Are We Actually in a New Cycle? | Roundup

This episode is brought to you by Anoma, the universal intent machine introducing a new era of applications where you define the outcomes you want. To stay up to date with Anoma, you can follow them at x.com/anoma or sign up for the newsletter at anoma.net. Special thanks to Anoma for sponsoring today's episode. Real is a permissionless L2 designed for tokenized real-world assets. They've just launched their rewards program, so get started at re.al/rewards and be sure to use the code in the show notes below. Special thanks to Real for sponsoring today's episode. This episode is brought to you by Avalanche. Avalanche is a leading network of blockchains giving some of the world's largest financial institutions new use cases and business models while leveraging completely customizable infrastructure. Check them out. It's core.app/discover. You can explore Avalanche's subnet ecosystem at core.app. Discover. I was playing around earlier today, really cool. Hey everyone, Jason Yanowitz here. Have you ever wanted to play casino games with your friends right from your couch? I'm excited to tell you about MyPrize, the first multiplayer online casino where you can play, chat, and win together. When you make your first deposit of $10 or more, you'll get $20 for free. Head on over to myprize.com/invite/empire to get started. I'm having a day over here. What's up everyone? Welcome to Empire. We got the roundup. Santi, why are you hurting? What's up?

I had a colossal fall on the bike. I got—

did you really? Yeah.

What happened? It'd been, it'd been like over like a long time since I fell. I don't know. I was cycling with a buddy. He's training for his Ironman in Copenhagen next week and hits me up. I'm like, all right, let's go for a ride and venture over to Italy. And man, just Italian roads are just third world country. And on the descent, I just had a feeling, like literally 2 minutes before I fell, I was like, I think I'm going to fall.

You look fine though. You didn't scrape it up too much. Oh yeah, you did.

This, and then there's other parts of my body that are not suited for the podcast.

People are listening on a Friday or Saturday. We can, we can show it off. I don't know, man.

I don't know what's worse, the bear market or my body, my bodily injuries.

I don't know what bear market we're, um, I'm sure if you just said what's worse, my bodily injuries or my butt, but we'll, we'll take it, dude. This, um, you know why you fell, right?

Karma. I don't know.

So when, when I was, um, I was in college, I did this, like, I'll share for another day actually. I basically did this like multi-level marketing thing that like was ridiculous. Um, and ended up being like, you know, probably, I don't know, should or should not have done that. But I was really good at it and had like thousands of people in like my, what is called a downline. And I was, and I got really into personal development stuff like doing Bob Proctor, Tony Robbins, Napoleon, whatever his name. And one of the things was like, thoughts become things. So the reason you fell is you were thinking you were going to fall.

Visualized it. Wait, I'm thinking that my portfolio is going to do 100x. Why haven't I done 100x?

You're not thinking hard enough. You're not doing enough thinking. Okay, there are these guys in this company that I was doing it with, and they were like, you just, you just got to visualize, you just got to manifest it. And I was like, fucker, I'm, I'm manifesting. And I was like 18.

Well, uh, what are we manifesting this, uh, in this roundup? I mean, I guess like, uh, I had a really good discussion yesterday with Kane. Yeah, they're launching their own pod with Infinex, and, um, we were just talking about the markets, and it was like, it was just, uh, him and I just share, um, we go way back, and so there's just so many stories that we could share. We could probably go on for hours. But, um, there, I'd like to start this pod. There is this great tweet by Seteris. I think he goes by Seteris. Basically shows a year-to-date performance of all the different coins bucketed by L1s, uh, AI, and a bunch of deep in and other categories. And basically the only categories you've made money this year is Solana and meme coins, and a select handful of meme coins. Um, and so we were just talking about— that was like the opening, right? And it's it got me thinking 'cause I relistened to the, the pod with David Kalk and what's his name?

Jeff, Jeff Hart.

Jeff, sorry, Jeff from Bitwise. A lot of people really liked it and reached out and said, oh, it was funny. We recorded that before the flash crash, I guess. But anyways, it's, Caine and I both sort of came to the conclusion that it's like, it's a very, you would think that it gets easier to like navigate crypto cycles, but this cycle has just been whether you want to call it a cycle or not, Kobe thinks that we haven't even started the cycle. But for all intents and purposes this year, it has been very exactly this chart right here, ladies and gentlemen. So color-coded, sounds like this guy went to, you worked at an investment bank. So the only categories that have made money are Bitcoin up, you know, 32%, Solana outperforming Bitcoin at 43%. And then Pepe, WIF, Bonk, Floki, um, and SHIB. Everything else is, you know, and a few kind of like Pendle and here, there, like, but like you look at this and it was like other cycles kind of didn't look like this. So it's, it almost mimics the equity markets, right? Where you've had like a very concentrated return, uh, of like, you know, the Magnificent Seven. And yeah, so I think this is really good context for the pod. I don't know if we should go there, but, um, there's a whole host of things that we can unpack here.

I mean, let's do it. Go, go in. So keep, keep talking.

I'm doing all the heavy lifting and math, dude.

I'm eating lunch right now. I'm hungry.

Okay. All right. Let's do it.

Wait, wait, wait, wait.

What happened? What happened to the chart?

I wanted to show you eating. I want to show you my meatballs, but Wait, no, we've talked bodily.

Anyways, moving on. So, so when we think about this, so like most funds can't touch meme coins. Fine.

All right.

Go listen to the pod with Joe McCann in November of last year. Probably one of the few funds that actually, you know, was comfortable openly talking about owning meme coins. Most can't or won't, uh, at risk of being ridiculed by their LPs. Um, but like, this is a very much a have and have-nots market. And I don't think— I mean, maybe my memory is betraying me here, but prior cycles didn't look like this. You, you obviously had like DeFi summer, like concentrated returns and outliers, but like, this is just like extremes, right? You have severe underperformance and severe outperformance, and there's like no man's land. Maybe DeFi is kind of there, but it's still lagging. It's still down. Um, I guess like, um, certain going coming into the cycle, you would have said, uh, I'm gonna, I'm gonna do like, I'm gonna do the L1, L2 convergence. You know, I, if, if something like Ethereum does well, the L2 should do well, right? Well, not really. You have, uh, you know, ARB, OP, ARB and OP down relatively the same, 66%, 67%. Um, uh, well, the modular thesis— well, no, you got crushed, right? TIA down 58%. Maybe you would have made some money on airdrops. Dimension down 75%. Uh, so that narrative kind of quickly went away. Um, some of the other L2s— Immutable, which is now fully vested mostly, is down 45, 46%. Manta is down 68%. Blast is not on this list, but it's also down. There's a whole host of criticisms around, you know, like there's not much going on and the points in the meta and all this stuff. But so, so the L1, L2 as a whole, the Ethereum ecosystem is just vastly underperformed. I think ETH, I mean, ETH here is 10%. I mean, shit, man, you're better off like doing senior secured credit and clipping 15%. So that's underperformed quite dramatically. Like just the Ethereum ecosystem as a whole, the Cosmos ecosystem as a whole. Ethereum DeFi, there are some kind of bright spots, brighter spots. So like Ethereum, ETH DeFi for context has been underperformed. And this is something Jason Yanowitz and I talked about extensively. ETH DeFi has been, you know, in a bear market since even November, since before rate hikes. Um, so, um, you know, but something like Maker, you know, we've talked about here is up 15%. AAVE has rallied recently. Um, I think there's, it's meta evolving around what happens if rates, um, with rate cuts now really on the horizon, you know, does that make ETH DeFi or just DeFi as a whole more attractive, possibly likely. Um, this is a great comparison. So like SOL DeFi relative to ETH DeFi has, uh, outperformed vastly. And interestingly, a lot of these like trade at much higher FDVs, right? Like Jito trades at, uh, I forget, like 7 billion FDV. Maybe more now that they announced, um, but you know, relative to like, I know, I know they're not perfect.

I don't think Jito's, I don't think Jito's $7 billion.

Sorry, no, not, not Jito. Jupiter is, yeah.

Jito is $2.7 billion FDV and, um, JUP is probably over $7 at this point, $8 or $9.

Correct.

Yeah.

So Jito is, uh, $2.7 billion market cap is only $340. So, you know, a lot of it's still locked. But compare that to Lido, which took a heavy beating, by the way, on Monday. Lido is at 1.7— sorry, 1.1 billion. Most of it is already in circulation. So like market cap and fully diluted are very, very similar. So like, that's just, um, you look at this and of course, I mean, no surprise, right?

The—

there's a very clear, strong narrative of the cycle, which is Solana. And the Solana ecosystem vastly re-rating relative to Ethereum and other ecosystems, but primarily Ethereum, which is returns off the bottom. And so what you want to look at also is like what actually rebounds fastest, like what catches a stronger bid. And again, SOL, like look at the top, top left, 31%. It's actually higher now. Like, SOL is now $155, $157. Um, and you know, some of the meme coins like WIF here is $142, now it's like $171. I mean, it's just incredible strength, right? And that, that is a very clear signal of what the market is bidding. Um, and, and, you know, anyways, there's the other observation I want to make, and then I'll pause, and then You know, I'll stop rambling. Is a lot of the projects that there's, there's just no bid. And we talked about this in the episode with David. Um, it's like projects that are unlocking have vastly underperformed. Like there's zero bids, there's zero interest in, in those. I don't wanna say zero, right? But they're vastly underperforming, right? There's just no liquidity in the system. It's, it's like hot balls of money moving around. Mostly between the Solana ecosystem, mostly within memes. Um, any new money's coming in, mostly has been retail, um, and that's going directly into memes. And the meta around buying, um, low float, high FDV coins is just really there and strong and top of mind.

So yeah, so we, uh, David Canales at Blockworks ran this analysis in the— actually, shout out the Empire newsletter. So you can see for anyone watching on YouTube. So basically what he did is he took the S&P. So the green line here is the S&P. Then he said an BTC Maxi portfolio. He wanted to basically look at a BTC Maxi portfolio, a buy the dip portfolio, which says you put in— you invest more any time there's a 10% drop, then an 80/20 portfolio, BTC 80, ETH at 20. And then a 60/20/20. So BTC 60, then SOL 20, SOL 8, uh, and, and ETH 20. And what you can see here is like, okay, so during this time period, this is from January 1st, 2023. Okay, so 80/20 portfolio up at 200%, BTC Maxi up like 220, 230%, Buy the Dip is up 400%, and then this 60/20/20 portfolio outperformed I mean, it's up 450-ish percent. So like, that's, I think, why you see the— what it feels like is the Solana ecosystem dancing on the timeline and everyone else—

to be fair, the date, the starting date, heavily influences the outcome.

Yeah, it does, it does. And he—

like, you're basically saying, like, you know, I'm telling you, the, the first of January 2023 was the absolute bottom for Solana. It was when it hit $9, $8, $8.40. Uh, if you go back, if you like started in, I don't know, mid-Jan, SOL's already at $26, right? That's, that would likely change the gray— the, the brown line for everyone watching online to below the dip.

Yeah, I mean, yeah, yeah, yeah.

But I don't think it— like, I don't want to like look— great analysis. Um, the conclusions I think is still pretty much the same is if you didn't have Solana in your portfolio, yeah, all right, you get paid to be— to get a couple things right. I understand if you don't want to pump meme coins, but like Solana, really?

So the question becomes then, Santi, so— and by the way, actually, before moving on from that, so Sederis's thing, I guess he did this first one is about returns off the bottom. But it's important to call out like there were things people made a lot of money in '23, right? So if you look at like Celestia is a good example. You're saying like this modular narrative, like Celestia ripped from $2 to $20. That's a nice 10x in like—

someone made money—

3 months there, but now it's basically returned back to the, to, to its initial price.

Yeah.

So, or maybe it's up 100%.

You know, if Seterus is listening or one of your analysts wants to run this analysis, give me or show me a, a little dot of when the unlocks start.

That'd be a good thing to add to actually Blockworks Research's platform. That's cool. Yeah.

Like literally just start and, and telegraph and then obviously going forward, right?

Yeah.

Um, I was having this discussion with probably the analyst I'm going to hire, um, around looking at just like how market cap— instead of— we, we tend to look at charts mostly on, on price. Look at it on a market cap basis. For instance, it was relevant for ARB. Like, ARB— there's a lot of noise in this analysis, but like ARB as an example, like it was trading at $2 before the big unlock. You go to the art chart. Yeah, so let's look at that. Okay, let's run this. So, so you go back to where— not April, around where DAS was. April.

Oh, April 24th.

Yeah, right around $2. Remember this? I'm an investor in NARC.

$2.

You start, then unlocks happen there. The big unlock happens there. I think it was like a bigger amount than the linear. So I think it was 10 or 20%. Goes down to a $1.60-ish level, right? See that green line after that big dip down? That's support. $1.60— sorry, $1.60 around April. Go to April. There, that green line right there, you see that two box, and it dips to $1.60 then and there. All right, that's the first unlock right there. And then, and then this huge red—

you're saying this huge red candle?

Uh, go even before that, uh, March. Yeah, because that was March, right?

Yeah, March. Okay, so this big one from 2.2 down to like 1.6.

Exactly. And then you have some, some bid, some support there, like 1.6, and then boom again. Uh, and then there's, there's some market stuff, like there was a, there's a big day, but I think like everything kind of Of course, everything you want to look at this, so like the market trend's so obviously down, um, for other stuff. So like what's the signal? What's like, what's specific Arbitrum? What's like just market? Um, but, but yeah, you know, I think it's, and I, and I tend to single out ARRR because it's like high qual in my, look, none of this financial advice, but like incredible. Like I think it's the best L2 The tech, the team, the ecosystem, like it's, it's a very buttoned up organization. Like it's, it's like blue chip, let's call it that. So, and again, we talk, my theory is, and I'd love someone to validate or invalidate this hypothesis is if you're an early investor, you're, you're in the money. And so You didn't get into SOL, or maybe you had a very small— you didn't size it correctly. The rest of your portfolio is flat or up 10%. You did make some money 2023, but not enough to get above the high watermark, right? This idea of high watermark is at the peak of 2021, you collect carry. If you're not a venture fund, you're a hedge fund, you collect carry. You take a snapshot of the portfolio of an investor and say, boom, like say it's, uh, you're up 5x, you collect carry on that. There's a snapshot of the value. So the value's now $500, say, of the particular capital account. Then the market was, goes down 80%. So that is now, you know, um, worth $100 again.

Right?

So it goes down to 100 for that set of investors that were in the prior cycle. For you to start making, collecting carry off of that base, you have to get above the watermark. The watermark is 5, right? So yeah, you did well in 2022, the market rebounded 2023, you know, but if you didn't get very specific things right, like not just sitting on ETH, maybe Bitcoin, but not Solana, you're likely not close or very close to that 5 number, the high watermark, meaning you invested in Arbitrum last cycle, uh, or other projects. And when you have an unlock like that, what are you going to do? You're obviously trigger happy because you're almost indiscriminately going to sell to get above, to get above that watermark, right? Because you know, because if, because ETH is, isn't carrying the weight, you may have or may not size Solana well or Bitcoin, and you're sitting on a lot of these things. They're like, if you're clocking, you don't care if you're clocking up 10x at $2 or an 8x or a 6x or a 5x or a 3x down at 50 cents. What you care is to get above the 5 to get paid this year because you haven't been eating the last 2 years. And that dynamic, I think, is carrying— that's as a whole, I think, what is, uh, challenging. And I, and I was talking about this last year, I was talking about this a year before. It's like A lot of these unlocks, if you don't have new liquidity coming in, you know, the, the early investors, especially coming off of the last cycle, that need to really get above the watermark, you know, are going to be, are going to be like forced sellers in many ways. And that, that is challenging in the context where you haven't really had new flows coming in, like stablecoin we talked about in, in the prior pod, like the, the, one of the most important metrics to track, um, is stablecoin flows. And that's not coming up. Like if you look at the aggregate inflation of like tokens coming live with the unlocks, I think there's a great website like Unlocks or something like that that tracks all the unlocks.

Token Unlocks.

Yeah.

I think they track the aggregate number of unlocks happening, like call it per month, per week.

Yeah.

And I think the, yeah, let's go to that. So the, these are presumably the major ones or captures most of them, right?

Mm-hmm.

So in the next 7 days you have 200 million of unlocks, linear unlocks per day, 50 million. So now I think what you overlay, again, one of your analysts should run this, is that and new flows coming in. So look at new stablecoin, um, supply growth, like the, the rate of change in supply.

I see, it's like you're getting at inflows. Is it greater than the open?

If it's greater, bid all this stuff. If it's not, don't. Like, Algo, do this, you know what I mean? You'll know when to bid a lot of this stuff when The stablecoin rate of change vastly exceeds the unlock that needs to be absorbed by the market. Yeah, that's it. I mean, that— there's no— and that's where I think— I think that's what Kobe's getting at. I think that's what Kane's getting at. I think that's my view as well. It's like the cycle kind of really hasn't started. We call it a cycle because obviously, like Solana said, a vast— like, in Bitcoin, there's been discrete catalysts that are like suggested it's a cycle, right?

Right.

But as a whole, it's not.

So maybe let me show you this. So if we pull up the— let's pull up the Bitcoin chart. So I think the interesting thing to look at on Bitcoin is actually to go back to 2019. Right. So there's two arguments for this cycle. One is, hey, look, we're actually probably like late 2019, early 2020. Maybe this moment the other day over the weekend was like a March 2020 type of moment. and like, we're just— the cycle is just starting. The other argument is, um, we're maybe like halfway through the cycle. This was like, I don't know, consolidation before the, you know, the second stage of the cycle begins. So if you look at 2019 here, right, we— it, you know, Bitcoin fell down to like $3,000, came up to $12,000, and then went right back down to $4,000 over the next couple months, obviously with the $4,000 being March— what was that, 12th, I think it was, of 2020. And if you pull up— did you read Kobe's tweet? This one?

Yeah. Just leave it there for folks to read.

Yeah. So I can read it for anyone who's not watching on YouTube, but someone tweets out, he said, this honestly, this cycle is just starting. Kobe goes unironically, cycle has not even started yet. Someone goes, People think you are serious. Lol. He goes, I am serious. Increasingly, I like the argument that this is not even a cycle really, but it's more like 2019 with leverage in ETFs. Was 2019 a new cycle or was it part of the bear market? Floated this idea to a few people in March, but everyone told me I was an idiot, which I am. But still, it was quite rude to say that to my face. Of course, if we're in 2019 looking 2024, it doesn't mean that 2020 plays out the same way because structurally so much is different now with the ETFs and High FDVs, probably too difficult to pattern match too much stuff about the future. So, I mean, I have thoughts on this, but I'm curious to maybe— maybe you want to— what do you think about it?

Yeah, I don't know. I like— I want to believe it.

I think This is the question. What, what Kobe is saying right now is the— we people get so fixated on the cycle. I think the reason why it's like almost tough to answer this question is because what constitutes a cycle and like, was 2023 a bull or not? Well, Bitcoin went from like $16,000 to $45,000, right? It was up 3x. Yeah, exactly. Bitcoin in 2019 was up 4x before it tanked again. So like, is that a mini bull? Was that a 4x inside of a bear? And that's, I think, why that question can be hard.

These things are easier to package up into nice narratives after the fact, but let's just imagine if you're there in 2019 and you see Bitcoin do a 4x and then it goes down to 4. $4,000. Um, and then it rips again to what? Pull up that chart again. So like from, from that 2019 moment that people keep referencing, you know, that's 2019, you go, you go from, from $3 to $12, right? Give or take. So that's 4x. And then you go down to what you're saying.

Sure.

Let me ask you a question. Do you use log? Are you seeing in a log scale?

I don't know what I'm looking at here. I think I just moved it to the—

crypto charts, by the way, should always be looked at on a logarithmic scale to not scare the shit out of you.

I was like, what day, what week am I on?

Yeah, there you go. So it goes from 3 to 12.

Yeah, there it is.

And then down to 4-ish.

Yeah.

And then in a matter of kind of 2020, in a matter of a year and change, you go boom to $60,000. I remember that. That was just bananas. I mean, that especially that second half, like November, was it?

Yeah.

Q3, Q4. I mean, my God, it just went from 5 to— it did a 10x.

We published a podcast on Empire with Dan Held saying the supercycle is here. Bitcoin could go to 400,000 to give you a sense of where people's minds were at. Okay.

I, I let's throw away the years and thinking, let's just think about flows, right? This is the, a lot of the discussion that I had with Caine and I've had it with David and Pranav, which by the way, we should have on, we should have David and Pranav is DeFi summer, or even in this moment, right? Um, the market gives you plenty of time to scale into a trade with momentum, and you had it in DeFi summer. You didn't have to be early as we were in ParaFi. Like, you didn't have to invest in DeFi before DeFi was a thing and buy Lend and Maker and synthetics at the absolute bottom to have made substantial outperformance and just absolute return. You could have waited for Compound to launch liquidity mining. You could have waited even months after Compound launched liquidity mining, a month or two. You had Yearn, you had a bunch of things, you had all these farms, Uniswap, like so many things, right? To— and it was like a window of 3 months or a month Depends, right? But it's multiple weeks where the market is telling you there's a shift in the narrative, there's a shift in the paradigm, and it's very reflexive. Like you're seeing Bitcoin here from 5 to 60. Ethereum did something similar. Solana has done that to a certain extent, right? I mean, it went from 8 to 185 now, right? Right. So I think we should probably stop thinking about, I don't want to go as far as saying, I guess, like we should stop thinking about crypto as a whole, like just one bucket. The more it grows, the more it warrants just bifurcation. But I don't want to be, I think that's a bit naive. I think ultimately a lot of it does depend on what Bitcoin does. and then what the rest of the, you know, space does. Um, but increasingly so each cycle, more and more you have these pockets of just outperformance, like it has been with Solana and, um, you know, memes this cycle. Um, but I guess the more important thing is, so like over the weekend where, you know, Berkshire announced, like it was Saturday where Berkshire announced like that they had sold a lot of their Apple I woke up and I was like, no, I know how this is going to look immediately. Obviously the crypto markets respond. I get on the phone with a bunch of folks, including Dave, including Purnav, and a bunch of others. And I was like, all right, like, you know, let's— what do you guys think? And stuff like that. And my conclusion was I'd rather hold a little bit more cash. Because I want to be in a position of mental clarity, strength, and liquidity to be able to bid that post, right? To be able to bid that Q3, Q4 of 2021, right? And I may psychologically— let's run what's going through your head. So you're 2019, you're in crypto, you're looking at Bitcoin and all of a sudden it goes from 4 to 12 in your face. You may have bought it at 12 'cause you're like, shit, it's going to 400. Like I gotta get on a bus. You buy at 12, it goes to 4. You may have sold at some point or you're scared shit and you're like, ugh. And then you're too scarred mentally. You may or may not have just allocated all of your bag and you're just fully allocated at that point. And that's okay. Maybe you sold, maybe you didn't. Likely you sold at some point, right? And, and then it does that in your face. Then it rips from 4 to 60 and you miss that because you're too clouded, you're too exposed, right? My argument around that is most people didn't have enough cash as a percentage of their portfolio in that period. Hmm. And I think there's a couple ways to go about it, right? If you're fully just, I'm talking about like funds, right? But even like retail investors, maybe more so. I've come to the conclusion that it, the way you want to play these cycles is like, I feel comfortable and I'll say it again and again, I feel comfortable not timing the bottom. I feel comfortable capturing at best 50, 60% of the, the return of the cycle. And that underperformance, so to speak, that not capturing the absolute return, that's 4 to 50 kind of thing, is predicated on a couple things. One, I'm never going to time the market. Two, trying to time the market is a fool's errand. It's going to distract me from other things. Three, it's going to put me in an uncomfortable position because if I'm all fully invested or not having any cash, I can't buy the dips. So you go back to the analysis that your analyst did. It pays to buy the dips. If you don't have any cash, good luck. Great analysis, no cash. Most people never have cash to buy the dips. And so I think I've just come to that conclusion where it's very difficult to hold cash, especially when stuff is ripping. But I think you take comfort in the fact that you're going to have plenty of time, couple of weeks to really scale in on the trade. The question is, we had a huge shakeout on Monday. But I'm still— yeah, okay, you, you're supposed to like, you know, bid at that point. Um, but I, I don't know, like, I don't feel— I'm not seeing it with absolute clarity. I, I basically think, to Kobe's point, we're like in that choppy period of 2019, you know. Yeah, and it's fine. You could just like cost average your way in, no problem. Maybe that's what you're supposed to—

of 2019, you mean?

Yeah, in and around that period. It was— and by the way, those are big movements, right? It's like 4 to 10, like 4 to 7, 4 to 8. Like, those are big, big movements.

I remember the 2019 movement up. This was the Binance IEO bull run. Remember that? All those Binance IEOs?

Yeah.

Um, I remember thinking, this can't actually be happening. This isn't real. Because 2018 and 2019 felt so long. Like, that was my mentality then. Okay, so I have a question for you. Why You're saying that you're timing the market by trading in and out of this stuff, but then you're also telling me you're not trying to time the market.

No, no, no, no, no. I'm not, I'm not necessarily, I'm not necessarily moving in and out of this stuff. I am just increasing my cash allocation.

But where do you get the, where do you get the new cash from?

Oh, from outside.

Oh, well, sir, we don't all have— well, outside—

no, no, no, no, no, like, I'm, I'm selling. No, no, what I'm telling you is I sold some over the weekend and Monday. Some.

But isn't that timing the market?

I don't know, like, I mean, I'm not trying to— you could argue it's timing the market, uh, I'm doing it more so to have And I, and I credit Pranav to helping me come to this realization. I'm doing it to psychologically be in a better spot and feel good and strong about bidding, um, in that low moment. Now, I don't know, like, I don't know if we go down more from here. It's always certainly possible. So if you factor that in, I just, um, said differently, I think if when the cash balance goes, the percentage of cash in the portfolio goes low and it goes to a threshold where it's uncomfortably low, I am more likely to do dumb shit. I'm more likely to be shaken out. I'm more likely to think about it annoyingly and it's distracting. And as soon as it's above a certain threshold, I feel good. And I'm not talking about just X outside of crypto, the portfolio that's outside of crypto. I'm just within crypto. I just think that within crypto, like imagine yourself as a fund manager that you're kind of paid. That's what I'm trying to convey here. It's like, 'cause a retail investor's different, right? Or my position's different 'cause I, I don't have like a fund, it's just my capital. But if you're a fund and you kind of are investing in these markets, like I think very few funds like have some cash. They're all kind of always fully allocated. But I don't know, go listen to the episode on David and I think it just, I don't know, I feel like you should. To some extent.

Have some cash, you're saying?

Yeah, hold some cash. And like, I think some of the best investors like always have like pretty high cash balance.

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Well, like, within the crypto portfolio, because I invest in other stuff, right? Like, like, like holding company, if you like, you know, like it's— wait, yeah, hey, well, Pernov, I'm talking about you. I'm trying to replicate, I'm trying to recreate the conversations we had over the weekend, and I'm, and I'm basically going through the exercise of if holding a little bit more— like, no one holds cash, and I'm positioning myself in a mindset of a fund manager, not me or a retail investor, it's like it pays to have cash, not necessarily because you're trying to time the market, because psychologically, you know, we're going back to like the market gives you plenty of time to, to scale into a trade once the momentum shifts. Even if you're not timing the bottom, if you get comfortable not timing the bottom and capturing maybe 50% of the, of the move up, it feels good to have cash because you're going to be just psychologically for me at least, have more clarity. And this is kind of the conversation that we had over the weekend, right?

Yeah. Well, I think right now it's kind of a little bit of a tricky situation in the market where the question is like, yes, you do want to have cash at some point so you can play offense when nobody else can play offense. That's the obvious reason, right? But when do you raise the cash is the question. Do you raise it sort of if you think you're 70% way through a drawdown, do you try to raise it then? The remaining 30% you can capture at the lows, or do you wait to see how things play out? Because I think time and time again, what we've seen— I think we kind of saw it a little bit of this, this week as well— is the market seems to panic very quickly, and the central bankers respond very quickly as well to deal with that panic. Because right now, if you kind of— again, I don't want to make this a macro conversation, but where I think the central bankers are is We kind of probably solved this inflation problem. Now we want to land the plane and we don't want to have a hard landing. So they're kind of in this mode of like potentially panicking too quickly and easing too early because they want to avoid that. So anyways, my view is it seems like we're range-bound for a while. And if you think that, then you probably want to raise cash at the higher end of the range than sort of 70% way through the range.

Purnav, how do you think about though, like at some point you break out of a range, right? So you top down, top down, you're ranging, ranging, ranging. At some point it hits the top and then it just kind of breaks through, right? So for people who are trying to, you know, it's bouncing between $50 and $60, let's call it, and you're selling at $60 and you're buying more at $50 and you're selling at $60, you're buying more at $50. And then sometimes at some point it breaks past $60. So how do you think about then you're caught on the other side of that?

Yeah. So I sort of in my brain separate the market into two environments. Environment one is own good assets and focus in the medium to long term. Don't try to be tactical. And environment two is try to be tactical. And I think in the first half of this year, our view was let's be tactical. For all of last year, we were like, own good assets and just play it out, right? Because we started our strategy mid-June 2022, where the entire world was kind of falling apart in crypto, and all you had to do is own the winners and survivors, and you probably did okay on their side. Coming into this year, everything had done extremely well, and you could see the obvious kind of frothiness in the market. Um, and, and that's when we were like, you know what, we should probably be tactical because everyone is— you're seeing just stupid things happening where like you have a new token launching every week and there's a new points program for something, and there's just too much supply vaults and all these things happening. And you're like, all right, I want to be tactical here because everyone is feeling very trigger-happy and everyone's risk appetite is very high. I think around May, things started to change, which was you had obviously candidate Trump coming out supporting this asset class. And then you sort of saw this light at the end of the tunnel for the entire space, which is, if you can get the regulatory landscape to fix itself, then more people will use crypto products, for simplicity's sake, stablecoins. And at the same time, more people have the ability or air cover to allocate to tokens allocated to the token market. So if you solve those two things, that's a big enough catalyst where you're like, you know what, I don't want to be too tactical and too cute here. I can just focus on that medium to long term. And that's kind of when we shifted our mindset. So we're not being tactical at this moment. We're just kind of focusing on the medium to long term.

Hmm.

Okay. Jano, something you said around, and then it moves up. All of a sudden we're under this impression that you have to constantly be in the market and playing every hand the dealer is dealing because it's going to, uh, from one day to the other, Bitcoin's going to be at Cathie Wood's prognosis, which is, you know, we're going to wake up one day and Bitcoin's going to be at $250,000. No, the reality is you felt it, right? Like, yep, you're sitting there and like Solana is ripping in your face.

Yep.

And you had, by the way, you didn't get it at $8,000. You could have gotten $16,000. You didn't get $16,000. You could have gotten $50,000. You could have gotten $60,000, $70,000, Yep. You felt late at all of those points because most people psychologically feel late. So the argument, I guess, to counter my position of like holding cash is that if you're not invested, you're perhaps more likely to be paralyzed because you hate not— everyone loves to time and is obsessed with timing the bottom. Yeah. And again, the most important realization shift for me this cycle is And maybe the capital base is different, and that's why I kind of operate like this, is I'm not looking to capture more than 50, maybe 60% of the absolute return that this cycle's going to deliver. And that encompasses many things, having a little bit more cash, not going off too much in the risk spectrum, you know, DCing in and out. Like these are kind of things that, but of course it's difficult even though like you write it down, you have it like seared in your brain. It's when people are making more money than you, it's like, I'm not capturing— maybe, maybe Bitcoin actually goes to $400,000 this cycle, as Dan Held said in 2019. Maybe. Who knows? Anything's possible.

I don't know.

I just feel like I'm so far on the left, left side of the curve from you guys because like my strategy is honestly just I sit here and Bitcoin goes down and I just don't really do anything. And if I have some extra cash from like my Blockworks salary, I'll buy some more Bitcoin. And if Bitcoin goes up, I'm not trying to sell it. I'm not thinking we're range-bound. I'm not trying to sell to then go buy lower. Like, I'm just sitting. Not—

this is like the meme that Shall had, which is buy, set, and forget. Just come back.

Yeah. I just, I, and I just listened to you guys. Cause you guys are such like brilliant minds at this. I'm just like, I don't know my— yeah.

I think, I think in most times that's probably the best approach, but you do need to avoid the 2022 90% drawdown events as much as possible. Right. And you never know. It's hard to call those things. So every now and then when things look like there's poor asymmetry from a risk-reward standpoint, it always helps to raise cash. We felt like that April of this year, which is like March, April this year, where you could just see the frothiness, like funding rates were through the roof. There were days where Bitcoin funding was like 40-something percent. Alts were also having a very high funding environment. Open interest had gone up a lot and people were making money too quickly and everything felt so amazing. Like, you're like, well, this party's not gonna last for a long time. And like, there's not real clarity on a lot of the regulatory things. So it just feels like a better moment to have some cash. Versus now, I think there's regulatory clarity. Look, I mean, I was looking at this yesterday. The amount of open interest we wiped out in Bitcoin, ETH, as well as alts, we're back to kind of like November of last year levels. So you've taken out all the excess in this market.

Let me ask you guys about this presidential election and like how you think, how you trade around it. So I've heard the, like, there's a lot of conversation on Twitter this week, which is Polymarket polls showed Kamala, I think, overtaking Trump at one point this week. It looks like I pulled it up now. Trump is at 50%. Harris is at 49%. But I don't know, does that factor into— I guess there's two questions. Like, how do you think about doing that on a very short-term basis? The longer-term questions, like, do you— I guess Santi and I've talked about this, Pranav. How, how much do you think this really makes an impact on, like, longing crypto versus not longing crypto? Like, if it looks like Harris is winning, are you going cash? And if it looks like Trump is winning, like, you're lever longing SOL right now? Like, how do you think about this?

We're not trading the election that way at all because these things are so hard to predict. And it's also like investors aren't giving us capital to trade election outcomes necessarily. But I will say this, which is kind of interesting. We subscribe to this investor survey where all these institutional managers like ourselves basically answer a whole bunch of questions and then they send out the survey results every month to us. So I'm not going to— this company's in stealth, so I'm not going to call their name out there. But there was a question that was asked, which is, how much do you expect the market to move and how upon the election? And all these managers with an aggregate amount of $3 billion of capital— it's 44 managers, I believe— said that they expect the market to go up between 10% to 30% in crypto if Trump wins, and the market to go down 10% to 30% if Kamala loses. So that's market psychology right now. So as Trump's moved up— or sorry, moved down in the polls, markets have drifted down. So I think if you can chart Trump odds on Polymarket along with, let's just say, the price of Bitcoin or alt, whatever alt, there's probably a high correlation there in the last 30 days. So I generally think to the extent Kamala Harris pivots on her views on crypto, then you're removing this left tail that people perceive there is— people perceive the market as right now. So if you can remove that tail from the market, then you could have a pretty nice environment between now and election. Now, post-election, then the question is like, who can execute on regulatory clarity faster, right? So Trump's kind of promised you first 100 days, crypto council, pass some legislation. So that seems to be a faster path versus the Comilla path right now seems to be litigation with Coinbase, Binance, get outcomes. Maybe that goes to Supreme Court one day and we'll get an outcome from there. That's the path. If you can maybe change that path to some legislation, maybe it'll still take more time with Kamala. That's still good, but it's one that's better for the market than the other.

Yeah. I'm not, I'm not trading it either. I think I tweeted about this yesterday. There's too much focus on predicted or polymarket odds, which by the way, they've peaked, they've peaked for Trump. They will not go as higher than what the day after the assessment.

100%.

No surprise, right? I still think he wins, but, you know, uh, again, I would agree with Pranav, very difficult to predict. Like, um, Nate Silver hasn't gotten it right after he got it right. He's a one-trick pony. Um, and so I think the more important question is, like, we weren't even, like, talking about Trump and a presidential candidate being super pro-crypto, and the market was rallying substantially. Like in November, no one was talking about this. It wasn't an issue. And I think sometimes in crypto we tend to anchor too much and place too much weight on certain things. And my thesis is it doesn't really change much if you zoom out and go farther than 12 months. Uh, on the margin, but not— it doesn't invalidate the entire cycle. I think, um, you have the Chevron case is probably something that people have completely forgotten about, this idea that administrative overreach is peeled back. Um, and so that's huge. And you're seeing courts rule in crypto favor, you know, most— Bitwise, uh, Grayscale, uh Uh, not Bitwise, it was Grayscale, um, Coinbase, Ripple yesterday. So like, that's very positive. Um, how much emphasis do you place on that? Um, like Pranav, you said earlier, I think the regular— we talk too much about government is what I'm trying to say. And that is gonna— it only goes down from here. If Trump odds only go down from after the assassination, the, the regulatory fierceness, the intensity that we felt in this industry is only going down. That is positive for the space. And just this idea that it's like in the conversation in the US, I think also helps so many other countries, so many other regulators that are observing this and saying, okay, yeah, like clearly it's a thing. It's an asset class, right? You have the, in Brazil, you have a SOL ETF, right?

Yep. Well, let me ask you a question that you guys see this a lot. I'll tell you my bias, and I'm curious what you think. I believe that the best builders in crypto are yet to come. Like, I think the ratio of, let's just say, mediocre founders to high-quality founders in crypto is like very different than what it is in Web2. And I think some of those, like, I, I, you know, I talked to a bunch of investors in my strategy that also invest in sort of trad fi or Web2 stuff like AI funds and all these things, right? And one of the things they tell me is like some of the best AI builders don't want to touch the space because of like all the regulatory headaches. But if things were cleaned up, then they might do— they might leverage stablecoins, for example. So I feel like the best builders are yet to come, and I think cleaning up the regulatory means those people will just leverage the tools crypto has to offer.

I would agree with that. I would also push back a little. So, Santi, I agree with your take on we peaked in terms of how much people think that politics matters for crypto, I would say, but all— or in like Trump's odds and all that kind of stuff. But I do think, I mean, there are some big decisions, but I think peaked is how much the president, how much the president will impact crypto. But what does matter that I don't really hear anyone talking about is like Right now there's a big decision between like Gina Raimondo and what's that other guy's name? Wally. Wally Adeyemo for Treasury Secretary. Like that, that does matter. And also like the SEC chair, like it's probably either going to be like Gensler is 100% out in my opinion.

Like Gensler, no matter Dem or Republican, like, and that's like the most important thing.

Gensler's out, but it's either going to be Caroline Crenshaw or Hester or like someone like Hester Pierce. Like Hester Pierce, amazing, actually. Hester Pierce probably.

I don't think it's right.

Yeah, maybe Selkis gets it. But like, like, like Crenshaw arguably would be even worse than Gensler. Even worse. Which I know seems crazy. But what?

Again, again.

But we're winning in the courts is the counter.

You call their bluff. You call their bluff.

And we're winning in the courts.

And so like, that's the most important thing.

I look, I'm agreeing with you. I'm agreeing with you.

I think that like, I hate talking about government. My dad reminded me, we talked about government.

He was like, big government guy.

No, like, well, like, my, my grandfather was Secretary of State. Just doesn't decide. No flex.

In, in what country?

In Mexico.

Um, no flex.

But like, I just think my dad actually reminded me this the other day. He's like, back in the day, like, it wouldn't— we wouldn't talk about government the way that we talk about it now. It's all the time, constantly. It's like, good government is invisible.

Yeah.

And like, we should just— like, I don't know, like, uh, it gets tiring. But I, I hear you. Like, on the margin, yes, I don't think it invalidates. We've had all of these cycles that we're talking about— 2019, 2020, 2023, 2017— in a, you know, pretty adversarial regulatory environment. So it only gets better from here, irrespective of who wins in the US.

What, um, why was Jump selling for enough?

Trillion-dollar question.

I wish I knew. Um, I've obviously read all the Twitter threads people have been posting. Um, one of them is like one of your Blockworks guys, Jonah, who seems to like have the answer to everything.

Um, the 1000x guy. What's that?

Yeah, yeah, um, honestly, I don't know. Um, I have like— we can speculate. Um, you know, one is like maybe they saw the unwinds from Japan coming, like the amount of carry trade unwinds, and they wanted to get ahead of it on Sunday because it was like so ridiculous that someone's selling on a Sunday, right? Like when everyone knows, if you're like somewhat marginally sophisticated, you don't try to move size on like a low liquidity day. So they were doing that on-chain and, or at least people thought they were moving ETH on-chain and that meant they were gonna sell. Yeah, I don't know. What do you guys think?

I have no, I've, I'm, I'm asking you guys cuz you're the smartest, smarter than me. So that's why I ask, you ask the questions.

Yeah.

I don't know.

It's the unknowns that marginally worry me a bit. I'm like, I don't wanna read too much into it. This is when like the Atoms come out with like the mega threads of like, this is an FTX type of event.

I messaged Santi, Vinnie Lingham's tweeted, said, I've got a sneaky suspicion that something, a.k.a. Three Arrows or an FTX, broke over the weekend.

I know.

We need you to invite him to this. I have to have the whole time. I literally was talking this morning.

I mean, I messaged him. Well, here's what he said. I think it's fine to share. I said, what's, what's, what's good with this? He said, yeah, it's really not about Jump. It's someone that forced Jump to do what they did. I said, big hedge fund got on the wrong side of a trade, question mark. He said, yeah, ETF linked possibly. So like something like that. So that's what I'm like is Is there something here, or is this like just fun for a good, good tweet, you know?

But also, I mean, we generally know who the big market makers are in the space. I haven't come across Jump in a long time myself, like, you know, from a market maker perspective. I didn't realize they were like, you know what I mean? Like, I thought they were kind of out of business.

By the way, there is— okay, are there systemic actors right now in crypto? Other than Coinbase, Binance, and Binance. It's not them, I think. Yeah, like, like, I, I don't know how it would be them unless, like, but no, like, so, like, okay, maybe a hedge fund blew up, okay, but, uh, I don't know. It's, it's nonetheless, it's the point still stands. It's, it's quite odd that they decided to do this in August on a on a Sunday. Pick the worst moment in time to sell.

I mean, look, they have a big market-making business on the trad fi side. And a lot of people in trad fi were worried about what happened on Monday on Friday because of the move that you'd seen in the yen and all the unwinds you'd start to see. So they might have had the right call because their trad fi business sees something that, you know, crypto people like us aren't seeing yet.

Yeah, that, that's some probably the more— I, I have heard other threads like outside of crypto, it's like, um, like cautioning around the rebound and saying, hey, there might be another leg down. Like, you know, yeah, people have unwound some of the positions, but, uh, we don't really know. Maybe there's just some carcasses there that are going to surface at some point.

I think, um, what was it, JP Morgan put out something saying they thought that 75% of unwind was done?

Yes, yes, yeah.

There's—

I mean, like, the question for me is like, okay, everyone knows about this yen carry trade at this point, but if you remember even in crypto when, um, that SDE peg broke a couple years ago, the question was like, what's— what are the next pegs to break? Actually, it was Luna that broke, and then that had people go after the SDE peg. So it's like the question is like, yeah, yeah, that's right. So the question is like, what's— what are the other carry trades in this market that are very big that are at risk? And the one people always talk about is the cash futures basis trade on like US Treasuries.

Oh yeah.

Oh, you're talking about crypto? Yeah, I'm talking about just tradfi markets.

People have markets. Yeah, there's, uh, I don't—

I'm—

have no insight here. Uh, it was Salini who tweeted about the low liquidity in the in the treasuries market, especially in the— in the— I don't know if you have paid attention to that or what you read into that. Like, he's just like, basically, I was a bond trader. Yeah. And I felt like way back, like, I think it was— he referenced 2021, like pre-COVID, like it was like low liquidity. Now he said, I can't imagine, like, it's, it's much, much worse. I don't know what to read into that. He basically was— I think it was something along the lines of no one is really bidding longer paper. And so that's a signal in and of itself around a hard landing.

So I know that people are concerned about these off-the-run treasuries, basically not the latest issue ones, right? Which is why the Treasury is doing a buyback of all these things. Here, I'll put it in our chat because liquidity on these off-the-run treasuries are pretty thin. I don't know if that's what he said.

And for listeners, what's the distinction?

So on the run is kind of like the latest issue, one that everyone trades. Like, so like here, um, and off the run is like something that was issued 2 years ago. Like, for example, the 30-year that was issued this year is the 2054 maturity, right? Like the 2049 maturity is like this 25-year, right? So this is, this is like, people say this is kind of like backdoor QE, which is if like the Treasury is buying Buying bonds.

Oh, this Treasury buyback program is like backdoor QE.

Yeah.

Yeah.

Any other— Yeah.

So by the way, I think this is an argument for pro-stablecoin policy in the US is if like liquidity— my wife, my wife's like uncle is, is like deep in the Treasury market at CME or CFTC or something like— or I think CME and The only argument, crypto argument, that's ever made sense to him is stablecoins being the buyer of last resort for these treasuries, saying the liquidity is drying up.

And like, yeah, the only thing there— yeah, the only thing there is like stablecoins can't buy 2040, 2050 treasury. They had to buy T-bills, right? Like short duration. Yeah. Because you can't have a Silicon Valley Bank happen to a stablecoin.

Yeah.

Yeah.

Well, unless you're Tether, right?

And you're using excess Oh yeah, you can do whatever you want with the excess. Yeah, you can go buy Bitcoin with your—

yeah, yeah. Um, but listen, on, on your point around what's, um, what could break and some of the carry trades, like DeFi, for all intent— I mean, for what it's worth, yet again performed exceptionally well on Monday. And I know a lot of people paying attention to Athena in particular as, you know, a project that might be a little more fragile and You know, it absorbed like, I think it was $190 million of redemptions or something like that to some. And so anyways, pretty time and time again, you know, at the time is it was classic like left-right kind of meme picture, uh, traditional finance. Like there was, uh, people lost access to, I think it was like 8 brokerage accounts, like Interactive Brokers, Fidelity. It was like, it's like, exactly, this is, this is why DeFi.

Right.

Yeah. So what do you think the leverage is in this market?

Like the hidden leverage? Because we can all see the on-chain stuff. Like, I don't think we have like another—

but who's lending?

No one's lending. The lenders have had an idea.

Like, you don't have Genesis anymore. Like, I want to build a Genesis. And actually, if someone— it was a great business, but you don't— I don't know, maybe, you know, like, where would that come from?

I don't think— that's what I'm saying. I don't think there is. Back to Santi, this is a conversation we're having over the weekend, right? We're saying, let's put probabilities on, let's just say, crypto going 30% lower, crypto going in this range, and then crypto going to 50% higher, those 3 things. When I think about those probabilities on the low end, I keep asking, what is the thing that drives it to that 25% lower outcome? And the best I can come up with is a correlation one, everything just goes down.

A macro, yeah, kind of thing.

Yeah, right. Yeah, that's something macro.

Yeah, yeah, no, that's— yeah, I agree. I, again, I think the conclusion here is that we came over the weekend is if you look farther out than 6 months, 9 months, 12 months, it is— I've yet to found compelling arguments to be bearish. Yeah. For a variety of reasons. Now the, the perhaps more nuanced, before you jumped on, Pernov, we were looking at, you know, if you want to pull it up, the Ceteris tweet that you probably looked at, it was kind of going around circles of the vast, just like return dispersion in crypto as it has been in traditional markets. Like basically if you didn't hold SOL, BTC, or memes, you kind of are flat or down for the year.

Yeah.

Um, how do you think that looks like a year from now? So yeah, let's pull it up. So you, I think you saw it, but, uh, here we go. Yeah. So you saw this, right? Basically it's, if you're not in WIF and SOL and BTC, like, good luck. You know what I mean? Or like, um, how, if, I don't know if you want to read, I mean, we, we discussed this kind of at length at the beginning of the pod. But the more interesting question perhaps is if we're all saying the same thing, okay, in 12 months from now, how does this chart look? How does this table look?

So I don't exactly know how this table looks, but I'll tell you how we think about this. And we've talked about Santi, so it might be repetitive to you, but 2 years ago when I talked to people outside of our universe and I said, "Do you have crypto exposure?" They say, "We own some Bitcoin, we own some ETH." And now you ask the same question, people often say, "We own some Bitcoin, some ETH, some SOL, and some Coinbase." That's kind of like your Mag 7 equivalent in crypto, right? So all I'm trying to do is pick number 5, 6, and 7 on that list that will be the 5, 6, and 7 2 years from now. And I think in order for asset number— In order for things to become 5, 6, and 7 on that list, it has to be things that hundreds of millions of people will be using and they're very aware that they're using those things, right? The reason you have Solana and Coinbase on the list is like 100 million people realize they're using this product, and there's all these other things to it. So for us, we're always trying to pick that asset number 5, 6, and 7, and that has to be, again, something hundreds of millions of people are going to be touching. So when you look at CoinMarketCap top 100, you can have a very elaborate thesis on some token, but then I ultimately go back to asking, will hundreds of millions of people be touching this product that this company or project or token is building, and as a result become a top mindshare grab for people in 2 years. And that's going to drive all the returns.

Couldn't have said it better. That's why I'm so bullish on Deepin. Like, I just announced an investment this week in Dreena. I don't know if you guys participated in that.

You know the team really well. They're great.

I don't know, basically, like, he's been building like this, like, broadband internet and like, you know, basically came to the conclusion that crypto was the next stage for them to like really scale it out. And, um, yeah, it's, it's, it's those type of things. I agree with you. Um, yeah, that also just, I agree, like, like L1s should like be invisible to some extent, but it's like hard to overlook the fact that most of the activity is happening in Solana. Most of the teams are like, even just today, Athena adds support. USDE is now available on Solana. Uh, one of the founders, PacMoon, uh, that is, you know, prominent in the Blast ecosystem— should not say prominent, but just in the Blast ecosystem— decided to go and leave, uh, to build on Solana.

And Aave. Did you see Aave? Mark Zeller, look at this. Um, I don't think anything's been confirmed yet, but someone tweeted at, uh, uh, here, I'll share this tab. So yeah, Zoomer Oracle said Aave of Solana sitting at $30 million market cap heading towards $10 billion TVL, launched in peak Nuke City 2 months ago, second biggest TVL of Solana after Jito. Mark Zeller, who's obviously big in the Aave game, said would be a shame if. And then I saw this tweet from Chris Berniski said Camino to Camino Finance, basically the road to, road to Camino Finance. And Mark Zeller said let's see how long they survive when we launch there.

So I think that Mark is just being Mark. Look, I'm an investor. Yeah.

I mean, Mark is being Mark, but he's also saying, I mean, I think that you don't— actually, unless Aave— no, no. Why wouldn't Aave launch in Solana?

All the— it makes all the sense in the world, right? I don't even— do you remember when Lido, like, left Solana? Like, things I don't understand.

Opened it for Jito. I mean, that was the—

exactly.

Yeah. So look, I would not be surprised if they launch in Solana. Here's the thing, it will actually be really interesting to see how they perform and how much TVL they're able to gather relative to Kamino and MarginFi, right? As like a proof point for teams outside of the Solana ecosystem. 'Cause probably in their mind is like, oh, maybe these guys are like very native, like the Kamino, the MarginFi teams are like very Solana native. But I've heard it from someone like Kane, like that the Solana community has been very welcoming. And I think it's sometimes a concern, right? It's like, oh, you know, I'm gonna, Theorem Maxi now, like, exploring, like, going into Solana. But Solana community is, like, very welcoming.

So since we're talking about Solana and these dApps, I have a question for you. Have you followed what, um, Sanctum is doing, like, with all these different LSTs?

No.

It's essentially enabling the long tail of LSTs, and then they essentially have a Curve-like product where you can swap between these LSTs without— with minimal slippage, right? So it's like JUPSOL and there's BONKSOL and all these things. And on the surface, you're like, "Why do you need all these long tail of LSTs?" It's the first reaction you'll have to this. But then I've been thinking about this one a lot, which is if you look at just the regular world, you have obviously 5,000 public companies, I think, and you have hundreds of thousands of small businesses. The small businesses don't have their own stock that trades because the market doesn't have such an appetite for so many assets to then include it in the season, own them and trade them. The market will never price you the right way if you're just a small business that's trying to have a listed stock, right? Similarly, I'm sort of thinking about this idea that like, do all dApps need a token? If you're a small dApp, aren't you better off just having your own LST and then monetizing your product a certain way and giving it back to the LST and then actually just capturing value a different way? And that's good for like— because here's the thing, if a new dApp launches on Solana, right, and I look at that as an investment opportunity myself, then I'm probably gonna have to sell some SOL to invest in that dApp. So you're giving me this trade-off that I maybe don't want to make, which is owning SOL or own this other random governance token that I think might outperform SOL? And most people are just like, you know what, we just would rather own one asset. So in this way, you're letting the dApp creator, founder, or team capture economic value, but at the same time, you're not having the investor make the choice between selling their SOL for governance token.

Absolutely. I think like some, like Drip for instance, is moving this direction, right? Um, right, they have their own You know, LSD, um, Helios as well.

Yeah.

They're now like the number one validator.

I, I think they're using Sanctum as well. Yeah.

Excellent observation.

Right. Mm-hmm.

Because I think if you're capturing attention in some way, shape, or form, capture capital too, and natively allow that capital, like remove the, the, the, the, um, opportunity cost is what you're saying.

Yeah.

Of, of having to swap something you like, but also on the idle component. This is the realization that the, that the, uh, the Blur team had. That's where they built Blast, right? Which is like, if, if you're providing liquidity to, for these NFT marketplaces, you're also missing out on like Lido type of yields. So like build the L2 with native yield integrated so that like you capture, you retain, it's all retention and, uh, game, right?

Yep.

Yeah. Yeah. And that is, is relative to traditional like tech, uh, or fintech money moves here much faster. Like the barriers to exit are super low. And so, um, you know, it's, uh, it's, it's, it's difficult.

Yeah.

You know, I think there are certain perp platforms on Solana that might do really well, but I want to maybe get exposure to that by owning the thing that gives them the trading fees in addition to the LST staking yield. But I don't want to own that governance token, right? So I think generally, I think most dApps should think about having their—

so you could, you could launch your LST and then have some of the fees just bundle all of the fees of the platform into that.

Correct.

That's smart. I mean, Jito's kind of doing— like, Jito has a government. It is a token that's capturing like a lot of things, right? Um, do you think that it's feasible for someone like Jito to like, if you were to like do it again, to like not have the GTO token and just like— yeah, I don't know.

I don't know about Jito. I do think— I don't think the current market structure of like every little project that builds one little product that has 10,000 users having its own governance token is like the right market structure.

Yeah.

Because all the, like, most of those things will just go down 90% over a period of time.

By the way, it's a good thing because a lot of times having a token is distracting for users, like, then demoralizing, right? It's like Pumped Up Fun. The projects that actually get off the bonding curve are the ones that actually get attention, but you give them that breathing room As you get a startup before IPOing, whereas the current construct in crypto is you IPO day one. It's like, uh, no guys, like you have to kind of wait a little bit. So you're saying smaller ones monetize this way, fund the business this way, fund the, you know, the development this way. Once you get to a critical size, maybe it makes sense to launch a token in there.

Yeah.

That's a good in-between hybrid thing.

And that goes back to that earlier question you had, which is like that chart of token performance and all these things. I think a lot of managers in the space, including— we think about this similarly sometimes as well. It's like you're always trying to find the next hot thing. And the answer just might be own the thing that is really working and don't try to chase for the next hot thing because the next hot thing actually might not make it.

Do you think that that strategy only becomes more important as we have more consumer applications? Whereas historically in crypto, it's like selling the dream. And so maybe it is, it paid to chase that new hot thing, that new high performance, high TPS thing. But that strategy is not going to work anymore because increasingly so you're going to have a very clear understanding of the have and have-nots from a technical, from an adoption, from a retention. Standpoint, right?

Yeah. Yeah.

Like, like it depends on the layers of the stack and also in the cycle, but going forward, it is gonna be incredibly difficult to justify, for instance, Ethereum being 6, 7x the value of Solana when Ethereum fees are down 57% in the quarter.

Yep.

Because of, was it 4844? What is it?

4844. Yeah. Yeah.

And oh, it, it's— and all of a sudden Solana fees plus MEV and then applications getting a lot of traction.

Yeah.

Like, like you couldn't stand on— you, you couldn't put a finger on some of these benchmarks and some of these analyses of like ideologies in prior cycles. This cycle and subsequent cycles, I think it's going to be just increasingly clear from a kind of undisputed manner. Yeah. Uh, the have and have-nots. Yeah. That goes for bottom parts of the infra middleware, but all primarily like ecosystems and then like the applications within those ecosystems.

Gents, I hate to do this. I'm 5 minutes late for a call. I think I'm the admin on this. All right.

Pranav, thanks for joining us on short notice. I was talking about you before you joined.

Let's have you on again next time.

Yeah, of course.

Anytime.

Yeah, that's good. All right, good luck, guys. Thanks for joining and good luck. Thanks for now.

Cheers.

Take care. Bye.

Thanks for watching today's episode. Just wanted to quickly mention that the wait for crypto's killer app wave is nearly over thanks to today's sponsor, Anoma, the universal intent machine. To stay up to date with Anoma, you can follow them at x.com/anoma or sign up for the newsletter at anoma.net. Thanks again to Anoma for sponsoring today's episode.