Inflation Fears, Four Year Cycles, and Berachain | Roundup

Transcript

what if all of the 2020 2021 cycle what didn't have actually anything to do with a four-year cycle it had everything to do with covid and the fact that we printed trillion dollar and every asset in the world went up it just happened to be that crypto moved faster and so everybody imprinted this thought oh we're continuing the four-year cycle again and so then it became you know two's a trend Three's a pattern it became a pattern so then everybody is using pattern matching to suggest that 2025 will be the equivalent of 2021 and then we're going to drop just like we in 2022 this episode is brought to you by Aries markets Aries markets deployed on AP TOS in 2022 and is now the largest lending protocol with $280 million in tvl to learn more about AR's markets follow the

link in the show notes below hey everyone this episode has brought to you by Unis swap Labs who is launching the largest bug Bounty program in the entire history of crypto it's a $15.5 million program this is aiming to be the most rigorously reviewed codebase ever deployed to ethereum so if you want more eligibility on the scope rewards payouts Etc just click the link in the bottom of the show notes to tell them that I sent you you'll be hearing all about Unis swap Labs later in the program 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 for informational 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 all right everyone welcome back to another Roundup edition of B curve you got Michaels one and two and Vance and fellas before we get into it just want to give a quick shout out and thanks to this episode sponsor a a is one of the most trusted oldest uh brands in all of defi they've got $20 billion worth of tvl and uh yeah if you want to do anything borrow lend uh swap whatever it is just head over to a and uh thanks again a for making this episode possible all right guys uh yeah it's been a minute how's the uh how's the break excellent another day another dollar it's another week in the trenches you know yeah how was the Year how's the start uh been to the year for you guys I

feel like it's been uh maybe a little bit of a sleepy start to the year for whatever reason even when we're you know coming up with stories and whatnot for the roundups like this's interesting stuff to talk about but there's not a million things going on I mean how are things going on on your guys end it's definitely been slower I would say um I think a lot of yeah a lot of people wanted to get stuff done by the end of the year so Q4 was very busy and it kind of es and flows from a venture perspective in that way where everybody works towards kind of like some timeline try to get a fundraise done but then the next quarter the next two quarters it's a lot slower um I also think that there's a lot of protocols that are waiting to launch or in the process of

launching you know days to weeks to a few months away from doing that there's probably like 10 to 15 pretty notable ones and so I think that kind of sucks the energy and um attention out of you know new stuff starting um so yeah that's that's frankly where we've been spending a ton of our time is just like on portfolio company work um helping them prepare and get ready and and eventually launch so I want to ask you guys about um you know it's Q5 right so uh you know I want to get you guys take on bear chain here at some point one thing I I actually have you seen this stuff about the Trump ball like the crypto ball and everything and we also got some so I I

gu I'm curious if you guys are going uh it's this Trump ball I saw Kyle San tweeted out I don't know what the uh what the invite list looks like but I I also saw that there were some executive orders potentially that Trump was thinking about signing in on day one of freezing enforcement actions that were initiated by the SEC and I found this super interesting because I think people been even very people who are very optimistic about Trump's on crypto it's going to take a little while this isn't going to be his you know day one priority but it feels like he's you know that feels good that he's trying to deliver on promises that he made to the crypto community so I don't know if you guys have any thoughts on this but it seems like he's really leaning into the crypto side even more than I thought he

would yep um I'm just I wrote them down so I could remember them so Sab 121 is the first one which basically um right now uh micro strategy holds their Bitcoin at costs and if it goes down they have to take an accounting impairment that's true sap 121 is specifically for depository institutions though it's it's for public companies it micro strategy follows this basically what this means is like every single earnings where uh Bitcoin goes down they have to have a write down and when it goes up they don't so that's pretty hard for a lot of um crypto companies especially something the size of micro

strategy to have but once this gets repealed basically what they're going to have is a revaluing of their Bitcoin on their balance sheet that will then count as earnings and if you go on rmst it's been a pretty brutal message board over the past like two months and it's like it's totally different than crypto Twitter it's a lot more Normy esque and basically the one Catalyst that they're saying is you know micr strategy 2000 once Sab 121 goes live or gets repealed actually so so I forget how many coins he has um but I know his cost basis is around 30 grand per BTC and so you're at 100K at the moment and so you could have you know tens of

billions earnings being advertised in like a single quarter or two which you know would put the PE of the stock like at you know five or 10x and be a catalyst for it to go up be a catalyst for it to issue more debt be a catalyst for it to buy more Bitcoin and like the cycle keeps going going and if you've ever listened to the Michael sailor micro strategy calls there's three things that he says um will Propel Bitcoin to five million the first is a repeal of Sab 121 so like you know that's going to happen the second is a Bitcoin ETF that has already happened and the third is a national strategic Bitcoin Reserve which is the second thing that we've heard that Trump will do and today you know he said or someone

said in the government that of the 200,000 Bitcoin that the government holds today 120,000 will be given back to bitfinex from their hack and so that's 120k going back to biex also that's so much money going back to them and like the tether people and like not that they needed it but like they're going to continue to be a huge Force even with that without that Capital injection um so that leaves 80k in the US government and I think that's you know I guess that's like what is that 80 billion or eight billion somewhere between 8 and 80 billion of that they will have I'm not gonna do that Math on the Spot yeah I'm not shot but that will be the start we think at least of the

Strategic Bitcoin Reserve I don't think the lumus idea is going to happen Senator lus has a bill which says like you know we're going to buy three billion of Bitcoin a year for the next five years but even the US government holding and acknowledging and you know committing not to sell their PTC is a huge watershed moment for the asset and will force other countries to buy as well yeah the I think the the real big effect of the repeal of Sab 121 it depends on how it gets implemented the specifically the Sab 121 is for depository institutions if they if they factor in publicly traded companies then the micro strategy stuff plays as well but just the repeal of it allows for

depository institutions and specifically the accounting treatment is when you have um crypto on your balance sheet as a depository well as a depository institution in general you have you know requirements on reserve requirements and liquid assets that you hold basically is back stop for the deposits that are coming in and what sabb 1221 did was it said for depository institutions you have to hold a liability on your balance sheet commensurate to the amount of crypto or Bitcoin specifically that you have on your balance sheet as well and so you can imagine this as hey I've got a dollar that comes in I have to hold a certain amount of dollars um as you know basil requirements for for banks and it made basically the business model of banks uh impossible if they wanted to

hold crypto on behalf of their clients and that repeal would basically say hey just like you hold stocks at this bank or you hold other foreign currencies or other assets as collateral we don't have to represent that as a liability on our balance sheet and therefore destroy our reserve requirements and basically like this is the thing that will open open up all of the banks being able to custody crypto on behalf of their clients and none of them none of the depository institutions have been able to do this so far you've got Fidelity who can do this who's not you know a depository institution um you know there are a couple of others obviously black rock is not um and and they're just a facilitator of the ETF but the likes of Goldman JP Morgan Morgan Stanley um they

have not been able to touch crypto because they haven't been able to build a business around it because of this specific accounting treatment and I mean we've talked with some of the leaders of the digital asset group or you know whatever their departments are at these Banks and they are they've been waiting for the last one two three years uh ready to go they've got you know clients who are asking about it they've got um you know the infrastructure ready to go they they have a team in place that have been waiting for you know things like the repeal of 121 um for years now and the second that that happens it's game on and you can imagine there's the Black Rock effect of what we've seen from the ETFs in in 2024 you know 50 billion of inflows and that's

and and they said they haven't even really started selling it um but imagine what happens when you have all of the banks who also have client bases similar to Black Rock who are now able to say hey you want to give us your Bitcoin great we can hold it and and we can you know give you a loan against it we can hold it and have it be with all of your other Financial assets that we're managing as well um and so I I think that you know opens up just like another Black Rock level opportunity maybe even multiples of the Black Rock opportunity that we saw last year just in terms of inflows of traditional Finance uh traditional Financial Capital flowing into this asset I want to get a sense for you guys as well just in terms of you know there's been a lot of movement in the

markets the last week or so and uh this is where we're going to make it a macro pod for five to seven minutes and get your guys take because it seems like what people are worried about is uh Stokes or restocking inflation fear so we had relatively soft CPI print come in like um energy or oil was a little bit hotter than we ultimately would have liked but a bunch of the categories came in relatively soft and you know we were talking Vince I know you mentioned before you listened to um you know one of Felix's interviews with I'm blanking on his name um the new steon Steven [ __ ] um and you know I think the uh it's interesting to think about just the macro situation for Trump going into uh you know when he gets inaugurated on Jan

20th because he's going to have relatively high yields he's going to have a relatively strong dollar both of which are tools that he could use you know uh from a you know to actually you know inject some liquidity into the system um and as frankly a negotiating tool with the rest of the world right so I don't know what your guys perspective here on is are like where we sit uh from a Market's perspective and I mean all right if we' been recording this podcast on Monday it would have been a very different one because we're back at almost 100K Bitcoin already so maybe it was just a silly little blip that everyone should ignore or what's your thoughts on just I hope you didn't sell the bottom yeah I hope you didn't that was like the easiest bottom ever to not sell I mean that like crazy if you did it

would be really funny to think like you know just is over the week before Trump takes office maybe there's a 1% chance but we're we certainly didn't sell anything so I think the tldr is that both rates and the dollar are going to go down a lot and you know those are the two things which determine how e Financial conditions are and this interview with Steven Miran in the paper which is titled a user's guide to restructuring the global trade system is really interesting Stephen Miran for people who don't know is the chief economic adviser and the chair of the I think the Council of economic advisors for Trump um and so he's tasked with working very closely with Scott bessent who's also put out a number of

interviews which are basically sympatico with what Stephen Moran is saying and Stephen Moran you know basically what he's saying is um first thing is we're putting tariffs on everybody until you acques to our demands and what are those demands they're twofold one is um we want you to revalue your currencies upwards which like frankly like if you look at the Brazilian real if you look at the Canadian dollar if you look at the Chinese rem andb or the Japanese Yen like all of these currencies are like at 30-year lows so there's a very legitimate argument as to you know why those currencies should be higher and like his argument for why the US dollar is so highly valued is like look these

countries are price insensitive acquires of the reserve currency of the world which is US Dollars and so basically the second part of his plan is saying you know we're going to slap you with huge tariffs unless you revalue your currencies and how are you going to revalue your currencies well we want you to sell all the dollars in short-term T bills that you have and we want you to buy our Century bonds so 100-year bonds like all you know and the mechanics are you get them to sell the dollars the dollar goes down yields go down with it then you term out the debt because one of the biggest drivers of the deficit in the US is the fact that we spend 1.3 trillion doll a year on interest

expense and that's expected to Triple in the next two years right and the reason it's expected to Triple is because we've issued all of this covid debt right at you know the Apex of that crisis all of that debt is at like 1% and if you re uh if you kind of roll it right now you're going to have to pay 4 and a half percent which even increases that that deficit so like all the stuff that doge is doing all the stuff that people want to cut from the government it's like you know pennies in comparison to the impact of a lower dollar lower yield and terming at our debt for a century so um that's kind of part of his plan and then the other part of his plan is basically like this Mar Lago Accord where for friendly countries we say you

know look security zones are a public good um we you know provide even security to oil in the Middle East for people like China free of charge you know we're kind of like occupying that country and so we have to defend it anyways but China and other allies benefit from it and basically it's just saying like look you have to continue to revalue your currency until we are comfortable with the level it's at we'll bring export manufacturing back to United States and in response will continue defending all the sea Lanes you know all the common economic zones that you have so like very very unorthodox um and it very much flies in the face of uh you know Adam Smith wrote a book it's on free trade it was like

basically Canon for like 200 years it was written in like the 1800s um and basically like the argument for fair trade is kind of the argument for like value investing where it's like you know don't worry the market will eventually get ra rational or like don't worry we'll keep all the free trade with China open and eventually they'll run out of money to subsidize their you know aluminum or copper or coal Industries and you know dump those goods will stop in America and I think basically what he's saying is like that's all horseshit um and there's a new economic model which makes sense for the US and the people who get tariffed like it's not like we're going to make ourselves poor it's those countries that will pay the bill so that's kind of the whole framework for it so I think generally Financial conditions get a lot easier

here yeah Ju Just to piggyback on that I mean just this morning we saw cor CI come in slightly lower than expected um I I think we're going to start to see inflation um slowly come down you're looking at the lag effect primarily of rent in housing um which is delayed I think 15 months on average um and so even if housing went down like this time last year we still have months of CPI print where it's artificially inflated based off of the way the calculation is done and that basically gives credibility um to the FED to to drop fed funds rate um but ultimately what you can expect is a lower dollar also has the same effect um but it also drives IM

uh Imports into the country because or exports from the country import to to other countries because the cost relative to other countries to develop uh products and services is lower and so you know it was a strategy I think in the in the previous Trump Administration we're going to make the dollar stronger wrong but I think now everybody's kind of come around and it makes more sense to have a lower relative dollar relative to the core asset core currencies of other uh trading partners that we have and yeah go V it also mirrors exactly what happened the first term of trump and there was you know Co and I guess not that that point but like Trump says rates are too high he says the dollar is too high like I think you can

either take the position of like you're gonna fade Trump or you're just going to like follow Trump and I don't know he's given you no reasons to fade him so far yeah it's very interesting times and uh yeah there's definitely I there was a great I'll link it in the show notes about uh or fed guy Joseph Wang actually wrote a piece on yeah you can't actually treat tariffs uh tariffs actually depend on what the the current economic situation of the world actually is and mostly the way to think about these things is just redistributions like the other way that you know you can and in interpret this like massive emphasis on global free trade is yes it's it creates economic surpluses but that doesn't mean that the economic surpluses acre to

everyone 100% evenly they actually can create massive imbalances over time and tariffs if used properly can be a way to rebalance um at least temporarily some of the imbalances that get created from there's a great uh clip I think this is even pre-election or maybe it was right after the election um from Howard lck going on CNBC and he asked the question the to the other uh people on the show he said how so we implemented tariffs as part of the Marshall Plan where we tariffed ourselves to help rebuild and basically export our economy to the to the to Europe so that they'd be able to bootstrap you know our demand but they would be able to sell us products and we'd pay extra for them basically to help you know build them back um and he he asked a question he's like when did

you think those when do you think those teror ended you know if the war ended in 1945 when you in the 70s in the 80s 90s what if I told you we're still getting tariffed and the US is still paying extra for all products that come from Europe and it's just a crazy phenomenon that you know nobody in I think uh at least in the modern times has looked at tariffs as an angle and basically a lever to be able to pull on the economy um and you don't actually have to use the tariffs but to all the things that Vance just described you can use them as a tool to get other things done um and I think that's what we're going to see and yes like what we've seen over the last few weeks is just like General

uncertainty like this is a new thing we don't know exactly what's going to happen you know uh but I I think ultimately um nothing has changed the plan is still intact and it's actually getting implemented and it starts next week and we're going to start to see some quick changes you know the crypto bills the stuff I'm sure there's gonna be other stuff too that you know isn't just in the crypto repeals but going back to that in terms of you know what gets implemented I think the first week you you see some of the things like sa21 you see Paul Atkins basically put a freeze on um you know existing um processes with the SEC or enforcement actions one big question that I have is like what happens to all the people that receive Wells notices where a lawsuit

hasn't started yet um I think Unis swap is in this camp and a number of others um but you know with coinbase for instance the law and and ripple I think the lawsuits have started and so you can't necessarily just like pull those back um but it'll be to see like how quickly those things change and I think that's the short term the medium term is probably you know economic changes driving you know growth in in all sectors Tech and Ai and crypto broadly will will be the most beneficiaries um but then the longer term and and this is something we keep coming back to is probably second half of this year we're going to see that market structure Bill and you know in the timeline of the Cycles um you know later half of this year would suggest

that's when we're seeing Pete price ing but what if we're seeing Pete pricing and the most SE seminal piece of legislation that basically defines the entire industry in the largest company in the history of the world uh lar largest economy in the history of the world um you know happens um right as we're peing you know do we start to break the four-year cycle do we start to change the trajectory um like I I think I saw Chris bernis posted something on this and I've been also thinking a lot more about this but I think there's a world where 2025 um starts to prove out the breaking of the four-year cycle I'm slowly getting in this Camp as well I even just from an operator seat at block works this isn't mirroring what has happened in the past

um the trends have already been broken from my standpoint like if you went back and looked at our revenue and what we've like throughout from 2019 to 2022 you know it's basically operated on nine-month lag um of what was going on with crypto prices and it was like crazy crazy growth especially towards the end and it's kind of in the last two years has been steady growth right like 2023 was where our Revenue bottomed out and it's like growing very nicely but it's not crazy there's not crazy Blockbuster audience numbers and I think sort of mirrors the sentiment that you see out there on crypto Twitter where um you know it's been a really good last couple of years for crypto assets but there's a lot of dispersion not everyone has just

been able to win by holding Majors anymore it feels like it's actually growing in a more sustainable almost organic kind of way it has in the past does that does that 100% this is what happens when markets mature and the market structure gets developed and defined which is it's not just a uh what defines your success and um like maybe one of the core examples a large industry I was having this conversation with Buddy last night um how do you define the success of or the you can even say the valuation of all the 32 NFL teams that exist 95% plus of the value gain for each of the NFL teams has been just in the market beta of the NFL itself you know sure the Cowboys have done better they've built a better brand

than the Jacksonville Jaguars Etc but you don't really have too much movement in terms of within the core industry how much have you been able to supersede everybody else and it's just been Mark beta has driven the success and I think that's where we have been as a crypto industry the last couple of Cycles which is now becoming less the case which is Market beta has been what's Driven success historically and it's it's been more about Market timing as opposed to like the actual assets that are doing well within the category and you can't just like and I think other podcasts even block Works ones are starting to to get wise with this too um you know you can't just buy a basket of assets and be like all right I'll check back at the end of the year and see where everything is like you actually do have to make

sure that you're in the right assets because those are the ones that are going to do way better and you know selection is from a liquid perspective is is the most important thing at this point and and I think we're at that transition and this is part of my my thinking around you Market structure is now defined you can't just buy a basket and and yes the market will go up and that will help provide a higher watermark for where these things could go but it's not just you know spray and prey and and check back in in a period of time yeah I mean imagine in you know nine months eth is at 12K you know bitcoin's at 250k the market is going to be a lot less about the majors for the natives and it's going to be more so about you know venture liquid you know

on the middle or long tail you know actual things that are buying back their tokens I guess kind of like you know Meme coins will be a part of that but like Market beta will not be driving the market to Michael's Point like it's going to be like okay you know the NFL is now the biggest sport on the planet like you better be the Kansas City Chiefs if you want to double your valuation like and and I think that will take longer for a lot of things a lot of the deepend stuff that we're looking at is like yeah this is going to be a multi-year Journey um and so it'll be harder and and that'll be okay but you know I think it's funny it's like you know people will sell their crypto and be like I'm gonna go

speculate on equities it's like that [ __ ] takes even longer than crypto like good luck so you know it's going to get harder but I think that's fine and um I think it's some point we're going to see AIS trading crypto coins based on fundamentals and it'll kind of like you know how the analytics Revolution came to basketball and people are just like chucking threes or like the teardrop two pointers and it's like more kind of maybe like mechanical um maybe less inspiring of a game but I I think that is kind of how a lot of this will manifest with you know over the next year if we get AGI or ASI or whatever you want to call it I think that and BuyBacks are going to be the

two primary flow drivers outside of kind of liquid funds and crypto um so I think there will be a lot of things that change even in the market structure and last thing I would say on Market structure is if you look at the market structure bill you know it does provide a pathway to commodity status for decentralization for whatever you want to call it it also has a lot of rules that come with it you know you need to disclose when you sell you need to tell people who you are what your token address is like I think a lot of the Cloak and Dagger that happens with memecoins and I saw the Burwick law lawsuit against pump fund today come out you know will come to a close so I think like the crime cycle is probably going to be an abbreviated one um because the

market structure pill just straight up does not allow for that stuff to happen at least as it's currently written yeah imagine all found so when you're the founder of uh a company that is publicly traded you have to file What's called the 10B 51 with the SEC and everyone you know tracks like oh the CEO is selling shares or the CFO is selling shares what do they know turns out they filed that document with the SEC and basically gave authority to whatever their bank is to sell those shares at predetermined times or values or prices and so the time when they decided to sell was probably a year before the selling event actually happened but that's exactly what's going to have to happen with founders of token projects and and investors as well which

is you have to basically disclose what your Holdings are where they are and if you're the founder or an Insider to the company you're going to have to disclose uh you're going to have to build a plan around when you sell and have that be basically followed with the SEC maybe not the SEC whatever the regulator is but it it'll be the equivalent if you liked pump. fun you're going to love disclosed out fun where you're just filing 19 v4s for your [ __ ] meme coins and like it's gonna be it's gonna be really onor but a lot of the concerns that have been raised by people in the crypto Twitter Community are going to be addressed where it's like investors have staking rewards that they're allowed to sell like never happens again against the law

probably also curtail some of the Wild West aspects of it but a certain portion of this Market will always live overseas quick shout out to today's sponsor Aries markets Aries markets deployed on APS in 2022 and is now among the top 10 lending protocols across all blockchains with $280 million of tvl Aries markets has expanded its product Suite to become a fully integrated defi Hub combining lending borrowing and More in 2024 alone Aries introduced several new features to better meet the needs of its users including native usdt support an incentive program and more click the link at the bottom of the show notes head over to AR's markets and tell them that I sent you all right everyone listen up like I said at the top of the episode Unis swap Labs is rolling out

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the show notes I highly recommend that you stop listening right now go to the show notes click the link head over and tell them that I sent you start earning money today what do you guys I mean I think one thing i' would be curious to get your guys perspective on this because one hey I think it's been a pretty tough year for actually some of the liquid fund managers if you remember back in 2022 it was like oh why would you ever be anything other than uh you know a liquid like liquid and directional was a very popular fund strategy because that was probably a time where you could buy everything and everything was going up but I think it's been a tough year for a lot of the liquid funds that have frankly not outperformed Bitcoin in a lot of cases and then the other um you know I think

also this fouryear cycle that a lot of people have imprinted on their minds especially for the crypto natives is starting to you know I started to hear a lot of uh like some of the liquid fund managers that I talk to say maybe this is a sell and May and go away situation or how am I going to unload this stuff and I there's maybe like a little bit of a quiet consensus building around uh prices topping out and I do wonder if just at the time when everyone has imprinted around the fouryear cycle we actually get these massive moves uh be it the Market structure bill or the first c pro crypto president that's going to Buck that cycle and the market has a habit of making the most amount of people lose the most amount of money right and I I could just completely see

people getting caught flat footed selling too early here's here's a potential thought what what if all of the um continuation of the four-year cycle from last time which you know was a four-year continuation of 2017 you know where we are between now and 2017 is like not even a comparable it's crazy think that that was the industry back then how far that but what if all of the 2020 2021 cycle what didn't have actually anything to do with a fouryear cycle it had everything to do with covid and the fact that we printed five trillion dollars and every asset in the world went up it just happened be that crypto moved faster and so everybody imprinted this thought oh we're continuing the four-year cycle again and so then it became you know two's a trend

Three's a pattern it became a pattern so then everybody is using pattern matching to suggest that 2025 will be the equivalent of 2021 and then we're going to drop just like we did in 2022 I I actually think that the individual data points of why each one of those events happened it was covid as on the up and then it was fraud and crime on the down um as long as we don't have similar things like that I I don't see a world that justifies a four-year cycle just because because that's the only argument that I've seen so far it's just because and I think there's actually more reason and more data that you can point to it not being the case based off of that those

facts yeah I mean Trump is president for four years not one year so I think everyone's expectations need to be adjusted upwards and like imagine if the government wasn't run like just like a [ __ ] group of idiots for like four years like I feel like there's just so much of that base case that people have failed to realize it's like all the executive orders more energy lower inflation a better stock market and like I think in the next four years the S&P goes to 10,000 I think that is kind of like the very macro call and you know I think people tend to say like the first and the third years of a presidency are generally the best years because the midterms happen on the second year and there's some kind of consternation but like in the first year what you can expect is all these bills

to get done through reconciliation which is basically a process where Republicans can push things through unilaterally but you know the other ones are the way the midterms are shaping up I think the Republicans are going to take even more of the house and the Senate um and so like you'll probably have even more stuff getting done in the third and fourth year and then you know I think America is going to be in a really good place and things will be growing and we'll eliminate this existential threat of the debt and like I just I don't see interest rates going from one to 5% I don't see another Ukraine war I see the opposite of that I see rates going down I see the wars easing and I see crypto getting to a point where the majors are so highly

priced that the mitted long tail is going to be where all the focus is so it's going to be very very interesting it's going to be very different yeah I think there's a lot of reasons to be positive about it and it's just worth questioning prior it's because yeah I've had like five conversations in the last week about I you know I got some early AI bags and thinking about unloading them and Y yada and I don't know it just it doesn't it's no longer I I have a hard time even articulating what it is it's more my oper seip at block works but it's not um behaving entirely as I thought it would I mean the the conversation that we have with portfolio Founders is and some of them are definitely thinking like oh I need to launch this thing because I need

to hit the 2025 trajectory so that we can you know get the notori it's like what if that base understanding is actually the wrong understanding wrong and you should launch whenever you're ready not trying to hit some Market Trend and Market time and um and like you know you have Founders who are like well the unlocks will be this and like what do you think the market will be in a year from now or 18 months from now when the cliff hits and it's like doesn't matter if you're doing well everything else is irrelevant the the other I mean the other kind of things that are different this cycle and are leading us to question some of our priors are like I remember when everyone was like God there's just so many tokens launching

like it's just going to be an onslaught there's too many tokens too many different types of tokens I think what we've realized is like now the rate limiter of tokens is the tier one listings Y and if you don't get that the prognosis for you is generally not as strong or like you will have to revive your token from like a three or $400 million market cap to like you know two or three billion um so I think like there's actually much fewer tokens launching than people think especially on that tier one kind of Marquee list so I would say that's one thing that I'm questioning the other thing that I'm questioning is just like this 50% to community airdrop idea and like especially within the deepin category like does it make sense to give tokens to people who are not

like building out physical infrastructure like just like give money to people just to create float so that you can list it I think what you're going to see is people take is taking on these deepend projects specifically longer to launch their tokens so that they can build out the infrastructure so that they can have the fundamentals so they can legitimize the deepin category and I just tweeted about this but like I think one of the things that you know is holding back deep in is the fact that you know helium is just such a small market cap it's a billion and it's the incumbent you can't underwrite Venture stuff to a billion um and I think a lot of that was caused by just like this early mining program where the float was mismanaged and all of a sudden you know tokens are ending up in the hands of

people who are not building out physical infrastructure anymore and it's just like you can only launch a token once and I think a lot of Founders are starting to realize that where unless you have a tier one listing path where you're like super high conviction that you can eventually get there like they're isn't that much of an incentive to launch a token and even if your mcoin gets to 200 million like there's not enough liquidity for you to take 2 million out so a lot of things are are kind of coming back to the drawing board in terms of like how does this work what makes sense I got a question for you guys what do you think about this trend of uh not crypto like protocols launching tokens like kaido is going to launch a token um and I would like I big I mean I would assume right they're

doing their um you know Yap score thing you guys have probably seen this yeah and there's going to be some sort of air drop I'm just assuming it's going to be a token that is I so I um I guess it's fair to talk about this at this point um but I was the person who uh when I worked at Snapchat was the one who explored whether or not we were gonna launch a token really no way what was that I yeah what was that whole process like yeah look I mean there was a very easy mechanism within the product and I don't know how many people here are snap users I I I frankly have not been using it as much as I used to Umi but uh you know you hadn snap score which an which

is an Ever incrementing uh value based off of your actions within the app certain actions were higher value so you got more snap points but like it's a very obvious way to just like convert that into an asset and have that be something that is distributed to all users and it's like it it was the airdrop before there were air drops basically um and I think ultimately what we got to I mean there's a number of reasons why it's like why would you do this number one um but also number two it could prevent you from going public um there's never been a publicly traded company that has launched a token and so I I think there's a bigger question as to and maybe this is something that that the market structure bill will at least be the first step in the process of solving um what is What is the value

atral mechanism for the entity that you're describing um and and we think about this from a venture perspective you know when we invest in a protocol what ultimately we're doing is we're putting money into a Development Corporation and we're also you know getting access to tokens um you know through some construct ultimately you have to make a decision are you trying to build a protocol or are you trying to build a company and those are two very different paths and I I have yet to see anyone really successfully do both at the same time I I would say maybe the one example that we've seen so far that I think is still doing pretty well is unis swap the app in the wallet versus Unis swap the protocol um but there and and they've been first so like they

would be the best place um to be able to go after this dual um entity construct but um it really is a question of I think everything in business can be boiled down to you show me the incentives I'll show you the outcome and if you have mixed incentives um it's really hard to have a unified outcome that's successful so you don't like the Dual like the dual structure of having like the company Equity plus the token no I mean at that point what is okay so you've got investors and employees who are incentivized by equity and then you've got what is the token is it you know is it for governance is it I mean you you could have sort of like truly zero value tokens that are used for governance Community interest and

development but then it's sort of like okay well people buying the token because they think it's going to go up in value you know it's it's it just opens up at can of worms I think I agree yeah it's also like there outside of the US there is not a stock market anywhere and so if you're International this is by far the best way to get liquidity on your project we'll see how these things come out if they're valued as apps or if they're valued as like crypto monies um I don't think something like KO will be valued as like crypto money but you know it still beats just like having these private shares that you're sitting on and you're to you know Drive some value towards like at least you can put a buyback on there and and express the value prop to have a wider audience and

that to me is like the essence of permissionless innovation and frankly permissionless liquidity yeah um all right speaking of liquidity um I want to ask you guys about bar chain here uh because there's yeah yeah boyo uh give us the update I uh you know I probably am like a loose follower of just what's going on in be chain is obvious that there's been a massive uh Community build um and they've done super well frankly and maybe it's like one of the you know I think one of the marks of a good L1 is being able to clearly point it and be like there is this type of guy or gal right like Bitcoin is the DOR uh protocol like people like to eat steaks and talk about macro and that type of

thing and yeah and yeah it's on your butthole and whatnot and uh the uh ethereum is you know very much like an optimistic kind of dreamer like very research oriented and Salon is kind of the Nar comp shied back we're we're building the world computer we're back we're back I love the world computer narrative that's great bring back Justin Drake yeah U love you yeah we do we do uh and I I think that be chain is probably when one of the few l1s which is defined um you know a type of person I feel like I could close my eyes and imagine the type of person that bear chain attracts and it's maybe a little younger a little close your eyes what do you see I honestly see like a little younger a

little dgen fun uh smart like is kind of like my like kind of goes to parties right like that's roughly what I you know would imagine is like kind of the the barar chain um VI I we party yeah we party what would you guys I mean how would you guys Define I I I think um you know the the community is one of the one of the assets that attracted us first to ver chain and you know I think everybody on who's listening to this probably knows but we're we're investors in bar chain excited about them launching uh hopefully soon here um look I think there there are kind of defined um there is a defined ethos for every

successful crypto project um but I think there's also kind of Market narratives at the right time um and I would I would even say salana you know had their Market Narrative of building the NASDAQ but on a blockchain um yeah we've talked about this and the use cases you know toally says that they're six I I think there's a lot more and frankly I think bar chain is like the counter position to that um because I think bar chain represents um not just an existing community of like the most insane active and excited people in crypto but bar chain in my mind will become the consumer application platform and I don't mean consumer in the like messaging and social media I mean just like where all the users are and if you

want to trade if you want execution and you want you know low cost there there will be places to do that and and will have bear chain will have low cost and they'll have execution they'll have all these things um but some of the most crazy and hilarious ideas for applications are you know some of the pitches that we get for people who are building on bear chain nobody's attracting that type of crazy out there idea uh to any other chain frankly and and I think that that is how I view it which is it will have just a lot of experimentation in terms of applications it'll have the Basics it'll have the resta it'll have the exchange a lot of the the concepts you know that we know on eth or Soul or anywhere will be

enshrined and that's one of the core economic advantages of bear chain but I think it's going to be a place of experimentation and if you can see anything from like a consumer application perspective experimentation is the only way to find success um and there's like 250 applications that are already building on top of be chain right now ready to launch once once mainnet goes live um but I I see it as a place where people are going to test things and then ultimately some of those things will work if I think about the stuff that's done well at least in the past six months like virtuals and AI 16c it's like it's pretty clear that like the future demands like new and strange ideas and that's how people kind of

expand what they think is possible within their Overton window and that's what crypto needs right now is just like Beyond price action is just like an expansion of that Overton window and um chain has that you know it has like you know what are the things that people really like about it I would say it's a highly aligned chain you know you don't have to deal with like the um is pump fun good for salana or L2 is good for eth it's like all fees are flowing in the same direction to token holders um it has culture and IP that can reach out to normies you know sports teams have mascots it makes sense that you know a chain with a mascot would you be able to reach out and touch people who are not you know super technically oriented um and I think it frankly has a bunch of

really strong backers that have Diamond hands and like you look at people who have you know uh held Diamond handed the bong bears nfts for like three years it's like there's clear belief here um and I think that's a rarity today uh a lot of the other chains seem a bit more corporate and I'm not sure that's exactly what crypto wants today uh and you know I think the proof positive now is like just the amount of liquidity I think they've got 1 almost 7 billion in BO Boo or I guess these are pre- boyco vaults boo pree yeah pree could you just describe what boyco is by the way for so um boo is uh the Genesis of the proof of liquidity vaults that are

launching after the chain and token goes live and that will be the main coordination system to farm both the protocols on the Chain but also the chain itself and um the various Primitives that are enshrined within bear chain you know the honey stable coin The Lending uh protocol and the decks those are all included there uh but really like you look at the amount of tvl that be chain has and I think they just crossed hyper liquid um which which is putting them I think top nine of tvl for chains and I think that's like pretty incredible and you know we don't know when the token or chain will will launch but you know there's going to be a fair amount of tvl that builds up before that so we're not done yet um and if you can get three or four billion of tvl on this

chain I think you know it's going to phenomenally well nice um and his boyco I think I remember seeing his ji uh from um Jay Jay uh associated with that from correct uh it's boo is not the be chain team um it's just a partner who's doing this um but yeah I mean look they're they're like imminently launching um you know does that mean days weeks who knows um but this I think is um the thing that we're probably most excited about for the next you know couple couple weeks to months and can you guys just give a quick refresher as well on like the

proof of liquidity like the mechanism for it is a very interesting idea I mean the the part about appeals to me is um you know I think that originally proof of stake chains were kind of designed they're trying to incentivize you to do something right which is lock up stake and secure the network um and I think like there are other l1s that experimenting with well maybe we actually want you to do other things as well and this is where you see very different strategies from some of the foundations on different l1s to say um like hey maybe actually we're going to have a lower inflation rate uh because we actually don't want all the capital locked up and Stak instead we want to do things like incentivize you to borrow and lend or swap on the protocol and it like so that's the kind of proof of

liquidity that is sort of what I see uh bear chain innovating on here but could you just describe again like the proof liquidity mechanism and you know what uh what it kind of incentivizes on the Chain so there's a great article on it um it's called Uh bear chain uh D5 playground or something else I we'll link it in the show notes but effectively what bear chain does is when you stake you actually have to direct liquidity towards A Primitive on chain and so by staking not only do you secure the chain but you also bootstrap liquidity and fees for the applications on that chain in exchange those applic s have to pass back fees towards bar stakers and so you can think of the

valuation of the bar chain chain as you know add up all the fees from maker on E add up all the fees from Unis swab all the derivatives exchanges all of those fees are flowing back to Bar chain holders which will be kind of the thing that it's valued off of um and be chain for us is like a Proto money um in terms of that is how the asset itself will likely be used on chain is like this hyper incentivized pool where everything is paired with bgt um and that's how people kind of think about the chain the other aspect of this is just like the retroactive funding and you know requests for liquidities that the community puts out uh the optimism um retr pgf funding rounds have done extraordinarly well in bootstrapping

their ecosystem but have kind of hit you know hiccups as they've tried to scale it or keep it going this is a Perpetual funding platform for applications on chain um and then I think the last thing is just like the relationship with chain and its l2s is very different than eth and its l2s where um it's kind of more of the polka dot style model where uh there is a proof liquidity concept where you actually have to stake Bara to be one of the l2s there aren't infinite L2 slots and so those are kind of you know creative towards the bgt as money Dynamic um and also just like bootstrapping activity improv liquidity on those l2s so that's the very very high level go for it Michael just like one additional point to clarify is you

know the the the fees flow to beakers the beakers Point their stake at these applications of these Primitives and then the inflationary rewards are what go to those applications based off of their stake and so it kind of like flips the economic model around in terms of you stakers get inflation it's actually applications get the inflation and they want to incentivize uh more stake so they can get more um inflation it's a very interesting uh design in general and uh yeah I mean whenever it launches which again is Q5 uh so hopefully sometime we're in the zone we're in the zone uh in the near future it will be very interesting to see uh you know some of those very cool like just experimentation that happens

on the and the last thing I'll say is like crypto has probably not seen a welld distributed wealth effect since salana ran and I guess that was almost like maybe two years ago now um and like you saw how much economic activity a new or I guess in Solis in case like an existing L1 that was at you know two billion going to 100 billion it bootstrap pump fun it bootstrap meme coins it boost up all these New Primitives like it wasn't just people getting rich I think sui frankly has like less like real users or like real people holding the token where like that wealth effect has not been as perceptible I guess so I would say that you know the cycle really starts when

the new L1 start because the wealth effect that's driven by that can be so accretive to the underlying chain and also the assets that are on it and um if you look at the actual boy code deposits like a lot of it's BTC a lot of its eth a lot of its stable coins like there's a good distribution of very active Capital that are also riding not only the rise in reaking and staking for eth but like the Bitcoin staking and reaking Landscape as well has grown a lot and that is just a Tailwind that you know frankly if you can bridge that TBL to your chain it just becomes native assets that are willing to bid you know things that are there if if you have an advance ious what the total number of people who have deposited are because I think that's the other angle here too it's

like you know when IG layer launched their reaking capabilities if you were staking within WAP state deth or if you were staking within you know any other staking provider you could just basically like Loop and you know you had a number of very very large deposits because of that last I saw it's over 110,000 it's 140,000 and you know rap e is 350 million of the .7 but like BTC is like almost 800 million so there's like roughly equal amounts of BTC in E and um I think you're also riding this like Bitcoin Renaissance Trend which is cool what is uh I would be curious have you guys looked at all at the Bitcoin L2

ecosystem and um yeah it's something that I kind of poked out a little while ago but haven't dive super deep into and you know I read John ch's piece on St uh you know the bridge from that alpen has been developing and I don't know I mean it seems certainly interesting um but I think there's a pitch um and the pitch is probably better suited to frankly less crypto natives maybe this is financial institutions maybe this is nation states uh Who and the pitch is is essentially secure your application or your ecosystem or your chain with Bitcoin the most distributed and decentralized and largest crypto asset and we're we're excited about B on um you know which is going to be basically

reaking for Bitcoin um and they'll have you know the concept of ABS is on top of there um but there are a number of other um l2s that are building on top of Bitcoin that I think will leverage this concept in and of itself it won't look and feel like you know bass going after consumer applications within the Crypton native ecosystem like that feels a very different kind of narrative than what I think Bitcoin l2s will go after which is a lot more um non kind of like definative Degen native uh audiences which which ultimately is great because we need to be able to move past you know the insular nature of this industry but there the the ones that we are working with at least are getting uh reception

at frankly the nation state level super interesting I me this is the old bitcoiner thing that uh every L1 is a test net for Bitcoin Defi and uh things are built on L2 so infrastructure you know issues basically that they they need to solve not to say that they can't but that's that's frankly what they're working on um and you need to be able to get the chain into a place where you can have the same activity that exists on it or is secured by it as you would have on the the world computer um so there's still a lot of things to solve but it it could move more in that direction the the key problem with Bitcoin Defi and like we have invested in a lot of it is just like the capital has been idle for so long that it's hard to reinvigorate

it and like think about some who staked their eth at like $500 and now it's at four or three 3,400 and like people are looping it and like that is money and like part of money is just like the wealth effect that gets generated along the way and your comfort with using as an asset um and like Bitcoin I think we're seeing the early Innings of people starting to use it but it's kind of unclear if they'll actually get there and like maybe a smaller scale example is like SOI which is you know nearly a $50 billion coin but like even the native team on their defi is like a billion it's just like if people haven't used it to some degree like they they won't use it the activation energy to get them off the couch is like very very

difficult yeah it's very high and that's probably been this you know comes down back to the you know type of guy or gal that holds Bitcoin is you've been told that you know that because you can't do anything with your Bitcoin there's not it's not a there's no smart contracts on um you know main chain so if there's nothing to do the only thing that it makes to tell people to do is to hodal right so you've been indoctrinated with that idea for a long time and this is I mean I remember having this conversation with um notable Founders in the space who um they yeah everybody would know their name I won't blow them up but um you know they're like oh let's what's in your what's in your like Doomsday b or

like what's in your what's in your 10year bag and I was like what do you mean in 10 year bag it's like what crypto assets do you just like have in a ledger wallet that's in a safe deposit box that you have no access to and you just like send assets to and you're like I'm going hold on to these for 10 years and increasingly the case is I don't think that you can have anything that you can justify from a holding perspective that is like a oh I'm gonna come back in 10 years and see where it is like yes eth maybe maybe one of them Bitcoin is basically the only one that I can think of where you can say okay I'm just going to send this Bitcoin to my Bitcoin address that's in a safe deposit box in timb 2 and I'll I'll check back

in 2030 where where it's at and and I think that that is the mentality of a lot of people especially when you know The Narrative of the you the archetype of of person is like the Doomsday people it's like well I'll check back when that doomsday happens and see where the price is but uh I think basically all of the rest of crypto you you don't you can't approach it like that and and most people have not approached it like that last question for you guys this is uh something that one of our analysts TW tweeted out and noticed actually but the uh the stake rate on ethereum is moved for the last couple of months has been moving in the opposite direction uh so basically you know and I think this is a somewhat interesting Trend because it proceeded it kind of kicked off all of

these concerns around Lio especially and the liquid staking dominance that Lio has uh but actually hosu put out a um an update to Goose which is the basically the Northstar set of strategic objectives for Lio where he outlined that Lio has actually been losing Market market share in the LST game uh still very dominant but um but losing market share as there have been new entrance and there's more in potentially institutional Staker that can't use something like Ste and now you're seeing the Stak rate move in the opposite direction as well and I don't know I mean I have always my personal opinion on this debate around Lio dominance is I've never been as worried about it as everyone else uh or like that camp was I just think that the market is going to

get much larger and much more heterogeneous and stakers are going to have different sets of preferences and it would make sense to me that lios dominance would naturally go down over time and it's interesting to see the stake rate reverse as well so I don't know if you guys have a sense of what's driving that um but I just thought it was an interesting data point so I think honestly what reasoning is is um people are looking at other attractive yield opportunities and like this turns out the economics and the expectations around you know basically like State rate um drive you know the these numbers and you 3 four 5% depending on what G price prices are but I think there's probably going you probably point to a direct correlation between what gu average G has been and then what you

know the lagging indicator of what's the stake rate on on eth um and if it's not very high it's not going to be as attractive as as putting it into something else um and I'm also sure that as the be the bull market picks up um people will just be looking for other assets um to go off and speculate on this is literally the wealth effect that we're describing yeah I think so too all right Fells that's basically it on my end anything else you guys wanted to chat about our cover no thanks for another good one yeah ears pull ears peeled on bar yeah keep them peeled all right we'll do fellas we'll do all right see you next week hey everyone don't

forget to check out Aries markets by following the link in the show notes below after deploying on app TOS in 2022 they are now the ecosystem's largest lending protocol and the perfect place to get started with ap TOS D5 thanks again to Aries markets for sponsoring today's episode we'll see you next time