Why most crypto tokens are trash and how to invest anyway

Transcript

GM. Good morning. Welcome to the Milk Road Show. The daily crypto show that hides alpha like your uncle hides Easter eggs poorly and behind the same bush every year. I'm your host Jay Hamilton. It's Saturday, April the 19th, and the Milkro Pro boys are back. That's right. We've got Kyle and Martin in the house today. Two guys who do absolutely nothing but read Twitter and look at crypto charts all day, every day. Now, every Tuesday we have our internal research meeting and we talk about it, everything that's going on in crypto, what we're paying most attention to, and then we release it to you guys for free on Saturday, so you know exactly where we see the signal amongst all the noise.

And there is a lot of noise right now. And what we think is most important for you to be paying attention to today, we are talking about 99% of all tokens in crypto are absolutely garbage. They're trash. And I know that sounds extreme, but it's true. There's just too it's too easy to launch a token. And when it's so easy, there's going to be a lot of speculation and a lot of bad actors. And so the natural question is, how do you build a portfolio and a successful investment strategy in a space with millions of bad investments that are trying to get your attention constantly?

That's a really important topic that we dive into today. We also talk about the majority of onchain lending is now DeFi versus CFI. In 2018, it was 100% CFI. Today, it is majority DeFi. Will this continue? Will banks use DeFi? What about fintexs like Robin Hood and Revolute? We also talk about the stable coin bill that is coming in the US and rumors are that it might not allow yield bearing stable coins. What does this mean for decentralized stable coins like Sky, uh, Maker, Athena, those that offer yield? We're going to explore that. Now, if you want to get today's episode on Tuesday when we record it, you can go

pro, check out the link in the show notes. Also, another reason to be honest why you should go pro. The main reason why you should go pro is today Kyle just wrote a pro report that got released that he dives into the macro setup right now and answers one very important question which is when and will we see the bull market come back? What are the things he's looking for? What are the what is going to actually trigger that to happen? Today's episode is brought to you by Moonay. Trade crypto fee free, fast, and on your terms. It's also brought to you by Coin Shift, powering top crypto treasuries with their yield bearing stable coin, CSUSDL. With that, let's jump in and hear from the boys. Gentlemen, welcome

back to another Milkward Pro Research meeting. We are without Adrian once again. He's unfortunately sick. Uh but um we got the three of us, Martin, Jay, myself. Before we get started, Martin, what's going on with your uh with your head there? Look, is that a band is that a band-aid on your on your forehead? On your eyebrow? Uh yeah, I was playing pedal and I wanted to catch a ball, but I didn't manage to catch it and I just fall right into my racket and just hit my head. And you hit your own racket. Yeah, your headbutt his racket. I hear that's a really good movement paddle.

And did you get the ball? Did you hit the ball? No, I didn't. No. So, you lost the point. But they just fix it and uh I got a band-aid and then we just continue and play and then I came home and my wife was like, "What? You you are still playing after that?" And I said, "Yes, I did." Yeah. Yeah. Such a good game, Kyle. I play golf all the time, but it's super boring. It's for old people. Should pivot to something more fun. If you're in golf, pivot to paddle. I play squash. I play squash, which is like the real man's the real man's paddle. No, it's like it's way more intense. It's way better. Oh man. It's like actually hard. Paddle's like slow motion. Like you're like

like the same sport. Maybe I'm thinking pickle ball. I don't know. Honestly, I think you're thinking pickle ball versus Yeah, paddle and squash are like very similar. No, squash is on a wall. Paddle is against someone. No, no. Paddle's also Paddle also has walls around the court. Yeah. Yeah. Oh, okay. Well, [ __ ] I got to learn. You don't even know. M Martin might move from Milk Road to uh like paddle tour or something like that. He might go work or maybe he'll just work for a local paddle uh club or something. Well, actually before the permissionless three last year, there was a tournament and I thought it's in

paddle but it was in pickle ball. Pickle ball though. Yeah. Yeah. It's not for me. How do you feel about pickle ball? Um, less fun. Not many people playing paddle here. Uh, pickle ball, I mean. But everyone's playing paddle here. Okay, let's uh let's We're here to talk about crypto, right? It's a research meeting, I think. Okay. So, I think everyone's listening and they want to know. Actually, what I do want to know is did you win the game with the bloody face? Yes. Yes. Yes, my man. Okay, that's what we're talking about. All right. So, today we are talking about why 99% of all tokens in crypto are complete trash.

But honestly, it's true. And honestly, it's something that you guys all need to realize. And I think most people don't realize it or or I think even I I tweeted this out and someone commented like, "You know what? It's true and it's obvious, but it's always nice to like rehear it because you often forget." So, we'll talk about that. We're going to talk about some CFI DeFi lending stuff. Um, obviously DeFi is doing really good there. Uh, and the last thing we're talk about is some stable coin stuff along with the stablecoin bill and then just a framework that Martin's got on stable coins. I think he's going to write a pro report on it, but we'll um we'll chat about it today anyway. Okay, let me share screen here. First up, maybe I'll just read this tweet and then we'll I'll set some contacts and we'll talk about

it. So, the other day, this actually comes off of the um the M crash or Mantra, which went down 90% in like two hours. Uh and then I I don't know what happened, but something with IP uh it also went down like 20% in like a couple minutes. Um, and so the thing, and look, I'm not commenting on either of those projects, but basically what I wrote was, if you haven't figured out yet, 99% of all crypto tokens are complete trash. And the reason for that is they either represent useless tech. They have consistent dilution or inflation from incentives, airdrops, token unlocks, etc. They're artificially priced from market makers. They do not acrue any value from the success of the protocol, or they're just an outright scam. And unfortunately, most tokens are actually

a combination of all of the above. And put all this on top of the fact that most startups outside of crypto, just normal, most startups fail within a few years. Like 99% of all startups fail within a few years. And so unless you've gotten pre-token launch, uh the odds are extremely stacked against you to win in investing in crypto tokens, like liquid crypto tokens. Um, now of course there are some that do well and will do well and that are legit and don't fit in any of those categories. But the thing I think people need to understand here is like let's put crypto aside for a second. Let's say you were to invest in just businesses in general, right?

There's only a small subset of businesses that IPO. These are bigger businesses. These don't have all those problems for the most part because like they've been around for like usually you don't IPO until unless you've been around for like 10 years or whatever, right? Um it's not always 10 years, but whatever. So, picture every other company in the world that exists that is private, that is not IPOed. They just started yesterday. They just started two weeks ago, a year ago, whatever. Now, here's the thing. Most of those companies are garbage. They're terrible ideas run by terrible entrepreneurs that are never going to make it, right? They might make it for a few months, a few weeks, a few years, and then they die.

99% of all companies in the world just die. That's just how the the capitalist world works, right? That's just how entrepreneurism is. This is a tough It's a grind out there, right? There's just not a lot of good companies. It is what it is. But in the non-crypto world, it's not that big of a deal because when a company fails, just the founder fails and they can move on to like getting a job or like founding a new company, right? Maybe they they got some money from a VC or a family member and that that goes away, but like is what it is. The problem in crypto is that we launch tokens before most companies even have a product, right? And so companies in the real world, the non-crypto world, they don't have this. They don't have publicly traded liquid equity, right?

That only happens once you become a big legit successful company, right? Doesn't mean you're always going to be legit and successful, but you kind of don't get to IPO until that world. But in crypto, we IPO, and I say that in quotations because we're not IPOing, but let's say, you know, you launch a token, and in most cases, you actually launch a token before you have a product or before you have product market fit. And the problem with that is now you obviously if you look at the marketing of a lot of these companies, they focus their marketing and their attention and and their strategy on the price of the token and marketing the token rather than marketing the the product. And so you have all these people, these retail people buying these tokens for these companies that they think are going to be great. And yet again, they're all

actual [ __ ] And even worse, the instrument that they give you to invest in is even worse than the project itself in most cases because it has, you know, artificially priced from market makers. It's got dilution. They're air dropping bunch of these tokens. Blah blah blah blah blah. Whatever the reasons are, there's so many. And so, like the thing people need to understand when you want to invest in crypto is it's extremely difficult, especially now, but the odds are very much stacked against you, which is also true in the non-crypto world. But if you think about it, angel investors, which are ones that invest in early early early stage companies, like what most crypto companies are, they invest in a thousand of them expecting that one wins. They expect to lose a

999, but they think one will go to a billion dollar company and that's where they make their money. Literally a thousand. Nobody here is investing well, I don't know, most people here are not investing in a thousand crypto tokens. Yet, the odds are even worse than those who are investing in angel investors in my opinion. So, this isn't to say you shouldn't invest in crypto. There's some incredible outsized gains that you're not going to get anywhere in the world. But you just you can't just invest surface level and just be like, "Ah, this sounds like a great product. Ah, that looks like a good, you know, uh, they have a good social media account or they have a good like leader, team leader, whatever." It's way harder than you think. And there's just so many more things that people are not realizing.

Um, and so I just think this is like this is maybe a PSA. I also want to get your guys' opinions, but this is my PSA to everyone else. Like, dude, this stuff is way harder than you actually think. And most of the stuff is actually complete trash. Do you guys agree? Disagree? Do you think I'm an idiot? What do you think? What is PSA? Public service announcement. Okay, it's a warning. I completely agree. I think it's a it's a harsh reality to face. I think you learn this if you if you've been through the cycle before, you tend to know this. If you haven't been through a cycle before, you tend to not understand this because there's a real survivorship mentality in crypto which focuses on the coins that

have been around for multiple cycles and looks at those coins, you know, meme coins that have been around for multiple cycles. I'm not talking about like fundamental based coins. I'm talking about like non-funddamentalbased coins. I mean, and let's be real, there's not a lot of fundamental based coins in crypto. Like, maybe there's like 20 or 30 realistically, but that that mentality of, oh, well, crypto's been around for, you know, 50 Bitcoin's been around for 15 plus years. Crypto's been around for a while. Oh, everything's going to go up over time. It's really easy to get stuck in that trap and believe that especially when you're in a cycle and especially when it's your first cycle and you pick an you pick an

early coin that goes up and you see that you have picked a coin that goes up, you feel like, oh yeah, like all the coins I pick are going to go up and you start to really overinflate your abilities and the picks that you're making. But yeah, it's true. like you are. We are an extremely speculative AC asset class. Extremely speculative. That's really all we are is just pure speculation. So if you're in a pure speculation asset class, 99% of stuff can't go up. Otherwise, I don't know, we'd be breaking the laws of like investing in the laws of physics, right? Like let's be honest, everything in crypto comes with fees. But here's a nice surprise.

Moon Balance doesn't take a cut. You heard that right. No Moon Pay fees when you buy or sell crypto with your Moonay balance. Top up with dollars, pounds, or euros. Then you're ready to trade instantly whenever the market moves. And if you change your mind, withdraw your cash. No Moonay fee there either. Simple, fast, ready when you are. Check it out at milkroad.com/moonay. Disclaimer: Network and ecosystem fees [Music] apply. You make a good point of the those who are in their first cycle don't get this. I would argue though that those in their second cycle don't get this either because any cycle previous to this there was a small amount of token like last cycle there was a small amount of tokens like less than 10,000

right and um and then the cycle before that even less and so basically every token did go up right because not no tokens had fundamentals then during last cycle you're right you're right yeah because every cycle before this there was no such thing as fundamentals no one was making any revenues nobody had except for like um for and Ethereum was making revenues at that point, but like no one had good tokconomics basically at all back then because everyone had just started launching tokens. So like everything was like you said speculative and so it was kind of just like everyone was just chasing the herd and there was a bunch of people that came in all at once last cycle and just wasn't a lot of tokens. So everything went up. There's like if you were in a bunch of tokens and a bunch of tokens went up and there

was one that didn't, didn't matter what it did, you're just like oh I'll buy that thing because it's going to go up and then it would go up, right? everything went up. Now though, we actually do have I mean we have a gajillion tokens, right? We have probably the same amount of people if not less than last cycle uh to be fair. And we actually have tokens with like strong fundamentals. And so there's like there's kind of a I don't want to say a safe haven in crypto, but like sort of a safe haven, right? Like Bitcoin you could say is definitely a safe haven at least in crypto. And there's others that are actually becoming more safe havens because like they have revenues, they have fundamentals, they have things to back it up. they don't have dilution, etc. So, like there's actually a difference between tokens today, whereas

last cycle there wasn't. They were all the same thing. They were all ideas of a potential product that might do well in the future and they all were just [ __ ] tokens, right, with no fundamentals. Today, it's it's actually kind of different. And so, it makes it I mean, it's better for the industry. It means the industry is maturing, but it definitely makes it harder, right? There's like um it means you actually have to do research today to understand and like try to find things that are actually undervalued. Now, it's not to say that like [ __ ] tokens won't do well. Like this is like I'll bring up this tweet here that Mike Dudis uh put out which is I really enjoyed and it was like thematically being net short the entire basket of alt L1, L2 and infra vapor is the best trade in crypto. It's

just a matter of how you put on put it on without getting eaten up by funding costs and counterparty risk in the meantime. Essentially saying there's just so much garbage in this space and if you could short it you do well. The problem is, and you can see it in the comments below here, is like it's also sometimes the worst trade in the world because you have like some of the worst tokens and the worst projects that are just complete trash that all of a sudden pump 100% in like a week and you're like h where how did that happen, right? But but it happens all the time. And part of it is because what I said, market makers like pumping up the prices, right, to try to make it look good. It's like random marketing tactics that projects will do for their token instead of their

project themselves. It's like just random things that don't make sense. And so like you actually just can't short all this garbage um even though it would be like I'd love to find a way to do it um in some sort of way that where like you can't get blown out um because there's just so much garbage in crypto. So many things that I don't want to touch at all and I would love to be able to somehow short it. I don't short things so like I wouldn't even know what I'm doing. But like if there was a way to be like I want to be long you know Bitcoin and a few other fundamental assets and then short everything else you'd do so well. But I just like you can't short this market because it's just again it's manipulated I guess is probably what it is. It's weird. I also

want to comment like I think these are all costs for being early into something. Yeah. because we needed that we see money and therefore unlocks for them to fund like everything that has been built over the years you know also the unlocks for team members who are still building and here then I would also argue that token incentives are still net positive for the industry because otherwise we wouldn't be able to attract that many people and I believe that still we got a lot of activity just farming new tokens and those kind of And while we can disagree that this is a kind of positive behavior and kind of

activate that you don't really want at the same time it's giving you kind of test and kind of experiment and like it helps you to see what's sustainable and what's not and unlocks. Yes, like in the long term you probably don't want to hold tokens with a lot of unlocks, but they they there were and they still are kind of necessary I think for many projects. Also the incentives still even though right now incentives still feel it already feels less important than in previous cycles because we now have kind of we we see what's already working and like the the major use cases and some

products with PMF and then it's really hard just to came came in and say hey there is our stable coin and we have much higher APY but everyone knows at this point that it's going to be just uh artificial inflated by their token emissions or whatever. Yeah. Look, I'm not even saying that necessarily it's a bad thing that these tokens have, let's say, dilution or inflation and they do incentives and things like that. Like in the traditional world, like I run a company, let's say I start a company and I need to get investment. I don't give away 100% of my company for that investment. I I maybe sell 5% of my shares, right? And then the next time I get the next investor because I need more, then again, I give away another 5%. and I keep diluting myself and my employees who I might be giving like as

I hire more people I'm also giving them shares like it's the same thing in the traditional world and like for example Coree just did a an IPO and they only did an IPO with 5% of their shares right of their company shares so like this is very common this is how it always works in Tradfi the but the thing is like usually you want to you want to wait years and years and years unless you're getting in early right before IPO you want to wait until all that dilution and everything's been figured out and the company's as part of market fit and you they have revenues that's when you generally it's available to the public to start investing and the problem with crypto whether it's a problem or not I don't know is like I just think people don't realize it is like hey you're

investing very very early stage and so like dilution has to happen for the company to succeed because that's they need to keep raising money this is normal right and or this kind of new dynamic where it's not just about raising money it's incentivizing users or whatever whatever and so like I'm not saying that's a bad thing I think these are all good you just need to be aware because it's like hey this company that just launched a token that might be a good product. It just might not be a good investment for like 5 years because it needs to get through the dilution, the incentives, the raising of capital and blah blah blah blah blah like all these things. And so it's just it's just something for people to be aware of. Doesn't necessarily mean it's a good thing or a bad thing. Now I

will say though there are of that list of things that I mentioned, most of them are actually net bad, right? Tokens representing useless tech. Okay, that's a net bad. There's no reason that that's ever a good thing. uh except for in some cases some smart entrepreneurs have then taken the capital from that token and then bought other companies with it. Uh I won't say any names but maybe you guys know who I'm talking about uh because people will yell at me on the show. Artificially priced um tokens from market makers obviously not bad thing. We should never have that but we do. Not acrewing any value from the success of the protocol. This is not a bad thing in my opinion. This is normal right? um we like most companies don't give dividends or do share buybacks until many many

years until their company. So like that's not a bad thing. It's just again something you need to be aware of. It's just a reality. Um you don't want them to be buying back tokens on day one. You want them to focus on growth and building better products, etc. Uh and then the last one was just they're an outright scam. Obviously not a good thing. And one more thing I would add here is that I personally really uh hate in crypto and we had that conversation last week is sometimes you hold token which you expect that you have a kind of rights on the tok on the product that they are building and also the future cash flows and revenues and then later on you figure out that there are also foundation or labs who is also

kind of making some rights on that product or the revenue. So is it like okay so there are two different parties who both want some share of that revenue and like who should really have that like final vote right so unis swap labs and unis swap unis swap labs yes cheto it's the same thing now it's a about a and avara so like it's really not positive view for like I always think about tokens like try to go and sell those tokens to people who really invest just in stocks because they will think very critically and looking at the key metrics and they will give you a good kind of sense of

okay maybe I I was just wearing a you know uh purple glasses but I'm not really realistically and critically thinking about all these aspects that these guys are and like I think we need to get much closer to these people and to equities like investments sort of And once we get there, I think it's the whole industry will will be much better positioned. Meet CSUSDL, the stable coin built for institutions and Dows. Don't just hold basic stable coins. Earn yield all without compromising security. Backed by regulated real world assets and secured with institutional grade risk management

by our friends at Steakhouse Financial. Put your treasury cash to work, earning native yields and protocol rewards. Built by the team behind Coin Shift, which is trusted to manage over 1 billion in business treasuries on chain, including A, Gitcoin, and hundreds of leading institutions. CYCSUSDL is gaining traction at milkroad.com/coinshift. good news and I think a lot of these issues will get fixed with the market structure bill that I think is coming in they're saying August who knows if it actually is but I think that that will make a big deal for a few things one the reason you have the unis swap labs and the unis swap like uh dowo or whatever with their own token and that kind of

discrepancy same with and all them is because in the US they weren't able to just like launch equity for their company as a token right it wasn't allowed so they they basically would launch a token have this dow and then they would have their exist existing company have its own equity in the private way because they had to separate it, right? Like otherwise they were afraid to get sued by the SEC which the SEC was suing all of them at the time and um and so like they were forced to do that. I think hopefully once and and probably it's already going to start now. I don't think they got to wait for the market bill, but like when that comes and we have more clear like guidelines here and regulations like you'll just launch a token and it'll just represent the company and slash the

Dow. It'll all be kind of one thing I think. Maybe not. Maybe it's just the way it goes. But so that and then I think with the market structure bill I I don't even know if this comes in the market structure bill but the SEC is also working on this which is they're going to figure out what is a security and what is not which a lot of tokens like they just are securities and that's not a bad thing or a good thing. They just are. And again that just means they need to go and fill out some paperwork. They need to apply get approved and then it's all good. They can still trade and do whatever they normally do but they just need to get approved first. And then they just have things they need to follow, which is like if you're gonna sell and dump on on people, you've got

to announce that before you do it, which probably prevents them from doing it. You know what I mean? Like uh you need to be just more transparent about what's going on with the the token price and the tokens and where they are and who's holding them and what they're doing with them. It's like it's going to really help create a more transparent, as much as we, you know, we think crypto is permissionless and open and transparent, it's actually very opaque on the token side of things. like you have no idea what's going on with these tokens. No idea um in the back in the background. And so I think the market bill should help with that. Um and it'll make these tokens just have a lot more um I don't know like rules which is just good for investors, you know what I mean? So

hopefully we start to fix that. There will always be a world of just like non compliant tokens and those will exist and they'll just remain, right? And that's that's just going to exist. But there's nothing we can do about that, right? This permissionless tech. But again, it's just up to you as an investor to notice that. It doesn't mean you shouldn't invest in ones that aren't compliant. They might still be great tokens, right? Uh but it's just you just need to be aware. And right now, I think just most people are just not aware of what's going on behind the scenes. And that that is not good for markets. That's really bad for markets, especially retail. Why aren't most people aware? Is it because the traditional investment asset classes are they're comparing them to that and they're saying, "Oh, well, if I can

invest, you know, maybe and like in their subconscious, they're saying, "Oh, if I could invest in a stock over here and I can invest in crypto over here, then they must meet some sort of similar standards even though they're completely different." Is it because there's too much noise? Like, there's so much noise in crypto and impossible to know who to trust and who to follow? Is it because most crypto investors don't take the time? You said yourself earlier, Kyle, you got to do the research now, right? It's not what it used to be, you know? And is it because too many aren't aren't willing to take the time to actually develop an investment framework and an investment strategy and stick to it and see it through, you know, because like every time we have this conversation, it seems so obvious that that so much of it

is trash. And maybe it's just obvious to us, but I I feel like it must be obvious to others as well. I just like what's the disconnect? I'm about to answer this with the blunt like thing that I always do that my girlfriend hates. Um, but before I do that, I will say part of it is because a lot of things are opaque and so like people just actually can't find the answers which is unfortunate. But the real answer is most people are just surface level learners, right? Everyone in this isn't even about crypto in general. It doesn't matter if it's health, doesn't matter if it's crypto, if it's investing, if it's like politics, whatever it is. 90% of the world, they just learn surface level stuff. They read headlines and that's it. They do nothing more than that.

That's how people deal with their health. That's how people deal with their psychology, their stress, their like their investing, their everything. They just read headlines and they just do surface level research and that's it. And that's just never going to win you anything. You're never going to get healthy. You're never going to be a good investor. You're never going to get good at anything if you just remain surface level, but 90% of our world, that's what they do because they just get their information from Tik Tok, Twitter, Instagram, whatever, which is all surface level stuff. I don't know about 90%. I'm just making up that number, but like most people in the world, that's what they do. And that's the problem is like you just you can't if you want to invest, especially in crypto, it's like you can't be surface level, right? Like you you need to go deep and really

understand what you're investing in. If you want to put a lot of capital to it, like look, if you want to go and punt Fartcoin, there's nothing you need to do there. just go and punt parkcoin, right? But like should you put depending on how much money you're putting into it? Yeah, but there's no research regardless. You know what I mean? So, I don't know. It's like you need to either like do the research or subscribe to people doing the research for you and then like even that like people who subscribe to Milk Road Pro. I don't think you should just blindly do what we tell you to do. We're going to do a lot of research and we we explain it in detail for you on in our Saturday reports and in these meetings which is very useful. But like then go and also do a bit more research

yourself, right? Fact check what we say if you need to or go and listen to someone else too, right? Like get another opinion. Like that's just keep peeling back the layers. That's what you need to do in investing. And here's the thing. The more you peel back the layers, the more you realize that almost everything in crypto is complete garbage and you would never put any money into it. That's what I've realized since starting pro is like because that's what we do. We just sit there and we peel back layers and like Martin or Adrian or someone comes to the table with this like opportunity and we just sit there and we rip it apart and we just keep ripping it apart and we end up going, "Fuck, that's another shitty one. Ah, damn, another shitty one." It's like it's so hard to find actual good

investments because almost everything is complete garbage. That's the thing I've learned by going deeper into crypto, which is like sucks, but it's also a really good thing because it prevents us from buying most of the garbage, which even the things you think are good still could be garbage. So, it's even harder. I I kind of want to replace your I like I would say I don't know if I agree with the it's complete garbage. I do like I know what you're saying, but I would like to say it's highly speculative because yes, it is or it's just too early or it's just too early. That's why I say highly speculative. Do you know what I mean? Exactly. That's why I'm saying like it's just highly highly speculative. Maybe it's not garbage.

That's because look, there's a lot of coins in the top 50 that the three of us would say right now are complete garbage. But maybe some of them work out. We don't, you know, it's so early. So I think it's this it's this it's just the expectation everything goes up. I think also I just got a comment. Your first thing of everybody's just surface level is so true. And I have to say the reason why is nobody has focus and sticks to their lane. And this is I'm going to focus on in investing for a second. It's true in everything but particularly in investing. I mean, even we can use, you know, Martin's example of paddle. Martin has decided that he doesn't want to play golf and he loves paddle and as a result, he's getting

better at paddle because he's focused on it. He's not trying to take on any new sport or anything like that. Same thing in investing and in crypto especially. So many people go outside their lane. All of a sudden, they're a memecoin investor or all of a sudden they're chasing AI coins or they're chasing a new narrative. And you can't do that because you cannot have unless you're you have all the time in the world maybe and you have no life and you can research multiple narratives and multiple companies and multiple different areas of the space. But it's just stick to your lane. And if you stick to your lane, you will be much more successful because you will notice things that other people are not aware of because you are deep in DeFi or you're deep in like you said, you know,

I could see somebody having a thesis on Fartcoin. Like I get what you're saying. There's no fundamentals to Fartcoin, but like I could have seen somebody a month ago or you know saying, "Hey, I think Fartcoin is it is the memecoin is the AI memecoin. I think hot air rises. Hot air rises. It's going to get a lot of media attention." Like I could have seen somebody build a thesis around fartcoin and say a month ago that they thought it was and look, you'd be up what, like 3x right now. So like but but you in order to build that thesis around something like Fcoin, you had to have been following it and in it and in in memecoins for a while. You wouldn't have just all of a sudden been able to do that. Or if if an influencer told you to go do it, you wouldn't have known what

was right and what was wrong from them. You just would have trusted them and made, you know, you got to become an expert in that thing. And so if you want to invest in memecoins, you got to be an expert in the trenches, right? It's like we actually had some tokens uh when we originally launched Milk Road Pro that we consolidated. We got rid of because we're like, you know what, we just don't cover that sector enough. We don't have an edge there. Um and so we, you know, we were down a little bit on it and we we just sold it out. We were like, you know what, we don't we don't know when is the right time to be buying or not buying these things. And so we got out and thankfully we did because it's gone down much more then. But we just don't

cover it. We don't understand it, right? Uh and so you got to invest in things that you you know, it's like one of the most important investment advice for sure. Yeah, you said it like you need to have a an edge. What's your edge? Like if you hold something, you know, everyone should try to answer that. And also the other thing is I can make a bull case for everything, but also you should think about the bare case. And this is something that people usually don't do at all, but it's a very good exercise and everyone should also do that. Yeah. No, that's a good point. All right, let's move on to the next topic though. That was a a great conversation, gentlemen. So, let's talk about this chart here that's went quite viral on Twitter. And this is looking at the market share of lending uh from crypto

lending from CFI versus DeFi back in 2019. See if I can full screen this guy. Back in 2018, 2019 was all basically all CFI. And then 2021, obviously things got really big with like BlockFi and FTX, etc. And they all collapsed um and they went down. And now you see DeFi lending is at 60% of all lending. Um, which is pretty cool. And this doesn't even include CDP stable coins, which is like I think this is like Sky, right? Would that be Sky? So, it's probably it's much higher than this actually. I don't know why they don't include that there, but quite interesting. What's your take on this, Martin? Um, I think it clearly shows that people start to finally realize how important the kind of

security around um, DeFi is. I mean like if you use CFI lending you are basically lending to someone to some other party that you have no idea about and like what if they are going bankrupt or whatever but in D5 lending it's like n 99% is over collateralized lending which is okay I'm going to lend someone money but there are smart contracts that make sure that these people always have higher collateral than they are borrowing from from me or like other people from pool of capital basically and yeah and also like it brings you more composability so like you know I might land to a I will get the liquid

representation of my kind of stable coin that I lended and I can use it further so I feel like it's clearly showing that people start to prefer D5 lending over CFI lending and I think we will see another stage here which is from CFI lending we go use defy lending and from there I think we will emerge into the savings products which are like think about your savings account in your bank. So you will just hold some yield bearing stable coin like SUSDs from maker or whatever and they will do all these lending for for you. So you will just give them your money and they will give

you a yield and what they will do with all your money they will go and kind of supply that to different lending platforms. So you don't need to do that for yourself because now if you go and lend to a you are only limited to a and you know the dynamics between suppliers and borrowers on a but maybe at some point it's it's better to land to compound but I don't want to do it. I don't want to track the markets and monitor them and like moving my funds around. So I can just kind of lend my money to maker or just buy you know SUSDS which is their stable coin savings product and they will do everything for me. So like yeah I think that's the end

game here. What about so as the market structure bill comes in which we just talked about and you know regulations are getting much better in the US and now with some of the changes already banks can start to custody crypto. What about when banks start to custody crypto? Are they not going to be like allowing for lending and you're just going to use it in your bank? I got a feeling that that's going to take off because of course they have all the users, right? Um, and I don't know like Coinbase has done this in a beautifully smart way that that is great for everyone which is like you can still do it in the Coinbase app. So where the users already are, but they actually go and move it on chain, create you a smart wallet in the background, they do it

through Morpho. So like that is DeFi, not CFI. But I wonder like banks probably aren't going to go that route, at least not right away. So do you think that we get a like if we let's say we you know crypto does goes nuts over the next year year and a half or whatever because of these new changes in rules and and I know we print a bunch of money etc. I would imagine banks start allowing you to lend crypto and that probably means really bad things and we go through what we did in 2021. I just thought of this now. I never thought this before but do you think that that happens? Why wouldn't it? You mean stable coins or like all crypto? all crypto. Like, why wouldn't I be able to go to Bank of America, give them my Bitcoin, and they give me a yield on it?

They're definitely going to launch that product, right? Like, why wouldn't they launch that product? That's this that's the reason why BlockFi and FTX and all them launch that product. Yes. But I think we are still quite far from there. I think like Coinbase, Robin Hood, those are like the the early adopters and yet like Coinbase just allowed that, right? So yeah, Bank of America and all these traditional guys, they are quite slow and I think it will still take a couple years. I think I think that's going to be a eventual like Black Swan event that like similar to what we had in 2022 with all Black Blockies and Voyager and all that. It's going to happen with the banks at some point probably because they're going to get too excited using

things like Bitcoin and ETH and Soul or whatever. I don't know. Let me let me show you guys uh show you guys something here. Let me pull up another chart. This is from the uh the Coinbase institutional investor survey that went that happened like a month ago. Uh so this is not banks. This is not banks. This is uh like VCs, private banks would be in here, asset managers, uh hedge funds, that type of thing. Okay? 350 uh institutional investors all managing an average of uh a billion dollars. Uh and here's here's the results on DeFi. So currently 24% of these institutional investors engage with DeFi. So some but low but in the next two years

51% plan to start to use DeFi in the next two years. So the institutional side is definitely going to use DeFi. That that much is very clear to me. The big banks I'm not so sure. I I agree that it would make sense for them to go the Coinb Coinbase route. I think we're gonna see both. I think we're gonna see some do the DeFi and some some will do. The Coinbase route is DeFi. They integrate into DeFi. What I'm saying is banks won't go that route. I think they'll do the BlockFi route, which is just like, give me your Bitcoin, I'll custody it. There's nothing to do with DeFi and I'll just go do things behind the scenes with other financial institutions and lend it out. And that's where things get dicey. Um, but I think

that's what banks are going to do. Um, and that scares me a little bit. So anyway, probably two years too early, but be aware it's coughing. I agree with this C5 tech and I think yeah the banks will do it but ultimately what will be the key differentiator is the product because I think with AI agents and the future we are heading is that the whole market is becoming more rationalized and like I might be able to do a a sophistication like sophisticated decision because I use blockchain all the time but like maybe my wife or my neighbor they don't because they don't use it.

But I think that we will live in a in a world where AI agents will help us to filter the best products like you know we are all using aggregators today like Amazon or Netflix or whatever those those are all aggregators. So I think at some point we will start to use aggregators even for kind of financial services because right now we are just isolated to our bank. So if I have savings product in in my bank, I'm only kind of limited to the yield strategies or to the users that these banks are using today. But I would assume that if people have an option to kind of jump between different savings products that are getting the best yield, they will do

it. They would do it right. So agreed. So I agree DeFi will win in the end. I'm not saying that DeFi is not going to win. They definitely will win the end because it's way better because AI agents can use them. It's better yields. There's so many better things to it. My assumption is just banks don't go from zero to using DeFi. It's from zero to doing their own lending in their own custody to then maybe using DeFi. Unless Coinbase like really succeeds fast enough here. Then they all see that and they just they just leaprog. That would be the best thing the best case scenario for our industry. I just um I don't know if they'll do that. I think this fintech 2.0 I know like Robin Hood and Coinbase and Revolute and these guys they are the gift for the industry because now we are

not able to bring D5 to people but they are because they have user bases so they'll just need to integrate some D5 products and there it is right by the way you want upside to crypto but don't get into all the 99% trash the easiest thing you can do is buy the equities because the equities like Robin Hood and Coinbase These don't have all the things that we talked about. They are not outright scams obviously. They don't have dilution and inflation etc. They don't have all like the market maker like all that stuff that I talked about. They don't have any of that. Now they might not get a you know 100x like some of these other tokens like you're thinking you want which I don't know that any tokens will do that really but they at least give you the safe upside to

crypto. Uh, and so like that's where I actually focus a lot more of my attention and capital on because um you don't have to worry about all the stuff because the SEC worries about that for you, right? Uh, and they're existing businesses. Even if the crypto thing doesn't work out, like they still have other revenue and other businesses. So, um, well, at least in Robin Hood's case, maybe not Coinbase. Um, okay. Interesting. That's a good conversation. Let's do one more here. Uh, we've got a bit of time and let's just talk stable coins. So, the stable coin bill is coming, I think, like in the next month, maybe. I hopefully. Uh, and I think that's going to be really cool.

Obviously, we've talked a ton about stable coins, but we've got a few questions because from our pro community, because in the stablecoin bill, there's rumors that they're not going to allow yield bearing stable coins. And so, people have asked, what does this mean for Sky? Like, are they are they cooked? basically because you can't no company or person in the US specifically will be able to hold um a yieldbearing stable coin at least in like they still could do it on a web 3 wallet obviously because there's nothing anyone can do to stop that like they want to hold it in their ledger or their metamas they can obviously do this um but there are technically going to be rules put in place that you can't give yield back to the consumer um which is dumb and super frustrating makes zero

sense right uh but that's what they want to do to at least to get things started, I guess. And I think eventually that will change. Um, does this impact Sky? Martin, I'll start with you. Is this a big problem? Like, what do you think? Well, I asked Run the the very same question, and he was like, hey, it's uh it's just part of the game and right now they might not allow it, but in the future they'll probably allow it. And it's not a big deal. That's my take and how he responded. So, I think he's right. like we still need to keep building and if we have good products and a good intentions we are not you know scamming people or stealing from people whatever then at some point we will get green light even for yield

bearing stable coins it's just a matter of time and I think also maybe like these fintex 2.0 you know they will find a ways to get that exposure anyways through some I don't know there's vault and you need to deposit and it's a you know maybe different thing and I I don't know like but I like what about circle what about circle giving USDC giving yield on Coinbase like is that allowed because it's technically different so Coinbase right now does it they say it's marketing right those are marketing dollars um but I I would assume that that's going to go away which would be very painful that that would suck. Um, but I would assume that goes away. We don't know what depends on how they word it and what they decide to do, but that

would suck for sure. But I would say so like that is going to be a big thing what happens with Coinbase because like if they can get around it, then it's all good. Um, it's dumb if they but it wouldn't make sense for them to put this bill in place and then just like allow them to just, you know, say it's marketing instead. The one thing I would say, my take on it is the this product of yield bearing stable coins is actually not necessarily targeted towards Americans and American companies because they can easily already get US dollars and put it in a treasury and they can get their 4% on their treasuries today. You don't need crypto to do that. Um whereas the rest of the world cannot. It's very like as a Canadian I can't do that. I can get the Canadian dollar and get whatever the

yield is in the Canadian dollar, but I don't want that. That's absolute garbage. Uh, I want the US dollar. Well, not the last week or so, a couple weeks of the US dollar, but like obviously long term, you want the US dollar and you want access to basically the treasury yield and most of the world wants that and they can't get that. And so Sky gives them that. So I I actually think what Sky and the others, it's not just Sky, but what they're building for is the rest of the world, um, at least currently. And, um, and they can get companies, they can get people all around the world that will will use that. American companies won't and American people won't which obviously is a big a big cap big piece of the capital. It's like it sucks but like there's still so much room to grow in

Brazil and in India and in Argentina and like you list the country name there's so many other places that will want this still assuming the US dollar remains the global reserve currency. So I think there's just still such a like untapped market that it doesn't really matter. Um because I also don't think that like most companies are going to be at least anytime soon are going to be like using yield bearing stable coins to like pay employees and things like that anyway. It is as Martin always call it like a savings account. They're still going to use their USDT USDC to like transact make payments things like that which obviously you need American companies for that because American companies basically run the payment infrastructure but like you're not going to use yield bearing stable coin for that anyway at least not anytime soon. So, I don't

think this is actually a big deal at all. Though maybe it like impacts the price of Sky for short term for people that like get scared. I don't know. But ultimately, I think they can they'll have no problem continue to grow their supply. Um I don't know. Any other takes on that? I think I think Martin's right. Like it's not a big deal in the long run. I think that the circle is a very powerful force in America right now and is likely putting a lot of lobby dollars towards this this stable coin bill as are some other big players in the US and none of those players are the ones that are focused on yield bearing stable coins. So it would make sense that we wouldn't get it in the first go here but it doesn't mean

that it's not going to eventually happen and I I I I think long term it doesn't really matter. Martin, you had um I don't know if you created this chart. I think someone created this chart, but you were sharing this and talking about the different types of stable coins. This really helped me wrap my head around kind of like investing in in stable coins and what's really happening here. Why don't you walk us through these kind of different types and help us like understand this a lot better? Yeah, like um stable coins are obviously like you know the the the best use case of crypto right now and clear winners with product market fit and all that and now it's start it starts to feel like all the yield bearing stable coins are starting to converge into kind of similar path and just again like I don't

think that these yield bearing stable coins on which are issued by decentralized protocols are competitors direct competitors to circle or tether because again like if I'm going to pay for coffee okay sure I'm going to use USDC but if I want to have savings account I'm going to use staked USDS from sky for example so I feel like those are two different use cases and that's why I'm saying that they necessar they don't necessarily compete to each There is type one stable coin which is a tokenized hedge fund. You can think of it as a you know Athena came in and say

like hey we have a interesting strategy that generates I don't know let's say five 10% yield and we just need you to give us dollars and we give you access to that strategy. So you can think of type one stable coins as like okay there is one yield uh generating strategy and they will just give you access to it and we can Athena is an example or you can see a as an example like people can go and kind of lend stable coins to a and a through their smart contracts will be able to borrow your funds to some people who are looking for uh more money for leverage basically. So that's type one stable coin where you have just one

strategy that is mostly managed by smart contracts. But then at some point you will realize and what's maybe Atheina realizing right now is okay but what what are we doing when the market conditions are not really favorable for our strategy right so Atheina was giving people I don't know 20% APY uh Q4 last year but now it's around 4% because there is not enough leverage in the market so their strategy is not really that profitable. So they are looking for different ways okay how we could still generate money for our users. So now Atheina is also bringing um US treasury

bills so they have kind of more yield generating strategies uh that they can allocate their funds into. Right? So that's that's type two and also you know Sky has some strategies they have lending they have also access to Athena now they can also use treasury bills so that's type two stable coins you can think of it as DAO and looking to the markets what's available and how they could get access to these strategies but when everyone is probably kind of heading into the future and I think that sky is pretty further like closest to that end game. It's where they sit down and

say like, okay, we think that savings products are still some something that we haven't really open and we haven't seen a full kind of demand cycle for savings products. But like I think like we we all three probably agree that savings products are going to be a huge at some point. Mh. And okay, we need to find a a way how to incentivize the supply and demand and by that I mean why should people buy my stable coin kind of thinking my savings product and not anyone else and that that comes down to the yield you generate. So you know like

Milro Treasury allocates their their funds into Sky Savings rate too because they give you like the best risk adjusted yield available and they might not allocate that much to Athena because they only have access to their strategy which is using funding rates which are very volatile and then the second option they have is only US treasuries which are now around 4%. So, but they don't have anything between. So, you will probably still use uh ST USDS from Sky because that yield, right? And now, okay, but we might need to incentivize that kind of demand side even further.

So, what's why should anyone why should Robin Hood integrate other savings products? because they are willing to give you a a certain kind of incentives that you are bringing more demand for their savings products. So imagine that I think 0.5 2% is giving to all the people all the front ends all the apps that are bringing more demand more users to sky savings rate. So they are like incentivizing the demand for their savings product and that's the demand side.

And then there is a supply side and okay so we now might have a demand for our savings products but how are we going to ensure that we are going to generate enough yield and in a sustainable way. So they announced something which is called um stars where people can join the the sky ecosystem because sky right now sits at 5.5 billion uh in USDC which can be deployed elsewhere but they only have like limited access to the strategies that are available today because they had to go and like find all these strategies and do audits and all

those kind of stuff. But now they are taking the opposite approach and like hey we have the money so we give everyone opportunity to borrow that money and you can go out there and generate the yield what it's up to you but you need to put up some collateral. We are going to put our own collateral as our as a MKR holders. So it this system will just create a flywheel where okay I can borrow from sky for I don't know 6% and I can generate yield on I don't know let's say ver chain lending 10% okay that's really nice I can keep like 4% profits so I'm going to do it and it will create the the flywheel for

sky so there are people different actors on the markets incentivized to bring all the yield strategy ies available to Sky and there is a system that will just make make sure autonomously how much you how much they will allocate to your strategy and like how they are going to track your performance how they are going to manage your risks and those kind of stuff. So it's kind of creating a autonomous design to minimize u human decision intervention where you know I don't always need to come and say like okay that this guy is getting that much money and everything is just kind of systemized in a way where that supply

and demand might meet at some point and you can think of it as a as a marketplace where they are just connecting supply demand and and that's it. They're they're they're becoming more like a platform. Instead of only trying to find people that want stable coins, they're finding all the other businesses that want to like deploy things and like get more yield. And so they're like they're getting both ends of it, which I don't think anyone else is really doing. But it sounds like Do you think so Sky is doing this? Are there others or do you think it's just Sky right now? But do you think everyone's going to go that way? I think so. Or you think Sky is just too far ahead or you think everyone will? Well, if if you think that everyone else is also kind of not trying to compete with

Circle and Tet, then they are going to compete on yield. And how are you going to generate like the best risk adjusted yield? It's impossible if you need to do all the decisions and all the yield sourcing yourself that yeah, it's just not scalable enough. And Sky is probably in the best position to profit from it the most. an automated savings account giving you the best riskadjusted yields is going to be worth so much at some point in the future as this thing actually takes off. Like I mean that's what made banks such a big thing, right? It's like hey give me your money and I'll give you x%. And that was a huge that's what built the banks back in the day, you know? Uh and then the banks like ah [ __ ] it. We don't need to give these guys any any yield anymore. And I

think these savings products are bringing that back. And so like obviously there's a massive TAM there. that's what literally built um these products previously. So um it's going to be cool to see that play out. Um and I think Sky is going to be one of the winners there. Okay, well that's it guys. That was a good conversation. Learned lots. Appreciate it. And uh we'll see you guys next week. Thank you guys. Thanks guys. Thanks for listening in everybody. Have yourselves a wicked awesome day. Thanks for listening to today's episode everybody. Before I let you go, I know y'all are probably spending some nice family time this weekend over Easter. And if you're hanging out and you're looking for something to do, I highly recommend you check out the new Vitalic documentary.

It's called Vitalic, an Ethereum story. It's available on Apple, uh, Vimeo, uh, Prime. It's available on a whole bunch of platforms all around the world. And it's a fascinating documentary, like a a a incredibly well-made documentary about Vitalic, his background growing up, why he built Ethereum, how he built Ethereum, and it really gets you into his mind in such a powerful way. The best part about this documentary is it's not just for crypto people, anybody outside of crypto. It's actually a great if you're looking for a way to introduce your family to crypto in a very approachable, very meaningful way. It's a really great way to do it. Check out the film. Link is in the show notes.

You'll be happy you did. Have yourselves a great weekend. Happy Easter, y'all. We'll see you next week. As always, if you liked today's episode, please hit subscribe and make sure you follow us so you don't miss out on the next one. There's also a link in the description to our free 5minute daily newsletter where we simplify crypto for you while making you laugh. And if you're willing to step up your crypto investing game, we're going to also leave a link for Milk Road Pro. You get access to our portfolio where you can see exactly what we are buying. This is your number one resource to help you invest successfully in crypto. One final note, this show is for educational purposes only and nothing we say is financial advice.

Investing in crypto or any asset is risky and you should never invest more than you can afford to lose. Thanks so much for listening in my friends. Have a wicked awesome