Will Treasury Companies Drive Crypto's Next Bull Run? With Michael Anderson

Transcript

That's why I say we're in the first inning. Like we are so far away from this becoming too big to fail. And if we get there, that's great, but if we get there, like Bitcoin's at a million. >> There's a case being made on X that these are going to end up pivoting to L2s. Is that Ethereum cope? Like what how do you think some of these newer purpose-built L1s play out? And it's kind of begs the question of like is the majority of this Ethereum run already behind us? >> Welcome back to the Rollup. We are your hosts. I'm Andy. I'm Robbie. And this is your home to learn from the biggest guests, the brightest minds at the tip of innovation.

>> Our goal is to help spread the collective knowledge of everyone in our community. We are breaking crypto out of its echo chamber and taking it to the real world. >> Michael, good to have you in the back. Good to have you on. First time on the show. Welcome, man. >> Glad to be here. Thanks thanks for that and yeah, excited to chat all things related. >> Sweet, man. Well, it's your it's your first time with I'll just get a quick intro about Framework, about kind of your growth story. For those in our audience who don't know Framework, I'm sure a lot of us do. But just kind of how did you get involved? You know, what's Framework all about? What what's your thesis?

Yeah. >> For sure. Yeah, I mean the the quick backstory is Vance and I started Framework six years ago. And in 2019, we kind of saw that there wasn't like an early-stage venture fund going after the space. We had previously started a startup in the space and and sold that and really we're looking at the landscape and you know, you you didn't really have anyone that was going after specifically DeFi as like the first category. And so we launched our first fund in July of 2019 and and kind of like became known as the DeFi fund. It's kind of funny in that everybody sometimes we'll talk to investors now and they're like, "Oh, you guys are still investing in DeFi?" And it's like, "Well, DeFi never left. It's the only

thing that matters right now anyways. And happy to talk more about that, but yeah, we we started in 2019 and you we we've raised three funds and we're we're continuing to invest heavily. Excited about a bunch of themes and yeah, the the industry feels like it's at an inflection point right now. So, it's exciting. >> I'm curious how you would carve out DeFi because I think your definition might be broader than some some others like stablecoins RWAs. All of this is going to go into smart contracts on chain. Would you consider all of this part of DeFi? Generally, how do you how do you define that category and and think about its scale?

>> Yeah, so what I what I said with DeFi was like the 2019 definition of DeFi and like Coinbase and Synthetix, Chainlink, The Graph, like like even back then Chainlink and The Graph were considered DeFi, right? So, the the the definition has morphed, you know, 14 different times. Um but no, I think the what I mean by DeFi now is that blockchains are purpose-built technology for value transfer. What I'd I'd say we don't necessarily have a ton of evidence on yet is can can we or should we have data transfer be something that is adjudicated over a blockchain? But value transfer absolutely works. Is this a stablecoin? Is it a treasury bond or bill?

Or or is this just a endogenous token? But like blockchains are built for that. That's all encompassing DeFi. So, I don't know. Maybe DeFi becomes financial services tech, but like it's all kind of DeFi because it's, you know, it's homegrown from us. >> Yeah. >> Yeah. >> Yeah. Yeah, I'm I'm curious actually just on that, right? Because we saw the US Department of Commerce come out. They're going to publish this data. But what you're saying is that data transfer on blockchain isn't necessarily interesting in and of itself. It's financial products. If we tokenize the GDP or or the PCE, then we can create financial products based on that data.

That's when blockchain becomes significant and interesting. >> Totally. I mean, nobody really cares that we're that we're posting >> I was trying to tell Rob that. I was like, it's not going to change anything. It's just going to be like >> the financial product that we build on on top of that. >> Yeah. >> Precisely, which is, you know, you want to go short long the US economy, you literally can do that on a purse market pretty soon. I mean, who knows whether or not it's going to happen, but like that's that's the part that matters. Like I don't know, client server computer architecture, which is super boring stuff, but like that's purpose built for like communications and content, right? But a blockchain is is different in that we have trust and decentralization, which is for value.

And I I think that's like how we separate the world. You know, philosophically maybe at framework, but also with our investments. And I think we're just going to continue to run with this whole value transfer element because in 2019, 2020, when you know, people like our investors were saying "Oh, I thought that, you know, DeFi investments were over." It's like, well, obvious just hitting its stride now. And like some of these platforms that have been around like Sky, formerly Maker, is just like now coming out of the end game thesis that it published two or three years ago. Like this stuff takes a really long time.

And I was also talking with a friend about like the 20 or the the 1990s and like the '99 crash and then like the 2000s and there's so much congruency to what has happened so far here, which is like DeFi started, it crashed, but like you had to have a crash for things to actually get to where they are now, which is productive. And I think a lot of people got blown up in the process, but like the Amazons and the Googles were started pre-crash and they're going to continue forward. >> Yeah, I think that's a really cool framework for like thinking about it, no pun intended, right? Because I a lot of people are thinking short term right now about, you know, is the top in of three to six months? Like are we going to blow off this and that? A A lot of us have

PTSD. You know, Robin I started a venture fund like a year and a half ago, just prop cap, did a lot of a lot of stuff in like late '22 throughout '23. Like, a lot of like the bigger kind of infra names for this cycle, missed Athena, which is like still scratching our heads on that. Uh um Yeah, right. So, you know, you can't you can't catch them all. But, now, I mean, you know, if we're going to kind of zoom in into this like lens here of thinking about like dot-com style and like the progression of like the mag seven today, kind of reflecting that lens into into crypto. I mean, you you had a a clip I saw from permissionless talking about kind of like the mag seven of crypto is being formed slowly.

You know, and I start to kind of think about like, okay, is the last, you know, 10-15 years of venture in in that vintage of crypto founders, is that where the mag seven's going to come from? Or now that the industry is like really starting to get socialized and legitimized, you know, is the next vintage of founders going to be the mag sevens of of crypto? And so, you know, we've kind of put a big pause on doing that that many early-stage checks for the last like six months. Valves went crazy, comp went crazy. The liquid we knew was going to do well.

Obviously, prop cap we have we have a bit less size, but more flexibility. But, I'm just curious like from your perspective about this this kind of lens. Like, you know, is this next vintage going to be better than the last? How are you thinking about like the venture cycles? You know, we had the L1s, the DeFi, you know, the L2s, the infra. Now, we're kind of into the apps, if if you will. Just like holistically, how are you thinking about the different vintages, where we're kind of at in the venture cycle? And I would appreciate a longer-term view, because I do find that a lot of us get too zoomed in.

>> For sure. Um Hopefully, it's not too long-term. It still has to be relevant and valuable. But um I think the uh look, the the like 30,000-ft perspective is um that fundamentals are ultimately ultimately what matter. And there's there's basically two categories of investment that you can make, which is L1 and then broadly, let's say like anything that's built on top of L1. And a lot of this is going to be apps, maybe like there's an L2 component, but anything that's built on top of an L1 has ultimately got to be um valued based off of the fundamental flows. And and fundamentals is is profit, cash flow, yeah, and flowing

back to a token. Now, if you're lucky enough to be considered an L1, what what I think of with that is that you have this multi-asset capability basically smashed into one singular asset, which is let let let's take Ethereum. You know, there's there's kind of like cash flows and staking yield that you can generate from it. It's a store of value, um but it's also, you know, a medium of exchange that people are using to pay for things. Um it's a collateral asset that people use to borrow against. Like there there's so many different ways of looking at that single asset. You can't just look at it as a single single thing. Um and so that's kind of like how we separate.

It's like L1, huge outcomes, extremely hard to be considered a a legit L1. And then apps, it's sort of like you're building businesses on chain. And so I I think, you know, if we were to also put this back into like the '90s and 2000s parlance, in the '90s everybody went public or or many people went public based off of an eyeballs metric. Like revenue wasn't even or profit wasn't even considered. And I think if we look back on DeFi 1.0, we're going to ultimately compare that to like TVL. And I think TVL itself is done. All TVL is not created equal, just like every single eyeball doesn't necessarily translate to profit on the bottom line for every company.

And I think we got to like move away from that broadly. And if you have like a really successful business model and and profitability with that TVL, that's great, but it's got to translate to the bottom line. And so I think we're kind of moving in the direction of there are going to be a lot of things that win, especially at the app layer or built on top of L1s. If you are so inclined to go off and compete against Solana and Ethereum and hyper liquid and you know, all the majors, even even the new upstarts like Sui and Aptos or whoever Berachain, I mean, you want to go off and and go compete at the L1 layer, good luck, but you got to differentiate and you got to get big real fast. And and if not, then it's

just kind of a venture landscape. You know, what what is your what's your mouse trap and how's it better? But it all comes down to value. >> It feels like there's a new category of L1s that that's coming out. It's the purpose-built L1s, the hyper liquids and and the stripes and and the circles and and these are the L1s that have already already have a substantial business, they have cash flow, and and now they're coming out and they're building their own chain. Do you think these are legitimate L1s?

There's a case being made on X that these are going to end up pivoting to L2s. Is that Ethereum cope? Like what how do you think some of these newer purpose-built L1s play out? >> Well, everybody is going to have the same playbook, which is how do you become and you could say some people would say how do you become the next Bitcoin, some people would say how do you become the next Ethereum just as the top two assets. Um it's probably some combination of the two, which is maybe it's Stripe who has for the first time ever in the crypto space the the distribution to be able to get the broad reach to actually build a legit L1. But But once again, an L1 in my in my kind of valuation heuristic means that you've

got a platform that makes money, you've got an asset that can be used as a medium of exchange or or a stakeable component, and you've got an asset that people want to use as collateral. And so like all of these things combine to create a successful L1, Stripe may be going off and doing the distribution first methodology. You know, somebody else like uh I I I think um Arc with Circle, they may go off and try to build like I don't know if you remember this, but like Silvergate Exchange Network, like a kind of like an internal like an intranet for for banks. Um and that may be their beachhead in. Um but I do think that if you've got if you're going to go up

against Solana or Berachain or any of the new ones that have launched recently, like what's your tech differentiation? Um but ultimately everybody has the same playbook, which is how do you go and become Ethereum? >> Introducing Extended exclusively on StarkNet, a next-gen perp trading platform live today. With 50-plus trading pairs from crypto to TradFi, you get the best experience on chain today. Deposit in the community vault for attractive returns, EVM compatible, and engage in unified margin spot trading, lending, and perp trading exclusively live at extended.app on StarkNet today.

>> Yeah, I wanted to bring up something that is is a little bit kind of tangential to the L1 stablecoin conversation, which is as of recently, and I see I've seen Vance tweet about plasma and Hyperliquid like like no other. And we happen to be investors in plasma also, very early to Hyperliquid here. And so just recently this week, Justin Sun decided it was a good time to blow out a bunch of shorts on the XBL pre-market on Hyperliquid. And my question to both of you guys is actually more about the precedent of rollbacks and of managing user capital than anything with regards to the valuations or anything, which is previously Hyperliquid had this oracle situation where this this really small token jelly jelly pumped up a ton, then they rolled it back, basically called it

an oracle exploit, refunded the HLP vault holders. Uh so basically like their their their core business that the HLP vault, you know, didn't have any lack of confidence going forward. You know, if there's any sort of or you know, slight erosion of confidence in that vault, I think it it really affects a lot of the entire premise of the whole platform. This time, who the people that got blown out were pretty much people trying to hedge their plasma token allocations. In fact, some guy came out publicly and said like he got blown out for like 2.5 million, a pretty famous uh crypto Twitter whale, and uh people were actually upset. I saw a big long post from a fund saying that guys, like, you guys rolled back jelly jelly, but you didn't roll this back. This is a

clear manipulation of a specific problem on Hyperliquid, but not on other exchanges. So, you know, me me meaning that this happened on Hyperliquid, but the other exchanges' prices didn't change in in in the same way. Um it's now settled out on like six or seven billion FDV, 66 cents 70 cents. So, question to you guys is like, should Hyperliquid have rolled this back? Or like, how do you as a kind of a permissionless network trying to you know, facilitate value, how do you think about your your users on chain and kind of these types of activity? Is is it something that that should be, you know, you know, spoken against? Is this should it be banned? How do we think about open

markets in relationship to keeping your users happy and and profitable? And yeah, Michael, you know, please take it. >> Yeah. It it is not um it's not an easy answer. Um in that you you can't do this every single time someone claims foul. Um because there then there's no stop in place. Um and look, the jelly situation was uh was an oracle manipulation. Um and I think what is extremely difficult with either low uh volume assets um or pre-markets um pre-markets in particular or or more so is that there's no reference price. Like there nobody knows what the value of Plaza is.

Is it the 5 cents that you know, Founders Fund had in the last round? Well, obviously not. Um there's a there's a market for it now, which is a pre-market, which is not something that is tied to what other exchanges are quoting as their pre-market price. And each exchange is going to have a a separate and and different market for for how this uh asset should be traded because you're not actually trading the the tokens themselves. You're trading pre-tokens. And so it's kind of like these aren't this isn't even XPL. Uh this is this is an asset that is specific to Hyperliquid or specific to Binance. Um and the market is the market. And if you're going to try and short it and you're going to keep those orders in um and somebody decides to blow them

out, like you have to know what you're getting into. Um and you know, no crying in the casino, I get um I I do think that where there is a difference with Hyperliquid uh in the role that they played in the jelly situation is that is frankly something that they should have taken down as a market before. Um it was too illiquid. Like it was, you know, not even close to being one of the top markets. I think it was on like the third page. Um and so I think that that's where they kind of admitted fault in some ways in that, "Hey, we we need to do better about clearing markets that don't have enough volume for for us to maintain this and subject the HLP to, you know, the the losses uh as they did." So so

that's what they did. And and remember, they they paid back the HLP. They didn't they didn't pay back users that lost money. Um and so that's also a different situation, which is sort of like it's their users. It's not people who are putting on shorts. Um and so I think that right now they're they're kind of handling this stuff really well. Um people are going to be upset on either side, but if you're going to try and hedge your free airdrop position and you get blown out, I I really don't have any you know I don't feel bad.

>> Yeah, I think you know, they like you said they set a precedent and it and to me if you do it once you kind of got to do it again unless there's some external forces at play. I'll keep my answer pretty short short here like let the hype stakers vote on it is my perspective. Like why not? That that's how we determined that Ethereum classic exists and we should you know, blackball the the hacker the DAO and basically blacklist their tokens. All the Ethereum uh holders were able to vote on it. It was a social construct that that we were all able to come to a social consensus.

And I think that is ultimately like that is the consensus here. Maybe it's four validators and hyperliquid or it's a lot more in Ethereum back when it was even proof of work, but ultimately I think most of this when it comes to forking and that's kind of what happened. It was almost like a soft fork in hyperliquid's case to to choose to or to not um let let the people speak their mind with their with their tokens. >> Are there other precedents within hyperliquid of them using the token to vote on situations that the exchange decided? >> No, that precedent I don't believe so. Um >> So that's also a dangerous precedent set.

>> That's accepting a governance protocol that they they may or may not want for themselves. And and yeah, that isn't setting an entirely different precedent. And yeah, I think you're trying to talk, but you're on mute. >> Yeah, yeah. You get into the layer zero wormhole debacle of is DAO governance even really valuable when it's really owned by a couple people, right? So. >> Well, yeah, it's just like are we going to decide on everything as a token vote holder? >> I mean, are you even going to vote, right? Are Are you really going to pull your ledger out and vote? You're probably not. So. >> If it matters to you, you you might, right? Justin might to keep it. Um Michael, I got a a little bit of a different kind of question, but it is still in this, you know, on on a similar

note. Um I was reading through Arthur Hayes's uh essay essentially for valuing some of these things. And I'm I'm curious if if the way he describes it, would you agree is the right way to think about this? We have, based on Best the Treasury Secretary's projecting $3 trillion of stablecoins uh by 2028, uh end of Trump's term. And Arthur goes through this valuation heuristic to to use that same term of, okay, if we have this much stablecoins in circulation, we're able to derive this average uh volume based on the amount of stablecoins, and then from that back into a revenue number. And then he used this to extrapolate like a 56x in Athena, 126x in Hyperliquid.

>> The best bag pumper ever, man, this guy. >> If you're If you If you believe that the growth of stablecoins is going to grow the use of these protocols and therefore grow their revenue and therefore grow their valuation, then the math adds up. But when you look at just the face of it, 126x multiple, it sounds ridiculous. So, where is the Where is the broken logic here? >> It's like uh I did investment banking for a little bit, and in many cases in investment banking you're told what number to find, and then you go and back solve for that number. Um Look, I I I think it's not It's not exactly that, but it it is uh let's find the most bullish methodology we can possibly come up with. Um I also think anyone who's doing like a discounted

cash flow is on the flip side completely wrong equivalently. Um because a lot of these things are either priced in the native token, which they're earning in and of itself or the native token is automatically buying back being bought back by the cash flows which is not a distribution of cash flows that you should discount to some you know interest rate. So I I would say there isn't a right answer unfortunately and that you know it's somewhere in between. It's somewhere in between like it should be worth X based off of cash flow Y. Um and you know I I think if we look at like the price to earnings of the S&P 500 right now is is something like 22. I haven't checked it in the last week but

let's say it's 22 and there's some really non-growth companies and really kind of uninteresting businesses in that. Um and and so maybe the right price to earnings is something like a 2X because we're growing on average 2X more as an industry than the entire S&P 500. Maybe it should be a 3X and but if we're talking about let's say an annualized rate let's say hyperliquid for instance. Hyperliquid is now buying back 99% of the revenue that it generates. Or it will be soon. Annualized and and sure this is not like perfect annualized because it is increasing over the last few months but they're at let's say conservatively a billion dollars a year.

Um priced at 46 I think 47 billion FDV. You know would I would do I feel comfortable buying that at a 46X price to earnings when the S&P is trading at half that? Yes, absolutely. Especially when their annualized number as of closer periods is much higher. And you got things like HIP3 like all of these factors kind of coalesce into the same thing. Um but the other thing that I that I think is important to note is like this is all over the long run what should be fair market value. Um and and there's like the in the short term it's a it's a voting machine in the long term it's a weighing machine or vice versa.

Um I I think broadly it's all about the flows in the short term. So, where is that new digital asset treasury company going to get announced and who's going to be buying a billion dollars of a 10 billion dollar asset because of that that? Like, guess what price that that's a that's a train going down the tracks that you want to get out of the way of. Um, so I I think short term it's all about the flows. Long term there there is like a valuation methodology that you think about, but it's some price to earnings that's much higher than than public comps.

>> Mhm. Let's talk about the flows then because um as of today and I appreciate that. It's great to hear a a venture capitalist speaking about venture capital who is excited about hyper liquidity. You know, these are these these can be rare these days. Surely that the the people's coin, but kind of looking at at the flows. I think as of today actually as per some of the Blockworks research, five of the eight Ethereum DATs are trading at MNAV or below. So, we're already seeing over like you know, a majority basically having no more ability to issue shares at a higher rate. They're now going to be trading in discounted territory.

Excuse me, territory and it kind of begs the question of like is the majority of this Ethereum run already behind us, right? Or like how much of this DAT bid can be sustained going forward? You know, I'm curious what you guys think like I put out a poll what inning are we in of of the DAT kind of mania cycle and I put second, fourth, sixth, eighth. I think it ended up being sixth as the leading projection here, but Michael, when you're looking at the flows, you know, with this stat in mind for Ethereum, you know, how are you thinking about the flows in DATs for ETH? Also, MicroStrategy's MNAV has just been trending down since for about the last year. It's that about 1.9? I think we're getting closer to 1.6 as of today.

How are you guys thinking about this? >> Yeah, great question. Um So, I think we'll separate out basically Bitcoin and Ethereum or strategy and all the Ethereum dots. Um On the Ethereum front, actually on the Bitcoin front first, I think there's been uh well Broadly, August is like the slowest month in in Wall Street and even more so than December. And you get most people are gone. So, there's basically no new issue issuance. There's no new kind of like productization that you're going to expect to happen.

But, today's Thursday the 28th and we're coming up on Labor Day pretty soon and like get ready for September cuz I bet that there's going to be a lot new issue in September, especially as they start to look into some of the preferred options. So, he changed Sailor changed some of the interest rate or the dividend rate for for STRC I think earlier today, which makes more attractive. I bet he's going to be able to issue a lot more of that. I also wouldn't be surprised. He also changed the ATM capabilities for him to issue new common.

And the big thing that I think is people are waiting on and it's it's really not a question of if, it's more a question of when strategy gets added to the S&P 500. And there is I believe a date of September 12th, which would be kind of the next potential available option. If not that, I would look to maybe December or January. But, it's expected that this will happen at some point. And at that point, everyone's 401k in the United States has Bitcoin in it.

Um >> That's insane. >> The classic vampire attack. >> Truly. Um The other element which I find super interesting is um the Norwegian sovereign Norwegian sovereign fund they announced that they had bought a lot of Bitcoin. I think in Q2. But when the filing came out, it was really interesting because they didn't own any ETF and they didn't own any Bitcoin itself. They owned strategy shares. And so there's a lot of sovereign wealth funds who are looking at strategy as basically a a higher Bitcoin per share amount than you'd get in in IBIT. Um and so there there's a there's a real kind

of advantage I'd say with that which is why it still trades at a 1.7 or 1.9 MNAV. And I look, I think the the standard rate for these is going to be somewhere between 1.5 and two. And so if we're in that range, that is awesome. >> We're cooking, yeah. >> We're we're cooking, big time. To the tune of billions or tens of billions of issuance in the in the next 12 months. Um now when it comes to the Ethereum what happened yesterday with Bitmain in particular is that it hit the second half of its unlock. So it sold off I think 6 or 7%. Today it's it's down another couple percent. AS BET kind of holding in there, but it's already through its unlock. And so Ethereum is now getting to that like maturation or

the Ethereum dots are getting to that maturation point where and in reality there's only two that matter because what you need to get to is that $10 billion mark so that you can do a billion plus bond issuance or convertible note issuance. And that's ultimately what everybody's playing for. I think Bitmain has something like 1.8 million ETH. And so, you know, 4,500 ETH we're we're getting close to that $10 billion mark which as soon as they do that and they issue, you know, convertible notes, they're buying a billion dollars worth of Ethereum and they're not diluting the shares. Which is huge.

So I I would say we're kind of at the like the end of the first sell-off of the Ethereum DApps. Keep in mind, these things launched were announced and launched in in the last 75 days. This is just getting started. And so I I it I I think there's going to be um tens of billions of purchasing that happens from the Ethereum DApps by the end of this year. So, just to like say that again.

Tens of billions, over 10, um which at at current prices I think would be like 7 to 8% of all ETH. Um and that's going to come from Ezzil, it's going to come from uh I can't remember the name of Andrew Keys um DApp, but it's going to come from that. It's going to come from Shapeling, it's going to come from Bitmain, and it's going to be a mix of both equity issuance and and debt issuance. So, we got we got a long way to go. Um and yeah, if you were to ask me the question of you know, what inning are we in? I I'd I'd say whatever E F whatever is not listed as the first inning.

>> Well, get out of the way, baby. ETH BTC to .08 is coming then, huh? My goodness. Um so just a quick note there that I think was going to be new for our audience and is new for me. Once a treasury company gets over 10 billion dollars of the underlying asset that that they're accumulating, they can then basically issue debt against that uh versus having to go and uh kind of do this uh ATM pipe strategy. They can go and basically do like the sailor strategy uh after they get that 10 billion dollar mark. That's the >> It's not a hard and fast rule, but but what you need is um support from an investment bank.

And um You can find smaller boutique-y investment banks who can do hundreds of millions of dollars of debt issuance, but you know, the large banks only want to do billions. And if, you know, you're issuing debt, there's sort of like a debt to asset ratio that you want to maintain. Um, rule of thumb would say the first debt issuance is less than 15%. So, so maybe you do a one or 1.5 billion dollar debt issuance, but that's only if you have a 10 billion dollar company. >> So, it's sort of like >> Okay, get to >> that level, congrats, you're there, banks are interested, let's do some debt.

>> Mhm. And one one more mechanism at play here is that this unlock that you said sort of led to this this sell-off in in Bitmain. Could you explain like, what is getting unlocked? What what did they sell for anyone who's unfamiliar? >> Yeah, so um, the unlock, I mean, I said unlock, it's really a share registration. Um, it's where anyone who is a PIPE investor in the original PIPE, um, there are certain dates after that PIPE closes where a certain percentage of your shares are available for registration. Once they're available for registration, it's like you get liquid assets and you can sell them. So, in crypto we're used to like, okay, maybe investors get like a third after 12 months and then it's monthly for the next 2 years. Imagine

you get 50% after 30 days and then 50% after 60 days. And that's what just happened. So, like the fact that Bitmain didn't sell off 20% is extremely bullish. I I also keep in mind, uh, I think the shares I I I want to say they're at least over 10x uh, in terms of cuz I think it was $4.15 was the original PIPE. And I think they're still trading over 40. Um, so >> So, what you're saying is that these PIPE vesting schedules are more like KOL rounds than traditional VC.

>> I mean, look, an IPO fully unlocks 6 months after the IPO. So, like I don't know where we came up with vesting over multiple years, but that's not how TradFi does it. >> Yeah. No, I I just think that the pushback that people are giving now for like the sole that's is that you know, investors are putting up locked tokens. That's kind of like where like retail doesn't win. There's a clip going of Jonah from the ThousandX pod talking about it. Um and I think that's where some of the pushback is is is coming from, but I don't think that that's just not happening on Ethereum and Bitcoin. Um they're they're much more cleaner. >> and there is no locked Bitcoin.

>> Yeah, exactly, which is great. >> And just to comment on that I I think um if you are putting in locked assets, um you are getting a lower dollar value because of that. >> Mhm. >> How steep is that discount? >> Yeah. >> If you've seen that, but it it's fair market value, so it gets valued by somebody else. Um you can't just like count one for one if you don't have access to the asset. >> Yeah. And when you're speaking to like your LPs or you know, people in SF, NYC, people that are you know, of stature, is there is there institutional interest in allocating to just straight-up buying Bit Miner as a as like a I want exposure to ETH versus like the whole like invest in venture fund or go buy ETH myself.

Like are you seeing real on-the-ground interest of like buying hundreds of millions, tens of millions of dollars of these stocks? And like actually want to be like, I want to hold this for a year or 2 years or kind of what are you seeing on that front? >> I mean, think think of it this way. Um if Bitcoin is the leading kind of playbook for every other crypto asset, Strategy is the leading playbook for every other that. And Strategy trades at a 1.7, 1.8 MNAV. They have run the playbook of equity issuance, debt issuance, now preferred share issuance. I would imagine every other that is looking at that and saying, "Okay, that's what we're going to do, too."

And and so what would be what will be amazing for the that ecosystem writ large is once again, when strategy gets added to the S&P 500 and then somebody goes, "Okay, well, I guess Ethereum's going to be in there, too." And then someone Solana goes, "Okay, well, eventually I guess Solana's going to be in there, too." And like that that's kind of the playbook. So, yeah, there's a ton of interest. >> Yeah, yeah. >> Yeah. And like >> leverage on crypto. >> Yeah. And like you said, you know, there's significant demand from sovereign wealth funds, Norway and you know, that that's the tip of the iceberg. But I I I want to clarify something on the S&P front because I I did a little bit of research here and I I'm of the understanding that a company has to be profitable for three quarters

in a row and then profitable I I guess over that a longer period, maybe. Is is Strategy currently profitable? Because when I dig into this a little bit, it looked like they weren't. Eventually, I think you're right. I think they will be added to the S&P, but I think you were saying like January, February, December, court Q1 of next year's when there's a timetable. Is >> Every quarter, there's basically a rebalancing of the S&P 500 and and one to three or zero to three um you know, additions and deletions. So, like it's constantly getting rebalanced. Um in Q1, I believe there was a a FASB uh accounting change that um made it so that you can have accounting

profit from these businesses um that are holding assets. Um and so they are eligible to This is the first time that they are eligible to be in um and it's just unclear as to whether or not they're going to make it in in the first instance. Now, it is different in that they are not a traditional operating business, um but that's up to the S&P 500's discretion um or the S&P's discretion. Um So, it it it's it's likely that they will get added. It's just a question of when.

>> Right. >> Yeah, got it. Guys, I know we should have a couple minutes. I'm just going to play devil's advocate here. I I put out a a tweet that felt like an unpopular opinion, but I don't think it was based on the response that I got. But now that Michael's presenting such a bullish case, I think it may be unpopular for him, which was I tweeted that at the bottom of the next bear is going to be littered by the bodies and the blood of the digital asset treasury companies who are being forced sellers near the next lows. I think it's hard to see that right now. I think I get a lot of pushback for putting any bearishness out there. And so I've just kind of stopped. Um you know, it it is is this something that you're actively concerned about from the lens of look

um something like some of these treasury companies are just buying businesses like whiskey companies, furniture companies, random things that are just completely not correlated to their to to what is actually happening in terms of the accumulation strategy. Tom Lee is there's rumors of him buying call options with with the money that he's raised rather than actually going and buying spot. Uh you know, people lose money, stuff happens, lawsuits happen, etc. You know, is this a playbook that's going to happen again with GBTC, DCG type of thing? How do you think about the potential negative ramifications of this? And is that potentially a good signal looking ahead into the bear you know, if if there's another bear, if it's not

just forever super cycle. You know, maybe we see a a bottom signal there with some force selling. >> Look, I I I think um uh the the veracity that this that industry has taken off with over truly just like the last 90 days is pretty impressive. Um but bubbles don't form in 90 days. They take a really long time. And they have to be really really big for them to actually kind of have systemic issue. And we're nowhere close to having this be big enough to where it could be a real systemic issue. This may be a systemic issue for a long tail that which you know, nobody's ever heard of

and doesn't have any liquidity anyways but if we're talking about the majors you know BTC ETH and what's rumored to be a bunch of sold apps it won't have a big enough effect to actually have any chance of taking down you know the the token itself and that's ultimately what matters now if you have a bad structured note or or senior secured assets you could lose the debt and that could be something that happens but it's not going to be something where um you know and then congratulations you did a bunch of shareholders who now own a bunch of assets but that's that's ultimately what could happen and so I am I think we're that's why that's why I say we're in the first

inning like we are so far away from this becoming too big to fail and if we get there that's great but if we get there like Bitcoin's at a million. >> Yeah wow that's awesome comrade Michael I'm riding this with you all in brother let's go thank you thank you for your time and look forward to having you on again in couple months maybe and recycling some of this seeing where we're at been a fan of what you guys do at framework for some time also have a lot of mutual port codes and just I think similar ideas so always around to help out and yeah appreciate your time man.

>> Fun times guys thanks thanks for having me. >> Absolute pleasure man all right man see you soon.