The Neo Finance Bull Thesis with Vance Spencer & Michael Anderson

Transcript

I think the the really powerful thing about maybe like open finance, maybe new finance is that there are massive returns to scale. It's a new description for what we're talking about, which is the convergence of financial technology, financial institutions, and decentralized technology. >> What makes this different from that past regime? And and why do you think this is a more sturdy and bulletproof thesis now than it was a few years ago? >> What is the Neoi thesis here? What is the new finance thesis um in a nutshell away from just kind of like the terminology here?

>> Welcome back to the rollup. I'm Robbie. >> I'm Andy. Rob and I met at the University of Florida in 2017 where we first found out about digital assets. >> We learned a lot along the way and we're bringing you face to face with the leaders of our industry. >> Sit back, relax, and enjoy today's episode. Gentlemen, >> good to see you. Just take a >> Happy New Year, Vince. Good to see you. >> Welcome back, guys. 11 a.m. here in Hawaii. Yeah, I'm on it. Let me do my off. You on island time >> a bit. Yeah. I mean, I've been on like a mental physical spiritual uh growth phase. Less on the business, less on the markets. So, that's been healthy.

>> Wow. What What have you learned? >> Uh I've been reading this book, Book of Zen, and um I've learned that fullness and emptiness are the same, and that the difference between a man and a Buddha is that one realizes that there is no difference. It's deep, man. It's deep. This is This is sober. This is sober, too. This is not like >> I was about to say, how many months? >> Well, boys, happy new year. Um, Rob and I started off kind of talking about uh this neo finance category. We want to bring it to you guys, get your take.

Obviously, you guys have probably invested upwards of, you know, 10, 20, 30, $40 million into this sector and have some of your largest positions in the sector. Upwards of 500 million. I mean I think you have nine figures exposed to neo >> finance figures. Nine figures 10 what are you talking >> about your size is not size. All right. So >> um so Galaxy Digital >> Yeah. Yeah. >> We we are the ones we didn't create the term but I'd say we're the ones that we popularize the the term DeFi. I think it's also fair to say that it's probably time to shut that one down. I think it's, you know, been a good moniker for everything that's going on. The reason

why when you floated this to us, and we've been trying to think of different names for describing what we do, we're at the convergence of fintech. Yeah. >> And decentralized finance. DeFi doesn't hold that meaning anymore. And so NEO I I think as being, you know, something new, but it's it's a new description for what we're talking about, which is the convergence of financial technology, financial institutions, and decentralized technology. >> So I I like it. Um yeah, it's it's a good term. >> So Vance, you you put out this tweet here, right? Uh persistent buybacks, maximum financial discipline by protocol, stable coins, RWAs, lending, capital markets, doing less, doing better, walking the the regulated path.

Mike, as you're saying, it's this convergence between um the entire financial system, legacy finance, not trady. We don't call it tradi, it's legacy finance and defi or fintech and defi. The um you know the galaxy digital CEO Mike Novagrats pushed that there's this kind of shift happening to businessdriven tokens away from narrative driven tokens, measurable value and profits, uh wallets and exchanges evolving into these neo bank like platforms. you know, we have we have, you know, uh it's kind of like this new supererset of fintech with consumer frontends, DeFi backends, business driven tokens. We expect an institutional bid on these DeFi blue chips that, you know, have this sensible value acrruel. Um, so just kind of like throwing things your your way. Andy, one

more one more thing I think is important to mention here and and it goes back to what Michael said about how DeFi is no longer the moniker that applies to a lot of the emerging technology and apps that we think are going to do extremely well because it's not it's no longer decentralized for decentralized sake which is what I think a lot of teams raised on when they got into crypto and that is no longer going to get them the dollars that they're that that they're looking to raise. So I think what Neo finance is doing is it's it's taking a more pragmatic approach. It's saying def decentralization works when you use it the right way, but really what consumers want. They want a forgot password button. They may never get sold on self- custody. And so DeFi is is kind of this

kind of this old term and and it's time to grow up and it's time to realize that if we want mass adoption with all the handwavy things that entails, there's a new way of building and there's a new way of thinking about crypto in this modern era. >> C can I propose something >> please? >> I think instead of uh calling it uh Neoance is is the full term just like decentralized finance is I I think you got to call it newfi. >> Nui that's really what it is. Neoi. >> Neoi I think is a little wordy. Yeah. Nufi in terms of the shorthand I think is a much better description. And you could even write it out as nefi.

>> Um but I think having it described as newfi is is really probably the best description. Robbie going back to what you're talking about which is it's not decentralization for decentralization's sake. >> Users don't want to users I think don't want to self custody in in a lot of ways. They want to entrust in in security and a third party to manage it. They just don't want the the people who they're entrusting to do bad things with it or do things that they don't know that's happening. And there I I think, you know, describing this as newi is kind of like calling, you know, web one to web two, web two to web three. Like it is an innovation. It's an improvement on what we're doing. And and I it's like a step two for for finance. And I think that that's really kind of what

decentralized technology applied to financial technology will be will bring, which is a step change in terms of, you know, all the different applications and what you're able to do with it. >> Yeah. >> I I also think people have co-opted the DeFi term for bad purposes. Like a always saying like DeFi will win, dude. Like they delist the third largest stable coin. they have this committee to list you and if you tweet badly about them, they won't, you know, up your supply caps. Like there's things that are DeFi and there's things that are not DeFi. And just like this, these bad actors have kind of blurred that line.

And um I think the whole term is kind of cooked and we either need to refound it and kind of actually call things decentralized that are decentralized. Otherwise, it's just going to be co-oped as a a lame marketing term. So I'm not even sure what to call what we're currently doing. But when Sky has $10 billion of of money, we should probably figure it out in terms of like what we're actually going to call this category. And you can call these things like capital market stable coin or decentralized stable coins or or whatever you want. But I think the the really powerful thing about maybe like open finance, maybe new finance is that there are massive returns to scale. And that's probably the key point that a lot of people don't understand is that um

you see these things, they kind of look like rinky dink toys at this current scale, but what happens when Sky has 50, what happens when Sky has 100red billion of actual assets under management? Um the massive returns to scale and the democratization of being able to govern that is truly what I think the quote unquote DeFi opportunity is or was. But a lot of people in crypto and DeFi and decentralization theater just got too high on their own supply and built things that either people didn't want to use or didn't have the massive returns to scale that characterize why crypto is powerful. So um I'm with Michael in terms of you know we got to figure out something else to call this but neo finance new finance open finance all good candidates. I'm personally hopeful that we can resurrect DeFi and have it

actually be something that means something. >> Yeah. So kind of then moving away from the specific nomenclature here thinking about like the thesis at large I think obviously you guys have spent a long long time thinking about this and then obviously allocating towards it. So like what is the what is the thesis in a nutshell for this category right you guys are obviously bulls on sky on syrup and on the on the likes there's this category that is bridging institutions on chain they've got a very clear uh product market fit they they have tons of capital um and they're doing things in a different way than just defi Michael Vance what is the what is the neoi thesis here what is the new finance thesis um in a nutshell away from just

kind of like the termin terminology here. >> What I what I would say is that um it has very little to do with decentralization. Um I think decentralization is a means to an end. You can think about it this way. Money transmitter laws are a hugely influential and and hugely uh consequential piece of legislation within the US and it basically you know adjudicates who and who cannot move money around and Vitalic comes around builds a decentralized blockchain with smart contract functionality and it just makes that concept irrelevant. And so I think there's some of that in terms of what we're trying to do with DeFi here.

Um, and really if you think about like a decentralized stable coin, it's not a uh decentralization theater in terms of like the cipher punk vision. It's decentralization in terms of risk management, in terms of transparency, in terms of people being under able to understand what yield they will get on what cadence and in what format. And I think that's probably the best of of DeFi. But when you think about what we are specifically bullish on in this category is that you know stable coins and asset management you know Sky and Seir respectively and and I would also say Spark have this very narrow path but a path to connect to tradi and the language that tradi speaks is inflows and aum and ROI and that exa is exactly what syrup and spark both offer this

landscape and so I that's why I like newfi or neoi but really if you combine the massive returns to scale of a decentralized system with the ability to connect to tradi that is the opportunity here and that doesn't really cut across to things like derivatives um because that's like so heavily regulated on one side and trady and completely unregulated on the other um and even kind of spot trading as well. So I think the actual opportunity is specific to stable coins asset management and lending and that's really what we're bullish on massive returns to scale being able to connect to Wall Street to accelerate that flywheel.

And maybe just to add a little bit and using the same analogy, um we actually were asked kind of this question at a at a at a panel that we were on a couple days ago. Um using the money transmitter example, I'd say that's movement of money payments is is kind of like what that category is. And you used to have money transmitter li laws for two reasons. one because you had to entrust customer funds in a centralized blackbox entity like I'm going to give this payment processor all of my money and hope that they like tell they move it by when I tell them to move it. Um there was also people who ran off with that money which is why the laws exist. But the other element is KYC. You have to know that you're sending the money to

someone who isn't a sanctioned you know terrorist. And when we think about what it what an Ethereum, you know, network enabled, it enabled you to not need the money transmitter laws for for one reason, which is you don't have to put trust in a centralized entity to move money around. And if you look at and that being said, you you still have to have rules. There's still rules around you can't send money to North Korea because that's against the law in the United States. But what if you use stable coins as an example here, you look at stable coin volume transactions and it's gone from basically zero 5 years ago to Visa today. And that scale is unprecedented in basically any other financial market in any other growth uh

sector for finance or financial financial technology. Like that is that is a zero to her movement in in record time at venture scale outcome similar to what we're seeing you know in AI this day these days like it is that level of unprecedented growth. Now that's Ethereum and that's stable coins. If you were to apply that same process and logic to every single other category of financial institution, whether it's, as Van said, lending, trading, banking, insurance, all of those categories will experience similar trajectories of growth if you bring about decentralized technology because it will provide a global scale and finance truly moving at the speed of software that we haven't

seen before where we got things I would say misaligned or or out of whack was the expectation that we have to be fully decentralized to do it. And it's actually not the case. You still need laws. You still need institutions just like you still need KYC for payments and stable coins. But if you have one element that allows for the speed and basically the the government regulators to to agree with you and see the value in this, they're going to come about, you know, recognizing this as a huge boon for the financial services industry. Just in the same way that they passed Genius and that we're excited about stable coins, you got the Treasury Department saying we're going to 10x in five years. Like that is I think the best analogy here for what the potential

is. And so we're just at the start. We've done payments and we've done stable coins. What about every other category of finance? >> Looking for yield that stands out? Infinify gives you just that. Deposit stable coins and earn far more than the current savings rate. Infinify is a battle tested, reliable DeFi platform that is ready to go. Head to infinifi.xyz. Holiday is unified crypto payments. Give your users more wherever they are. Go to holiday.xyz to never write a smart contract again. Trade on anything, economics, weather, sports, crypto, and more. All on kshi.com 24/7 for the world's biggest prediction market. And we're seeing it happen. And I think this is the reason

why we're seeing a lot of the the institutions that are starting to take, you know, at first it was they they put their toe in the water and now they're ready to dive deep. uh and they're doing so with tokenization because that is that feels like the unlock that brings a lot of their services onchain and ultimately allows them to then process their financial stack at at the type of software scale Michael that you mentioned. I I'm I'm you know and we this is something we've thought a lot about over the last few weeks as we started to recognize more and more and we saw the juxiposition that was happening in the institutional world the legacy financial world and and their break point into this space. So, I've been I've been trying to think about like what are the potential holes in

this thesis and one of the ones I keep coming back to is the 2020 20212 like CDFI like offshoot where we had the Celsius blocky liquidity contagions and we had centralized frontends and decentralized backends and they were serving DeFi yields to regular consumers and it feels similar to what we're talking about but I I think there's a fundamental difference and it it's essentially that the yields are sustainable. So I'm just curious if you guys have also thought about this. What makes this different from that past regime and and why do you think this is a more sturdy and bulletproof thesis now than it was a few

years ago? >> Well, well, first and foremost, uh, every single founder of those companies that you just mentioned are in jail right now. >> That's right. >> So that's one uh like le let's call a spade a spade. Fraud was going on during that period of time. And I think broadly what we now have is and what we're excited about, you know, Spark, Sky, Syrup, they're they're all doing amazing things on chain. the the stuff that we've invested in and announced recently, you know, whether it's the day product where you're doing energy and basically a decentralized utility that generates yield on chain from solar and storage in on residences throughout the United States or you're talking about USDA which is enabling you know GPUbacked lending as a new business model that brings on like that yield

isn't like indogenous to the crypto industry. It's not we're just trading back and forth with each other or we're, you know, giving you these these tokens that have an asmtote to zero over time. We're we're talking about bringing real business models, real business activity that's happening offchain onchain and that's where the yield comes from. Like that's a fundamentally different perspective. >> Um, we had re protocol on yesterday talking about the reinsurance market. Another really good neo finance example there.

another framework portfolio company. >> They just keep coming on the show. What the hell, man? Um, so, so that is actually so this idea of and Rob gave me this thesis like, dude, I'm actually pro- centralization. And I sat on this for like two weeks and I was like, dude, we cannot come out and be publicly saying that we're pro- centralization when we're running a a crypto podcast. And then now that we think about it more and more, the regime that we're in is actually enabling that, right? And so this is a good segue into this market structure bill voting next week and into like the midterms and and all of this where you know we built a lot of these systems based on regulatory arbitrage for the previous regimes that we were in. Obviously this new one is much more friendly towards crypto regulation and

innovation as a whole. We've got this market structure markup bill vote happening next week. Also midterms at the end of the year. How do you guys see the evolution of just like this general category and and the space at large as it pertains to the market structure bill? You know, what are like the pros and cons of that and genius as it relates to NEO finance? And then coming into midterms and even thinking like further out to the next election cycle, how do you guys kind of pause it around this centralized front ends, decentralized backends or this kind of general shift towards um this newer approach? How do you see it changing?

How do you see it uh evolving here? I I think there's going to be numerous regulatory pathways for people to be nonsecurities and also deal in new financial products like tokenized stocks or or tokenized uh bonds. Uh be it clarity, be it the SEC innovation hub, be it other avenues. So I think there's going to be a variety of avenues. Um, I think the cost of compliance is going to be meaningful or the frankly like the ability of a space to get into like an SEC innovation hub or or other kind of sandbox type environment. So, it won't be for everyone. Um there's also going to be a difference between people who have already launched a token or a product and and you know probably are

thinking about it as we're establishing like a US branch kind of like a USAT versus people who are more you know just like evergreen entrepreneurs and starting out and wanting to do things at small scale. Um I think there's going to be a question as to at the end of the day what does being a non-security get you on top of all the hurdles to get there. Um, and if you are, uh, you know, deemed a security, what happens? And I'm assuming that, you know, a lot of the current tokens on Coinbase will probably be deemed securities at one point or the other. Um, and I think what their strategy is, frankly, is to kind of have a broker deal license and be able to trade uh, those things, you know, right next to coins. But it's a shitty outcome because you know if you are a uh you

know public security but you're listed on not NIC or not NASDAQ but like the Coinbase alternative broker dealer that's like a pretty tough position from a liquidity perspective. So, um I think there's going to be some tough times for some tokens, but for the other tokens, they will generally be held to a very high standard of decentralization and and uh education as to what they do, and they will either graduate from the SEC program or they will kind of be non-securities on day one of Clarity Act. For everyone else in the middle, there's going to be a lot of work to do. Um and for a lot of entrepreneurs, I think they're going to see the path of just being a normal private company may actually be for them. once everything is laid out in front of them, it's going to be easy to tell versus today where it's

kind of like this nebulous journey which seemed to be very valuable because you can launch a token, but there's really no uh actual regulatory hurdle. So, uh you know, point being is that there's going to be winners and losers and it's going to be pretty winding path and it won't all happen overnight, but it will be good for the space. The worst thing that can happen is that we're still stuck in this no man's land of like nobody can buy what we're selling because nobody knows what it is. are those products that you know they're going out um they're going outside of crypto so they're avoiding that indogenous risk that the CDFI world was susceptible to a few years ago and they're bringing like real business and revenue into crypto and they're serving it as yield maybe in a yield bearing

stable coin a yield coin are you suggesting that the best path for them is to start getting ahead of the eightball going and exploring securities laws and probably launch as a security it really depends I would say in terms of what you're talking about in terms of what is the security. So there there's there's like a couple of elements here. There's like do you have a product that is a yield coin and is that yieldcoin in and of itself a security? the you could take one belief that it is and you know for instance yeah like I think that there's yield coins out there right now that limit us persons from uh you know minting or redeeming them basically interacting with them directly and there's a KYC element for for the same

reason that is fundamentally different from let's say the governance token that is you know maybe you know collecting or or like governing the entire protocol um that I I'd say is probably not the aspect that the security is and that would be something that is covered more in the clarity act or whatever it ends up becoming called. But the products themselves can be viewed as securities just in the fact that they are accepting you know subscription and redemptions um effectively and we have rules around this which is like a redd offering which basically means over a period of time you can use an exemption to not have to go through the full securities offering securities listing process. If you wanted to do that, then that's something

that you could you could go through the process of. We just don't have any, you know, regggd exemptions for crypto. So, you kind of have an option to like do the regggd offering, limit the number of participants. Like, they're built for a securities landscape that doesn't factor in this concept. Um, that's where things like the innovation hub with the SEC I think are are extremely valuable because it's not just a one-way street. It's not like a you're in the hub, you get a you you basically get like a all clear for the next three or four years. It's more like they're trying to work with the industry to figure out what the next type of, you know, innovation hub uh or or what what the next type of exception could be based off of feedback they're getting from innovation hub participants. Like that's why I think,

you know, we've put a lot of stake in this clarity act or this market structure bill passing. I think that there's elements of it that are going to be really important and we need to have and we need to have at least as Van said clarity on what this what these assets are and a path to decentralization but the nuts and bolts of what really matters when it comes to like newi if that's what we're calling it is really going to be about participation and conversation with the SEC via the innovation hub that's where the nuance and the real rule making that's more important you know than what is decentralized what is not that's where that's going to take place >> anything to add Vince I I think that's broadly right. Um, a lot of these programs will also require you to rep that you are a non-security

and that is like a uh that's and I think that's being set probably by the Democrats with the sense that like if you're going to go for this, you actually have to replically that you are not a security and so you can't be doing like some fugazi decentralization for no reason. Um, it ups the stakes for protocols for sure. But once again, it's like what is you and what is repping? Like you is not the you is not like the product that you're building, the yield coin that you're building. It it could be, but you could use the exemption for that. And that says that you are a security, but your securities offering doesn't have to go through the exemption process, >> right?

>> It it probably doesn't mean like the governance token. That one is the one that you're repping and saying, "Hey, that's not a security." >> Yeah. Well, that kind of brings us to another good point. We we had uh Jordy Alexander on earlier and he's talking about, you know, like the the whole model of buybacks and how he's he's more of a fan of actually doing buybacks in a way that is uh let's just say more game theoretically apt rather than just aping every day programmatically hyperlquid style which uh forces you know retail to be buying in at highs where you know because there's always this buyback and yada yada. He has a very fund manager approach to to this and we got into kind of like the token equity dilemma which we're kind of orbiting around here right

now. And so I guess the the point and the question is is this new kind of like NEO finance category tokens are they going to be able to create a more unified approach to uh what your claims on on on ownership are what really you are owning like how do you guys see the evolution of the token infrastructure standards evolving this year in this category? I think these teams will probably be leading this because they have real flows because they have revenues. Um, how do you guys see this token equity dynamic evolving as it relates to kind of what we're talking about here?

>> I I think the equity side has to be done. There's there's really no workable path for a dual structure. Um, there's this good line about like, you know, democracy can't be two wolves and a sheep arguing about what they have for dinner. Uh, because it's going to be, you know, just diluting the token. It's going to be raiding the treasury. It's going to be all the easy things that you can do. And I'm not very sympathetic to founders that are saying like uh you know we need like this equity structure because we need to grow the protocol. And that just reeks of me as to you know they didn't get enough exit liquidity on the token now they need to layer another useless part of OPEX on top of the protocol in order to continue to get paid. Um the idea of these protocols is

that they're done at a certain point and there should be a robust ecosystem of you know folks like consensus for ETH who are able to grow it without being you know directly tied to it or having governance over it especially not owning the brand and the rights and the IP over it. So I don't think those structures are workable at all. Um I do think the optimal structure is a foundation a permanent capital vehicle that can permanently align that does not have a profit incentive rights over IP or brand. that that does seem to me, you know, after five years of doing this, we've never seen the equity token thing work. One plus one does not equal 15, there's no, you know, like that doesn't make any sense.

>> I I will say, you know, like we're we're talking about multiple things here, which is um you know, there's the equity tokens, which is like tokenizing existing equities and bringing them on chain. That's just to be clear, not what we're talking about. we're talking about is like the equity of the labs company, let's say, you know, persisting on, continuing on. Um, look, I I think consensus in Ethereum is probably the best-in-class example of this. It, you know, consensus is a centralized entity. It has a business model. Like, there were rumors that it was going to go public at some point. And it owns MetaMask. It's making a ton of money from all the different business lines that it has, but it is aligned with Ethereum because I'm sure it has a ton of Ethereum on its balance sheet, too.

if not from the ICO, from purchases after or quickly after or or maybe funded by Joe Luben himself. I I don't know exactly. But the point is you want to have an aligned entity that can go off and make business transactions and sign contracts because there are actually limitations as to what foundations are able to do. You like you can't hold equity in a foundation. Like there there's just like structural limitations. You want to you want a centralized company to be able to do that. um but also employ a bunch of people and scale up, raise venture capital. Like all of that stuff is valuable. Um and a foundation isn't able to do that. They're able to sell tokens and hold a balance sheet of cash and tokens basically. Um but I do think that when you're talking about a token, that

probably is the ideological split, which is the IP, the brand, the technology, and the token are governed by the token itself. And so whatever business activity is being generated by the protocol that determines the value of the foundation which is basically the a proxy for the valuation of the network and the and the token itself. The IP uh that's generated offchain and in the company like all of that stuff acrru to the value of the equity. And like we can have two different layers. It's just that they're going to have completely different mandates. Trying to squash them together is like to Vance's point it just doesn't work. Yeah.

>> Uh and we've seen hundreds of these at this point. like none of them have worked out well. Look at unis swap and unis swap labs at this point as a as a great example. Um you know it just is hard to do round page square hole. >> Yeah. So so consolidation into the token and and into a foundation but then okay so then let's say we get there right and let's say some of these products do this whether it's retroactively or you know proactively. How do I as an investor then know what I'm buying? because like I think that's still a problem here is like what like what am I buying when I buy XYZ token like I don't really know so like what what's the step from there to like understand what I'm actually owning.

>> Yeah. Sorry. So you know to add to this I I think what you are buying so what you're buying with equity with shares is obviously the future stream of of value whether you know revenue profits whatever you want to call it the IP of the company itself and the brand and sort of like what's called goodwill like that's all on the balance sheet of an equity and then you have your proportional share based off of your ownership of equities. Now, there's tons there's like decades, centuries of case law that like backs all of this up basically. And that's why we have robust financial markets around equities in the United States and elsewhere around the world. It's because we have property rights for those. What we don't have currently is property rights for tokens.

What we probably need is property rights for tokens. And I think that >> sounds like a framework article. The first step in getting there is identifying what a decentralized network token is relative to the equity. Like, but just to like pull the curtain back a little bit, when you're a company that's building a protocol, what happens is you start off as just a company and you raise venture capital for it. It's into a labs company, the investors who raise the money are getting, you know, equity in the company, but they're also getting a warrant for future tokens if you are to build the protocol. It's like the structural way to to fund you know new new networks. At a certain point the company basically splits. It's like the you know as life begin you know as life

starts it's like the the cells split and like one of them continues off as a foundation and one of them continues on as a company just like it was set up to do. There's an IP transfer that happens. So any of the IP that's related to the network, the token, the protocol that transfers to the foundation. Whatever's not stays within the company. There may be residual value in the company. There's a lot of people who will continue to work for the company developing open source software for the foundation. Maybe they're getting paid in tokens that the foundation is giving them. Like that that's structurally kind of like how everything works. But I hear you in that we don't have rules and regulations around, you know, I own this token, I get a proportional right to

whatever is in this. That's why equities are outperforming like stocks are outperforming crypto right now because everyone's like well I'm just going to go buy something that I know is going to stick around longer and has uh has like I'm actually buying something that I know what I'm getting or something right >> first step in us being able to do property rights for tokens is defining what a token is with market structure built >> it all comes full circle anything to add >> you know I I think uh it it has come full circle and there's going to be a lot tokens that just have no purpose.

But like this whole idea of there's a ton of breadth in crypto and a ton of projects to invest in, I think is just patently false. Like the industry needs to focus on the five to 10 that are really working. And I think some exchanges are somewhat incentivized against this. Like Coinbase specifically offering every coin under the sun, including creator coins. It's just a travesty. I I think really this at some level also needs to be policed by the exchanges in terms of what they give access to users um or what users get access to to trade. >> Ye is built for big moments. The most fun you'll ever have with your crypto.

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we're building here uh in the industry from the token perspective. What is the I mean like the logical consequence here second and third order is okay a lot of these tokens are going to be deemed as as you say Vance kind of like useless or worthless but then there should be a bit of like a a value concentration power law happening this year and I put out this tweet um yesterday saying that I think 2026 is the year where we'll really get the you know further definition of like the mag seven of crypto that will be very investable tokens for like the next half decade but then last night I was having a beer years with the with the circle head of research actually up here in Hawaii.

Brought him to the place, showed him the view was total total schmooz and um you know he's like man it took you know 15 years for the mag seven of the actual equity market to be created. How do you guys think about like so the ramifications of what we're talking about here will we then see like this pocket of investable assets in crypto basically you know come by the end of the end of this year into next year? How do you guys view that process of like basically consolidation happening? I I assume you feel you're already positioned for it in your portfolio. Other investors may not be. How do you kind of think about this? What's what's the mental model for this investable future of like smaller number of quality assets going forward?

>> I mean, we may not be 15 years in, but we're at least five years in and we may not have a MAG seven, but I think we've probably got like a MAG three or four. >> Yeah. There are investable assets and the reason why you you call them a match seven is because they're the ones that have outperformed but they've outperformed based off of their business being so strong and and growth being so robust they just like drag the rest of the ind indices up and kicking and streaming in some cases and you know we're at all-time highs. I think you know the Dow Jones is like it either passed or or is about to pass 49,000 which would be an all-time high like but if you look at the representation of that there actually are a number of assets that have done well but like the

MAG7 is what's driving it and that's the whole point. If you look at any of and it's just it's unfortunate that this is the case but after 1010 we were at such a high point. If you look at any of the alts, like they've just gotten absolutely crushed, decimated. Like it is it is tough out there. But there are certain assets that are up, you know, on the year up since 1010 and have extreme growth forecast for what they're going to enable in 2026. Like we are starting to separate. What we also need I think is understanding of how is something valuable in crypto. And I think basically we've got three camps and it's like very very broad but the the three are Bitcoin as one of them smart

contract platforms that have you know some monetary premium I would put Ethereum and Salana and that's it in that and honestly and unfortunately I would also maybe put XRP in that just based off of all the attention that they have. I I look it pains me to say but that's true. Wait, the third the third camp is businesses with fundamentals that are on chain. That's it. Those are the three categories. >> Just real quick from framework perspective, is the allocation like you know a lot of Bitcoin, some of the some of camp 2, some of CAM 3, or is it like just >> No, I mean look, it's hard to build a venture case or a venture fund around Bitcoin. Of course,

>> now if you're an asset manager or an ETF manager doing a different strategy, like if you if you can charge two and 20 to own Bitcoin, then that's great. But I I I think that that's just not our our strategy. That's not our forte. Um you know, we did invest in Ethereum when we started the fund and that that was a huge, you know, value driver in our first fund, uh as well as a number of other DeFi assets and and um a lot of them we've talked about today. Yeah. Uh but I think going forward it's who is building a strong business and has value approval to a network asset with the expectation that over the lifetime of that investment property rights will define you knowity and structure around ownership of that asset.

>> Within that last category is there also a carveout for things that might not even launch a token but they do have onchain services like maybe they have a like a stripe that has a stable coin. >> Yeah. and and equity has been I mean you probably saw the rain cards big that they raised today but you know it's never been better for equity investors and >> I don't know if CT has figured this out yet or or maybe they have and their and their butt hurt about it but like that involves no community allocation so that's kind of a tough one and um you know we've had big wins on the equity side and we're starting to see IPOs and M&A and things like that and that may be one of the animating forces behind crypto going forward is just this equity outcome uh that is not available to the

community and uh that means there's no wealth effect and that means there's all these other you know probably not as great uh secondary knock-on effects but I think what we've seen with um with tokens has been um we do have probably the mag three or four the incumbents are incredibly hard to displace especially now because there's no venture dollars which can fuel a real shot at them um and that all impacts frankly people's ability to get upside side in these things. And so I would say the general retail participation landscape has to change pretty dramatically going forward. Um there's not going to be a ton more air drops like and frankly like as we think about tokens like it used to be we do you know uh one to two token or equity to token ratio I think that's

kind of going away because there's no need to give half to the community anymore. Um, so we're we're closing the chapter on crypto, uh, the first era of real kind of venture-driven crypto with these tokens. And I think what we're going to be left with is kind of these one of one Monae paintings in terms of they're very unique. They're very uh singular. Um, but there's probably three or four tokens that are really worth buying and very very interesting as businesses. But that's it. And that's kind of our contribution to this world so far. And it won't stop there. But uh generally tokens need to be treated better and part of that is regulation, part of that is you know giving less to the community, part of that is just having better business fundamentals, but probably not what people want to hear in

terms of, you know, airdrop hunters or or whatever you want to call them. >> And just as additional color, you know, like at framework, we're probably 5050 tokens equity. So like we're talking tokens here and I think that's probably the most interesting you know generally right now um for this audience but equity I'd say is not only increasing in interest but it it it's been a mainstay of our strategy since day one. >> There's an increasing breath of assets that have onchain products and services that don't have tokens and have equities.

>> Yeah. >> Uh guys closing out. Um how are we feeling? Are are we still bowled up full on? Uh I'm I'm a little scared out here. >> You've been scared for months though. I look >> exactly >> I think I think what I would say is that uh people should really read the documentation around both BMR and Micro Strategy. Those are the main driving factors of this market and the MSCI decision. You know, they they actually kept Micro Strategy. Um and then the Tom Lee pay package is on the 15th and there will be all sorts of knock-on effects to that coupled with very strong ETF flows over the past week. Yesterday was outflows

but the first two days you know Monday, Tuesday, Wednesday were nine figure days for both ETH and then high figure nine figure days for BTC. Like those two things that's the one-two punch that makes the assets go up. Not the vibes, not the CT, you know, commentary, but those two things are what is the driving force. So if you're bullish on crypto, it's because you understand those two things. Um or you just have a view that these things are inevitable. But I would say Bitcoin and ETH are kind of singular and then the DeFi names are singular and then everything else, you know, is kind of out of our purview and and we don't really have a view. Um there's things that haven't worked in the past, but I would say the vast majority of our thought process is staying long uh and waiting for the inevitable push to new

all-time highs for the majors. what Vance is um uh dancing around is a bit of a uh perspective that we have you know read about but also kind of discovered um and no no proprietary information here this is all in disclosures and and you know everything that's been uh put out from BMR in particular but it looks like um Tom Lee has been building an extremely large uh in the money call position on ETH um which as well as stack tracking um at least a billion in unencumbered cash right now, but that's been a billion for the last month plus while also hitting massive ATM numbers. Where is that cash going? Our belief is that it's going

into a very large call position, which you actually started to see earlier this week on the the dealers delta hedging um ETH, which is why it went from 2,700 to like 31, 32, 33 kind of out of nowhere and with no information whatsoever. Tom Lee has his shareholder vote next week. That shareholder vote decides his pay package. I our expectation is he's basically been building this position for the last month or two. Also, the expectation is that he's been selling a ton of puts in December when everybody thought it was going to a,000 or 1500.

He's he was basically like nope. So like I think rotating the premiums from that raising the cash from the ATM and building this massive call position um our our you know guess and a lot of people's guess seems to be in the high uh six figures potentially seven figures of ETH notional um and you know executing on that is um massive um so I would expect that there's potentially fireworks in the next few weeks for for in particular Ethereum I think the MCI high um announcement I agree is actually extremely bullish um sailor for the for at least another 12 months until he can rightsize the the ATM and fundraising process which I think he absolutely

will. Um and yeah, I think you know we in talking about market structure here definitely have put a lot of you know uh chips on the on the table in terms of market structure passing. I actually think that that it is important and it would be great if it passes like next week or gets through committee next week. I don't think it actually matters that much if it's before after the midterms because what will matter a lot more uh is what the innovation hub actually does and and the idea is like you join the innovation hub and the SEC wants people to join and they're like things that we have talked about you know on on channel today are are definitely you know looking at this very strongly um and the idea is that you get a a multi-year kind of sandbox um

multi-year like effectively like a no action um for for three, four, five years. I'm not sure exactly how long it is, but the idea is like you get a long time to basically figure out everything. And in doing so, you work with the SEC to as we're talking about like define some of these rules. So like extremely bullish that um just yeah, like that that's happening way sooner than any of the market structure bill would happen in the first place. So, like that's that's way more bullish um than market structure. >> And look, the the things that really matter as well are uh the DATs and the ETFs being in good shape plus a narrative drive. And and we have all the ingredients for that with relatively

light positioning. So, that's kind of how we think about it. And I think at a very very high level, you know, in a world of AI and like how fat the tails are getting on with AI like you know Sky or Star Starlink or Sky Skynet, you know, robots taking over like there's going to be a need for a world computer. There's going to be a need for a digital store of value that is not gold. Um I I think there's a lot to be optimistic on with regards to just crypto's inevitability within a world uh filled with AI. Yeah, Hid gave us the uh asteroid mining is getting extremely uh sophisticated. So, gold is going to be, you know, watch out for all your gold >> buzz. The SpaceX IPO part of the SpaceX

plan is >> J. I think I just 100x long the ETH. Thanks for coming on >> again. Again, is that a thousandx now? >> Thank you. I would just encourage you guys and anybody else who's curious to go dig through some BMR stuff because you pull in the thread, it gets it's long. Yeah, we stayed up I forget which night that was, but >> I think Tuesday night >> I found this article and Michael goes to bed much earlier than I do. Um, and I was just spamming Michael, hey, like I found this like look at this and like I saw him the next morning very clear that he did not sleep at all.

>> Sounds very familiar. Sounds very familiar. >> Michael is I'm more of the night owl. Michael is uh early early to bed early riser. >> All right, Jens, happy new year. Have a good weekend. Thanks for coming on. >> Cheers, guys. >> See you soon. >> Bye. >> Cheers.