The Onchain Equity Boom

Transcript

Another thing that's changed over the past week is looking at market share of spot volume by pair category with the rise in tokenized asset volume shown in yellow here. Uh I guess onchain equities are trading more volume than memes on Salana. So uh I'm curious is that durable shift? Uh, do memes ever have their comeback against onchain equity? Nothing said on Xerox Research is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only, and any

views expressed by anyone on the show are solely our opinions, not financial advice. Luke, Danny, and our guests may hold positions in the companies, funds, or projects discussed. Hey all, welcome back to another episode of Xerx Research. Joined today with my co-host Danny and Carlos and Sam from the Blockworks Research Team. How are you guys doing today? >> Doing well, GMGM. >> Doing well. >> Yeah, doing great. Watching the market implode. Yeah, on that um Bitcoin just made new range lows uh beneath 60K. We see stretch down to 75 this morning. Um

what's your what's your read on the market? What's driving this lower? >> I mean, seems like we're just paying for Sailor Sins, but uh I don't really have much much commentary beyond that. uh never really understood like uh stretch to be honest. I always thought it was a stupid idea, but uh I guess I guess now we just have to see how it plays out. Uh I don't know if you guys have more useful commentary than that.

Yeah, I guess um I don't know if it's more useful, but it does feel very um I don't know like the market is maybe become a bit more aware and concerned and emotional about the the impact of Sailor and his various products. Like I guess we're at the point now where I think folks want some more confidence either in this product or around the BTC that strategy holds. Um because I guess the big question mark there is, you know, are they just going to continue to unload equity and maybe equity like below, you know, an MNAV of one. um and use that those proceeds to kind of back, you know, build up a nice reserve of

capital to fund stretch dividends or are they going to unload, you know, a significant amount of BTC to pay back that stretch and if so, you know, when is that coming? Could it, you know, could price decline further and you could see some reflexivity there around that? Um I although although I do think if you know strategy were to unload a large chunk of BTC that would probably mark some kind of capitulatory maybe even near-term bottom type of moment. You'd probably have some other folks you know worried off um and sell into that as well. But I don't know I don't know what else you'd have to fear sort of after that moment.

>> Yeah I kind of have a similar mindset to you Carlos. Um, I thought launching the perpetual preferred was perhaps one of the the stupidest things strategy has done. Uh, raised their cost of capital tremendously and the debt doesn't mature. It doesn't expire. Um, it's perpetual. So at 75 basically the the market is saying we need a 14 15% effective yield to hold the paper. um while they're paying an 11 and a half% divid dividend yield on par value 100.

It's basically like credit spreads are are blowing out on stretch. uh the market's increasingly concerned about their ability to meet the dividend obligation and back when Bitcoin's at 120K and they have a a really healthy balance sheet uh strategy doesn't look that levered and they have plenty of duration to to cover obligation. But when you cut that asset side in half with with Bitcoin's draw down and you continue to issue stretch um from from what was you know 1 billion a year ago up to over 10 billion in outstanding supply now uh that that

liability side of the equation is just much more concerning. So they they tapped the ATM earlier this week um and they used the proceeds to uh one raise a bit of cash uh then secondly to continue buying Bitcoin. Um but I'm of mindset now is like that the market is giving them the signal that something's wrong, something's off. Um and there there are kind of two things they can toggle here as it relates to stretch. like one is uh the the cost of capital uh the the interest rate. Um two is just the supply. So there's the price of money

and then the quantity of it. And they could you know hike the dividend yield up to 15% uh which is what the market says they need to hold um at par value 100 or they can reduce the quantity. And I'm of the mindset, right, like right now at 25% discount to par. Um they they should be dumping yards of Bitcoin to buy back that paper at a discount. Uh you you reduce the quantity. Um you lower the liability side of that equation. And as unfortunate as it would be to kind of paint a a death candle on the Bitcoin chart, I think it would go a

long way in assuaging the market's current concern about that liability side. Do you think maybe put a different way, do you think there is they have an ability to tap the ATM enough to buy down that stretch product rather than sell because it would be just an absolute like misstep and fumble to issue Stretch buy Bitcoin at much higher prices than today than buy back Stretch even if at a discount. Like I don't think the math maths there where you're buying stretch at a 25% you know discount from par to then you know from offloading some Bitcoin that you just bought higher. Um complete waste of

time, waste of capital, waste of everyone's attention. Um I don't know if they can hit the ATM that hard. >> Yeah, it's it's kind of there there are two venues they can tap for those cro um at the moment. one's the ATM which is that premium is shrinking. It was 1.14 earlier this week. I think it dropped down to to 1.1. Um so the margin there is increasingly thin. Um and then of course the Bitcoin market is only down and to the right. So if they were to sell the some of the stack that they had just acquired, they would be you know realizing these losses for for common holders. And increasingly it looks like

uh strategies as they have been uh more than willing and able to sacrifice commoners um for the sake of both bitcoin than uh convert holders and um stretch. So wouldn't surprise me if they they continue to to tap that ATM even in this thin window. I I don't think this is discussed a lot but what do you think about the imitation era like obviously sailor was first like with a strategy and then came a bunch of uh digital asset treasury companies after uh now uh Sedor did this stretch thing and Bitmine is doing their

own preferred like instrument like how do you think that's going to play out uh especially because Um it seems like the more people like repeat like the same mistakes all over again like the market obviously like at at some point you like you have to learn right and people stop buying into the story but I'm not sure like uh do you have any thoughts on like the BitMine preferred? Yeah, I think Bitmine's definitely in a bit better of a position where firstly like they don't have as encumbered a balance sheet um with like debt and outstanding convertible notes the way uh strategy does with these large cliffs in

2027 and beyond. Um then two is the staking yield where um you you can of course have some income income side to that balance sheet but I I think the bigger problem um I I think there's totally a place to have the issuance of some sort of perpetual preferred. I think the bigger problem was it got too big for strategies balance sheet and that that dividend obligation uh grew grew too large relative to uh the duration of coverage that they hold.

So I think between the staking yield on ETH and then uh should Bit mine be able to basically like not overissue that paper um they can they can keep it much healthier and I think yeah if they navigate those those trade-offs and those risks well um then there's totally a place for that sort of instrument. What do you think about one last thought here is this decision to you know they recently paid off paid off um some some 0% 2029 notes that they had convertible bonds that they had um outstanding. Uh I'm curious like just your thoughts Luke

generally on this decision to go from okay let's offer 0% convertibles to raise cash and then that gives us some you know five six year time window um buy BTC and then we can sell MSTR into the ATM through Coupe funds and maybe intentionally or as best as we can avoid those convertibles like being good value at the time of redemption um versus offering something like Stretch and then having to pay 11% consistently. >> Yeah, there there are definitely trade-offs to each of these uh financing mechanisms. Um both the convertibles and the perpetual preferred issuance embeds

a degree of like timing and directional risk with the assets that you're purchasing in ways that the ATM facility does not. And um the perpetual preferreds like yeah technically they are preferred equities. they have primarily bondlike characteristics. Um, and when they're perpetual, they never mature. They never expire. There's no there's no clear um cliff or duration that you can hedge or manage around. Um, that being said, I I do think converts may be perhaps superior where if you get that directional timing right and you

know you're stacking at cycle lows um and the equity appreciates alongside the underlying asset along with the cycle, it's like okay, you get diluted um 100 200% higher on the commons like big deal. like that that was the um that was the trade-off you took on and it ends up being accreative. Um whereas with the perpetual preferreds um you you got to you got to pay that in dollar terms eventually. So hey guys wanted to share the latest data dashboard from Blockworks featuring the BNB chain. The dashboard gives you a live view into how capital is moving across BNB's onchain

economy. From stablecoin growth and yield bearing assets to the rapid expansion of tokenized equities and RWAs. You can track things like stablecoin supply by asset, yield bearing stable coin adoption, contract balances across DeFi sectors, transaction activity, network revenue, and BNB's ongoing token burns. On the RWA side, the dashboard highlights everything from the growth of tokenized stocks, issuer market share to total onchain RWA supply across equities, treasuries, commodities, and yield bearing assets. Whether you're tracking the growth of onchain dollars or the adoption of tokenized equities, this dashboard provides the clearest view into how these markets are evolving on BNB chain. Explore the BNB dashboard now at blockworks.co/analytics/bnb.

perhaps pivoting to um some charts that are up and to the right in this otherwise uh bleak environment in crypto. Um what we saw on chain this past week is a huge uptick in uh spot equity volume primarily on Salana. Um so this is yeah chart of weekly tokenized equity volume by blockchain and we see Salana putting up about just short of 1.4 billion in weekly spot equity volume and this also accounts for like 98%

of um total onchain spot equity volume across chains. So I know Sam Schubert um Carlos as well have been deep in this in this topic is um so like zooming out a bit what's going on here and like why is Salana winning this whole market? Yeah, I guess it's um a bit of relief just like thematic is finally coming through. Um as like if you're invested in Salana, I feel like this is one of the main potential themes that they should have been going going after for a long time. And largely this massive jump is from two key players being X stocks as well as Backpack which we can see the

share in slide four I believe. Um and in particular backpack essentially they now have this system to create equities that are one for one fungeible with the real world and that's sort of them released SpaceX Micron and now they're contining continuing to do a few others and I guess my thesis on this is like the fact that if you are KYC with Backpack you can now trade these stocks that are one for one fungeible it gives makes a claim a lot more legitimate and I feel like that's going to bring serious traders to a platform. form as well as proper MM wanting to quote these stocks. Um, but you also have X stocks as well, which is a bit of a different claim. Um, it's more of like a claim on cash in the

future rather than being direct one for one. Um, but they're the two big reasons we're seeing this uh big jump at the moment. >> Yeah, I mean it's quite interesting to me to see the big rise in backpack market share. Uh but over the past few days you have seen kind of X stocks reclaim uh their place like historically being the leading like uh tokenized asset issuer on Sana. Um I was like looking into this like structure in terms of like what the legal claim is when you hold an X stocks versus a backpack tokenized stock. Uh, and my conclusion

at like when I first looked at it is that if you're just a user on chain and you don't really care about like going from brokerage of to onchain or vice versa, then to be honest, Xtox is not that like it's not it's not bad. It's like a Swiss there's nothing wrong with a Swiss tracker certificate which is the structure that they use. uh it it just means that uh the holder of that token is a creditor uh to the issuer as opposed to a shareholder. So obviously you don't have like um shareholder rights. You can vote on on stuff but you still have like a onetoone equity exposure. It's just a different type of

instrument. I I do think that backpack legal structure is superior in the sense that if you if you want to go to your brokerage, you can do that and you don't have to incur like a taxable event or whatever. Uh but I don't think that most users actually want to go like from their brokerage. I don't know anyone who who really wants to go from their brokerage to onchain or vice versa. Uh the one thing I'll say is that I I pointed this out to to Armani like the founder of backpack. He mentioned that it's not just about uh like users. It's also about market structure in the sense that if you can go from the onchain version of the token to to

the brokerage version that's so much better for market makers and so much better for liquidity which can lead to uh the volumes that we've been seeing over the past few days where you have seen like really tight spreads. So it's not just a matter of like thinking about what users want, it's also about uh market structure. And he also mentioned that and and I kind of agree with him like very big whales or like uh people with size may may actually care about this kind of stuff more than everyday users.

>> Yeah, I agree with you there, Carlos. I think the the bigger unlock in the immediate term is more from a market making perspective in the sense that before you know you were probably taking on some some additional risk. Not that these like prop ammms and other teams were unwilling to do so. I think they have a willingness to do it. You know, prices are fairly live when the market is open for, you know, the NASDAQ and the NY um and any listed name there. So, um I don't think they have too much trouble doing it. But I think operationally this makes things simpler if you can you know have you know assets in brokerage and assets on chain and you can quickly reconcile those accounts you know maybe at end of day or something if

they're only going to trade them maybe during market hours for example um and make markets uh I think it just makes things easier and I will say to Sam's point as well or maybe Carlos you've mentioned it that um Backpack saw a big spike I think this is expected you know they the SpaceX IPO was a big moment obviously I mean biggest IPO in history but also tokenizing the equity immediately um that's obviously going to cause a big pop in like day one day two week one trading volume but given that Xbox just has the larger variety of names today it doesn't surprise me that you know volumes would just pick back up um kind of across the board I would expect to see like as backpack lists more names and especially if they're

relevant you know they micron and sandisk some of the memory you know the memory bro names um getting [snorts] listed off the excitement there. Um maybe you'll see some smaller pops. They're obviously not as big as, you know, SpaceX from an impact or an excitement POV, but expect to see like similar behavior where you get maybe some additional pops per listing and then um you could see them compete further down the road when they have more assets listed in total um to where maybe you see more more direct competition among the issuers. Yeah, I completely agree with the um market structure point of view and I feel like like eventually in the long run like we're going to see I guess multiple versions of the same type of ETF or stock which we are kind of

already seeing and that could um cause some problems in regards to liquidity fragmentation which might not be the best thing but I would say the fact that backpack does have this gateway and that is u better for market makers um that will likely see more propm quoting backpack stocks. Eventually, the best pricing will be on back stocks and that could eventually kick out other players um if they don't have as favorable market structure dynamics that these market makers actually want. So, that's something I'd be looking out for and I wouldn't be surprised if we only see one or two main versions of each thing. Um but yeah, to your point, it doesn't really matter um to the user, Carlos, if you're just staying within DeFi. Um but

yeah, kind of thinking about like how this market share dynamic is going to play out over the next year. >> On the point about market structure, I'm curious which uh which dexes are are winning this recent surge in volume and is it like legacy concentrated liquidity AMMs or is it prop AMM? I'm curious who you're seeing win this flow. Yeah, I'd say if we go to slide eight that probably that's the SpaceX over the last two weeks by backpack. So this is through the backpack and Sunrise partnership only the backpack SpaceX stock and you can see the trend is majority propm which in my opinion is

like a very good sign. Um it means like I guess the work I've done on SA spreads it means we're going to get this really good quality execution for users. um the fact that you can see zeroi terrestrial and goonfi are around 80% 80 90%. Um so it's majority propm and I would say because propm especially during the day they can reference oracle prices of these actual exchanges um in the traditional financial system that allows the that's what essentially the prop amm model needs to work the most effectively. However, you did see Midora um like generic pool model actually maintain around 10 to 20% of share

throughout the whole time and that can be to a few reasons particularly at launch I feel like there's a lot of uncertainty um especially for proper MM um which can make them a bit more passive and then when we when you go into like nighttime or weekends when there isn't I guess the same quality of Oracle pricing um you kind of have to let let the like defy market itself decide. Um that's when you see that's when you do see pool models pick up quite a bit. Um so I do find it quite interesting that propm definitely leading the charge especially for these highly liquid equities but there's still a place here for these pool models. Do you guys think that the pool models are

just getting uh picked off in the sense that uh a lot of the volumes that you see is just uh toxic flow uh just for the pool models where you already have deep uh propm uh like quoting if that makes sense like that's something you saw with the soul USDC pair where propm just became the dominant uh trading venue for the soul USDC C pair and then the remaining sold USDC volume on traditional AMMs was just toxic flow in the sense that uh it was just like stale quotes that people were getting picked off on. I'm curious if

you could see something similar for equities uh in the sense that if 10 probems are coding SpaceX and that's also being quoted on like Meteora, Radium and Orca, maybe the BI that you see for SpaceX on on those three bad news. Uh it's more of like getting stale codes getting getting picked up. But I'm I'm not sure uh if that makes sense. I think to um jump double up on Sam's point around during market versus aftermarket hours, like I think I would expect that you see, you know, the passives get picked off during market hours, especially if if all these propm are quoting, you know, stuff like SpaceX. Um but maybe after hours if they

stop quoting when the market's closed um you could see that the kind of dominant routing choice at least for now is maybe to these pools. Um because even in in the case where you know Robin Hood or other brokerages that exist today like there's 245 is a thing but the liquidity is still quite limited. You know you're going to you're going to pay a decent spread over regular market hours to to trade into something like that. And so, uh, it may not make sense quite yet to try to quote to those prices, but I don't know. We might need to see a we might need like a time of day chart almost like a during market, aftermarket, pre-market type of breakdown of of who's routing. That'd be really cool to see.

>> Yeah. And it kind of gets into like deeper market structure things essenti like a bit above my pay grade, but like propm essentially market makers. Um but like in a generic um traditional financial system, you have a central limit order book where there's all these resting orders on both sides and but I feel like for the prop AMM model to work like you have all these market makers that are quoting where they could essentially pull their quotes instantly and then there's nothing there. So I feel like the pool model kind of is like this like back stop even during market hours which is important even if it is being picked off and more important on weekends and stuff like that like you're saying. Um, so I do believe it's important to have like some resting

orders which the pool model does provide for market structure. Um, but yeah, that's how I'm kind of seeing it. Yeah, that's a really good point. I'm also curious like it would be really cool to track if the price of um stocks on weekends for instance track the price that's like on something like hyperlquid or if there are meaningful discrepancies there. Uh, but yeah, I haven't looked deep into it. I don't know Sam if you have >> not yet but yeah that's something I'm thinking about doing and like you said as well Danny like looking at like how much is the AMM share versus the prop AMM share nighttime and weekends because I feel like that can really highlight um how the market structure is actually

working and where we could be going from here. >> Yeah. Yeah. And I think I think we're going to see it just continue to shift in the short to medium term in the sense that, you know, I know incentives kind of drive a lot of things within crypto and and know that some of the activity um for some of these products and some of these DEX is certainly is driven partially at least by incentives. you know, in some cases it's, you know, arbitrageing the price relative to the the trade five venues and in other cases like there might be who knows if there's points or other bonus programs going on around the board. I'm sure there are. Um I know in some cases there are. So um we we could see volumes like maintain or continue to grow um for for one uh

version or the other of of a different asset, but it might not really be indicative of like the long run outcome. Um, so I think we need more time to kind of really see what the shape of the market will really look like. And longer term, I think there's this kind of open question of, you know, we there's not this issue of different forms of the same asset when you're on the in the Trady system. It's like if you're buying SpaceX, it's SpaceX. There might be a bunch of different parties that are kind of like in the middle of that transaction to kind of know about that and reconcile it so that there is only one form of it. But um I do wonder like you know a few years out from now if if more of trady comes on chain and more more tokenization continues to occur

like do we eventually end up with kind of one canonical form of something you know there is like the NASDAQ you know SpaceX you know tokenized equity and it's kind of universal across the DeFi platforms that exist. Yeah, that would be interesting. And I'd say like I mean I feel like now it's pos possibly negative for users having multiple different types. We could argue like in some type of end state like the markets are so liquid and there's so many traders that like there's constantly an arbitrage between all the different types and maybe it doesn't actually really matter in the long run if there are five different types of SpaceX. Um, but I'd say particularly at the start, yeah,

possibly picking winners could be advantageous, even though I don't think um, Salano or anyone's going to do that. >> Yeah, I kind of agree with you, Sam. At the same time, it's also like doing the Tradfi anal analogy, it's kind of like saying uh that the Trafy experience is really bad because there are multiple ETF issuers for Bitcoin, right? Uh, at the end of the day, I I just think it's competition between issuers. That's a good thing. Uh and it just helps the market decide what's what's the best structure. Um I think it's a natural thing that you cannot stop. Uh it's just the way the way it is and the way the market will work. Uh you can't you can't just have a single issuer. What what what will happen over time in my opinion

is you'll have something similar to hyperlquid where there are multiple deployers but then trade XYZ wins the majority of volume and the majority of liquidity. I think you'll see something similar in Solana where there are multiple issuers. That that's just how free competition works, but then a couple of issuers will just get uh most of the volume over time uh as they get tr more more and more trust from the market. Um I just think that's how how it will play out and I don't think uh you should constrain competition uh to achieve that. I think that's just how it will naturally uh happen.

Yeah, I guess a good analog to that actually going back to a different kind of example from you know TRAFI systems is that every you know depending on the brokerage or the bank you use like technically every single one of them has a different kind of like money market fund vehicle that you're in if you're holding cash or something along those lines on the platform you just don't you don't see that because there's no like neutral system where I like have dollars that isn't associated with one of them. So, it's not like I have to say, "Okay, convert my Fidelity dollars into, you know, Robin Hood or Schwab dollars."

That just happens behind the scenes. Um, within crypto, obviously, it's you kind of get to pick where you want to go and you you are starting in that neutral place. Um, so maybe that never changes to your guys' point. Like that might just always be kind of a feature of being within DeFi unless you're on a platform that chooses to make, you know, specific, you know, if you're on Backpack, then it's all backpack issued versions of those assets. But if you're just on, you know, vanilla DeFi, then you get to pick. >> Yeah. that the frictions in the Trafi uh implementation kind of diff take different shapes and forms where like if I hold Apple stock in my Schwab brokerage but then I want to transfer it to a new Fidelity account like that can

take a week or two to do so even though uh it's it's the same underlying equity. Um, I guess outside of issuer type or AMM type, uh, I'm curious what are the equity tickers, uh, people are are trading right now and why do you think the volumes took off like at this particular point in time? >> I mean, yeah. So, SpaceX is the obvious one. So, that's essentially was like the launching equity for Backpack. Um, so I don't feel like I feel like some people have like the concept that like there hasn't been demand for equities and that's why it hasn't popped up in the last couple years, but I feel like it's

definitely the other way around. Like we've just seen Backpack launches version one for one of SpaceX. Now they've also done um Micron and SanDisk I believe the name is um for those who know the AI space well. And so we have talked about SpaceX already doing a bunch of volume. If you go to slide nine, we can see uh Micron also do a fair bit of volume around $30 million yesterday as I believe it had its earnings that was aftermarket. So I believe that guess highlights the advantageousness of being able to trade everything 247 even during aftermarket releases.

Um and yeah and then you can see a similar theme medora doing around 10 20% of volume but the propm doing 80 80 90%. Which is um I guess very advantageous for users. We also saw yesterday an announcement by humidify with aquarium that they're essentially for SNDK. Um they're going to be quoting that and I believe that's the first equity they're going to start like start quoting. So everything's kind of coming around with the first couple big stocks, but we're still in the very early days. Um that's three out of there's 5,000 in S&P. There's around 30,000 around the globe. So there's lots to come.

>> Yeah, I think it highlights the the same strategy that was taken and is being used by like Hyperlid for example to list these highest momentum, highest attention assets like when they're exciting. Um this I think what we've seen like generally speaking from from Xtox and the other issues up issuers up until now has just been you know let's kind of hit that broad range of things that maybe people will tra you know hit spy hit Tesla like let's just get those tokenized onchain. Um, but it it that doesn't really capture necessarily like maybe what the the mindset is geared towards in terms of like, you know, onchain perhaps speculatively minded traders. Um,

and potentially a lot of the folks at least with material like capital um already have access to something like Spy or Tesla in their brokerage account um that they have offchain. So something that I, you know, that Armani that I spoke to from Backpack that he felt very strongly about was like that this like immediate term strategy of just going after like the highest attention and impact assets makes more sense than just saying like, okay, we're going to tokenize everyone in the S&P 500 because if you wanted to, you know, as a user, if you want that, like brokerage accounts exist in in most countries and you can get access to that. generally speaking, the folks that maybe don't have access to are not, you know, today are not a very large market. So, you wouldn't see it in the volumes

necessarily. Um, so I think it just kind of exemplifies like what we've seen from Hyperlid and how they've had success with, you know, gold, oil, like jumping on these trends and and you see it, you know, the pops in in the volume. Then another thing that's changed over the past week is looking at market share of spot volume by pair category with the rise in tokenized asset volume shown in yellow here. Uh I guess onchain equities are trading more volume than memes on Salana. So, uh, I'm curious, is that durable shift? Uh, do memes ever have their comeback against onchain equities?

Um, so how big do we think this grows by year end? I remember watching the early signs of uh equity volume on hyperlquid markets when there were I don't know two to 5% of volume in OI and then quickly rose to 40% within a quarter. Um are we are we seeing the early signs of the same thing here and Salana stacks landscape? >> Um yeah I mean I' I'd say I hope so. like the last couple years obviously we saw the memecoin wave um and that's largely pinning like Salana to the memecoin narrative um but my opinion like if you want to take the bull case

that was essentially just stress testing the system um and the Salana foundation a range of key players always had in mind tokenized equities and eventually tokenizing every other legitimate asset into the pipeline um so yeah now it's nearly 20% memes look like they're bit under 10 like around 10 to 15. Um, and that's only with what three versions of stocks from Backpack. Um, and a fair bit of Y by X stocks, especially the SPY product. Um, so we really have a very small amount of products today. And as Backpack is planning to list essentially the entire stock exchange eventually um as well as multiple other stock

exchanges um I wouldn't be surprised if the majority of share within a year becomes tokenized equities and I feel like that would rerate Salana as a more serious ecosystem and so that'll obviously be advantageous but it would really highlight to the rest of the world I guess the value prop of something like a monolithic L1. one um or like the house of spot essentially and yeah so I'd be I'm pretty bullish on a one-year horizon.

>> Yeah. I mean uh just to give a different perspective at one point like a couple of years ago Sena was called the NFT chain then then it was the beam chain now and it's like the tokenized uh equities chain. It's like Sena at neither point tried to push like one narrative or tried to push one sector. It is just that the chain was so good that activity just took off uh naturally uh for for those specific themes, right? Uh and I think that we've gotten to a point in terms of like market structure and people working in the ecosystem that you can just have tokenized equities trade on Solana. uh 247 with very low

low slippage. Uh and I don't think that's a narrative that necessarily Salena needs to push it. I just think it comes naturally the same way that just memes took up on Sena naturally just because that's where users and activity were at the time. Uh you can see that because builders and uh people like like companies like Backpack, Xbox etc are choosing to launch on Solana and users are already there. that's that's where you're seeing uh tokenized equity activity pick up now. Uh so I don't think that Sena necessarily has a narrative uh problem or it needs to be seen as a more serious chain. I just think that naturally as the as the chain

as the chain's capabilities like just increase and the market structure improves then you'll see more and more activity uh happen over time. I I I also think that the great thing about this is that for now we're talking about tokenized equities because that's what's topical but over time like you can trade basically anything like if you remember last year uh commodities have big like uptick in in volume and hyperlid could benefit from that narrative at the time. I think Salana is now in a position where you can also benefit from different asset classes. uh as as we all say like there's always a bull market somewhere and like that's the nice thing about being able to tokenize a lot of asset classes.

>> Yeah, I I agree with that. I think I think the framing here is maybe like I think folks maybe have the wrong view when they think about the timing of when these things kind of come to fruition. I think really what we're just seeing now is kind of the downstream impacts of the more positive, you know, regulatory climate and, you know, US administration in reference to these assets. Like I don't think spot equities onchain in current form could have existed really any sooner. This is just all of these issuers now, they're they're going as fast as they can to do this in a compliant way. And like pre2024 that was not it wasn't an option to do it like this. Um, and so I think we're just we're seeing them ramp now m much later than pers because I think the per

implementation is much easier to do, right? You just get get an oracle price and and just start getting some market makers and start trading the thing. It's not as simple for spot. So it took a bit more time, but I think it's just we're just seeing now that, you know, finally a lot of more of the pieces are coming into place for these issuers and we're starting to see it, you know, ramp up. Um, and to Carlos's point, I think the point that I would make is that what we've seen on Salana and probably blockchains generally is like there was a massive bull market for memecoins, you know, a few years ago. Then there was a, you know, massive there was a bull market in commodities for a while. We have a massive bull market in equities and AI names, and those are the things

that people want to trade. And so it's not surprising to see the volumes start to scale at the same time that a bunch of these issuers are coming online and a massive bull market is ongoing in this asset class. So maybe to close off that point, I would not say that, you know, I don't think meme coins just like go to zero forever, but if you get a point in the, you know, maybe they decline and not much happens there for a while because everyone's excited about AI names. Maybe at some point in the future, you know, memes have another period of time. We see meme stocks pop off here and there. people are talking about Wendy's this week. So, um I'm sure there will always be, you know, some kind of outlet for some of that just like raw speculative fever that maybe doesn't go into, you know, fundamentals

based names or like a a theme, a thematic trend that's happening. Um but we we'll see different things, you know, popping off at different times. >> Yeah, definitely agree with that. And I'd say it's one of the key themes it seems like, yeah, the SEC is essentially giving the green light for this to go ahead. Um, and then if we get the Clarity Act to pass, I feel like that's what's going to allow like big institutional money or players or traders to actually touch the chain, which they can't essentially do at the moment. Um, and those type of players are probably more likely going to want to trade equities rather than meme coins per se. Um in addition like I remember looking at Salana around like two years ago during the high of the memecoin um phase and then you could see it's like

multiple um relative to rev actually contract to like something that kind of made sense even though that was probably the most um bearish indicator because like the multiple was going so low because the activity wasn't sustainable. Um, but I do feel like with tokenized equities, like there's always some thematic within equities, there's always some theme. I feel like that's going to cross over. Even with memecoin traders to trade these sort of things and the level of activity is going to start to become a lot more sustainable. Um, which I feel like is a very good sign for the entire ecosystem and even our Salana valuation.

>> Yeah. So if if tokenized equity volume on Salana is to increase multiples from here um perhaps the um FPB to to rev multiple could look a little cheat based based on that. Uh Carlos I really I really like the point about there always being a bull market somewhere and it's consistently true. Um right now it's it's very obviously in onchain equities uh not just on spot like we talked about earlier with spot equities on Salana but continues to be with uh perpetual futures on equities as well whether it's spot or perks volume on equities. Um the these are like the

prettiest charts on the board right now with yeah weekly um perpex equity volumes also at all-time highs. Uh it's beautiful to see SpaceX here in purple with a 4 billion slug on the weekly. Um it's over over 30% of all uh equity per volume on chain. And what I think's interesting is, you know, while while spot equities traded about 1.4 billion last week, um the equity perks traded 11 billion. So the the PES market is still

significantly larger. And kind of what we're already seeing is similar to how on Binance the future to spot volume ratio is generally 6 to 10x. Um we're kind of seeing similar uh metrics playing out in the equity space as well where futures just turn over significantly more notional volume than the underlying spot market. Yeah, I think that makes sense and it's a probably a trend we'd expect to see hold and I think that gets reflected in in the pricing as well, right? like when you're trading, you know, per futures, like you're paying maybe a few pips um to trade. And you know, obviously spot

prices on Salana for some assets have come down. you know, if you're trading the sole USD pairs, maybe you're only paying a few bips and it's quite good. But, um, for a lot of these like hot speculative assets, uh, you do, at least historically with memes and like depending on the the interface you're using, um, you tend to pay it like a little bit of a a premium to be trading that spot asset during a peak period of attention. um a trend that I guess I'm watching broadly speaking from like the the user the historical or maybe like legacy trader base on Salana being that it was dominated by memecoins is if users of these trading apps actually convert more of their activity from memecoins to

equities as more of these equities come on chain. Um, I think charts five and six, if you start with five, like kind of showcase this, had Sharples, uh, my, uh, personal quant here at Blockworks, uh, pull these out for me. But you can see, you know, memes across all like the broad list of Salana trading apps, um, including folks like Phantom, Axium, etc., uh, are still doing, uh, what is this weekly like, you know, half half a billion to up upwards of a billion weekly in volume. Um, but if you jump over to the what we're seeing on tokenized equity side of things, uh, it's still it's still very small in its early stages, um, where we're at a few million dollars a week in volume across

these assets. You do see that big spike candle on the SpaceX IPO. Um, but it's clear that like this kind of like legacy memecoin trading user base has not like shifted their behavior yet, but it's something I'll be watching. My expectation is that they do and we do see a trend kind of of meme volume towards these equities volumes especially as more of the platforms lean in. You know, obviously Phantom has been leaning into they have hyperlquid per integrations. They're they're leaning into like I'm getting pings from Phantom like Micron earnings are today. Come trade, you know, trade the equity, trade the per um FOMO leaning into it. Um so I expect to see this trend to continue.

I think this is a good segue to talk a little bit about like uh front ends on Solana and JTX. Uh I don't know Sam what's your what's your opinion? Do you think like the existing front ends are optimi they need to be optimized for this type of activity like for equities or do you think that the existing trading terminals just stick to meme coins and you see something like JTX just dominating like more sophisticated use cases. Um I don't know I don't have strong thoughts but what what about you?

I mean, yeah, I'd say there's no really legitimate sophisticated front ends at the moment on Salana. Um, like we saw from those numbers like Axiom and stuff, still largely meme coin flow. And when you look at Axiom and other players, like the net take rate is like 50 to 100 bips sometimes. Um, coupled with like poor execution as well. Um, so it's largely just the front ends we see today are largely just for essentially memecoin trading. So I do believe there's a big gap in the market for a player like JDO to build a real sophisticated trading front end. And if you look at like a range of key hires have made over the last um couple years all within like quantitative finance and trading backgrounds. Um I feel like I

think in the July release date, but yeah, they got to release a product that's similar to like in traditional finance that people have like Bloomberg terminal as well as a range of other software to actually have real sophisticated execution. I believe they're trying to build something along those lines. Um in addition like they're wanting to highlight that you can actually like as you trade you're getting better execution than sexes like binets and stuff like that. Um so I guess some of the work I did on Salana spreads is showing like material better execution just using like a Jupiter front end um device. Um but they're essentially wanting to go a step further here. And I feel like things like their plug-in program that should

allow them to have a range of like more sophisticated audit types because you the front end can essentially t tag the BAM plugins as they trade. Um so there's a range of possibilities here. But for me there's yeah definitely position for them to clip a couple basis points have proper execution um and really take advantage of the Clarity Act and tokenized equities developments coming on chain. Yeah, I'm going to agree. Being the historical memecoin market writer for Blockworks Research in the past, um this is a a moment that's that's ripe for uh a set of new players to take up all the market share. Basically, I think historically what we've seen in kind of

call it the meme space, but I would say broadly like onchain trading apps and interfaces is that when a new trend comes around, there are players that hop on that first fastest and best and over the following five, six months, they take a majority of the market share um in that category, but then also broadly in terms of like the the onchain trading app space. And we've seen this like four or five times over now. Um you saw it back in the days when you know we had Uniot and some of those in Banana Gun were some of the first to market but then we had a cycle on Salana and all the Salana trading apps went crazy.

Photon, Bonkbot, etc. And then when Pers became a bigger uh move and the the like craziness with memecoins and multiwaling and all this stuff went nuts. You saw stuff like Axiom um just absolutely take over the market by being first to kind of tackle that product. So I think if JTX can do it, if they're first to kind of jump on this this new trend and this new product and really deliver something kind of leading class, um you could see a similar market outcome where they take up a majority of the activity that's that's happening in this space, you know, in the next well we have to wait for them to launch the products but then you know over the following you know maybe five six months call it.

>> Honestly I think I I I I agree with you guys. Um I I I think my only maybe contrarian thought here is I think Jupiter will be much harder to displace than people think. Um I think they have a very good team and they've historically always like dominated uh trading front ends on Salana and I think it's going to be much harder than than some expect to change user behavior. Um even if you even if you create them a better product I think user behavior is incredibly hard to change. Uh I remember at some point Camino swap uh was doing like maybe a year and a half ago like uh

you know it was delivering better trades like less lipage basically but people still like usage was minimal like people were just using Jupiter because that's that's what they're used to uh that's where they're used to trading and and I think that's embedded behavior that you can just it's really hard to change. >> I actually agree with you Carlos and I'll add one more name. I think Phantom will be a constant here as well. I think they've they've done a a very good job, I think, of like iterating their product, introducing new things as they come and and blending them into the product experience. And I think they haven't fully done that yet for like these spot tokenized equities. They, you know, they got some of the per integrations um locked away like a year

ago. Um the spot side, I think it's it's still like they're kind of treated like the other assets that you trade on chain. So maybe they need some additional features there, but I don't know. They've they've just been a really good team at shipping kind of continual new product that aligns with like what's happening in the space. So I would agree with you, Jupiter. And also I would expect to see Phantom do well. >> Are you guys playing the uh the onchain equity bull at all? Are there tickers you're allocated to to to have upside or are you trading uh Micron onchain instead?

I'd say I mean looking at the entire stack I do think uh Jitter makes sense here even though it's made a pretty big rally so you have to contextualize that but if you're truly bullish Salana Dex volume and you assume they get a clip of that um it doesn't take that much really of monetization for the valuation to start to make sense. Um I mean backpack is another obvious one even though it's a bit more wishy-washy with like token economics token holder rides and what is exactly happening there. Um but simply being the place where the exch like the um the exchange where one for one fungeible equities is happening um I feel like it makes a lot of sense there.

Um, and if they can extend tokenized equities developments into like the prime brokerage model, um, that could be quite lucrative. And then I feel like the trade that not many people are talking about, um, could potentially be the pools again. Um, so we saw in the data that propm for these big equities 80 90%. However, I feel like um, like we're not going to just see like one after one after one. I feel like eventually the entire stock exchange is going to be on chain. Um, a lot of these profms aren't going to want to quote the very long tale of equities. Um, so I do feel like pools could come back in a big way to essentially especially for the

first USA be that liquidity layer before we see propm get more comfortable and start to quote every asset. Um so and when looking at um Mediora uh especially it seems like I'm not sure if they have some deal with Backpack and Sunrise but essentially they are the main pull for backpacks security. So that looks like a possible play if you're bullish on the backpack and Sunrise developments. Then there's also radium which if you go to slide 11 I believe you can now see tokenized assets um have surpassed memes in daily revenue and are just behind project tokens.

So I feel like pools could be a bit of a sleeper trade here like we saw like Radium and Or do like a 20x um from the memecoin craze. >> Yeah, it's an interesting shout here. Radium in particular, I think market has likely left it for dead when it, you know, lost memecoin volume share to uh to pump swap, but as you show here, tokenized assets are now their second largest uh revenue lion item. Um so perhaps there's really good upside optionality there.

Yeah, Radium is actually interesting given the way that it's been priced by the market back to like, you know, 2022 lows types of price levels. I I mean, I haven't looked at the valuation or anything along those lines given kind of you could make some go forward estimates on some of this like longtail equity trading activity. Um, that might be interesting. Uh, it's not one I'd thought about, Sam. Um, go ahead, Carlos. No, I was just going to say that uh if you looked at radium beginning of 2025, 90% plus of their volumes was memecoins.

Uh I was looking at their like quarterly report that advisory released and they achieved an all-time high in tokenized uh volumes in Q1 of this year. So if you were paying attention, there was already some indication of them gaining some share of tokenized uh asset volumes. However, at that time it was still not that significant from uh from a perspective of their entire trading volume. Right now I think it's just going to keep rising uh tokenized equity volume as a percentage of their total volume. uh especially if we see way more listings as as Sam was explaining.

>> Maybe maybe the only difficult thing that I could see is that I think their revenues today relative to their all-time revenues is something like a 100x multiple and that was benefited by the memecoin craze in the sense that like you can obviously like be a bit you know more a bit pricier in terms of how many how much fees you take from users trading memes. Um, I don't know that we can see like a 100x. You could see the increase in the activity, but in terms of how much users are willing to pay necessarily like the fees probably might even need to compress on the equity trading side of things, whereas for memecoins, I think they could they could stay quite elevated for a good period of time. But I don't know, maybe those two

trends will counterbalance and maybe just the general growth of the activity will be meaningful enough. >> Yeah, completely agree there. ac across the board. I I still think it's kind of early innings to the traction of of onchain equities and there are players across the board. Um Jetto, Jupiter, Meteora, Radium who kind of all facilitate the market in some way. Um even just Salana um and that activity on the chain um could benefit from this as well. So excited to see what the uh what those volume charts look like going into year end. Um I'm of the mindset they'll be significantly

higher. Perhaps to to wrap up with my one little weekly bit of uh bull posting and and copium to sew some optimism um as Bitcoin makes new lows. But increasingly like I I have this basket of high time frame like cycle indicators I I look at and many are either flashing green or very close to flashing green um that we might be near a cycle low. So this one's a little complicated and technical. But on the top panel we have the NASDAQ Bitcoin pair. Uh on this middle panel

here we have the RSI weekly of the NAS Bitcoin pair and then on the bottom is the uh the price of Bitcoin. And what we see is that whenever the weekly RSI on the NAS Bitcoin pair is is overbought, you know, in excess of 80, um those points in time are highlighted with the rectangle and then marked with a vertical line on the Bitcoin chart, that tends to coincide with a very high time frame cycle low. And we kind of have that signal flashing green right now.

This is the the most overbought the NAS Bitcoin pair has ever been. Um, and historically when you get that level of um, uh, relative performance generally coincides with like very favorable returns on Bitcoin over the coming two years and also coincides with, you know, near a cycle low on Bitcoin. So, um, that's my little bit of, uh, of copium. I with with this signal flashing now, um, I wouldn't be surprised to see Bitcoin outperform the NASDAQ over the next two to three years.

And, uh, yeah, likely by year end, I think, um, I think the relative performance switches back to Bitcoin as the leader. >> You heard it here first. Luke is calling bottom. >> Not to the tick, but but soon soon TM. >> Nice. Love it. >> All right, that's all we have for you this week. Thanks for our listeners for for tuning in and thanks to Danny, Carlos, and Sam for uh Alan and sharing their thoughts.

>> Good chat, guys. >> Thanks, guys.