it but in my opinion um we're there now and the price action in October really suggested that uh and then you know you kind of look at the the overall flows that have been coming into crypto related products um they're huge uh and this isn't just necessarily Bitcoin this is other things like salana as well so when you say that

we're we're there now what tell us more about what you mean by that sure so um you know in January we had a huge run in a number of uh you know crypto assets total crypto market cap went up significantly you had a bunch of assets that were just completely battered um you know salana being one of them down 97% from his alltime high or whatever uh and those flows you know kind of managed they kind of happened for a decent bit there in January continued a little bit into February and then kind of like Q2 we sort of traded a little bit sideways to lower and then we had like uh you know the ETF news in June and that that caused a bunch of additional interest

Etc but the reality was like if you looked at you know spot volumes and even um uh you know on chain volumes they were just they weren't they weren't even there right they were just dropping off at a precipitous Pace I mean yes you had like Pepe coin and you had ordinals and you had certain things that would like idiosyncratically Spike you know interest and volumes but that's just basically you know crypto natives you know speculating and punting around shuffling money right um the difference now is uh I think is heavily flow driven so if you look at um like I mentioned just a second ago if you look at like the actual institutional inflows into crypto right now uh they're very meaningful the most um October I think

was like the month that had the highest amount of flows into Bitcoin eth salana and a bunch of other products um all year and those types of flows are not fast money like you know I run a hedge fund and a venture fund but on the hedge fund side we're considered fast money um fast money doesn't uh or excuse me uh you know allocators don't trade like hedge funds right they're not squeezing a few you know percentage points here and there they're they're accumulating right they're allocating size and so some of the software I built at asymmetric helps us identify when these flows are actually coming in in real time on the tape and we were just seeing you know particularly salana um massive

prints hitting the tape meaning large trades hitting uh the kind of you know call it retail or institutional markets binance coinbase buybid Etc on the spot Market side not the derivatives and when you start to see this type of flow coming in consistently right and you look at the charts you're like wow this thing is overbought it's got to pull back when it doesn't pull back that is a very very strong signal to you that there's real accumulation from allocators coming into the space now we're not talking about tens of billions of dollars yet but on a relative basis the amount of flows that are coming in are meaningful now in addition to that if you look at um stablecoin uh uh

flows coming back into exchanges and particularly on chain they're rising at a pretty pretty large pace for the first time in a very long time and so one of the questions I would get from in investors earlier this year is kind of like where who's the you know incremental marginal buyer of crypto at this point and my answer was there isn't one uh not until you actually start to see stable coin flows come back into these markets because then people aren't necessarily speculating or investing in the space and so U you know you kind of put that together I also run a lot of technical analysis um in addition to you know flows and and kind of the reading the tape Etc and I put all these together and say probabilistically there's a high chance

that this is actually a change in the market structure um sure I could be totally wrong and it could plunge 50% while we're on this call right that's that's crypto for you but uh the probabil is really favored and then finally I think as you look into some major catalysts that are going to be at the beginning of uh next year the happing of course but also uh our view is really that the ETF uh and Andor ETFs will be approved in January and so you see a lot of this in the options markets as well so you see a lot of call buying and and people basically longv into that General U strike like that range December January um which means they're they're bullish heading into that and so

yes Traders can be wrong options Traders can be wrong um but again it's is like another one of those check boxes that are checked that suggests to me that this is actually meaningful uh and a meaningful shift in the market structure today yeah if you look at the crypto market cap as a proxy you know it really bottomed shy of just south of a trillion right a trillion I believe um and now you're at 1.4 so you know roughly speaking there been 400 some of that's inflation driven but call it between 300 and 400 400 billion is you know market cap expansion um over the course of the year um when you think about like which institutions in which jurisdictions do

you have a sense of where that is and and who and what strategies they deploying yeah great question so the short answer is you can never actually know unless you're kind of the the dealer or the market maker um if you're talking with these safe family offices or Sovereign wealth funds I don't believe SN Sovereign wealth funds at this point are purchasing crypto but they could be um what we try to do is look at what we call like the bio rhythms throughout the trading day right so crypto as you guys know are 247 but there are specific chunks of the day where um you can see differences in in the flows and so you know to begin every day um and I'm just I live on the West

Coast United States so um you know at call it I don't know 4ish am 4:5 a.m. my time so maybe 7 8 a East Coast time uh you've got like the US hours and then when Us hours end you then have the next you know technical day uh which Asia starts to you know trade and then after that you've got the European hours so if you break those up into you know eight three eight hour segments you can kind of get a sense for um who's actually buying right and so with respect to the US hours these are the ones that we pay attention to particularly um because a lot of the institutional flow uh comes through Us hours and particularly through coinbase um because

coinbase has an Institutional offering uh you can you can kind of sus out a lot from the order flow that's coming out of coinbase they have their coinbase Prime offering coinbase Pro with a number of other products I get so confused every time I lock into coinbase but um so we we tend to look at you know us hours what's happening particularly on coinbase and as that relates to something like like binance um we can't actually identify is this a family office is this a hedge fund is this an asset manager um but what we can identify is uh or I guess we can infer from it are the way that the flows are actually being accumulated and so

there's two things that we look at one is is um can you kind of detect what are called tawop orders or time weighted average price so somebody this just says Hey buy me $10 million wor the Solano over the course of the next 12 hours I I don't care what the price is just you know keep keep buying it that's one thing that we do is we look for you know we detect these types of um these types of automated orders uh the second thing that I kind ofy tend to look at is the premium or discount on coinbase relative to binance um binance as you guys know has the majority of the market share for trading there's all kinds of punters on that platform um I'm not suggesting there aren't institutions that buy and sell on binance I'm sure they do but very few us institutions will do that if

any uh and for hopefully obvious reasons and so if there is a persistent premium for an asset let's say you're you're trading salana and you know it's I don't know 20 30 basis points higher on coinbase relative to to binance and yes binance does have tether so you have to factor that in but if that is a persistent premium that suggests to us that there's real institutional allocators or people with real size that are buying because they're willing to pay above market price relative to what's on binance and so if you use kind of like the daily biorhythms coupled with um that that premium and kind of trying to detect these systematic flows you can get a sense that hey this isn't just retail right it's not like

everybody got air dropped a bunch of money from the government and went on Robin Hood and bought Bitcoin that's just not the case right now and you can see this in the order flow so what is the what else does the order flow show right now Joe in terms of I guess both what Santi was asking like is it us-based maybe emia based or also the other I think pressing question is in terms of this specific rally does it feel overbought under bought think that there's room to run pullback coming how do you think about like this just the short-term trade there as well yeah it's a great question I mean uh if you if and I love technical analysis have been used it my whole career but if you were using ta uh SE on you know salana recently you

you shorted or missed everything right because it was just consistently overbought on every time frame it's still overbought on the time frames but the thing that I think a lot of Traders miss about things being overbought or oversold is they can stay that way for a long time and that is driven by momentum and flows and so uh if if for example um you know when salana first kind of broke out uh kind of near like that FTX implosion level of mid-30s um it was overbought and so I think a lot of people were saying oh you know I'll just this is now going to pull back and I'll end up buying it in the high 20s low 30s what happened the thing went to 48 in a right and so again the

the kind of like identifying when to use ta and use like these other skills with respect to understanding the flows of how what's happening in the market are critically important because if you look at celes for example they just recently launched their token and they were kind of trading for a few days in this like this 2 250 range now it's trading like six bucks right it's clearly overbought on like a one hour four hour even potentially daily time frame depending on your indicators but there's flows behind it and so I think like that's the the key and so do I think this rally has legs I think it's also very uh token specific right so well on that point I guess I wanted to ask you are we in this environment where

you just long everything because you know very quickly it's an honest question like look I Pary now is a we like to over intellectualize our role as investors but there are environments where no matter what you're punting everything goes up and I hate to say but that's just crypto sometimes and so I am curious are we entering that environment how you how do you position yourself there's certainly like some narratives evolving right like C l2s um you know stuff like Celestia and certainly the saana e system but uh yeah I'm curious how you think about that yeah I mean it's a it's a great Interruption question because that's exactly where I was going with this is

that part of the problem with um this is that like you're like oh well I'll just like I'll just long everything and and it'll be fine um that's great if you're just trading like your personal account and you know you want to manage your own portfolio whatever if you have LPS like I do uh you have to generate returns and you have to do that in a way way that you know beats a benchmark and so no one's paying I mean there are lots of people that will take two and 20 at a hedge fund to just buy and hold Bitcoin right I'm not that guy right and so part of my job is to almost be like a stock picker I need to identify the right assets that are going to generate outsized returns relative to say a

benchmark like Bitcoin um and the the trouble with that is is twofold one is is are they liquid enough depending on like the size of your book right um and that that's one issue and then the other issue is is that uh if you're not actually managing the risk of being long only everything um the volatility in your book will be crazy and so a lot of investors yes they're investing in crypto they know it's clearly volatile they're still going to want to understand uh at least my investors do how are you managing that risk so that the the volatility in your portfolio isn't triple digits uh you know every day right um so what I would say is that with with respect to you know longing

everything it's not Financial advice anything I'm saying by the way uh I think if you just picked a basket of tokens and were long them from here in 18 months you're probably doing great um however I do think that narratives matter to your point Santi like narratives really matter in crypto and um if you look at say the price of ether recently you had ETF news and salana went up 40% so what does that tell you well correlation is not causation of course but um I think that there is a a there's a challenge with respect to um ethereum's narrative right now in terms of price um and we can kind of dive into that as you see fit because one um most

institutional allocators large allocators yes there could be potentially this black rock ethereum ET F and that could generate a ton of flows into ethereum most of them have all been focused on bitcoin I just need to have some Bitcoin allocation digital gold y yada set it and forget it whatever right now I can get it through black rock or whomever um if you're a crypto native or or someone that's actually purchasing crypto directly like spot assets uh what is the purpose of holding say ethereum relative to salana from a return perspective and this is where the narrative comes in so remember ethereum went from basically zero it didn't exist to 1,400 down to 80 and then to like 4,800 right well salana went from zero

didn't exist to 260 down to $8 well what's the next level for salana even if that doesn't happen it's the narrative that's seated in the minds of investors right so for example every trafi investor out there now that's actively managing portfolio is looking at salana and the reason is is they missed ethereum they're like wait a second is this this narrative could play out all over again so am I gonna over allocate to ethereum or am I gonna over allocate to salana to have that potential outsize return right Joe I think you're kind of

uh we're dipping into the Solon thesis so maybe we can go full full bore Solon thesis and and kind of I'd love to just hear your in I mean I remember January 2023 Salon is down 97% you guys start talking about loading up on it at like I don't know basically the bottom um would love to just hear your full Salon of thesis outside of which I know is deeper than just hey I think some other institutions are going to buy it because they missed the boat on eth yeah um yeah the narrative is one aspect you know so my background I've been a technologist and a Trader for 23 years um ran an open source infrastructure company called node source for node.js which is arguably one of the most popular open source projects on the planet um and so I have a good

bit of experience in understanding open source understanding kind of like software development Trends Etc um and the my my kind of thesis on salana came from the the bare Market in like 201819 uh you know best time to be doing R&D is during a bare market and so I was started to track the ethereum ecosystem build some solidity applications was getting familiar with that and then what dawned on me was like wow this is such a huge leap in computer science um you can have these kind of permissionless applications just execute uh code and it can be verified um in a in a un coercible way like that was just such a huge leap and I commend ethereum for

that um what I was seeing though with salana was they are taking a completely different approach to um scaling a block chain and uh and also managing spam and making it cheap etc etc and so what I look what I was looking at with Salon was okay ethereum's design which is not bad I'm not saying this is was a terrible idea the design from a developer perspective is anytime I build a solidity application I have to kind of optimize the code at like a per line of code level because it costs gas to execute all this kind of stuff and that then leads to like a second order effect

of well developers are likely going to build applications that aren't meant to be interacted with very frequently because it's a non-deterministic fee it's non-deterministic in ter in terms of how long it'll take for the transaction to settle etc etc salana thought about this very differently they were like what if we made it dirt cheap and super fast and also we can do this by parallelizing transactions where when certain aspects of the state don't need to affect each other they can be trans they can be transacted in parallel this to me was like a movie I'd seen before in Tech previously this concept of parallelizing you know compute or tasks is not new we can go back to you know processors when they sorted to add simd

which is single instruction multiple data set right you instead of just doing one thing you can do four of them it's the same concept um and so my view was really hey if there's going to be uh an alternative to the approach that ethereum is taken with building you know call them smart smart contracts on Solano they just call them programs um it's probably going to look something like this and furthermore when you now enable developers to not worry about how long is this going to take how much is it going to cost the spectrum of applications that they can build widens dramatically and so my view was hey for for the things that ethereum is really good at they'll probably just kind of

own that but for this other you know massive set of applications that developers will inevitably just try out new and interesting things this feels like a platform that would enable them to do that and what we've seen irrespective of the price what we've seen in sana's you know kind of technological Arc is yes they've had challenges pretty much every open source project has right um they've resolved all of those issues particularly around reliability but more importantly the things that they've now added things like um State compression and enabling like the minting of millions of nfts for you know a couple of dollars uh it's just not possible anywhere else at least

currently right it could happen on a new chain it could happen with some you know changes to some architectures Etc but what's cool about this from my perspective is that when you enable developers and I've seen this open source for a long time when you enable developers to kind of have full expression of what they can and want to build you end up with a lot of innovation and to me you know I hate I don't I want to say I hate using this analogy because it seems somewhat derogatory but um you know ethereum's kind of like Android right like oems can utilize this and it's a it's a mobile operating system and it works or whatever right but salana kind of operates like the iPhone where Apple

controls this kind of vertically integrated State even though yes salon is open source and all that the point being that the types of applications that can be built on an iPhone and and people choose to build on iPhone first even though they have less of a market share uh ends up driving a lot of in innovation in the mobile space I see the same sort of thing happening with something like Sal what's Solana's biggest problem today uh liquidity we need more we need more liquidity on chain I'm serious like look I mean is that a function of just not enough people institutions funds uh certainly the defa ecosystem is thriving

you know you're seeing Dex volume surpassing ethereum most recently I've invested in closely kind of monitoring a lot of defi protocols and the functionality and the protocols very much mimic the defi ecosystem in ethereum So when you say liquidity you help us on back that yeah I mean look uh ethereum was first ethereum was the best uh they have the line share of of assets available in pools and and locked up I'm not a huge fan of TBL but people tend to use that as a as a shelling point for you know kind of like the value of a defi ecosystem um it's just too low in salana right now um and I think some of that had to do with the Fallout from FTX um

and a lot of teams got really kind of uh disenchanted I would say uh given that you know the price of salana had dropped significantly defi activity dropped significantly and um that has left a void with respect to liquidity for for defi on salana um it has to your point picked up I I've been mentioning this on my Twitter um Dex volumes are off the charts stable coin inflows are huge that's just now happening and so one kind of key thing that that did happen quite literally like the Pico bottom it was on I think Christmas Day last year um there was a coin that was launched on

salana called Bonk and you know a lot of people look at meme coins or arcade coins they kind of like oh it's no utility y yada what was really fascinating about this this uh kind of experiment that has gone incredibly well is that Bon was aird dropped to loads of developers in salana that had been kind of you know upset with what had been happening with with the salon ecosystem like they've plowed all this time and energy and resource into it and now all of a sudden this scammer you know arguably one of the biggest frauds in US history is being associated with it it's dragging down people are leaving etc etc so what they did was they aird dropped all of these you know uh tokens to thousands and thousands and thousands of

of wallets and loads of those were developers and it turns out that those developers are scattered all around the world where a $1,000 airdrop is really meaningful money for them to continue to persist on building on salana and so you had this interesting kind of set of Dynamics where salana hit eight you know people were saying it was going to zero which is obviously why we got long um and furthermore you had this kind of destitute mindset amongst the developer community that all of a sudden was kind of 180 and since then Bon has become kind of integrated into dozens of

plat of protocols throughout um I think hundreds actually I'm I'm way underestimating this and not only are they like you know integrated within salana it actually has become kind of like the culture coin for salana and so I've talked about this other podcast briefly about like if you wanted to invest in Internet culture like like how do you how do you buy a derivatives contract for internet culture you you really can't like maybe you could buy stock in Reddit or something but like you can't really buy internet culture and so there is a there is this kind of contract that's a derivative of it which is a lot of these meme coins Etc Bon is by far the kind of culture

coin for salana and it's one of the reasons why I think uh a lot more retail will come to salana is that Bonk like it's integrated everywhere and you can just kind of like try stuff out for fun you can get aird dropped a little bit of Bonk to just try you know swapping or doing something with nfts or whatever the thing may actually be and that coupled with the developers getting this airdrop has kind of like accelerated I would say some of the um some of the activity on chain because what we're seeing now of course with the flows coming in and the story behind why salana why should I invest in salana ETC um a lot of it's being driven by the culture of salana and I think that that

was a problem for sure uh but right at the bottom we kind of had this event and I think that just really changed the trajectory of of sana's um course let's play a fun exercise here so Bon I'm look at Bon and you know it's roughly $175 million fully diluted Val it trades some serious volume 30 million a day what do you think I'll perform salana or Bon over a 3 six month period onee period like honest question like would you go long Bon or would you go long Soul you could only do one uh Bon it's that simple yeah really I mean it probably has a two two if you

think it's sold well I'm trying to figure this like a two I'm trying to think if it's basically Dogecoin if it trades like Dogecoin which is one thing or if it trades like punks which are basically just a higher beta on eth so and those are two very very different trades right that's correct yeah so so the the analogy we tend to use for folks on ethereum is like there's ethereum chain link and shib Shino and then on salana there's Soul pith and bonk and uh Dogecoin is definitely its own Beast right but if you have something that's actually High beta I mean I you know

Shino definitely High beta no doubt about it uh certainly was um High beta to Soul would be Bonk um but I think also like it's very rare to find a you know a meme coin or a culture coin that is so deeply integrated into the entire ecosystem that it's it's everywhere and yes there's also the unit bias thing right there's a reason shibbu took off because people felt like they were billionaires because they had $40 worth of shbu right like the these kind of like gymnastics that people do uh when they get into crypto Bon is obviously uh capitalizing on that as well but there's actual like I mean the the the team

butts behind it I mean they're they're everywhere in the solo ecosystem and so it's I would actually argue that they're probably more deeply integrated than any startup that's in salana at this point and it's just a culture coin so you know again this is not Financial advice uh whatsoever but you know um I'm longing I'm longing like a million I'm going long million I'm all right everyone so we talk a lot about the institutions coming into crypto on Empire Santi and I are both headed out to London March 18th to 20th for blockworks is 8th ever digital asset Summit D this is an Institutional

buttoned up conference that we've hosted since 2019 I like to joke that it is probably the last remaining kind of suit and tie event in crypto people are still wearing suit and tie it's pretty funny but you'll actually hear from a lot of the largest institutions in the world coming from Standard Charter FIS JP Morgan framework folks coming out winner mute vanc Goldman Sachs there are a couple big themes of this conference one Bitcoin catalysts the having and the spot ETF two A View From the buy side three rw's tokenization and stable coins four Global regulatory Frameworks five institutional infrastructure including Banking and payments and six the macro case for crypto if you have anything to do with the institutional side of crypto

you have to be there Santi and I got you back we hooked you up with a 20% off code it is Empire 20 there is a little competition running internally at blockworks to see who can drive the most number of tickets so help Santi and I out register with our code and you get 20% off that is Empire 20 this episode is brought to you by toku toku makes implementing Global token compensation and incentive Awards simple with toku you get unmatched tax and legal support to Grant and administer your Global teams tokens from easy to use token Grant award templates through token vesting to managing tax withholdings toku understands every Grant structure token purchase agreements restricted token Awards restricted token units

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click the link in the description yeah can we can like a lot of I think I want to ask two questions one is I mean you certainly I saw you being very vocal about salon at the bottom I also felt that eight box publicly I said in this pot that it was probably good time to buy and it was you know when everyone is sort of dancing on the grave and saying that salon's going to die is probably the moment where you want to counter trade that obviously it's had a huge runup how do you manage risk I mean it's a broader discussion on managing risk in a liquid Venture asset class but along the way have you taken profits uh you know it's been a fantastic year if you were along some of

these assets early on especially so East um yeah I mean Sol is sitting at what now 54 bucks 50 bucks yeah yeah it's a great question I mean because uh I think um some LPS and other funds have learned the the hard lessons of a long only Venture excuse me uh crypto hedge fund where you're up you know 10,000% then you see 80 90% of it get drawn down uh that's just unacceptable at asymmetric we we are on the hedge fund side um we're a hedge fund right so our our job is to generate returns and so there's a couple of things that we do at asymmetric that I mean it's it's not rocket science but I don't know a lot of

other funds that are doing um these types of things it's very common in traditional Finance so for example when when you know when Sal hit eight bucks um we got Max long uh I should say Max long we don't use any leverage it's actually hardcoded into our limited partner agreements we don't use anything above 1X notional um so but what we can do is when you see you know salana trading 8 and we knew that um funds were having to raise cash because investors redeeming because 22 was such a shitty year um we saw that as a huge buying opportunity but not just on the spot asset we also um purchased what's called a risk reversal if you guys have ever traded options so we sold a put at you

know seven bucks uh in SL eight or seven or eight bucks put and then we bought a call spread in salana 20 by 25 so you're Five Points wide with pretty pretty reasonable size and dealers will sell you that because they're like oh you know like this is a 3x from here like how is you know there's no way or I don't want say there's no way obviously there's a way it's a distribution of outcomes but they're happy to do that kind of stuff and so one of the ways we get extra juice from just being say long salana is the way that we express things through options and derivatives and so we actually kind of nailed that call spread because it went directly to 25 bucks um we took profits in our spot as well because we're Traders right we

understand that on the one hand we can have a philosophical View and a techn IAL view which I do um this is why we're invested in a bunch of startups in the ecosystem um but we're also Traders and go hey this thing just tripled probably should take some profits and if it keeps running okay but you know this is pretty pretty uh hot after it just got murdered uh for you know call it 14 straight months or 13 straight months so so from so from our our perspective we we we manage risk in a way that says like we never go above 1X leverage where do we take profits we have levels identified in advance and that's why that's where we pinned that call spread was like we think this thing goes to 25 um now uh so then you know Market kind of traded

sideways basically salana was in this 20 by 25 range for months it kind of dipped down and bounced back up and it's finally broken out and so now we I don't want to say we wouldn't be taking profits or whatever like we definitely uh you know sana's move has increased the implied volatility of the options markets for salana Dram ically and so we like to sell VA when it's really expensive so you could imagine that we're selling you know puts and calls against some of the spot generate some additional carry and this protects Us in the sense that if you know Salon pulls back we maybe got puts that we can kind of lock in the The Profit there or if we're selling say I don't know out

of-the money calls and we get called to it we're probably taking profits at that level anyway and so again this isn't really like rocket science and trafi this is just I don't think it's a a common way that a lot of the liquid hedge funds in crypto operate because most of them are just long only or they lack kind of the you know the capacity or or knowledge for how to actually hedge your book or generate additional carry off of options and derivatives yeah a lot of uh a lot of it has been inefficient pricing and who can sell you these things has it gotten better or worse because a lot of the market makers are gone and they you know no longer exist and even when they were around pricing was certainly C relative to

traditional Finance just really wide and inefficient so are you finding the ability to do that in size in this market yeah great question and man do I have some stories um so uh I will not name names because that is not my my style I know that you guys want this as a media company but I can't name names um I I'll give you an example um so there are some dealers that we trade with that are publicly traded like Galaxy right great team love the team over there they are by the book you know very little credit risk with someone like Galaxy um knocking on wood as I say

that uh we like trading with Galaxy um they're a little wider on pricing in some scenarios in other cases they're great right if they have an axe which for folks may not familiar with that that phrase when a dealer is asked it means you know an ax head points One Direction or the other so they're either you know too long or Too Short when they need to stay neutral so they give really good pricing when they have an axe some dealers um are uh trade a lot of size um but are uh I would say not exactly what you would think they would who they are right okay so I'll give you an example um in June of this year we had a view inside asymmetric that um

there's going to be news on Ripple some point during the summer we didn't know when we just knew it was coming Ripple was trading about I don't know 4550 cents somewhere in that range we said all right let's go ping our dealers and see like who will sell us really cheap you know Wing options like Wing call options way out of the money options um and at what price just and what size and so we found a dealer that we that we were working with we done some trades with them in the past uh Bitcoin and ethereum and and I said hey uh we're interested in buying you know August 7th September 7th calls at in uh you know call it between 70 and 75 cent range so huge huge move from 50 cents um you know

what you guys make us an offer on this um and they said sure they sell them for a penny and I said I'll take as much as you'll sell sell and uh they sold us about 15 million notional of uh xrp so it only cost us about I don't know $185,000 which is not a trivial amount of money but um suffice it to say uh when the Ripple news came out and it traded above 90 cents we were very happy to asymmetry but guess what happened with the dealer they made us a price when we tried to get out of the trade that BAS basically was below the price we paid for it so yeah this shit's still happening

yep it's definitely still happening and so you know lesson learned never trade with them again right very simple and again I'm not not naming names not going to bash the dealer uh they are very well known but um that's just and you you effectively ruin your relationship and and your reputation when you do that type of stuff on the other hand there are really good dealers out there um you know it is actually a shame that Genesis trading isn't around anymore because the trading arm was really really good yeah really good and that is yeah and I do believe I think there's rumors of a team that that team is ending up someplace else and thank God because they they were very good um and so so there are other dealers that

are doing the right stuff that are that are you know will make you a price they're not going to pull this you know this um that that we dealt with uh and the more that we can kind of flush those types of actors out of the space I think better overall because I'm telling you right now an Institutional fund much bigger than me that comes from trafi into crypto and has that happen you know they're just not going to take this this space seriously because that kind of stuff would never happen in trifi right uh there's I'm thinking of the I'm thinking of the big short scene where they're being quoted CDs on price like prices start falling they're like wait a minute why isn't it updating going down but uh yeah like an efficient

market and what happens in that scenario like do you do you contest the price I mean is there any recourse like can you go find another B like I'm just kind of curious like so yeah so this is this is where it gets a little tricky right so um we could we could go to one of our dealers and say hey like we you know basically if we're long calls from 70 cents and Ripple's trading 90 cents we say we want a short ripple at 90 cents and basically lock in the Delta right so you know if the calls go up in value and and at expiry they're trading whatever like we make that money if Ripple goes back down well we're short it so we basically locked in the Delta the problem with that is very few dealers

will let you short that much Ripple right because then you got to post all this additional collateral well if my collateral is tied up someplace else right like it just becomes a major pain in the ass and so um uh at the time we didn't uh we were unable to to kind of thread the needle on that which was as you can imagine huge bummer yeah I'm doing the math on on how much profit you would have made if if these guys were actually legitimate yeah it was a lot I'll buy you coffee Joe when I see you in person yeah thank you so so yeah you could do something like that but then there's a collateral issue you could go to another dealer that would that would say hey um where can you sell sell this sell these

options to me but but you know if if I'm short the option I gotta post initial margin it's just it's a mess and so the ideal scenario is the deal dealer honors the price and and does the right thing um in this scenario they did not and so uh you know not much you can do except chalk it up to the game and move on how concentrated is your book at any given time talking about just overall risk well I'm looking at it right now um it's just Bonk and soul Santi mine mine is now too but it's okay yeah yeah I mean so you know look like we we got really long obviously in

October so we we tend to run a relatively uh low net um most times but we're we're running a pretty high net right now just because we we think the market has shifted um what does that mean Joe to run a higher low net so basic yeah like your your net leverage in the system right so like how much literal like cash do you have relative to what's being invested right so if you're running like a 50 net you're 50% cash 50% kind of invested right um and one of the reasons we like to run a low net is we run a we run a lot of option strategies and structures that enable us to be very Capital efficient and when we're right they are worth a lot of money and so you actually can still

retain a significant amount of your cash on hand as opposed to just like you know yoloing into a bunch of spot tokens and kind of crossing your fingers which is something we would never do um so you know it's very you know to answer your question s it's very Market dependent right so we have a pretty high concentration in Soul right now you know we do have some exposure to ethereum and and Bitcoin um they are smaller as you can imagine I think we actually are the only fund that actually owns Bonk uh so uh you know Joe what would you say to folks who are on the institutional side and feel like they've missed the entry for so long um yeah that's another really good

question I mean if you are if you're trying to well I guess let me back up it's probably what's your time Horizon which is like the kind of canned response to that but it's really true right if if you think salana can go to a thousand and it's trading 50 you just hand over fist buy like you don't you don't think about it um if you're looking for like something a bit more short term um then I think you've got to be a little bit more diligent as to how you would kind of enter into the market um I you know I I run a telegram tra trading kind of Channel and I've been doing it for years uh thousands of people subscribe to it

and it's it's a lot of fun because it's just kind of my stream of Consciousness in there but people always ask in the chat room you know should I buy this here and I'm like only you can answer that question right like it's like I don't know your personal finances I don't know your portfolio I don't know what your risk tolerance is and so um do I think salana is going significantly higher longer term I hope it's clear that the answer is yes um do I think you should mortgage your house and buy all your Sal right now probably not right like let's see what happens but I I do think the train is on Pro probabilistically certainly ref reflexivity is a big thing in markets and certainly crypto would you say that

Soul has a greater probability of hitting a 100 than it does 20 over the next 90 days without a doubt I would say super high probability it goes higher than it does go back to 20 and in fact it's funny you mention 20 because I mentioned this actually I think on in my Trader chat a couple months ago is that you know salana has been kind of trading in this 20 x 25 range for months and so once it breaks out what people will look at is is that that's kind of like generational support almost if you will and so I don't think I mean look anything can happen right like this is crypto but I think it would be yeah a a steal if it got back into the mid 20s um

I I you know again I'm not gonna I'm not kind of like a predictor of levels of where you should be buying from but if you feel like it's run too fast you know too high too fast you know maybe you just set some bids at reasonable levels and 20 30% lower and then just like set it and forget it right if you're actively trading it like I am you know you got to be a little bit more diligent I was just you know I I've been thinking a lot about just of course we're talking about flows and stable like a lot of things you know in the grand scheme of things not a lot of capital is required to double a lot of these assets or more but what weighs on me relative to perhaps other Cycles is sort of this whole macro uh but you know to your

point yeah I mean rates are where they are I'm not a macro expert I think but but you can't Overlook that I think now um where the market NASDAQ like all of that is you know being tested and I am curious how you factor all of that in and does it compute into what you're seeing or are you just saying hey look we're constantly monitoring flows if we see a a deviation from that we'll act quickly hope to act faster than others maybe I'm just trying to understand how you compute macro into all of your thinking and allocation yeah great great question and absolutely we Factor macro in um in fact if you read any of our

Market updates we have a dedicated section to macro and we've had a number of our actual LPS and and anybody can subscribe to this you know go to subscribe. asmet financial whatever if you want to subscribe to to the monthly newsletter that we put out um we've had LPS tell us and other investors um this is the best macro stuff we've seen like ever from a fund that we're invested in and we're not a macro fund but the difference is is that crypto is part of macro whether you like it or not right I mean you saw this in 22 every risk asset including bonds got absolutely decimated crypto is furthest out on the risk curve so guess what's going to get hurt the most crypto right we knew this um I don't to say we knew this we forecasted

this in 22 and you can read it all the way back to when we started started publishing our Market updates in August that we were bearish the market we just did not see a bottom in yet for risk um given the hiking the tightening cycle uh and other kind of macroeconomic indicators that we had been tracking and if you do go back to like I think the September article we we predicted in in this year that we think rates will Top between five and six% that's a relatively wide range but we're kind of in the middle of that you know closer towards the five and a quarter five and a half um that has absolutely affected our investment um uh decision- making as it relates to crypto so there's a couple of ways that we kind of put on trades if you will at asymmetric and there's

there's kind of three buckets one is is fundamentals so we believe decentralized storage is going to be a requirement for web three applications so we should go find the best you know decentralized storage so whether it's filecoin R weave or some other thing right the other one is is kind of event or narrative driven so the E canonical example I use here is in December of last year we we had a view that um the kind of liquid staking narrative would relase pick up steam as we head into the Chappelle upgrade for ethereum well who's the biggest Staker and who has a liquid token Lio right so we did that trade but we got out of it so that's an event kind of event driven

idiosyncratic and the third one that we look at is macro and the way we tend toess Express a lot of our macro views is primarily through Bitcoin and and ethereum to some extent and it has a lot to do with uh our ability to structure things in options markets in ways that enable us to express that view so I'll give you an example um uh when uh the the banking crisis happened the banking crisis the Regional Bank uh acute issues as the FED likes to call it um happen in March we actually wrote about this a like a month and a half prior uh we were basically in our macro section we had said um you know the FED keeps saying Bank Reserves are strong Bank Reserves are strong Bank

Reserves are strong but what they don't qualify is that the distribution of those reserves across Banks is not equal so the regional Banks had major issues with regards to reserves whereas the the deives the massive Banks did not and so our view was there's a tail risk here with regional Banks because of the unequal distribution of reserves amongst these Banks well what does that mean well if there's a Bank Run Or there's Bank collapsing or there's issues with banks what do people then go do they go buy gold this has been a natural thing that has happened for forever basically uh since banks have been around and we said all right well gold is you know a

flight quality asset well how do we do that digitally you do you buy Bitcoin right and so when the the kind of banking crisis if you will happened with svb that weekend we got got massively long Bitcoin spot as well as a lot of upside call spread and and certain structures that enabled us to capitalize on you know a significant move in Bitcoin and even though the banking thing is not it's not macro like you know interest rates it is related to macro and and given that you know we saw this flight to Quality narrative going to pick up steam with respect to the stress in the regional Banks we wanted to be long Bitcoin in that regard but

then we didn't want to just be long Bitcoin spot we wanted to find the best way of expressing that view and it turned out that vs were Dirt Cheap around that time and we could buy really cheap upside um and naturally the Bitcoin exploded after that what are some other you mentioned uh fundamental driven trades like filecoin or R weave folks will need digital storage you know that that's a trade there another one is like an event driven trade something like Lio what are some other either event driven trades or or or fun fundamental trades that you guys are excited about right now yeah so um I'm definitely talking my book here on the VC side uh I'm asking you to do it that's all good we do think um you know look we do we do think uh

cross-chain messaging and interoperability is is a pretty important um piece of kind of web three infrastructure um we uh you know did the the first round of funding with variant and a handful of others um into hyperlane which is kind of a layer zero competitor if you will from like a a comp perspective uh obviously we think it's Superior um but uh we think that piece is going to be huge and part of this is like yes the bridging and the interop is is kind of a pain in the tus now but it will be hopefully easier going forward but there's another aspect that I don't think a lot of folks when they're looking at like cross-chain messaging or or the interop are focusing

on which is in you know software development for decad ades we've had this concept of message passing arbitrary message passing through message bus through RPC Etc and um I don't think that design space has been really well explored as it relates to we web 3 because the the the kind of canonical interop is bridging well what happens when you start passing arbitrary messages of information or metadata or some other thing that isn't invented yet in crypto you're going to need deep infrastructure roots to enable that to happen hyperland can do that and I'm not suggesting the other ones cannot I'm just focused on the one that I'm invested in of course but I think that is a huge opportunity on the

fundamentals side that hasn't really been um primarily explored so that's another one on the fundamentals uh as it relates to event driven um we did uh we did actually um very quickly trade blur when it first came out um you know we you kind of saw like we we are big fans of tensor uh I I missed actually investing in them because I had a baby on Christmas Day last year and was like out of the office but tenser on salana is like I mean if you do any type of nft trading on ethereum you just have to go look at this app it is mindblowing how good it is and uh our view was kind of like well tensor doesn't clear doesn't doesn't

have a token they're still relatively new but they have an unbelievable kind of carve out with what a trading product should look like for nfts and collectibles and so when blur came around and they did this the the the airdrop token launch Etc we just thought that narrative would pick up steam with ethereum Traders and it did well we know what's happened at the price since then but that's why we got in and out of the trade in I think less than like week and a half right what about um going back to your salon thesis Joe you mentioned parallel processing how does the fact that parallel Pro so um there's folks bringing parallel processing to eth like monads doing that you have um Eclipse right announced their general purpose svm kind of L2 on on eth how

does that impact your uh Soul thesis yeah great question this gets back to kind of my my open source Roots if you will uh I was on I think I was on the podcast with uh the light speed podcast and they asked me about um you know eclipse for example and I am all for the svm being forked and put everywhere and the reason this is so like in like you see me smiling is that this has happened over and over and over again in open source when a kind of core technology starts to get forked or integrated or implemented in areas that uh hasn't happened yet um that core

underlying technology has a very strong Lindy effect being built behind it and the reason is you now have something like Eclipse they have a dependency on the svm that means the svm has to exist and persist in order for their project to be successful so uh you know the the move Lang chains apos andu they're using parallelization right great all you're doing is validating the thesis behind salana and so I think the more we see SPM get integrated uh in other areas the the team at monad what they're doing is awesome we're big supporters of that as well all this uh you know I don't want to say the value of the token of Cru

back to salana but the intellectual value ends up flowing back to who did it first which was Solana and I think that that is an extremely powerful um uh statement to be made to new investors that are coming into the space to say hey look from a first principal's perspective salana did something fundamentally different that people said would not work it's working and by the way it's now being you know kind of modeled with these new move Lang chains you're being modeled with monad it's being forked into Eclipse it's being uh it's being forked into actually the pith Network so if you guys are familiar with pth it's a pricing decentralized pricing Oracle right so their 1.0 version just use salana um well guess what they're

doing their 2.0 version is an application specific chain built on salana uh the guy um the founder of maker what is he using for his new project salana right it's a fork of salana so this is all I excited about how how the svm being open source kind of lends itself to these new ideas that you can utilize the svm in in in in a bunch of different ways basically exact you're saying that that value all ends up not maybe directly flowing back to Soul but almost indirectly because it's the where it all came from exactly so there there's there's you know precedence of this in in software design so if you look at the Linux kernel how many flavors of Linux are there yeah I don't know dozens at this point um or

the jvm the Java virtual machine created by Sun Microsystems the jvm is literally everywhere like your TVs your micro it's it is pervasive and there are multiple kind of you know versions if you will of the jvm and the the jdk itself the Java development kit um did all that money flow back to Sun no but what it does what is what it does is it supplants the jvm as this kind of canonical virtual machine for software development right so if the svm can be become the canonical virtual machine for say paralyzed parallelized compute in web 3 networks I am all for that because the success of the jvm has spawned you know

multi multi- trillion dollars worth of value for you know so call it web one web two and just software in general would love to see a fraction of that happen because the sbm gets forked and in integrated into Myriad projects when you think about the continued success of salana how do you think about the success of other l1s or l2s in that context meaning you know ethereum some of the l2s some of the other competing l1s you mentioned opto sui some of the others how do you envision kind of this world the salana continues suck and drive more market share intellectual capital or do you see thriving ecosystems and just more connectivity among them oh man the uh the trillion dollar

question that people love to ask me because I definitely have a non-consensus view here uh no surprise so um let me kind of like caveat this with with saying that um I don't uh you know I'm not a ethereum hater I'm actually very Pro ethereum um especially on the technology side and some of the stuff that they're attempting to do with with Proto dang sharding Etc like I mean I'm just like wowed if they can pull this kind of stuff off the Chappelle upgrade was probably one of of the most incredible software upgrades in history so there's a lot of good stuff that I am Pro ethereum now let me talk about why I

don't think l2s will work so I've been I've been kind of talking about this for I don't know 18 20 months or so um that the reason it's called an L2 is now you have two problems um it's probably more than that but the the the reason that I'm that I'm suggesting this is that if you take it from a developer's perspective when you start to introduce this new like literal layer of software that you are utilizing um you now have an upstream dependency on the L1 well what happens when like ethereum you know changes the underlying source code or you know upgrades or whatever well now all these l2s in theory they should just be able to utilize it and again I'm I'm kind of talking Loosely because I'm not an L2

developer or author but I do know that when you're building software if you have an upstream dependency on something you have to maintain that dependency and it becomes it can become cumbersome and exhausting right that's one aspect the second aspect is how many l2s are there and which L2 do you choose and then even within an L2 like um arbit has two chains right so which one do you pick out of that and now we've got l3s from a developer perspective um you can kind of get into this analysis paralysis almost where you're like I have too many choices when I'm just trying to build an application or wait I need to now support all of these other l2s right um

now let's talk about the user experience side on the ux side uh which L2 am I on which chain am I on do I have the token do I have to bridge something do I have the right token do I need a token can I just use ethereum like there's all this kind of stuff and by the way ux can totally be solved for that's a solvable problem but it's still underscores the issue that I have right now with l2s uh is that from a ux perspective and by the way I use l2o like again like I I know this at least from my own experience which is certainly anecdotal but it is non- Trivial to just especially again like I'm I'm going back to Sal like if you just go use something you know like drift protocol and you want to trade pers it's just it's it's

just like a normal exchange with like an a transaction approval it's it's so normal it just feels normal whereas if I'm doing something on you know this aggregator versus that one how do I set a limit order why is it like timing out I just pedal this eth and it didn't work like it just there there's a lot of additional Cru associated with it from a ux perspective which again can be solved for but isn't currently to date um the third thing and I think this is something that you know kind of dawned on me and and I know I will get absolutely flamed for this in my my Twitter but I was it dawned on me when I was looking at like the rise in L2 activity and then like the the drop in L like the the cast cost of gas

I was like wait a second are l2s actually now going to cannibalize a lot of the activity on the L1 which I thought the narrative was more activity on the L1 actually makes it deflationary so number go up and I'm looking at this going like wait a second if l2s are actually the scaling solution and all the activity or the majority of the activity happens on l2s and a lot of that doesn't settle back to the L1 like from a one: one perspective what happens to the deflationary narrative associated with the L1 and you know again this is like a relatively new thought that I'm I'm sure I'm wrong on in some capacity but it just dawned on me that hey if the scaling solution for ethereum is to abstract away to something else that isn't necessarily going to impact like

say the the the amount of settlement that will happen on the L1 doesn't that have an impact on its deflationary outcome I think the answer yes and the last thing I'll mention is I do think l2s will do well right like we're long eth we're long arbitrum like we we we like arrum is like a beta to eth we could sell that trade in an hour like the point that I'm getting to is that if you're if you're investing in l2s on the token side I think they will actually do better than ethereum you've got unit bias you've got more you know activity happening you've got more potential narratives forming around these particular l2s etc etc so I do think that they will actually outperform eth on a relative basis you know call it over the course of the next few years

but the last thing I'll mention is that there's a ton of VC money behind this and I kind of wrote about this in the market update that like they're going to will this into existence and so the notion that ethereum is going away the notion that l2s are going away is nonsense and I am very aware of that because uh the amount of money that will muscle this stuff into existence is massive and so the irony here is is that a lot of these same VCS that are kind of musling money into the ethereum ecosystem and rightfully so are massively underwe salana and I've heard from them they're saying like I got to get up to speed like what who who who who are some companies I need to talk to what are the projects like can you get

my research wrong with so and so yada y y and so I think as kind of a final thought is that do I think l2s work long term no I think there has to be some combination of you know developer uh heuristics and workflow coupled with a ux Improvement and and some way that it actually helps benefit the L1 on the uh in terms of the deflationary narrative um but I do see a path for this stuff persisting for quite some time whether it's the insane amount of developer activity in the ethereum ecosystem and or the amount of VC cap that's flowing into the space does that um is that thesis predicated on this idea that it needs to

be deflationary for it to work no I'm just saying like the uh there has been a very strong narrative I I would argue from M multiple communities not just the Ean community that that hey now that we're proof of stake with the activity on the Chain going up it it becomes deflationary which is amazing sure it requires activity on the chain and if you look at the activity just over the course of the past year you basically had like a spike with Pepe coin and you've had a couple of idiosyncratic things here and there but it's been trending lower and to the right you know I mean it's it's not really it's not really what you want to see if if the narrative is hey more activity on the L1 is going to lead to this deflationary

outcome yeah no certainly I mean I think the the more important Nuance thing is what is the relationship between increased activity and L2 and how much of that is settling back to the L1 and what does that ultimately translate into because I think the kind argument of that is look you believe that we're so early the use cases are V powered by enabled by an L2 that if you believe that the user activity involv volume is going to you know do some sort of order magnitude or two increase across these l2s that will again based on the ratio that you're assuming will benefit the L1 but it again on the margin right and that's exactly when I was talking with one of my colleagues kind of sussing out

my my theory here my my kind of response was it would require like orders of magnitude activity l2s which could certainly happen in with you know Mass consumer adoption of of uh web 3 through ethereum l2s it could absolutely happen I like the the the current forecast that I see has a lot of friction in front of it so for example if you look at the crazy amount of activity that's happened in SL over the past you know month plus imagine that kind of on a relative basis for l2s I think that genuinely benefits the all1 we're just like you know there's the the ux challenges and the develop workflow as well yeah yeah to be fair you know one of the more eye

openening experiences I've had in salana was drip you know I spoke with them and I I started using it and they said even if we were to for Contex drip is that you can just they're every day they're issuing free nfts and and you in your opening statement on your salon thesis you said yeah like minting on a batch like millions of nfts at once is kind of uniquely very unique to salana and the D and the R team mentioned this and they said listen even if we were to deploy on an L2 would have cost us it wouldn't have been viable for us as a startup to deploy even in an L2 in ethereum so we have to use salana and so I think that was very unique and drip again is very

nice I mean I think from a user perspective getting these free nfds which have some value is pretty it's pretty cool and so some of the consumer applications today are very unique to salana that aren't you know uh you know even an L2 would have been possible um yeah I mean quickly on that yeah go ahead just really quickly on that point this was something that I talked about with a lot of brand managers back in the 21 cycle that were like hey we need to you know I used to work in the advertising industry in New York had an agency and was CTO there so I have a little bit of this kind of Creative Communications background and a lot of these folks were like I gotta I got to do an nft thing I don't know like what

do I got to do and I was like well what's your budget and they would tell me their budget and I'm like yeah um the problem is is that like you can't do that for your audience size on ethereum and they're like but yeah but that's where like Crypt punks and board apes and all this stuff this is where I'm like yes that is correct but what you're talking about is you know a consu like your cohort of consumers is in the tens of millions and so that could be I don't know 10 million or 200 million just to Mint the nfts like we don't know what the price will be right and so um a lot of this my my my responses to them were like you should look at something else maybe salana because you could actually do what you're describing this is before

they created the the cnft or or state compression associated with NTS where it's even even cheaper than it was before and so even cheaper one of the things about drip specifically is that it is one of these instances of when I talked about that spectrum of applications expanding this is a prime example of it these guys are they're brilliant I love the team very smart killer founders have this vision for this you know Creator content type you know everyday business that uh is utilizing nfts not in the way that say a board ape or crypt Punk is being utilized they're utilizing it as content and that is a huge unlock which is to your point something that's basically

only possible currently on salana yeah yeah my my when I people ask me why salana it's like it really enables unique consumer applications and the fee Market is just an very elegant design and and that talks to like perhaps a third point is the team the DNA of the team and Anatoli and and everyone else is they've just probably the best team that has taken at times very harsh criticism and use that to their advantage to improve a protocol because you're constantly an open source to your point improving it and I think that's a winning if salana wins like I mean it's already winning but if like I think that's main advantage is that they they're just they're just built a bit different um yeah what could yeah what

could derail salana at this point and then in in the last couple minutes I want to get your take on perhaps certain applications that you're excited about or sectors that need more funding in the ecosystem that you have a venture arm as well that you're looking out for yeah so first question is what could what could derail salana um I think this is the case for probably any L1 which is an outage right uh some you know zero day style exploit of the chain I don't know um uh barring that I think that's implied with basically anything you invested in in web 3 at this point um you know one of the challenges I think that uh salana could potentially run

into is um I mean and this is this is probably a bit minor from my perspective but uh they have been onboarding loads of developers um and you know I've talked about this in the past where like my kind of brain dead investment thesis as like an angel investor whatever is just follow developers where they're going and there's probably value there um they are doing an amazing job of that um but I do think that there's an opportunity to improve it um one of the things that like you said Ani is is a great friend he he's an LP the fun he's awesome he's brilliant um he's gigabrain right so

he's he's you know there's that he said that I'm like I don't even know like I'm pretty smart but like this is beyond my pay grade there is value in that right that kind of like pushing to the extremes of what we want to do with distributed systems and a global State machine that's running at the speed of light like all that stuff he should be focused on that there's other things that can be done that's blocking and tackling that makes it easier for develop developers to build integrate deploy Etc monitor secure all the stuff that you see in web 2 and Cloud we need more of that and so there's an opportunity I think for if other chains for example do a better job of the developer go to market to kind of Leap

Frog um to be super clear I do think and it's if you see like the outcome from like their hackathons and whatnot like they're doing a great job on developer goto Market but I always you know I always want them to to do more because the more developer mind share that you can get and especially showcasing some of these apps like drip for example um it it opens the minds of what folks thought was possible within web 3 and they can actually do it especially if you're providing like the tools and best practices and patterns Etc and so it's a minor point because I think they're doing a good job but it is it is a potential area of of weakness um uh in regards to some of the apps that I'm on that on that on that point maybe just as

a point um does the fact that some projects are not open source concern you I mean I've invested in this company called SE 3 with toly and it's actually one of my largest checks because I think they're focused on improving security and auditing for teams and specifically focused on salana and and again some teams that are not open source a lot of them are not I think still actually very few are open sourc in Salon ecosystem so I'm curious like does that concern you at all give so um Anto and I both pound the table on this on Twitter all the time uh the there is there is something um that I

think rightfully scares entrepreneurs about releasing their code for free because they think anybody can just take it and clone it and then that like they're how they going to capture any value and I'm like this is the open source business model it's really hard I did it before tokens it's hard it's really hard so you have to build something that people want to use and also you know integrate interoperate interoperate with and so um I I am the the optimal goal would be 100% of all Sal programs are open sourced that's never going to happen um should we have more of that absolutely it doesn't concern me to the extent that uh well more solidity programs or contracts are

open source and then salana which is true that's a problem for the ecosystem I think it's a it's a a maturity step that will happen with the entrepreneurs and developers in the space and by the way Armani fante of backpack Coral that team he gets it I've had conversations with him and like open sourcing and understanding the power of Open Source and how it is basically a free distribution channel for your software is unbelievably powerful the question is how do I make money how do I generate you know income as a business around this and there are you know some tactics I I've talked with some of these Founders about because I'm an adviser to a lot of them on this and so um there's you know you can you can charge hosting

like on the Web Two Worlds hosting extensions Enterprise y y yada what of those things like in web 3 well we're kind of yet to see but I I bet building a killer application on top of it where no one can build it better than you is probably one of them I mean by the way there's a reason that Elon Musk open source all of Tesla's IP he just created a market of EVS that he dominates right so yes you're not Elon Musk but the same principle applies you start to distribute your open source code you're creating a market where your app is the best um so Joe I I think this been a fantastic episode um you're great thinker I don't know if you want to finish off in terms of what what's your outlook for the ecosystem things that you're really excited about um both on

the Venture and liquid side and maybe use cases that may emerge this cycle but up to you yeah so sure so um you know in salana I think uh man there's a lot of amazing projects so I goo is lights out um liquid staking they're they're creating a potentialized uh Stak staking pool operator called staket I'm probably butchering that sorry Lucas and team um goino is awesome uh big fan of that uh I think um there's a there's a kind of a lesser known I think protocol called Goose effects that does some really interesting single side liquidity staking they've got a pretty novel approach to this where it's different

than what you would get in Unis swap V3 um Jo does it sound it sounds like sorry to interrupt there but it sounds like we're basically uh taking all the lessons of what happened on defi on eth of the last five six years or really I guess just last three four years and building what feels like I've played around with some of the margin fi Orca Jupiter uh what is building with Phoenix like it these feel like almost cleaner smoother products um but it also feels like we've had three to five years of lessons learned it do you see a defi evolving in the similar way that e defi on eth evolved or or different yeah it's a great question I was actually GNA mention Jupiter um the number one app I

send people to to get started with Salon is Jupiter I mean I have have guys that are like crypto just idiots that use Jupiter and they're like this is an amazing product I'm like exactly that's what it's supposed to feel like right um the thing I will mention is that yes I do think uh yes there's Define ethereum define and salana great the products on defi on salana are in most cases I have found smoother easier to work with in general this does not mean that salana defi is just a copy and pcee of what is on ethereum in fact one of the hackathon winners and I'm drawing a blank on their name which is shameful they're creating U these kind of

composable order books like I don't even know if this is possible in trafi like they're just taking the concept of order books and making them composable in ways that I don't fully understand yet the value which is why I need to meet the team but like that's where are you seeing that anywhere and I'm not seeing that anywhere and so again this kind of underscores what's only possible on salana as well as when you give developers free reign massive Spectrum to be building cool stuff on you end up with stuff like this maybe it doesn't go anywhere but the the idea that that type of innovation is even possible is just makes me extremely bullish on what's happening on longer longer term Joe like Santi said man great great conversation

really appreciate it uh have a feeling this won't be the last time you're on you're on Empire so thanks again man enjoyed it yeah my pleasure is great yeah during this episode I went and subscribe to the fun newsletter so everyone should go and do the same probably put the link thanks cool yeah thanks Jack hey everyone thank you so much for watching today's episode really hope you enjoyed it we wanted to take a second to just remind you about our upcoming digital assets Summit in London March 18th to 20th Santi and I got your back seats are limited and we hooked you up with a 20% off discount code it is Empire 20 if you heard it earlier in the podcast there's a little competition running at blockworks to see who can drive the most number of tickets so when

you register for the digital asset Summit make sure you use our code Empire 20 see you in [Music] London