LIVE at The Nest: DAS Recap, Frax Founder Calls, Grayscale & Hyperliquid Strat In Tokenization Tower

Transcript

[music] [music] [music] Heat. Heat. [music] >> [music] >> 17 floor.

[music] [music] We'll see you around the timeline. Feels [music] good to be back. I think the rollup is one of the most premier media brands in crypto and Andy and Robbie are [music] great experts at everything they talk about and it's my favorite podcast. >> Adding to my library [music] every day potentially multi-chain deployments. We are at Dev Connect day one here. I'm guessing from the base. [music] [music]

[music] Heat. [music] [music] [music] Heat. [music] >> [music] [music] >> JP Morgan, Black Rock, DTCC, Fidelity,

the entire thing was just institutions. It's just it's next level. This industry is going to the next level. And guys, I I don't know what else to say. >> I'm bullish. >> He said it. He finally said it. >> So bullish. It is bullish. I'm bullish. We're bullish. [music] [music] >> [music]

>> Heat. Heat. [music] [music] Heat. [music] Heat. [music] >> [music] [music]

>> Corola [music] is headed to the top. If we're not already at the top, we're going to the tugos. >> Roll up is my favorite. >> People from all walks of life, all over the world, all over this industry come together for the roll up. [music] >> [music] [music]

>> Zoom out. [music] The institutions aren't coming. They're simply here. Taste the golden age of crypto, guys. Get right. Let's go. [music] Welcome to the next. See you on the show. Ladies and gentlemen, welcome back to the rollup. It is Thursday, March 26th in the tokenization tower. It is degrees outside. >> Yes, sir. Rob >> tookenization tower. I'm in the nest. It feels good. I'm wearing a suit and we are coming off of two days digital assets. My god.

>> Holy mackerel. >> Yeah, that was a whirlwind. I mean, Dash just felt bullish like all in all just felt like a bull market conference. Day three is still going on today. I mean, it just felt it felt like we were in the midst of a tokenization institutional, you know, partner logo by logo partnership era. It just was bullish. >> So, um, obviously we were slammed. I think we had 15 guests yesterday. uh you know the the likes of somewhere between somewhere between 12 and 15 guests um you know we had KPMG we had chain link we had Santiago Santos we had Franklin Templeton and uh the Salana policy

institute framework ventures yada yada yada um so obviously we were super slammed um and then we came straight to the tokenization tower for the grand opening of the nest we had a bit of a party did we ever we had like I don't know we had 800 people sign up. I think we accepted like a couple hundred. >> Yeah. Uh Plume team was phenomenal. Momentum X, shout out to all of the partners. We had Magic, we had Theo, we had S&P Global, >> which was an incredible partner and I think just a sign of the times as far as where we are in the industry today.

>> That was kind of like a full circle moment where we're hosting an event and the company behind the S&P 500 is a partner of it. >> Yeah. Pretty incredible. Um, in case you had any other takeaways, but I I you know, we were caught up in the whirlwind. We went straight from D to, you know, the tower here to start setting up for the event. I didn't get a chance to talk to you about your your Neo Finance panel. >> It was good, man. Um, it was the end of the day. All the hosts just wanted to kind of have fun. >> Yeah. >> So, as spicy questions, >> just kind of had some fun with them, honestly. Um, I should have asked the circle representative some more spicy questions. I got to ask the Salana people about Hyperlquid.

>> Um, [snorts] I got to ask Invesco people what makes them better than anyone else to support Superstate. Um, and then I almost asked the Robin Hood lady about Coinbase, but didn't get to that either. But yeah, I mean they they get it. They're I mean they're they're the representation of it, right? So >> of Neo Finance. >> Yeah. >> Yeah. It it pretty incredible. Um while you were on stage with uh Invesco and Robin Hood and Circle, um I was chatting with our our friends at Framework who announced a billion dollar uh you know uh placement into eight companies uh as part of their initial Obex cohort. Uh and Framework's been super supportive of the Neo Finance thesis as well. And I

think a lot of the teams that were announced as part of that that cohort also belong just firmly at the center of Neoinance. So, uh, Securitize was part of that cohort as long as as well as Centrifuge. Uh, they had a public company, uh, called Better Home that's doing mortgages. Uh, and and then on the that kind of front ran the announcement today. I don't know if you saw this of Fanny May talking about cryptobacked uh, home mortgages. So, >> I did see that I put on a tweet. I was like, is this really a bare market? >> It's just so insane that we're going to collateralize all of these assets and then like to me that is the extension of credit. You no longer have to one, you don't have to take out a loan onchain.

Maybe Fanny May comes on chain. I mean, people were, you know, taking out loans for houses on Curve and Curve founder was famous for that. Um, but but I'm sure, you know, when people wanted to diversify into real estate or purchase a home, >> they would sell their crypto. They don't have to do that anymore. >> Yeah. And also lowering the cost of HELOCs was something that we heard yesterday with bringing them on chain. Sansi was super bullish around Mike from from Figure uh and and their entire Heliloc product. >> Yeah, guys. So, let's get into today's topics. Um we have Plume, of course.

>> Of course, >> we're here in the Nest by Plume, ladies and gentlemen. The core of this entire show, the tokenization tower. The Nest is also the name of one of Plume's awesome vaults, uh and their vault product, guys. Check that out. We're going to get into today's topics and then we've got Sam from Forex ready to go as today's stabled up. We got Welcome back to Tokenization Tower, guys. If you guys missed this event last night, it was absolutely insane. >> That's probably why we're a little slow today. We [laughter] had so many people hitting us up. So, the flow is basically you walk into the Empire State Building.

I don't think anyone's ever held a crypto event here ever before. Yeah, >> there's obviously been financial and different things, but this I think was the first crypto event at the Empire State Building hosted by the Rollup Plume and all of our amazing partners. So, you walk in, uh, we had, you know, the lovely Emily from Momentum X greeting people at the front desk. Uh, and then we had Aon, you know, walking people up the elevator. So, it was incredible. Uh, the vibes were immaculate. Initially, the Empire State was like, "Hey, you have a little too many people coming to [laughter] this event." So we were a little bit we were a little bit unsure about how things were going to go.

>> What's up? We didn't even accept that many people. >> Insane. That was also another tell of the state of the demand of this institutional era is just like these events are absolutely filled. I saw this massive line at a Canton event. >> Um yeah, I mean we had a couple hundred people flow in and out of here. We had an Empire State uh fire warden walking around. >> We had the security guard sandwich. We uh we had uh so a little bit of data from from the Lumo. We had 70% of attendees that signed up that got accepted attend really >> that checked in.

>> I mean, who doesn't want to know the Empire State? >> Of course, right? I mean, but you know, the typical attrition rate at these crypto events is 25%. >> 30%. >> Yeah. >> Three times that at at this event. So, >> it was fun. >> Shout out to everyone again. I think we'll do those. >> We'll do those probably once a month. I mean, this is a big one. It's D. It's like the thing. Yeah. Like the opening. >> But there's going to be more of those guys. So, looking forward to seeing >> different varieties of them. This was obviously kind of more of like a like a party event, happy hour type of vibe. A lot of networking. I mean, people were coming up to me saying, "I just met this guy. I just met that guy. I think we're going to work together." Which to me

provides uh just a lot of gra like I'm just really glad that we're able to do that. Uh cuz one of the things that I find the most fulfilling is when we're able to bring people together, they're able to find value in one another. Um, but I I think we're going to mix up the style a little bit. We'll do, you know, some different educational style things. We'll do more networking things, more happy hour things. Plenty more to come. >> Party, guys. >> Uh, we've got Markets and Weather from the Empire State. Uh, we got Stabled Up with Fra founder talking clarity, talking stable coin. Fra's founder Sam was one of the core components of the Genius Act initially kind of getting it through its um early early stages.

>> Yeah. And obviously we have, you know, the most recent debacle. You know, people calling it a resol. The politicians are calling it a resolution, but from the crypto angle, it feels more like a debacle. The politicians sold this out. They basically put something forth in front of the banks that said no yield on stable coins and and crypto's looking around like, wait, what? I thought, you know, we were on the same team here. So, I I'm very curious to hear what Sam has to say about this and how this is going to shake out because I have a feeling Brian from Coinbase is not going to sign this. And I'm curious how how Sam from Fraction >> and also Miller White House Levine from SBI yesterday said that they're actually trying to go back and um change the Genius Act in some way which I found to

be quite interesting and a little bit weird >> essentially that uh I don't think they're going to go back and change the Genius Act because it's enacted into law. But I think what what what Miller was saying was that you know the the banks were caught off guard. They were flatfooted. They did not see the yield >> language. They weren't paying attention when the Genius Act was passed. Then they realized, oh wait, this is a serious risk to our business. Now they're holding clarity up and they're using it as leverage because they need to fix this yield issue and they can't go back and change the law that's already passed. They have to try to fix the the issue in the new law that's going to be proposed and then that would obviously uh update the the entire legislature around yield on stable coins as it becomes more and more updated. So

I, you know, that is the main contention that the banks have. Uh they didn't see it. They were caught off guard. They they just missed it when the Genius Act passed. So now uh they're trying to correct their position. Then we've got Grayscale, head of research on the show. We've got Hyperlid's strategy CEO uh as well. Should be a full slate, guys. Today's topics powered by Treasure, one of the best hardware wallets on the markets guys. >> Go ahead and use code rollup 10 to get a treasure at treasure.io, guys. Uh we're going to roll into our first guest. We're going to take a super quick break. We're going to bring him up and get this show on the road, guys. Let's take a quick pause and we'll be right back.

Heat. Heat. Down. Hey. Hey.

You know, hey, I'm going to Heat. Heat.

Hell yeah. Everyone down.

Heat. Heat. N. Get out of here. >> [music] [music]

>> Welcome back to another episode of Stabled Up, our premier weekly show covering the ins and outs of digital dollars, stable coins, and the future of decentralized finance. >> Show is made possible by FRA and FRA is powering the financial engine of the internet, powering FRXUSD and genius compliant stable coins. This is the stablecoin super cycle made possible by FRA. Now enjoy Stabled Up, our weekly stable coin show. All righty, guys. Welcome back to Stabled Up episode number 25 powered by our friends over at Fracks with their genius compatible stable coin FRXUSD. We've got none other than the FRA founder himself, Sam here with us. A lot to talk about this entire clarity structure, Coinbase. We were just in DC.

There's a lot going on. Rob, Sam, it's great to have you back. How you doing, man? >> I'm doing great, thanks. It's uh it's been a while. So you guys are doing the DC circuit this time, huh? >> Yes. >> Yeah, we did last week. >> We were in DC last week, Dash this week. So I got a suit on, Annie's got a button down on. We We miss you, man. >> Yeah. Yeah. No, it's uh You guys are You guys get the baton hand off. Like I was just thinking the other day that like for for genius I basically like lived in DC in like March last year and uh you know now there's a lot of exciting stuff in and fracks that we're building uh in stealth and just uh in in the uh in the lab so so to speak and uh eventually the

the baton will get handed off uh to to me too but uh you guys are holding down the fort. Well, well, Sam, you laid the groundwork so that we could go there and we had plenty of material to cover. Um, obviously the latest is that, you know, we we had uh the the latest resolution or debacle. I was saying just before you joined that, you know, the polit it feels almost like the politicians sold it and I'm curious how you how you're seeing this. To me, it feels like the politicians sold us out. They said, "Hey, we have this great resolution on yield as it pertains to clarity." Um, the great resolution is that there's no yield on stable coins. Don't you guys love that? Um, but this doesn't feel like a resolution. It just feels like the banks won and no crypto founders are

going to sign off on this. Is that the right way to think about it? How how are you reacting to the latest resolution air quotes uh coming out of DC? >> Yeah. So, I'm I'm following it pretty closely, but one thing to put in context honestly though uh for people that aren't really thinking about it is this is pure politics, right? So, this is not going to stop with this yield thing or even after clarity. And and what I mean by that is like, you know, I I don't know um if most people watching this are Americans or not, but like you know, there's there's the second amendment in America, the the right to bear arms. And for example, this the right to bear arms thing is always going back and forth between people on the side. It's not

like, oh, this one act passed and now everyone's done talking about it, right? That's why there's like these lobbying groups on both sides. No matter what you think about that, you know, the Second Amendment and stuff like that, I'm myself slightly pro for it and and and things like that. But regardless, whatever you think, right? So, one thing is like they pass it that says, "Oh, you can't have magazines for for like guns that that are above this, right?" And then if it's passed the next one, they'll be like, "Oh, you can't have guns that are this long, right?" And then it's like, "Then you can't have guns that look like this." And so it it slightly goes forward and forward. And so that's just how politics is. It's not it's not about like stable coin yield and all this stuff. The main thing with

this is it follows the same pattern. So with Genius, it was almost a resounding victory uh thankfully last year where the only compromise was the issuer could not give a certain like legal claim or expectation that you holding this genius like compliant stable coin uh like like ours like you know circle eventually going to be and all these like pyd the issuer could not say that holding this thing gives you some kind of legal right or expectation which is fine like very very few issuers we're we're going to straight up say that, but you could give it to a distributor, right? Like a centralized exchange partner stuff and and have them give and distribute yields. Now, this is actually that's essentially if this is the current

wording, right? That's essentially uh kind of banned. you you'll have like certain things where it's like activity based kind of things where you know Coinbase will have to think about they can't say USDC like earn but by just by holding they'll have to say like but if you log in and and like make a trade or or something like that and and the the architecture of it is important to realize after this let's say this does pass like this which is not good I I hope uh it doesn't pass but if it does then in different administration or like a different SEC like uh thing, right? If if it's not like pro crypto, then

they'll be like, "By the way, by activity, we're releasing guidance where activity means that you can't do an unsubstantive economic reality." They'll they'll basically say you you can't do like logging into the thing or you can't do like this or that or whatever. And so I think people uh need to understand that's why I was saying you you guys can pass me the baton hopefully later is like this is not going to end in some kind of I think the crypto industry is kind of uh you know they're not politicians or they're not like used to you know uh the fact that this stuff is part of you know politics is an ongoing process not a uh oneandone thing and so I think ideally this is not the final wording but to be honest it's really

good for DeFi uh strong stable coin teams like like FRA and not that great for ones like you know Coinbase and USDC's like earn program and stuff that are constricting uh are constricted a little bit more um and in fact like I think the two biggest winners uh other than in this wording probably the the banking lobby right would be Tether uh right because because Tether is crushing it and they don't pay yield historically and how it got harder for their competitors to pay it in an open-ended fashion. And then also DeFi strong teams that have genius compatible stable coins like FRAUSD where we actually have these

partnerships where if you peg to FRAUSD and curve peg keeper pools, we have this big thing coming up with a v4 that's launching uh next week where we stream the actual risk-free yield as like a base of of the floor uh of it. And so FraUSD is going to be one of these big uh base um hub blending and and and borrow assets and things like that. And I think that benefits us a lot because we already do activity based risk-free yield streaming. But you know, uh it's it's not the best wording, that's for sure.

>> Yeah. Yeah. So, so you're pretty confident then that because it's just kind of like an evolution of of politics in this way that just going to, you know, they're just going to keep inching inching inching until they take uh, you know, a full mile. You are you confident then that Brian Armstrong from Coinbase is going to hold off on getting this through? Because all right, we we had a conversation with the uh CEO of S uh Salana Policy Institute and basically he was saying look at some point we're going to have to accept a trade-off either trying to get this done before kind of like Julyish because all of Congress is going to go out and kind of do their whole you know runound for um for their next elections. So we either

need to get this done and make a compromise sooner or this is going to get pushed back all the way until later in 2027 likely. So, do you think that that Brian is going to um try to get this through quickly or push back? I think some news just came out that he's not going to and Coinbase is going to oppose this. >> He he was in in opposition to it, which is I think expected. Um and and maybe just, you know, a similar question in in different words is, you know, c does Brian even have the power to sign off on this because it my understanding is that he doesn't, right? It's mostly the politicians that can push this through regardless of what the crypto industry thinks about it. They just don't want to piss off their donors. Obviously, they have donors on the banking side and they

have donors on the crypto side. So, they don't want to piss anyone off. But, if push comes to shove and the politicians are getting a lot more donations from one side than the other, they'll just go ahead and push something through. >> Yeah. I I think uh so so I I don't know exactly how hard uh Brian can push, but he is a he is a big guy. He is the uh elephant in the room from from the crypto side. Um but it's funny because I think everyone in the crypto industry is discovering what what like pork is and like an omnimous omnimous bill is like which is like this huge bill and then pork means like small things added to it whether it's for spending or or other things. than like this yield clause by the way is an amendment to the Genius

Act. So it's it's literally by definition uh well I I don't know if it's by definition poor because I think it has to have additional spending in it but it's literally like an additional thing in there right in a huge clarity uh act kind of like an omnibus bill of of sorts. And so I think the best thing to do is to kind of take the half uh W half L on the on the yield stuff and and just pass the Clarity Act because it is a huge bill that there's a a lot of other obviously there's a lot of other problems that could be like perfected, but the again politics is uh you know all of this stuff you you can never get everything you want. The Genius Act was

close. the Genius Act was very very very close to as perfect as you could possibly get. Uh which is why they're trying to amend it and and and things like that, but um based on midterms and you know, who knows what's going on with all this like macro war and and and stuff like that, I think it's very very unpredictable if this doesn't get passed by, you know, July, like you said, like recess. Um which is the same thing with Genius last year, right? They were trying to pass it. Uh it got passed in July, right? So, I think this is probably the last or second to last uh revision. Um I hope it's a little bit better, but again, it's really good for DeFi uh strong teams. Um so, we're we're pretty excited about it at at Fracks

regardless if they can just pass the the Clarity Act. This is our bread and butter, right? bringing risk-free yield uh in a safe stable coin in the most important hubs in onchain in in curve peeper pools amm in a lending in important places and uh also the other good thing about it is it's activity based rewards right and so one thing is that you can al also just give these rewards away in uh loaded in cards like frauist's on etherfy right these etherfy cards that are really really hot and so for example you can have a system where You load a bunch of, you know, genius uh compliant stable coin and we calculate a proprietary, you know, like algorithm

based on like the swipe last time of swipe. So like activity and then also some uh integer of like obviously how much you you have in in like credit or or debit on on the card, which is another way to say uh the the balance and and like the time factor of it. And what's interesting by this is is is actually if you pay out in in cash uh the the essentially the accumulated yield, it's not a taxable event, right? And so like the IRS has already said stuff like cash back rewards, right? Like people don't put their cash back rebates from their cards in their IRS uh you know annual tax returns, right?

Because I the IRS has said these are these are cash rebates. They're not income. They're not actually new income. And so in a funny way uh smart good DeFi integrated you know neo bankank integrated teams can actually turn this activity based requirement. Uh it would have been better if it wasn't a requirement if we would have just done it optionally obviously right but but this activity based requirement into a new product where you get uh essentially risk-f free yield uh that's taxfree and and not actually like a uh a dividend of sorts >> and and the uh the etherfy cards you guys are working on that's an example of how you could structure this so that it is legally compliant and also beneficial to the end customer.

>> Exactly. It's actually already out if you have an Etherfy card. Uh you know the EtherFi guys are amazing. Um they already integrate PRAUSD spend the uh risk-free rates distributed uh daily based on activity holdings an entire kind of proprietary algorithm and so you can go and uh try it. Exactly. And and it's and it's taxfree. >> Very cool. >> If you're American I don't know different places different >> Yeah. Um I I I uh I'm curious you know you mentioned the Genius Act was essentially perfect. Why do you think the banks let it slide through so unwittingly?

>> Yeah. Like why are they not paying attention? >> No, no, no. They they they were paying attention. As someone that that was was in uh DC and stuff, they they were definitely paying attention, but they were really caught off guard for how fast everything happened with like the November election and then like everyone being pro crypto super duper duper fast and then uh this getting out the door even faster than um other people thought. and and like Senator Lumis and Senator Hagerty, the two authors of the bill being so so great and and such great allies of of the crypto industry. And so, um, you know, I they did try for sure. I I can I can assure you that. But now they um you know, they they want to push the it's it's politics, right? They want to push the envelope here. And I I

always said it always just is about what layer the yield will get distributed. Once the Genius Act passed, the cat is out of the bag. Stable coins that that are that are genius compatible, compliant, these these safe stable coins, they exist. They're going to be used in in really big places. Um, you know, we have announcements coming. Everyone is is doing something really big with institutional and and large companies basically every every week or two. And so it's just a matter of how how is it what layer is the yield going to be allowed to be distributed and who benefits the most um from who knows how to distribute it the best in those layers. Is it is it clunky? Is it smooth? Is it you know the this team knows the best about it? Stuff like

that. >> Yeah. Uh Sam, I only have one more thing on the uh Genius Act Clarity Act, all this legislation going through DC, which is that, you know, I I think you you're of the position here that the Clarity Act, we should just push it through. uh the yield compromise is something that we can compromise and you know the D5 protocols at large stand to benefit from clarity going through because we can strategically you know curate these products in such a way that uh everyone ends up winning in the industry. You know, the the I guess the counterpoint here is that we have guidance from the SEC and the CFTC now that effectively puts classifications and market structure around the industry, digital securities, digital commodities, you

know, some more classifications there as well as stable coins as a carveout. Uh Paul Atkins, Mike Celig are also talking about this innovation exemption. That sounds really exciting. I'm really curious to see what comes out of that. The main thing and and uh reason I guess that we need clarity is just to instantiate that into law in case there's a new SEC chair, new CFTC chair that you know just issues different guidance. But I if we can just issue amendments like we we're doing to the Genius Act, if we can just do, you know, issue amendments to new laws and and it's just that easy to switch guidance and amendments like that. Is it really like h how crucial is it that we get clarity act versus you know how far along the line does the recent SEC CFTC

guidance get get us? >> Yeah. I mean well that that's why we have politics and and administrations coming in and out of the uh out of the the US every four to eight years right. So it's like uh the the guidance from Chair Atkins is is fantastic. It's great. Um the reason by the way that the prior uh chair who shall not be named uh it did not ever give any guidance is he was smart. He understood how how politics works, right? He knew if if you said ICOs are securities offerings, everyone would say, "Oh, this we're not doing an ICO, we're doing a points program." Totally different. And then if if he said well actually points programs are uh you know their their securities

offerings too because of expectation economic reality yada yada yada then someone would say oh well we're not actually doing points program we're doing uh a uh mystery airdrop uh rewards system of blah blah blah and then if he said blah you you you guys you guys get the the politics of it and it's it's really just how easy it is to change. Obviously, legislation and amendments are the hardest, which is why, you know, this is really hard for uh the banks to to get through. And I think to to be fair, there's a lot of stuff in clarity that could be better again, right? But like especially some clauses with with DeFi and things like that, but it is clearly a pro- crypto bill all things considered, right? And and we have probably a little bit of time to

continue to adjust some some wording on yield and maybe a little bit of other stuff. Um but it's a pro- crypto bill. It's a pro- crypto bill. It makes it makes it harder for uh people that politically don't agree with crypto's uh use cases and ethos to just issue different guidance or or remove guidance or things like that. So, we should definitely pass it for sure. And it won't be the final thing. And I'm not saying there will be like a different crypto act. That's not at all what I'm saying. What I'm saying is there will be slightly different things that you know going back to when I first came on someone other people will have to get the baton passed to them in 2027. This is not like a uh a single thing. Um it's

not it's a big milestone obviously like Genius and and things like that. But in 2027 there will be like you know other amendments proposed in like the spending bill and uh you know God knows how much the spending bill will be with these these wars and and conflicts and and stuff like that. Um, there has to be a lot of, you know, eyes still on the prize and and make sure that none of this stuff changes. But the the Clarity Act should hopefully get passed. I I'm very pro passing it. >> Would you say that the Clarity Act passing, as you say, um, earlier, you know, uh, with Tether and Paulo, what he's doing is a big beneficiary here. Um they also made an announcement that they're hiring a big four a big four auditing company to audit their reserves

and their backing and all of that. Would you say that that circles kind of regulatory arbitrage or their edge um will be eroded away as regulatory clarity becomes clear or like what should we actually look for in this bill getting through tether's audit to like understand how the dynamics between tether and circle will change? I think tether's a big winner uh along with like fracks and defi tether for different reasons but but like tether because they never pay yield which is their benefit their their strength and it's very hard for uh their primary competitor now to uh pay yield in the way that they're good at like like offchain distributor

agreements and stuff at least in this wording um tether's doing great obviously right like no one needs to say it but one of the things that uh I think is really interesting thing is, and we're seeing this a lot, um, like we're talking to a lot of banks, a lot of new banks like Arabore, everyone's, you know, heard of Palmer's uh, bank and and and those guys. And what I I think is going to happen is we're going to open our eyes kind of in uh, 6 to 12 months from now. And there's going to be a lot of banks, a lot of huge uh companies and Visa and all all of these things that are going to natively accept a short list of, you know, genius compliant or just like, you know, stable coins that

that are safe and and stuff or known like USDT and stuff, but a short list of them as actual deposits and and cash equivalents. Like we're going to wake up in in like you know, 2027 uh you know, June or whatever and it's going to be like, "Oh, holy crap. I can I can just send FRAUSD or USDT or USDC or something uh to Wells Fargo my Wells Fargo account and and I I can say this from uh from the conversations that that we're having um without naming names and stuff but this is this is going to happen quickly and then when that happens uh I think that's when you have this step function of the stable coin market cap going from like you know what is it right now 190

or 200 billion or something to like 500 billion. in like a matter of like three to six months. These things are always like that, right? They're they're like this, they're like this, they're like this, and then they're like up and then and then like a step function. And so I think these are the things that are silently happening that they don't immediately have a feedback loop. But when you open your eyes and you can like buy real estate just literally by sending it to like the real estate escrow company and then they send it to your bank or like you can uh buy like things just by literally sending it to the banking or the card layer rather than download this like spendable card and then it's super cool and then like but the but the merchant doesn't do the point of sale thing with wallet connect

and you know it's not compatible yet. forget those like those things will all slowly mature but then there will be an inflection point where just a short list of stable coins will be real money those will grow at least that's how I thinking about those will grow like you know 15x in in like overnight by like in in like 3 to 4 months period once those conditions are ready that's how I think things will go it won't be super fast right now it won't be like you know super quickly on on this stuff until those conditions are met essentially And and Sam, you've talked about the DeFi layer on top of the stable coin layer and how, you know, FRA is positioned for that. As you're thinking through banks and the the typical

banking and payment layer starting to accept more stable coins, especially these genius compatible stable coins, do they hold those on their balance sheet? How do they deploy those? What does the banking and the regulated DeFi landscape on top of stable coins look like? Yeah, that that's a great question because I everyone's trying to figure that out right now. I can say without kind of naming too many names and stuff is some some banks are exploring literally accepting things like FRAUSD specifically and then not redeeming it for cash and then depositing, right? Cuz that that's different. That's different if you just take the stable coin on the software layer, redeem it for cash and then put it on the bank's balance sheet.

I mean, literally holding the F FRXUSD and then showing to the customer you have like $1,000 if you have a,000 of those, right? And so those are happen those explorations are happening. Um, again, I think it'll be in 2027 when it'll roll out to a bunch of places where uh there will be a short list of stable coins like that. I also think that the what those short list of stable coins will be will be determined by how much onchain penetration they will have because at the end of the day if you just launch a stable coin and there's zero holders of it right like like let's say a new stable coin uh by you know city bank or something like that but no

one holds it no one uses it on chain no one does anything you could say hey any city account you could just deposit this but no one has it anyway right and so the the short list of stable coins will be the ones that are used in the most important places on chain uh are held and spent on the most important neo banks and crypto products have uh centralized exchange like listings so people can come in and out because those are the ones that'll be in demand and so that's why we have such a huge DeFi uh footprint and and continue to grow it because you can't just say hey uh we're one of the few stable coins that are pure money um right and and just like say it and and make it happen. It has to actually be used by a large number of

people. >> Yeah. Yeah. I mean, I think that there's a there's a big fight right now to get stable coins into the hands of as many people as possible. We're here at DAS and it's it's everywhere. I mean, it is like we are going to get stable coins into uh brokerages. We're going to tokenize equities. They're going to be onchain with stable coins. there's like there's just this massive institutional push right now that I think is going to accelerate what you're talking about. So, we kind of have like these two things happening at once, right? Where it's like, yes, we're going to get this through. There's going to be some trade-off, some kind of accepting of of of a situation that maybe like on the crypto side we didn't fully want, but at

least we're getting this through. And then we have this like just institutional FOMO happening at the same time. I think we need to reset our priors a bit on what the expected growth is going to be for stable coins in terms of total supply uh over the coming year to two. I know we had uh I think it was Scott Beston say 3 trillion by 2028. Like it looks like that's a far you know kind of road like we're only at I think a couple hundred billion 320 or something 310. We're kind of breaking out to new highs again as of the last couple weeks but I think that it'll be kind of slow. so slow and I think next year will be the year where we really see that acceleration because this I mean this this is happening from both

sides right now and it's just it's just undeniable. Um and I think something that people are like interested in ZAM is like how do I invest into this right? Like how do I how do I get in front of this? I know this is going to happen and there's a bit of like a sentiment gap happening where people are like confused how to invest in this. Obviously you you're the founder of Fracks. There's public equities. there's kind of other crypto tokens, but I'm curious like what you think the general like investment landscape uh is going to evolve into. Uh so, you know, we have this institutional track, we have this clarity track happening. How do we, you know, get in front of this? How do we invest into this? What are some of the second and third order effects that are going to happen that will, you know, maybe change

a dynamic in the market, present good opportunities? Yeah, I mean I think that the main stable coin uh like assets that are investable obviously not financial advice but like circle stock fra tokens clearly there's uh there's there's sky which is a little bit different because their main product is yield bearing uh like defi stable coin um but we saw circle went down by 20%. because the market actually uh can properly price in the fact that you know their way of actually distributing USDC got hit the hardest right uh in in this current wording which is again not final but I'd like to see people and investors and stuff as they get more and more

sophisticated for example this wording obviously is very good for DeFi native distribution uh genius uh compliance stable coins which fracks right and There there might be a few more. Um, right. But, uh, I think the market is getting better and better at being more precise about the different flavors of of stable coin investment like Sky, great yield bearing stable coin um, you know, protocol. Um, different thesis, Athena obviously, but for when it comes to genius like money payment type stable coins that have like the, you know, hundreds of billions and and trillions of of TAM, I think there will be a few flavors, right? There will be circle stock, there will be fra tokens, there's

probably like I don't know other um maybe there's there's like Paxo stock uh in the private markets, but they all will have their different um you know value propositions so to speak. And I think the market's getting better and better at pricing them and obviously Tether seems like that you know they're coming out uh more and more these days. >> Yeah. So just couple last things. Uh so the market is right or wrong about Circle stock over the last couple days. >> Uh say say that again.

>> You think so? So so it sounds like you know the the Circle way of distributing USDC got hit the hardest. It it got hit really hard. Do you think the market is right or wrong uh about the Circle stock over the last couple days? I think it's right that it hurts circle the most, but I don't know if 20% wipe out is like maybe it's partly due to the the war in Iran or whatever, but like uh in macro, but but like I think it's good that people are specifically investors are specifically able to make these kind of uh changes. It's like oh this hurts circle the most and not you know like uh like FRA the token didn't go down 20% at doing that, right? But like the point is like they know how to value these things

more and more. I don't know if the absolute amount was the right amount. Uh but yeah. >> Yeah. >> Okay. Uh the other one was just kind of based on on the the stat that Andy brought up. You know, Scott Bessant set the line at $3 trillion by 2028. You taking the the over the under? Um well I don't know if uh uh Secretary Bessant uh expected um what is a $100 crude or like a giant war on [laughter] a weekend that it was not a 48 hour like excursion whatever uh President Trump calls it. Um but I would still take uh the the estimate as real but I would take it as a step function. I don't think if if

people thought, oh, it's going to slowly and evenly like get there. Um, why aren't we like hitting the dot plot, you know, on like a linear graph? I don't think it's going to be like that. I don't think it's going to be like that for H2 of this year either. But I do think the estimate is fairly accurate. Uh, you know, assuming literally World War II doesn't doesn't start, which seems like it's more likely these days, but I think it's I think I'd put it still there by by 2030. >> Got it. Yeah, >> Sam. Yeah. Yeah, thank you so much for coming on, man. Always a pleasure. Your words, you know, frankly, I think you're you might be the lone wolf when it comes to this clarity act as as a success for the crypto industry, but I have a feeling more and more people will start

to come around to that realization and uh I I hope we get it. Poly market has a 61% chance clarity act signed into law 2026. >> Yeah. Next time I'm back, uh hopefully it's either there or or almost. Thanks for having me, guys. >> Yeah, cheers, Sam. See you next time. Thanks, Sam. All righty, guys. We're going to rotate into Zack Pandle here, the head of research at Gayscale. Guys, that was stable up episode number 25. Clarity's coming. We're going to get this bill in. It's happening. There's obviously going to be some winners and losers and a changing of market dynamics. We're going to talk about more of that and more of these market dynamics with Zach. Give us just a second. We're going to get them all set up and we'll be right back, guys.

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hey, hey. Okay. Hey. Hey. All righty, guys. We are back at the Nest

live. We've got Zack, the head of research at Grayscale with us here today. Zack, welcome to the studio, man. Welcome to the tokenization tower. >> It is my great pleasure to be in the nest. I've been looking forward to it. >> Absolutely, man. Uh tell us a little bit about the event this morning, hence the necktie and and it is certainly uh the digital asset necktie era. >> It is it is unfortunately the necktie era although you know it looks uh it looks sharp. Yeah. >> Uh you know I I have a Wall Street background and thought I was escaping the the life of neckties but they followed me into into crypto. This morning Gayscale hosted one of our crypto connect conferences. Uh this is an event for financial adviserss and institutional investors to level them up on investing in crypto. Uh basically we

hosted that uh this morning. Excellent event. I think a lot of energy. It certainly doesn't feel like a bare market if you're in the business of pitching crypto to institutions. >> I totally agree. >> Yeah. I mean, we've we've seen this, we've heard this all around Digital Asset Summit, all around New York City. It feels like there's this institutional FOMO, this institutional bull market, and that is a very very divergent s sentiment than what we're seeing on, you know, Twitter in the typical like crypto realm. I I've said crypto is dead, but the exports of crypto are very much alive. Stable coins, digital assets, tokenization are the talk of the entire financial world, but we're leaving behind a lot of the old crypto guard. Is that what you're seeing as you're

talking to, you know, those with the capital ready to deploy? That is a very interesting framing. Look, I would I love the framing of the exports. I think that that's right. You know, some things grew up in crypto now are going to change the financial system. But I guess I I would quibble that the old guard ideas of of crypto are are dead. And maybe I'll defend two two things in particular. One is I love the fact that crypto is a grassroots bottomup global retail phenomenon. And I think to some degree it will always be that and that's that's really about permissionlessness.

You know, anybody can try anything. And I think that we will always have an ecosystem of new ideas, young people throwing out protocols and seeing if something uh works, you know, trading trading around these ideas. I think that that will always be a part of crypto. You know, the capital comes in and the capital comes out. The other thing, of course, and maybe something that we can touch on on this call is I think the original cipher punk ethos is very much alive. you maybe need to go find it. But I think the idea that crypto offers something not only exports that can be used in the mainstream financial system, but something truly distinct from the mainstream financial system, censorship resistant transactions and and things like this. So I guess to me those uh

elements, those pillars of the early crypto thesis are still there if you look for them and I and I certainly hope they don't go away. >> Yeah. Yeah. Incredible. I mean permissionlessness decentralization this is ultimately what we're realizing. institutions want too. Um when we were in DC, you know, there's people coming there from all walks of life, you know, all over the industry, different companies coming together. Uh and the consensus was look, banks aren't going to want to deploy and work on other banks technology. Everyone has this competitive nature to them for better or for worse. We live in a capitalistic society. Um which I think is ultimately a good thing. And and what we have is the potential to redesign the financial system on credibly neutral infrastructure. And this is again true

to crypto's original ethos as you're talking about. How important is that when you're speaking to asset managers, when you're speaking to banks, especially when we have, you know, New York Stock Exchange launching their own networks, we have new entrance into the stable coin market. How important is it that they deploy on a credibly neutral layer? >> Yeah, that's a great question. Look, I think at some level what you're seeing from institutions is just a if you can't beat them, join them sort of mindset. I think that they have realized that stable coins, the tokenized assets, other applications of this technology, the train has left the station and they better get on board or else it'll cost them uh down the road. And so even institutions that are competing for the

same revenues, you know, credit card companies, commercial banks, these are competing head-to-head uh with the stable coin businesses. That's why they're colliding in the Senate at the moment. We could talk about that uh too. Uh look, in terms of the choice of blockchains, my own thesis around this, you know, permissionless, you know, credibly neutral. I I think this is something that will progress in phases. Uh and I my own take is that we actually will have a more centralized permissioned preference by many institutions to to start out with and some you will see some ground gained by some of those things. And the bigger uh prize is those credibly neutral uh permissionless global censorship

resistant you know kind of pure peer-to-peer decentralized finance visions that that's where the bigger prize is but I don't know that the financial system is totally ready for it uh today and I actually don't know whether the tech is totally ready you know privacy identity we need to solve a couple of things uh for the pure Ethereum vision if you will uh to be executed um and so I think we're going to see some uh centralized versions of tokenized finance that maybe people don't love in the crypto ecosystem, but you just keep building towards that vision. We will get there. We will get to that uh pure vision eventually.

>> Yeah. Yeah. I mean definitely. I mean you mentioned privacy, right? That's something that I know that Gayscale is passionate about. Barry is a big Zcash bowl as well. What is the state of privacy adoption from your perspective now? How big of an issue is this kind of for this institutional adoption phase? >> Let me make a uh a little bit of a silly metaphor just you know with my friends here in the in the nest. You know we we went through a necktie bare market I think after co and maybe uh we're coming out of it today. Um we went in a financial privacy bare market for a long time. We've been looking at this very closely in the context of some of these investment ideas in in crypto. you know, have to look back to u the rise of the

internet, online banking in the 1990s and things like the Patriot Act in the wake of 9/11, you know, here in New York. Um, a reference to that. Um, you know, there hasn't actually been a lot of focus on financial privacy for a long time in in capital markets. Our deep thesis is that that is at an inflection point driven by a few things, but number one is AI. you know that that's really the major technological change uh happening in our world today aside from public blockchains and AI does raise some questions about financial privacy and and the surveillance tools that are going to be available uh in the coming years. So our thesis is that we are at an inflection point where you're actually going to see a much bigger uh

public discussion way beyond blockchains on the issues of financial privacy. And so the Zcash thesis, you know, the Zama thesis, you know, some of the other uh privacy tools that we have in in crypto, I I think we are just getting started in that broad public uh uh conversation. I think there's, you know, potentially quite sign significant financial upside uh to some of these assets. >> Yeah. Um Andy put out a tweet uh I think must must have been a couple weeks ago uh that got a lot of traction that that we like to talk about. Uh and I'm actually going to make this a two-parter. Um and and the tweet was about how if the tokenization super cycle is correct and we do have every asset tokenized on chain who is the biggest biggest benefactor of that. The

the second piece that I want to add to that is if this AI crypto privacy wave plays out and we do have a lot of inference and decentralization baked into that who are the biggest benefactors of that wave? I'm just I'm just curious if you have maybe a couple of leaders in your mind as as these particular cycles play out. >> Yeah, let me answer it in this way. Look, I I think you can on the tokenization thesis and it relates to some of these tools. I I would encourage people to think in terms of phases. Uh this is going to take a long time. The tokenization journey is top of the first inning. Maybe the first pitch has been thrown at at this point. We have a long way to go. I think it will be a story of all of our careers. Uh frankly. Um so

very very very early I think we are in the beginning of phase one and my view is that uh you will be surprised people will be surprised that some of the centralized uh and more let's call it institution centric models see a fair amount of success over the short term and a good example of that would be Canton uh network and uh and I I mean this in a very positive way I think that they will see shorter term uh success u partly because they are able to solve privacy and identity in the same way that our institution ccentric financial system solves those things today. It basically keeps the same model and so it solves some of the the challenges. So I think you will see some of those things

uh continue to gain ground. They're having good traction today. I think that they will continue to have uh good uh traction. Uh the question though is how much upside is there to that vision to investing in the token uh itself. you know, we're we're an investment uh platform. So, ultimately, that's what we uh care about. In a second phase, maybe you will see hybrid uh models of of some uh kind. You know, there's lots of different chains that you could point to, but something like Avalanche, which has both a institution and a a permissionless feature or the Ethereum L2 ecosystem is is a bit of a hybrid uh structure like that. I think we will be in that scenario for a while. And then I see the kind of phase three the ultimate vision as a u as a pure decentralized

peer-to-peer smart contractbased uh financial system where we have actually disintermediated many of those uh institutions and I think some institutions see that sort of roadmap also and that's also why you should expect some of the institution centric models like canton see some success because they don't want to be disintermediated they want to you know continue to control their their own domain And so I think uh investors should think about it playing out uh in that way. There's some uh maybe lowerhanging fruit, let's say, institution centric blockchain technology solutions that are not pure decentralized finance clearly.

Uh and then ultimately over time we will get to the the bigger vision and maybe those things have bigger investment uh upsides, but they may take longer to achieve and there's still some missing tech that we need to build along the way. >> And and Zach, I I just in your own personal view, is there any kind of time horizon that you see these things playing out? Are we talking months to years? Are we talking decades at a time? >> Let let me put it this way. I think Ethereum has um you know at least a couple of years before it is totally ready to onboard um global finance at scale if that's the tool and I think the road map the Ethereum road map straw map uh as it's called today uh in my personal opinion articulates the right

vision uh that you need to stick with some core principles that relate ultimately to trust actually think that's the hardest solve and the thing that Bitcoin and Ethereum do most successfully today. There are platforms that anybody in the world you know today does trust and I think you need to maintain that first and foremost. But you do need to solve uh you know speed uh you know uh and cost and and maybe isolated fee markets things like this and and on onchain identity uh tools you know if we're going to tokenize say uh some of the work that we do some of our products are for accredited investors only you know you have to certain regulatory requirements about who can buy these products you need to have onchain identity tools so we know uh who we can offer these products to and you

need of course to solve uh privacy so I think it's going to be a couple of years um and I think that that's okay. I think that the tokenization of capital markets is a a 30-year vision. And so the the really the big project should be focused on that 30-year vision and not the next three months. >> Yeah. What about the decentralized AI part of the uh of the vision here? Is that a multi-deade vision as well? I know you guys are big bit tensor bowls. What does that actually look like for that thesis to play out? >> We are. It will also be a long story but I my view on this is that uh the time is now to be investing in these assets. Um I you know I think uh you are still at remarkably

uh modest market caps for what can be achieved with these platforms and so um I would say from a investors standpoint you know you really want to be looking now uh at these assets and the other thing I would say is you know the the problem that we are trying to solve is also here uh today or at least it's on the doorstep you know um let me tell the story in in this way we have bitcoin coin. Okay? Because money as a technology is something that's too important just to be left to centralized authorities. It's too risky uh to leave all of the money to uh say the the you know government bureaucrats or or something or some centralized agency.

Our our thesis at at Grayscale is that artificial intelligence will be so important in the 21st century that it's much too risky to have just a centralized uh uh entities uh running all of it. And that is what is happening. all the capital, all the talent, all the intellectual property are coalesing around a small number of groups basically in the US and China and we believe that that is creating risk already. Uh so I would say you know the problem is on our doorstep the time to start investing in these ideas now and it'll take a little time before they are fully fleshed out but I I think it the investment thesis and the the rationale for these tools is absolutely here today. Um you know uh the current administration has called AI this

national defense issue uh also putting digital assets and crypto into that as a race uh with the the global powers that be. Um why is this such a critical piece of of the future infrastructure of our our economy and our country? >> There's a couple ways to answer that question. And I I'm going to give you the somewhat cynical answer u to that uh question u because I I come from a macroeconomics background. You know lots of people come into crypto from different angles. It's a multi-disciplinary uh field. Um you know some computer science etc. I come from a macro background and and came through the Bitcoin door. Uh let's say you know thinking about the imbalances that we have in our economy today and what that

means for capital markets and the the big glaring imbalance in my view is deficits that can't go away because they are very deeply entrenched and bipartisan related to entitlement spending and the debt growth that that creates and what it means for fiat money. Um so you know the cynical perspective of of why there's so much focuses on technologies is that if you can't uh raise taxes or cut sp entitlement spending the only way to solve the debt problem is massive growth. >> Uh and so I think the reason that these things are such a priority is that uh the administration is searching hard uh for growth. Now that is a uh a reasonable response to the challenge.

You know, personally as a voter, I guess I would like to see some uh fiscal belt tightening as well as prioritization of growth, but we can't do that, I guess, in in de facto uh from a um political standpoint. So, the administration is going gang busters for growth. I think that is the reason why you you find where where can the growth be? You got to look for major technological trends, artificial intelligence, public blockchains, those are the right candidates. So, I think they've picked the right things. Uh but I think how we got there is partly a political outcome and the the limits to uh another way uh to deal with the deficits.

>> Let let's say this thesis is correct and and you know we're going gang busters through growth. That's going to be a team effort, right? Like you know the administration isn't going to do it alone. Us as an industry, you know, we all have to join forces like how does this play out? The administration is trying to Genius Act went well. Clarity act a little slower but still you know trending in the right direction. um you were speaking with asset managers. We heard lots of tokenization announcements from New York Stock Exchange, NASDAQ and and the largest institutions and exchanges and venues. Um what is how I guess good place to start here. What is Gayscale doing to support this effort?

How are you working with asset managers to ultimately go gang busters for growth? >> Yeah. uh we are leveling them up from an education standpoint first and foremost and then offering easy to use effective investment products. It's sort of as simple as uh as that. Uh you know it does take a while to get leveled up on crypto. You know certainly uh I wasn't obsessed with Bitcoin the first time I heard about it. You know it took several tries I think for it to totally click you know until you see the matrix and then can't unsee it kind of thing. Just like everybody else I had that experience. our clients have that experience. You know, you need to go through these ideas over and over again uh until it finally clicks and they say, "Okay, no-brainer. I need to build this into my portfolio." And then from an

investment uh product standpoint, there's lots of ways to own crypto. You can buy crypto on exchange. You can hold it there. You can self-custody. Of course, we know all of these things. Um, the ETFs are the easy button uh for institutional investors because they solve all of the individual challenges that that they have around custody, around the cost of trading, around the holding uh cost, um around doing your taxes, around estate planning. You know, I think you know, of course, many of the people that we talked to their u you know, institutions are ultra high net worth. They have a lot of complex estate planning issues that they're thinking about. And so if you're holding say crypto in self- custody, you need to deal with all those uh topics yourself.

The the ETFs are the easy button. Uh and so that's what Grayscale is there to do. Educate investors on this and provide them access to this ecosystem in a way that solves all the particular challenges that they have as institutional investors. >> Yeah. And are they most interested in a particular sector or asset class? Like what is their what is their demand appetite look like currently? Because we're in a bare market, you know. >> Yeah, absolutely. Bare market. Yeah. I the price is down. I I certainly doesn't feel like a bare market to me. I guess I'm too too busy to call it. Let me say I'm not willing to call it a crypto winter. I think crypto winter is both a magnitude and duration uh uh comment.

And I potentially think that evaluations could come back much faster than the market think. So we we will see. But in terms of >> a cold front, >> yes, maybe a cold front coming through or so [laughter] something like the winter in Florida or something. Um but the institutional investors I think it's a very easy answer. You know they are primed to talk about stable coins and tokenization. Uh they're not you know sometimes bitcoin can be a challenging subject in the same way that gold uh is a challenging subject. You know in in my old uh uh life as a a macroeconomist on Wall Street you not everybody's ready to invest in gold either. And so you have to have some of those same uh discussions about a commodity money asset that doesn't pay a yield. you know this sometimes there's that and investors that we speak to are typically

also not ready for Bit Tensor or Zcash but they are primed to talk about stable coins and tokenization because they see it all around them and they see the say maybe the CEO of their own company uh talking about this you know some of these CEOs were at uh the digital asset summit this week and we we can see that effect uh at our clients you know the troops are very activated when the top of the house message uh is clear on these issues so I stable coins tokenization Those are definitely the buzzwords uh today for institutional audiences. Naturally, we we start there and then we help them through some of the other topics. Bitcoin, decentralized finance, um etc.

>> Yeah. What is the urgency right now from their side? Like what is there anything that's driving the urgency of them getting this done? Like what is this? What is driving this? >> Two things. One is the you know the use case uh is is clear and they people want to make sure that they're ahead of the curve. you know, you don't want to be uh uh a late adopter and see your competitors potentially achieve higher returns or improve their business uh case with these tools. The other motivator is price. Um you know uh investors, institutional investors, professional investors are very thoughtful about things like entry points. You know they are not that uh inclined to FOMO. They are much more inclined to be value

investors. And so you're looking at prices that are, you know, depending on the token, 40 to 70% lower than where they were at some point last year. Uh you've seen price stabilize also and and the tokens have been trading very well in the context of tough conditions in other markets maybe giving you a hint that the uh paper hands uh have been washed out of the out of the market. And so that is also creating a sense of urgency is that may maybe the time to allocate is right now uh because you can see the fundamentals prices come down tokens are trading well you know pull the trigger I think that that's the mindset of a lot of investors today >> in in a lot of ways you know Andy and I and the role at large we we see

ourselves as educators as well um you know that that's kind of how we started we you know started learning from people much smarter than ourselves would come in and then we we would learn in public alongside everyone who who watches Um, is there anything that we should keep in mind as you're educating? Are there things that you've learned that tend to resonate with your audiences more? How can we become better educators in this space? You mentioned you start with Bitcoin, then kind of walk through decentralization, some of these different concepts. Anything that, you know, when you see the light bulb moment, you know, how can we help take this message further?

>> Yeah, absolutely. That's a great uh question. I I would say um start from the basics. you know, you can get people accelerate uh their understanding very fast. Uh but I think just maybe going back to first principles is important. We always start our discussions with u peer-to-peer finance. You know, how how how different is it when I give you a dollar bill uh from my pocket and hand it to you. That's a peer-to-peer transaction in a bearer instrument, financial instrument. uh and how different is that how our banking system works with I have to call my bank and it has to call your bank and we have a settlement process you know just making making clear that uh how payments work in a digital sense can be improved with things like a blockchain and and a

stable coin so going back to basics I think is is important uh and and I think there's a tendency of a crypto uh enthusiast to to start with the thing that they're most enthusiastic about maybe that's Micro Strategy's stretch product or or something like that which is an interesting uh a product. Um, but you know, it's very difficult for people to start from there and understand what's going on. So, start from the basics and people will level up quick. Uh, so we try to start with that foundational idea peer-to-peer uh, finance and and people get it uh, pretty quick if you start from the basics. >> Yeah.

>> Yeah. Yeah. You know, on we we talk a bit about the the colliding worlds like the convergence of, you know, uh, this decentralized financial peer-to-peer financial world and, you know, the traditional financial world. In some sense, I I kind of think that's a bit simplistic. I I've kind of updated my mental model towards one that is a bit more of a progression. Uh starting from uh the current narrative meta, which is tokenization uh and and saying, okay, once we tokenize all of these assets, they will end up in these peer-to-peer DeFi mechanisms where things are a lot more composable. We end up with lower latency. We have quicker settlement times. A lot of creative financial products can be born out of these

mechanisms especially once these assets are tokenized then we end up with the vault complex and you can even imagine AI managed vaults how do you how do you re does this resonate with you this mental model is there anything missing that we should fill in the gaps >> yes it does resonate and I think there is something I'd like to highlight here which is um I think the a missing piece that is underappreciated is institution initutional wallets and institutional custody. I mean this is a very simple thing but you know the financial system is about connecting savings and investment connecting the people that have an asset and people that can buy the the asset. So it would do us no good

to tokenize $300 trillion worth of assets and say stick them on Ethereum, stick them on Salana if there were no capital to buy uh those assets. um we will get there on on tokenization but there has to be a kind of harmony on the tokenization of assets and the ability of capital to come on chchain uh so big investors they they buy securities and they hold them in a in a in a brokerage account say today that's how their systems are set up uh for them to be able to receive tokenized assets they need to have wallet infrastructure they may be able to interface with the the blockchain and some of the leading firms I would name check Morgan Stanley as uh one of the Wall Street firms that's

really leaning into this idea. They they get it. They understand that that's the missing piece and they need to build it out and they are putting the investment dollars to work and and building that out. But that's a missing piece. We need to have not only the asset side infrastructure tokenizing the assets built out. We also have to have the investor side infrastructure build out and wallets in my view are kind of a key missing uh piece and and where the investment is going at the moment for the institutions that really get the vision and are trying to work towards it. >> So one one last follow-up here. Three of the largest announcements that I we saw over this digital asset summit week have been these partnerships between tokenization platforms and asset management platforms. Just to rattle off

a few, you had Invesco partnering up with Superstate, you had Onondo partnering up with F uh Franklin Templeton, and you had the New York Stock Exchange partnering up with Securitize. Do you think the biggest missing piece is the institutional wallet complex to enable the buy side of all of these tokenized assets? >> I think I do think that that is the biggest missing piece that the capital is not ready to buy tokenized assets. You know, there's a reason that the most successful category uh has been the T- billill uh the tokenized T- billill uh products is because that's what the capital that was already on chain needed. You know, if you are a crypto startup or a someone with Ethereum wealth, say, and you already had your

capital on chain, what you needed was a safe place to park cash and earn a little bit of yield. And so, it was it was appropriate to start with those products. They've seen incredible takeup because they were delivering uh to the need uh to the investor's need and that investor was onchain capital. Okay, native onchain capital. If we're going to tokenize the world's bond market and to tokenize the world's stock market, we have to get everybody's capital onchain as well. And I I think that wallet infrastructure is actually a key missing piece. There's lots of other parameters and those are the things that superstate and securitize and all these uh uh specialists are are working on u you know the all the regulatory requirements etc. But you know the some of the basic infrastructure needs to come too.

>> We're gonna see a Grayscale prime broker Grayscale custody product here pretty soon. >> We we will see. We are working on a lot of different things. You know, we're an asset manager uh first and foremost. Um and what we're most focused on today, so Grayscale runs both uh exchange traded funds, ETFs, and private funds. And we just want to make sure that investors have access to the best tokens in the best rapper. that that's what we're in and what my team and the research team is most focused on is trying to identify what those things are and getting them to the ETF uh as smoothly as possible.

That I think that's how we can service the the market most effectively uh today. Pick good assets, get them in the right product structure. Um you know, that's a way to for our investors to experience um good outcomes from the crypto asset class. >> Yeah. I mean, I I just wonder if there's going to be a a phase shift here where we've built a lot of these kind of like building blocks in this cold front in Florida here for the last six months. And there's just kind of like this tipping point where all of it comes together. We have clarity coming right like in the bear. These things don't really feel that important. They don't feel like they're really happening on like prices don't react. Um people talk about it for a couple days and it's gone. It's like it's become normal. It's kind of insane how these headlines have

became normal for the industry in a world where you know we would look ahead a couple years back and be like that's insane. Um I I just wonder like where you think we are at in the kind of state of sentiment broader mark broader market and just kind of like what is going to be the drivers to turn this market around? Is it going to be institutionally led? Are we are we waiting for clarity? Is there more regulatory clarity? you know, what's going to drive this market to to turn around in your opinion? >> Yeah, you know, what we're seeing in in crypto um where the price and the fundamentals seem to be out of sync is the most common thing in the world in capital markets. So [laughter] you know I whatever market you used to cover I

used to spend a lot of time on currency markets and I may be maybe think that say Japan is having a great run but the yen may be depreciating for all kinds of reasons because the the capital flows that drive the price uh and the activity that drives the fundamentals are are two different things and they have harmony in the longer run but not always in the shorter run and and this is a a very conventional uh thing. So so the fundamentals are there. So the your question is just you know when does the capital uh come back and I I think it's a macro uh question um you know uh the price of bitcoin price of our assets have been moving in tandem with lots of other things with uh software companies with defense tech stocks with quantum computing companies I think that's an

important thing to say you know it's not I don't think this is a quantum draw down the quantum stocks sold off exactly the same as the price of bitcoin so it's just about risk-taking in capital markets u and so I I think you need to look at macro uh variables. You need to think about um you know is the Federal Reserve likely to rate kite or hike rates? When is the war going to kind of start winding down? You know what are the prospects for the different parties in the midterm elections? These are the things that are going to drive uh risk-taking and and on a broad level. The other thing that I would like to say is I think that there is a very thoughtful debate going on on the uh conflict or complimentarity uh around AI and different types of software. you

know is you know AI is uh the biggest disrupting force in the in the economy uh today and so investors are saying looking at everything in their portfolio and saying is this complimentary uh to AI or is this in conflict uh with AI and I think in this last draw down which partly was AI disruption driven I think that there were babies thrown out with the bathwater you know good assets that probably are good assets and complimentary to AI uh but you know there's a lot of de-risisking in portfolios uh and crypto is one of those things uh so I think what you're going to see in the and I think maybe one of the reasons it's trading pretty well uh lately is also investors saying uh actually this this asset class is complimentary to AI it's you know public blockchains and large language models

are accomplishing something completely different and they go hand inand uh with each other so my answer to this you know what is it going to take for valuations to come back you know I think some of these I would even consider clarity a smaller thing from the standpoint of um valuations in markets I think it's these are macro questions and I would ask you know what is the economy doing what is the Fed doing what is risk-taking in software investing and early stage tech investing doing originally and and how quickly can people kind of come to this realization that public blockchains and AI are complimentary that's what I am focused on um much more so than the four-year cycle uh type of idea now we will see you know the four-year cycle uh enjoyers uh were right uh on the top

okay I think we need to acknowledge that and so you know you're you're supposed to put some weight on that uh concept, but I could see this kind of nature of risk-taking in frontier tech come back much faster than like a four-year cycle analysis uh would suggest and uh I think investors should put some weight on both of those concepts. I I think we could rebound relatively quickly. >> What what what catalysts are are you keeping an eye out for? Is it the end of the war in Iran? Is it >> short short term? That's the biggest thing. you know, look at any uh chart in financial markets, the S&P 500 or anything else um and plotted against the price of oil. you know, markets were

trading very well because, you know, especially things that are closely tied to the underlying health of the economy, industrial stocks, equally weighted S&P index, EM stocks, uh, you know, uh, industrial commodities, all that stuff was trading great because the economy is is doing well, performing well, and it was interrupted uh, by a massive spike in oil prices. Uh, so we need to kind of move away from this situation. um you know I I don't know that I want to be uh yet another person uh to become a geopolitical expert in this uh period.

Uh so so we we will see how it un unfolds but um uh but I think that that's the single most important um short-term uh factor and then the next question is going to be Kevin Worsh's um confirmation hearing and that that's coming up quick. Um I think maybe that this is also underappreciated. you know that there's a lot of confused takes on the debasement trade and and the Federal Reserve. Um I think it is the case that something that was a headwind for our asset class among other asset classes is that despite what the price of gold and the price of silver were doing in January, they they were becoming a kind of uh meme trade essentially. From a fundamental standpoint, the debasement thesis took a step back in January. uh meaning like the a couple of things

happened that shored up the Federal Reserve's independence and shored up the likelihood that we have decent inflation outcomes in the US and there were two things Kevin Worsh being named as the Federal Reserve chair to to follow Jay Powell and a Supreme Court case uh that seemed to suggest oral arguments in a Supreme Court case that seemed to suggest that President Trump could not remove Federal Reserve uh Governor Lisa Cook. These two things shored up Federal Reserve independence and probably took some air out of the debasement thesis. Now, Bitcoin realized that right away.

Gold and silver are realizing it with a lag. Um, so I think that we're going to go back to those types of questions. You know, what kind of central banker is Kevin Worse going to be? That that's going to be an important question after we get uh hopefully uh over the military conflict here. So on on one hand we have like you're saying the deflation of the debasement thesis kind of you know consolidating a bit but on the other hand you know we're going gang busters for growth and and and these two things are fundamentally at odds. How do you reconcile these two forces? >> Yeah I I think growth is primarily the thing that investors should focus on. I mean just sit back and ask yourself if we are in a booming economy, if industrial stocks, uh, if EM stocks, you

know, if this stuff is taking off and at the same time that stable coins and tokenized assets are, you know, deepening into the financial system, is the price of Bitcoin and the price of Ethereum just going to continue to slide into the end of the year? I personally don't see it. Uh so you know my my own investment uh my own positioning in markets today my own personal risk-taking in markets today and the advice that we give to investors is that we have a solid economy um and that assuming that we can get over the military conflict we will be back to that uh pretty soon and I think risky assets will trade well and I think crypto probably will participate in that and it it won't uh uh continue to

dribble lower just because of a four-year cycle concept. I think there will be a bid uh for the assets. >> Yeah, I think that's probably the right take on the four-year cycle. Like it's clearly the right it's clearly happened now with the top, but it's going to be a shorter like we're in and more of like these like speculative cycles uh that are shorter and more kind of defined by a maturing asset being Bitcoin. Like even if you look at this like four-year cycle run, the way that the chart moved looked so much different than previous. You can expect the the kind of bare to be different as well. shorter, you know, is probably high highly likely.

>> Yeah. The four-year cycle. Look, these are important ideas and I I absolutely respect uh you know, the concept and many of the people that uh uh think about the price of Bitcoin in this way. But, you know, let's recognize that Bitcoin has been correlated to lots of other types of software, for example, other types of frontier tech. Or are we saying that those are also following uh the four-year cycle or is there other things that are intersecting with the timeline uh that are macro related or retail speculative risk-taking uh related that may just happen to be coincidentally uh coinciding with the the four-year Bitcoin >> cycle. Uh Zack coming full circle to you know your event at the Four Seasons

earlier today. Um you know you were speaking with asset managers. We we had a guest Jeff Park of Pro Cap. uh he was on the show yesterday and he was talking about the radical portfolio construction theory um how you know the current 6040 stocks bond split is a bit antiquated uh he he pontificates basically you know 6040 60% should be betting on on the health of the economy long uh the current financial system 40% should be what he calls resistance assets uh kind of you know hedging or betting not necessarily against but on potentially alternative alternative uh asset classes and and alternative to the financial system. Um I'm curious what uh percentage of portfolios you're

recommending to asset managers they they put into digital assets and and if you resonate with this radical portfolio construction theory if you see it as an alternative asset class or generally what is your portfolio construction look like given everything's in flux all the time interest rates wars these sorts of things but you know at an equilibrium what what is your portfolio construction A great question. I have huge respect for Jeff's ideas on this. We were honored to have his partner at ProCap, Anthony Pompiano, at our event today. So, you know, we know this team well. Uh love the work that they're doing, including the the recent uh acquisition of a AI related AIA related uh financial services uh business. So, very cool

stuff and lots of cool ideas on on the um portfolio construction concepts. Let me say a couple things. You know, first there's an academic answer to this question and and we start with that with our clients because that's how they approach these things. They think about portfolio construction optimization in a particular way. They use particular types of models. So we use those models to show them what uh happens when you include Bitcoin and crypto in those types of portfolios. And the answer is 5%. That's sort of the academic uh answer. uh and then we you know talk with our clients on how do they take risk, how do they think about how the world's going to progress uh etc. That's the academic answer. Um I I find myself agreeing a lot with uh Jeff and um how I would articulate the story is you know

there's a lot of macroeconomic uncertainty that that's really my background you know applying concepts from textbook macroeconomics to uh financial markets and there's a lot of uncertainty there's uncertainty about inflation uh around growth and how it will be distributed uh in the economy uh you know uh within the US economy and across the US and the rest of the world what will be the role for the dollar uh etc. How effective will certain other types of alternatives be? You know, it's been a great run for things like private equity, private credit. Are those still the right alternatives or do you want to uh spread it around? So, the academic answer five 5% my own view is um you should be thinking hard about uh really distinct bets uh in a in a portfolio and

and I think Jeff's work speaks to that. I'll say one other uh thing though. Um, you know, people approach risk-taking uh in lots of different ways. Um, uh, my own personal uh investments uh tend to be driven by the things that I have maximum conviction on uh that I think have the best return uh opportunities for the uh uh for the right amount of risk. Um, and so, you know, I own way more uh than 5% uh uh crypto uh allocation because um yes, I understand that that that's maybe the you know, that that's the right zone for most people to to be in, you know, that are running a diversified portfolio. Um but I I really believe in the what we're doing here and um the fundamentals, the

the value of of these assets. My team has spent, you know, more time than almost anybody else thinking about these questions. And we have deep conviction in where things are going. And so I'm willing to make a much bigger bet, I think, on the asset class than uh than the average investor. >> So are we. We're uh we're right there with you, Zach. >> That's right. >> Yeah. Um man, this this has been incredible. Um I don't have much else, Zach. I'm just curious, you know, just a last word on Grayscale and what we can expect over over the coming months. >> Yeah. So, you know, Grayscale is an OG in the space. You know, we've been at this since 2013, which is, you know, very early days in uh Bitcoin investing.

Uh Grayscale has been a pioneer in the in the space up to this point, and I expect us continue to be a pioneer. You know, I think some uh fund managers, you know, may look at Bitcoin, may may look at Ethereum. you know, we are much deeper down the stack um uh in in very interested in ideas related to to privacy assets like Zcash, very interested in decentralized AI, open source AI, assets like Bit Tensor. We're going to continue to, you know, look at everything uh in the space and try to surface the best ideas for for our investors. I think that that's what people can expect from Grayscale.

Wonderful. >> Appreciate your hard work and educating the community at large. >> Yeah. onboarding large institutions, retail folks, etc. >> I love what you guys do. Fan of the show, first- time caller, longtime listener, as they say. Delighted to make my first appearance at the Nest. >> Thank you so much. Yeah, >> ladies and gentlemen, we will be up next with David Chamis. We're going to take a super quick break. We're going to hang with Zach for a bit and we'll be right back. Hey,

hey hey. down. Okay. Get out of here.

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down. Okay. Get out of here. You know,

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You want to be with me? Ladies and gentlemen, we are live from the tokenization tower. David Sheamus, welcome to the nest. >> Nice to be here. >> It's good. Not a bad view, huh? >> It's pretty awesome. Yeah, it's a great view. >> You're a a local New Yorker, New Jersey. >> I am a New Yorker. Uh I live on Long Island, town called Sands Point, but I've lived I lived in the city for 11 years. Um, cool.

>> And I grew up on Long Island, so I've been a I've been a New Yorker my whole life. >> Great, man. Great. Well, I'm I'm sure you've been to the Empire State before. >> I have. >> Obviously not here, but it's good to have you. >> It's good to be here. My first job was at Solomon Brothers at Seven Wheel Trade Center, one of the buildings that went down, of course. >> And my view was exactly the faced exactly. So, it's kind of cool to face the opposite direction. >> Yeah, man. Great. Good. I mean, what a what a couple of weeks for the world, for for markets. um CEO of Hyperlquid Strategies. David, give us just a quick update on your progression here into Hyperlquid Strategies. I think a lot of our audience and folks will know you, but uh how did you get started and what

is the state of Hyperlquid Strategies? >> Yeah. So, so I think everyone knows or at least some people know Hyperlquid Strategies. We're the largest DAT for Hyperlquid. Uh we own something like 18 a little more than 18 and a half million tokens right now. Uh that number will be growing over time. Um, and we got involved in this about a year ago, a little less. Uh, so my career has been almost entirely financial services, private equity. Uh, completely tradi with one exception, which I'll get to in a second. But, um, and and I'm the I'm the co-founder of a firm called Atlas Merchant Capital. Bob Diamond, the former CEO of Barclays, is the other co-founder. Uh, he's the CEO. I'm the CIO. Um about you know call it 10 months

ago we got turned on to Hyperlquid by some friends of ours partners of the firm and the real argument they came to us with is that the world probably doesn't need another Michael Sailor knockoff >> right Bitcoin probably doesn't need another DAT but look at hyperlquid it actually kind of needs a that the it the world needs it there's a scarcity value um we can go through this in more detail if you want, but hyperlquid at the time and even still now um is not easily traded in the United States. Uh it's only really traded on chain. Um and for people that look at it and it's sort of

equity- like features that it has, and again we can get into that. Um there's a real need for a DAT. there's a real need to be able to simply buy the token or the equivalent of the token in an regular way equity account on your Fidelity or Charles Schwab or whatever or Robin Hood. So, we spent kind of May and June sort of investigating that and really figuring out if that was true and how we felt about that. All the while we learned more about Hyperlid, got ourselves more excited. Um, along the way, we had heard through some, you know, reasonable sources that Paradigm was looking to do the same thing. we got introduced to them. It was kind of a match made in heaven pretty quickly. Um the the things we lacked they were

really long in and the things we they lacked we were really long in as far as partners together here. So we went from you know sort of shaking you know meeting for the first time to shaking hands in I don't know two weeks, three weeks, not not a long period of time. Um, and we set out in mid June to raise $300 million for this idea. And by early July, we announced a deal of $888 million. So obviously a very successful fund raise when you're almost triple what you expect. Um, and I think that that proved to us at least that others besides just us believed that the world needed a hyperlquid debt. Uh, we closed in December.

You'll notice a long gap between Sonni and closing and the re and it was a different kind of structure. Um, lots of people contributed hype tokens for us to us, not just cash. We did that in a tax-free exchange. I'm not going to bore over the details unless you want to hear it. But the big difference between us and most other debts is because we had that long period of time between signing and closing. Once we closed, we didn't have that crazy like unlock where the stock gets clobbered because all these people, you know, get to sell their shares. the day we closed, everyone's shares were already fully tradable and that drama didn't happen. So, we never had to go through that.

>> And conveniently avoided the what is now in hindsight the the the top of the previous market cycle as well. >> Yeah. You know, sometimes it's better to be lucky than good. [laughter] Um, look, we uh something like 2/3 little less 62% or so of our capital that we raised was in hype token and that hype token was priced last summer. So that was a higher priced frankly than it is right now. But whatever 38% was in cash and that cash we really didn't start putting to work uh in hype tokens in a serious way until kind of early January.

>> Yeah. >> And so that brought our average token price down a lot. >> Yeah. Our average token price is about where the where the price is right now. >> Yeah. >> Um which >> 39ish or so. >> Yeah. It's that that neighborhood. U so we feel pretty good about that versus pretty much every other debt. >> Yeah. For sure. >> The other thing versus ever the debt or at least I shouldn't say ever that most ever the debt is um you know the day we closed there were a lot of people on crypto Twitter expecting us to you know spend whatever $350 million to buy hype in 48 hours.

>> Of course. And had I done that, I would have been a hero on crypto Twitter for 48 hours. >> And then we [clears throat] would have had a problem, right? >> Yeah. >> We' had no money left. We probably would have bought at a higher price than we ended up buying. >> Yeah. >> Um so we've been much more judicious, much more thoughtful. >> Yeah. >> Um we have this on the website, so these aren't any secrets I'm saying, but we probably have give or take, you know, a little bit over 100 million in cash still left. >> Yeah. >> Um it's nice to have that flexibility. Uh we're seeing DATs these days doing a lot of unnatural things because they're so short on cash.

>> Yeah. >> When I say unnatural things, I mean like I mean a lot of things, but one example is like selling calls. >> Yeah. >> You know that you mean if you're if you're a debt, your job is to be giving upside to your investors. >> Selling a call, you're literally giving away some of that upside so you could keep the lights on. Yeah. >> Like that's exactly what we we didn't want to be doing, >> right? Yeah. I feel like the hype liquid thesis has evolved a lot as well as since you started. Yeah. >> Um I mean on the numbers here for for the DATs, yes, there are tons of DATs that are underwater. They're tokenizing jet engine shares, you know, being forced sellers, uh you know, doing crazy option strategies. There's just a lot.

>> Yeah. >> There. And I I I'm not a proponent of what's happening. I don't know what's going to happen and I don't even want to get into it too much, but I do think that there's something to be said about being the one DAT that is above water or at least at at the margin, right? Um, and so >> glad that that's the case and hope that that obviously continues to be the case. On the thesis side though, Bob, >> feel like when you started it was, okay, let's just have this revenue generating equity-like token. It makes a bunch [clears throat] of money on chain. There's a lot of these per contracts, these DGEN kind of traders. They they trade with size with high leverage. And this token and this exchange is just a really money a money-m, you know, it's a machine. It's a true machine.

[clears throat] >> Over the last couple of weeks, especially post HIPP3, which we can definitely get into. Yeah. Hyperlquid has gone from the crypto exchange for DGens to the place to do onchain price discovery for any asset in the entire world. Yep. covered in Wall Street Journal, covered in tons of mainstream media. How has this affected the way that you guys are talking to uh mainstream media, to your investors, to clients, to people that are asking about this? Like what is your current, I guess, hyperlquid thesis now, and how did that evolve since it started?

>> Yeah, I would say a couple things. Last summer when we looked at this sort of from a valuation point of view, because I can't help myself, that's how I look at everything. When I looked at it from a valuation point of view, I sat there and said, um, okay, this is a really good crypto exchange, uh, it's growing nicely, really nicely. Um, and if you look at sort of traditional valuation metrics, it's probably relatively underpriced just as a crypto exchange. Um, and then, you know, last summer there was no HIP 3 markets yet. Um, and we thought generally speaking the market wasn't giving them any value for HIPP 3.

That's kind of how we felt about it um, last summer. Um, I think once we did the deal, you know, we've been yelling and screaming about HIP 3 to anyone that asks. >> Yeah. >> You know, you know, explaining to my parents what the hell HIP 3 is is not easy. Um, but you know, I still think the market had a little bit of a of a, you know, I'll believe it when I see it attitude >> because there's a lot of people in crypto running around talking about how they're going to attack the massive TAM of bringing real world assets on chain, right? Like on one hand, we're all spend a lot of time on crypto. It's a great thing. We all love it. The total market cap of every crypto combined, I think, is still less than like Nvidia's market

cap. >> Yeah. >> Right. Right. So like who are we kidding? There's still, you know, the TA of other investable assets is just so much bigger. So there's a lot of people running around saying they're going to do this on chain, they're going that onchain, they're going to figure it all out. And you know, with a few exceptions, it hasn't much happened yet. And I think the market saw HIP 3 or Hyperlid doing this as just another, okay, that sounds great, but I'll believe it when I see it. Um, if you look at hype's price, you know, from the time we did the deal, which was uh we announced it in in early July until, let's just say mid January, it kind of moved pretty close to Bitcoin and Ethereum. Probably a little more beta because it's smaller and but but it, you know, the ups and downs looked very

similar since mid January, which is when the HIP 3 thing is really starting to to be real. Silver was January and oil was February kind of. >> Yeah. you know, Bitcoin and Ethereum went one way and Hyperliquid went another way. And it's really obvious when you look at that graph. >> Yeah. >> And I think um I don't blame the market for saying that HIPP 3 stuff sounds great. I'll believe it when I see it. >> Uh but when they saw it, they're starting to believe it. It's still small, right? I mean, it's >> I think it's like 1.4 billion in OI or so, >> something like that. I mean, the numbers look great, you know, considering it was zero in November, >> right? Um, but again, compared to the compared to the TAM, uh, the size of all these other markets, it's it's still

just scratching the surface. Yeah, >> I think that um, you know, I wish we weren't at war. Nothing ever good at being at war. Um, that being said, the fact that the war kind of broke out on a Friday late afternoon when the markets were already closed and the only place to trade oil for the next whatever 48 hours was on Hyperlid was pretty amazing. Yeah. And the world definitely took notice of that. >> Yeah. >> Um and that's it wasn't just that first weekend. There were a few weekends again like when you're in when you're in war, right? Like these wars don't take weekend breaks. Um and a war that is so you know that oil is such an important part of it. You know, like people want liquidity 247. And that's sort of the point here. You know, um you know,

people tra people have gotten you in the trady world, we've all gotten used to, you know, 9:30 to 4 p.m. >> Yeah. you know, trading with T+1 settlement. And then it's like, hold on, guys. Look over here. You got 247 trading with instantaneous settlement. >> Yeah. >> All on chain, all auditable, all all in the public. Like, what are we talking about here? >> Yeah. Part of my thesis as well that it seems like that you share here is that this kind of ever growing instability and volatility, it's kind of just like the law of entropy, right? Just going to keep accelerating more and more randomness in the world. In the Trump administration, it feels like he just turned that light on. It was just like, let's just accelerate all randomness to to the extent that the headlines these

days are just something that you would be used to seeing on a monthly or quarterly basis is a weekly or daily basis. I mean, anything from war to stock market prices to big acquisitions to other shooting. It's insane. >> Yeah. >> And so the thesis of the kind of like the hyper financialized world takes you into a place where there's going to be a stronger demand to speculate 24/7. Yeah, >> just because there's stuff that's going to happen that's going to move markets more. >> Yeah. >> Um >> it's also it's not 24/7 is important, really important. >> Instantaneous settlement is really important. It's not only that, right?

Like the two of us are sitting here in the Empire State Building. Like it's really casual, really easy to say, well, we can trade on chain or we can trade in our Charles Schwab accounts. Like what's the difference? You know, there are a lot of people in a lot of places in the world who might want to go long Tesla or Nvidia or whatever. And it's not so easy to do. You know, if you live in Batswana, um, which is somewhere I visited last summer, so I choose them. You know, it's not so easy to just go open a Schwab account and buy some Tesla shares. >> Um, and you know, again, we take that for granted sitting here in New York.

>> Yeah, of course. I mean, the access part I think is big, but I think my point was just more of a like in in the Western world, it's just this accelerating desire to speculate. Yeah. On on different types of assets. And I mean, uh, Trade XYZ had that deal with the S&P 500. They were a co-host of our uh little uh happy hour last night, SP Global. They have a you know huge product suite and Yep. >> So they actually gave an exclusive license to trade XYZ to trade uh the S&P 500 per. >> Yeah. >> Do you think that's another meaningful step or is commodities going to be more heavily traded on Hyperlid?

>> Look, I I think that's a huge step. We know the trade XYZ's guys well. They're very impressive. Really impressive. Um I would say you know when you're S&P the company right like the most valuable asset those guys have is their name >> right and that that that name that index is worth so much obviously and that is something that is a reputation that they've that they've generated and and and nurtured over many many many years and when they put their name on something they do not do it casually right they take that really seriously that mean the The fact that they allowed this means they did serious diligence on hyperlquid. Uh they did serious diligence on trade XYZ. Um they are

highly confident of two things, right? One, trade XYZ and Hyperliquid by extension are legitimate businesses that are not fly by night, that are not here today, gone tomorrow. These are people they're willing to partner with. >> Um and two, they're making the point that this is the future, >> right? Like I don't think trade, you know, I don't think S&P is doing this for, you know, whatever a fraction of a percentage of the of volume that this might get, you know, the first day it came out. You know, this is because they they're seeing the future and the future is on chain and the future is hyperl.

>> Yeah. And so kind of more on the on the nose here about expectations, uh, we had Santiago, uh, a former Parafi investor, now founder of a company called Inversion. He he came on the show. He basically said that he's kind of bearish on tokenized equity trading relative to tokenized commodity trading. Uh for whatever reason, he anticipates the volume on HIP3 to be stronger in the commodities area than in this product. Do you agree or or do you disagree? I >> I'm not sure. Um on one hand, we're seeing it live now with things like oil.

Um and I don't know if you made this argument, but I'll make it I'll make another point. you know, commodity traders, you know, are certainly very used to trading in derivative form and trading in futures form of one another. So, that's not that's not new to them. Um, on the other hand, um, you know, there are a lot of people that trade equities. It is a very huge uh, addressable market. Uh, there's much more retail trading when it comes to regular equities. the point I made before about access about non- US or non western country um that factors into um as well I I I I if I had to bet for the long term I would take the other side of

that bet with him. >> Yeah, >> maybe we'll bet a beer or something if he's interested. Um but you know certainly like I haven't looked at the numbers yet but like for the month of March he certainly might be right. Um I just think for you know 2030 or 2035 equities are pretty big. >> Yeah. >> Uh the other thing I I talk about a lot >> is you know you look at something like Robin Hood >> a a big chunk of their revenue a decent part of their business more than decent part of their business are people trading options and you know quite short-term options. Um, I personally think the perk form in a lot of ways is a much better product, a much better contract for retail people to be trading than a vector zeroation gap or

>> I just think you know first of all um when someone tells you let's just say you and I are looking at an option and let's say that option has a month to go just making up numbers here before before the exercise date and the premium goes you know from whatever ever $2 to $3 right now. >> Yeah. >> And I say to you, explain to me why. And the answer is, well, in other words, the stock price that didn't change, strike price didn't change, time didn't change, but the premium went up a lot. And the answer is, well, V went up a lot. And like, it doesn't take long for that conversation to become very complicated.

Yeah. >> And something that requires, you know, some serious people with serious brain power to really unpack. And you look at like any of the big investment banks, without a doubt, the highest IQ group of people at those places are the equity derivatives people. Yeah. And that's who you're on the on the other side of when you're a retail guy trading options. >> Whereas a perp like you understand the math. It's kind of easy, right? You're you're the you know the the whatever we'll talk about whatever company now Nvidia is at 180 whatever it is right now and you do it with five times leverage whatever the whatever you want to do. you know exactly the level at which you get taken out. There's a funding rate. You can monitor that. Like >> nothing's simple. Trading with leverage >> might not be advisable, but people do

it. >> Yeah. >> Um none of it is easy, but I think it's a lot easier to understand the basics and the mechanics of a perp than of a of a call option. >> Yeah. Yeah. I mean, I totally agree. I mean, it's it's a it's a massive learning curve to understand uh even even pers are a learning curve, but options is is a different world. And I saw a stat that there was a massive increase in the amount of zero date options this quarter or it was either this quarter or this past month than in the previous like for for like years on end such that the amount of volume is coming on zero day options like options that that open and close in the same day which is like super high leverage super high risk.

>> Yeah. I don't know the number off hand but a high a more more a higher percentage than you'd think of Robin Hood's revenue are zero day options. Exactly. >> It's pretty wild. >> And they're doing four billion I think in revenue or I think it's either topline or or bottom line per year just from options. >> Yeah. >> Yeah. >> Yeah. It's wild. >> And it's all these kind of like basis trading and hedging and they kind of trade with their users etc. Um let's talk about the TAM here. Like if we're going to, you know, the house of all finance right? >> People are calling for $100 hype, $250 hype. We start to get valuations that get like really quite big. I mean Ethereum is trading around $250 billion valuation today. Um what what's the TAM in your mind for this uh investment? How

do you see the growth of the protocol and how does that [clears throat] reflect and hype the asset? >> Look, I would say the bullish story is really easy, right? It's the crypto part of Hyper continues to grow. It continues to take market share from the Binances of the world. Uh we all saw how how sort of hopped up CZ has been particularly like last fall over hyperlquid. Yeah. Uh so people you know serious people in crypto are feeling that sort of pressure on the regular way crypto side that's there the real world asset side there you know any asset that could be priced with an oracle price could be brought on hyperlquid you know onchain.

>> Yeah >> that TAM is unbelievable. Um, as I said before, I think the market generally has a show me attitude. You know, I'll believe it when I see it. I don't blame people. Um, hip three is happening right now. Hip four, I'm sure you've seen, is coming out. Hip four is prediction markets, which is about, you know, the most interesting, exciting thing people love talking about these days. And it's options, which we were just talking about a second ago. It can even be used for insurance, which is like my old stomping ground, what I've been doing for 25 plus years. Um, that's also another massive town. Um, and if you believe all those things and you think the the the the bullcase here is really easy and there's a lot of room to grow.

And if you value this the way people value Ethereum or people the way people value Salana, like the number is we're nowhere near the number that it should be at whatever it is, $40 a token right now. >> Yeah. >> You know, there's a bare case too, right? The bare case is um it's not traded in the US. there's still a tremendous amount of regulatory uncertainty as what's going to happen in the US. Um that probably I don't think there's something that can happen regulatory that'll kill this thing, >> but it could certainly slow it down. It could certainly create opportunities for competitors that might not be nearly as good but somehow better positioned regulatory maybe.

>> Yeah. >> Um so so and then look in in crypto as we all know in any in any financial services business competition is real right. There's no such thing as true franchise value in financial services because people just move to the best priced, highest liquidity, whatever, you know, they can do of any in any business. Um, so you know, competitors show up all the time. Yeah. >> Four years ago, no one would have never heard of hyper liquid. >> Yeah. >> So, so like anything there's a bull case, there's a bare case. Right now, that equates to $40 a token. >> We think that's, you know, there's a lot more upside than downside and that's what makes a market.

>> Yeah. there's um a new kind of policy division as part of the Hyperloop Foundation. Jake Travinsky is leading that. Uh he's doing a lot of work there on bringing uh you know positive regulatory action and ideally like no action letters and these types of things into hyperl and obviously the hyper or hype EVM environment. Any rumblings from that? Anything that you can share about progress or just anything that is happening like like what is what is going on there? because I know that there was a good bit of tokens allocated to that. I think token holders will want to get a bit of an understanding of what's happening.

>> I was with Jake uh less than two hours ago. >> Cool. >> So, there you go. Um Jake is excellent. He's putting together a really good team. I think it's really simple that it's obvious there's a lot going on in Washington right now around crypto. >> Um that's good and bad, right? The good, you know, there wasn't a lot going on for four years during the last administration. Um, so I don't think Hyperlid thought it was all that important to have direct representation in DC because nothing was really happening good or bad. They were kind of had their head in their sand a bit. Um, there's clearly a lot happening right now. Um, the the various legislation that's supposed to that's the Clarity Act and other things. There's both legislation from Congress. There's also

regulatory actions from the SEC and the CFDC. And I think it became more and more obvious as 25 rolled on 2025 rolled on that there were some things that you know hyperlquid was getting sort of free representation from other crypto >> policy people that where they were but there were other places where you know their interests were different you know hyperlquid interest and Coinbase's interest are quite different when it comes to a lot of stuff in DC so I think I think Jeff and the team >> pretty much realized they needed someone on the ground. They needed people that on the ground. I think it was a very good decision. Jake's an excellent choice >> and he is all over this >> and um like

>> you know it's hard to predict what's going to happen anywhere. It's really hard to predict what's going to happen in DC. I was at a conference in uh November where a very senior um you know wellplaced congressman said to the room that he is absolutely 100% certain the Clarity Act will pass by the end of the year, end of 2025. Here we are. So that's what 100% certainty means in Washington DC. Um but you know whatever gets passed even if nothing gets passed whatever happens with the SEC and the CFTC and some a lot will happen there you know having a competent team on the ground specifically worried about hyperlquid was the right decision.

>> Yeah. >> And I think it's it's tokens well spent. >> Yeah. I asked that because I think I mean you laid out the bare case and I think there's a couple like pretty clear risks to this thesis. one being regulatory uh competition I think in the space is less I mean there are some other really solid per sexes but I think this is going to follow like a 40 30 20 kind of dynamic or maybe even 40 2020 something like that as as far as volumes and kind of how that scales maybe even more skewed in terms of hyperl in the power law or not um is there any other tail risks that you have that you have in in mind for investors here who are holding hyperlid and looking at this and trying to understand just really everything that that they need to know

on on the risk side. >> Look, when it comes to risks, you know, I'm a private equity guy. I'm very good at putting together risk sections of uh of investment memos. You you can come up with a million risks. It's endless. Exactly. Like >> um this is a technology business. Yeah. >> You know, this is a technology business that's built for 200,000 transactions a second. >> Yeah. the company has 12 employees um and you know six of them or seven of them development side like things can go wrong and I'm not looking to like freak anybody out here but like of course there are risks like this is this is equity style investing uh where you think you're getting equity like upside um it's not a it's not a good government bond

>> uh so there's definitely risks um and it's impossible to predict the future u but we think with a lot of work and a lot of thought and comparing a lot of things we've done in the past. Uh we think the upside versus the downside here is just a really really good thing. I didn't mention this before. Um you know as a as a you know we our firm is a bit over 10 years old. We've done close to 20 deals. I spent 15 years before this as the first employee at JC Flowers and Co. the private equity firm. I've done a bunch of many many many deals there. Um only I've only done one thing in crypto before this which was circle.

We invested in that in, you know, in the sort of early 20s. We were the spack that was going to take them public. >> That didn't get done obviously. Thank you, Gary Gendler. Yeah. >> Um but, um, we got a sort of consolation prize by investing along the way. >> Nice. >> Um, I bought some Bitcoin in like 2015 personally. Yeah. >> Should have bought more. >> Yeah. In case [laughter] >> you didn't know that. >> Yeah. Yeah, but the point is the the >> the vast majority of my experience and Atlas's experience is not on the crypto side, it's the side. And I think that's part of what what when I told you we we partnered with Paradigm, that's part of what I think part of the part of the attraction and the was between us.

>> Um I think they wanted this to sort of look and feel like Trafine. I think a big part of our job as the dad on Hyperlquid is to be sort of spreading this gospel, not just to guys like you and your viewers who are all probably pretty >> crypto knowledgeable, but we're talking to people all the time. I mean, literally, I had >> three of these this week. Yeah. With sort of investment banker types. Yeah. >> Uh um all over the place, senior people, you know, let me tell you about Hyperlid. They've never heard of it. They have no idea.

>> Um let me tell you what a purpose. They've never heard of it. They have no idea. And that is a big part of our job. >> Yeah. Yeah. Yeah. Um >> the the explanation of a perp is something that I guess I didn't anticipate just being so I mean I was trading pers in 2017 just like you know what I mean? Just >> um what you know you know who invented pers? >> Uh Arthur Hayes. >> Well he invented crypto pers. >> Do you know who invented the concept of an actual purpose? As far as I understand it and I think I learned this from Wikipedia was Bob Schiller who is a professor at Yale. Uh he I took his class in the spring of 1995 when I was a senior. Uh he's the one that that coined the phrase irrational exuberance.

>> Really? >> Yeah. And uh he came up with that idea obviously not about crypto in the 90s. Yeah. >> It was about but an idea of sort of less liquid but priceable assets >> to be able to trade liquid and and leverable markets. And I think the idea kind of sat on a shelf >> until as far as I know, Author Hayes picked it up and said, "I have an idea." >> Yeah. >> Pretty cool. >> Yeah. Is the is the questions that you feel from these kind of more institutional types, are they very much like like what's the revenue, what's the fees, what's the business? Is it like who's behind it? Is it is it like like what are the main questions?

>> It's all the above. >> Yeah. >> Uh it's all the above. Yeah. Um, but generally speaking, I'll start the conversation by saying Hyperlquid's a group of people had been 11 people that just went to 12 recently. They've never taken any third party capital. Um, they've been around for just over three years and there's close to a billion dollars of free cash flow coming out of this thing. >> Like that's really impressive. If you just stop right there, that'll generally get people's attention. >> Yeah. And then you unpeel the lots of things to unpeel and why we're here and why we did this and what it all means and what the future is. And again, it's an easier conversation having now >> having having now now that the Wall Street Journal and Bloomberg and EFT

have reported on things like oil and hyperlid like now there's at least someone says, "Oh yeah, I did hear about that. I read that over the weekend or whatever. Tell me more about it." >> Yeah. >> And again, it's the same point I made before. It's a show me kind of market, right? You know, the people have heard a lot of cool stuff that crypto is going to do to revolutionize the world. Some of it's happened. A lot of it hasn't happened yet. Some of it might still happen, but people want to see it, you know, in real life. >> And so, are these investors looking to buy like perr or are they like going more direct on the rock? >> I'd like them to buy purr. >> I mean, >> Who wouldn't, right?

>> Generally speaking, um, yeah, the these are people. Look, it's all the above. our job our you know we're we're talking >> you know we're talking to conferences and not just crypto conferences. We want to be in front of sort of equity financial services conferences. We're doing stuff in the press. We're talking to lots of investors. We get on investor calls and there's a wide range of knowledge here. >> And the investors we talk to who are super crypto native and are already trading on a DEX like they just want to hear our perspective and maybe they'll buy some more hype or maybe they already own Hype or whatever. But we talked to hedge funds that are very sophisticated equity long short guys that have never bought crypto before >> that um you know would probably pretty easily be able to set up an account to

at Coinbase or ever to be able to buy crypto but the idea of them buying something on a DEX is just not happening anytime soon. >> Yeah. >> And you know when they look at buying our stock you know at or around one times MNAB they're like well that's that's an easy decision. Yeah. Like I can make my compliance guy nuts for the next four weeks. Yeah. >> Or I can pay, you know, one times MNAP for your stock. That's an easy choice. >> Yeah. Yeah. Yeah. Um question on the stock side. On the actual company side, as you mentioned, a lot of these other treasury companies are kind of open up new lines of business or like uh adjacent uh kind of quests in an effort to effectively figure out how to rectify the situation of kind of buying the top more or less. Yeah. Um, are you guys

doing anything other than just buying Hyperlid, holding it, using the spare cash to buy more, and just focusing on kind of like spreading the gospel? Like, is there anything else? Are you guys staking it? Like, what's the >> Yeah. So, the answer is definitely yes. >> Okay. >> Um, I would say though that when you tell crypto people this stuff and you tell crypto people we're going to do things, you know, if you tell it to them on a Thursday, they expect to see it up and running the following [clears throat] Monday. Exactly. Um I tell you I will tell you we are thinking about lots of things. I'll give you some examples.

>> We are thinking about it in my own trad. >> You know we're careful people. Yeah. >> Um >> earning effectively earning more yield than the state. So we are staking by the way. We're staking more or less 100% of our >> around 2% yield or something. >> A little more but not much more. Uh we're staking 100% of it or awfully close to 100% of it. And uh that is a no-brainer. Um the question is what can we be doing with our tokens to be getting that that yield higher than just a straight staking yield. We're looking at a lot of things. One thing we've talked about publicly already is I think it's very natural for us to be a validator ourselves on the hyperlquid network.

>> So we're going to we're in the process of figuring that out and we'll do that. That's not going to move the needle a lot. You don't make lots and lots of money being a validator. You make some money being a validator. Um but there's lots of other ways we're looking at. We had, I don't know, three or four meetings along those lines today at the conference. You know, today's the uh the the block works conference in New York. Um and you know, if if we announce, I don't know, two or three of those sort of things in 2026, >> I'll be happy. Uh I don't have to announce 10 of them by Monday to be happy. And that and that's kind of how I feel. So, we're going to we're going to work hard to get that yield above that, you know, staking yield level. um you

know when you're dealing with an underlying token that's 100% give or take volatility evolve >> you know sometimes people say well why even bother what's the difference whether you're earning 2% or 4% I think it matters I think in the long run in the long term you know it matters to your MNAV >> and I think our job among other things is to get that MNAV up over time um you know we were sort of solidly trading at kind of one one >> a couple weeks ago we've come down a little bit we can all speculate Why? We're probably at about 1.0 right now. Last I checked.

>> Yeah. >> Um, you know, we sort of dance on the head of a pin a little bit between 1.0 and 1.1, but that's the life we that's that's the that's the job we've chosen. >> Um, >> but anyway, the answer is yes. And obviously, if you can generate a lot more yield, >> right, >> you're going to trade at a much bigger. >> Yeah, there's always going to be more risks. I mean, the typical way to go get more yield is going to be going into smart contracts on HyperVM. Then there is a whole another level there of teams because right now the company and your entire thesis is structured around 12 people right and other you know subsidiaries and custodies and firms and accounting and all the all the sort but like there's like a 12 person thesis here >> you start to expand into other protocols

other teams the risks grow quickly. >> Yeah. And by the way it's not totally fair to say it's 12 people. I mean technically it's 12 people. Um I when when I saw Jeff when he was speaking at token back in Singapore in in whatever that was September October someone asked him like how can you have a company with with or a group with so so few people and his answer was that they made the conscious decision to sort of have other people in the ecosystem as you just said doing different things and his example was you know unit brought spot trading onto hyperl. Yeah. >> Right. And he said, you know, if this was a regular company, >> we would have a division called the spot division or whatever course and it would be another whatever 20 people or 15 people and they'd be the spot people and

then their company would grow and grow and grow. He made the conscious and I think very wise decision. >> Yeah. >> To have the ecosystem doing lots of stuff, not just him. I mean, it's an extremely, in my opinion, humble decision he made. Yeah. >> Which is they're going to stick to what they're really good at. Um I think he likes himself being behind that computer doing a lot of the coding and developing himself and he's gonna allow the ecosystem to build and he doesn't need to build an empire. He needs to build a really high functioning um uh platform and blockchain that he's personally in the middle of like you know every line of code every >> Yeah. David Sheamus looking forward to continuing the conversation in the

future six months year from now. See where we're at see where PER is at. see where Hyperliquid's at, see where just the general crypto market uh kind of revitalization. I think it the four-year cycle is intact from the top, but I I anticipate it to be a little shorter. Anticipate risk to come back uh slightly quicker, not that much quicker, but you know, yet to see. Thanks. Thanks for joining part of the Empire State Building here. >> Thanks a lot, buddy. >> Thank you. >> Ladies and gentlemen, that wraps us today. Thanks for being a part of the show. We will see you guys tomorrow live from the nest. See you guys then. >> [music] [music]