Bitcoin Breaks $95k, Crypto’s Valuation Problem & The Path To Real Onchain Users

you just cannot justify the valuation of most projects in the space. And it's a classic Silicon Valley meme of like, never show revenue, always sell the dream. Crypto is no longer the main character, right? It's AI. So from a momentum-driven trade, over. From a valuation fundamental trade, over too. Like Ethereum as a $400 billion asset, Avi, Jonah, in what right mind would you buy this when it's cranking out $1 to $2 billion of fees that are not recurring, that are going to dry up in a bear market when liquidity's there. Like, you're churning through most users and liquidity very, you know, every month when people get liquidated. I just cannot make a case to buy Ethereum. I'm not getting paid enough. I'd rather punt AI.

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Today's, today's a crazy day. Last time we recorded, Bitcoin was above $100,000. Today we're recording, Bitcoin's at $94,000 and, and things are dropping precipitously. It looks like the timeline is very anxious. So in order to assuage those fears, we brought on our professional market man, Santi. Thank you for joining us today.

How are you, Jonah? Thanks for being here. Thanks for having me on. Thank you.

No, this is awesome. I, you know, I think you, Jonah and I have talked about this a little bit high level on a bunch of podcasts where we basically just keep saying, hey, the market is changing dramatically and I think it already has changed dramatically a bit. And then you put out a blog post this morning, which I'd highly encourage everybody to, to read, which really tackles like the issue of, of valuations in crypto and why we might be experiencing some of what we're experiencing right now where things, things just keep kind of coming apart other than Bitcoin. I mean, if you look at, this cycle outside of Bitcoin, very few things have actually performed well. Most things are down even though we've been in a quote unquote bull market. And you know, the things that are down are kind of the things that we've always made fun of a little bit, but they're also things like Solana, right? Like Solana's sort of sideways for 4 years now. Ethereum is sideways for 4 years now. And when you look at it on the grand scheme of things. So I guess that's something that was top of our mind that basically like what's happening? Like why are things not going up?

Look, I mean, when you look at it at a fundamental analysis, like you just cannot justify the valuation of most projects in the space. And it's a classic Silicon Valley meme of like never show revenue, always sell the dream. And perhaps that's like the greatest credit I'll give to Ripple, which is they've done a phenomenal job. If you go out walking the street, you ask people, hey, what do you think about crypto as an infrastructure, you know, this fintech opportunity? They're like, oh, it's Ripple. And it's not Maker, it's not Uniswap, it's not, you know, anything really. But like zooming out a little, it's like, do you always, as an investor, it's like, is it priced in? And it's a hard question, but I think the market already told you that it very much was priced in. You had every narrative that you could have imagined, every headline imaginable, to the point of JP Morgan launching their own deposit token on public infrastructure called, you know, BASE. Prices are not moving, they're going down. Now Bitcoin is in a camp of its own, you know. I think that's like, there's reasons why you want to hold it. I think the macro thesis, the hedge, you know, digital gold narrative is intact. Like it's less than 10% of gold's market cap. You want to kind of have it in your portfolio. For everything else, it should be valued as a, like, a technology play. A, crypto is no longer the main character, right? It's AI. So from a momentum-driven trade, over. From a valuation fundamental trade, over too. Like, Ethereum as a $400 billion asset— Avi, Jonah, in what right mind would you buy this when it's cranking out $1 to $2 billion of fees that are not recurring, that are going to dry up in a bear market when liquidity is there. Like, you're churning through most users and liquidity very, you know, every month when people get liquidated. I just cannot make a case to buy Ethereum. I'm not getting paid enough. I'd rather punt AI.

Yeah, I mean, that's been, that's been a huge issue, I think, for just crypto traders in general, is that the— I mean, outside of this crazy run by Zcash, uh, recently, and I guess the meme mania of 6 to 8 months ago, trading stock market has just been infinitely more fun and profitable than trading crypto. And I think we all know that a tremendous amount of value is derived from the fact that crypto was a very fun place to trade. And like, it was a place that you could make a ton of money. And now that's starting to dissipate. And what actually kind of worries me more is Also, crypto was like the one place that you could get a ton of leverage to go. Let's say you had a small account, you had like a, you got $1,000, you could lever that up 10, 20, 30, you could go 100x long on BitMEX. And you would only do this with crypto. And now, I mean, HyperLiquid's introducing stocks. I would wager like in the next 2 to 3 years, you're going to be able to trade stocks on pretty significant leverage as well on these, on these platforms. And then, and then that's like another just punch in the throat, uh, for, for all like the, the stuff in crypto that isn't real. Um, and mind you, like there's some stuff in the stock market that's, uh, that, that, that's real. Like, uh, there, there are people minting money on buying rare earth minerals because we're in a, we're in a, you know, rare earth mineral war with China. There, there are people that had minted money on buying small-cap drone stocks. Now that drones are much more important in warfare, it's like you can actually put your mind to work. In, in, in the stock market. Whereas in crypto, it seems like, I mean, obviously there's real stuff being built. It's just less so.

Yeah. Maybe, maybe penny stocks are the new crypto. Sadly.

We keep always, always have been.

I mean, the crypto's always been good at, because in the early days, it just has created this public infrastructure, like 24/7, 365 markets for everything. Um, so like no one's really kind of disputing that. I think they— there's a, there's a real industry behind that, and same with Vegas is a very real industry in Macau. My question, and where I come at it, is should it be worth $1.5 trillion today? Like excluding Bitcoin, should that opportunity be worth $1.5 trillion? And if it is, can we actually support the valuation? Because when you look at it on a revenue generation value capture standpoint It's only going to get harder for most of these chains to capture value. And so I get very nervous when I think about that. And, um, it's— I think a lot of people in crypto come at it like, back— something you said earlier, just banks are going to use this, and you're seeing all these headlines. The, the problem with that is, was it priced in? Because the market's not stupid. It will play short-term games, it will, you know, be momentum-driven, but it's not stupid. And I think it's, it's one of those things where, yeah, AI could be in a hype phase, but at least you can look at some like NVIDIA and it's trading on, you know, 30, 40 times earnings. And Ethereum's trading at 200 times sales. Like, make it make sense.

Yeah, it doesn't make sense. I mean, I think one thing that my old boss Don Wilson of DRW told me is, you know, when I was asking the same question, which you could have asked during any of the previous cycles with these ridiculous valuations on certain altcoins, I'm like, why, why is this? How is this token so stable at such a multi-billion dollar valuation when it's obviously vaporware? Like, the team has literally packed up shop. They're not shipping new code. They're buying villas in Sardinia. They're not doing anything. Why is it still worth what it's worth? And the answer I got from Don, which I think is kind of prescient, was, hey, Jonah, tokens don't file for bankruptcy. Like, these, these valuations can just be sustained for a while. And I took that as gospel because at the time it was true. But I think what needs to be realized now is that we're entering a new paradigm. Like, you talk to any crypto investor about shorting tokens. They're like, oh, that's tricky, can't do that, because it's been so hard, right? Maybe now is finally the time where you can just sell stuff. Because, you know, if sentiment on CT is any indication of how people in our space feel, what was supporting those valuations was not revenues, to use your word. It was the dream, as you said, right? It was the dream of future revenues that was supporting them. So now, participants, insiders, crypto natives, bag holders are throwing in the towel. And that, you know, even though the project itself might not file for bankruptcy, that can certainly take, uh, altcoin valuations down a lot. So maybe that's the trade. Maybe we're just supposed to suck it up and short stuff.

Look, I was sitting there in 2017 and 2020, you could have heard me say, hey, the top 10 is going to change. Like, how is Cardano still a top 10 coin? There is a part of market psychology where it's a meme. And so there is credible flows attached to that, and there's social value. And, and I'm not here to discount that. It's just as an investor, I get worried when I have concerns around the broader market, um, valuations, not just in crypto. And so will I be willing to hold this thing? Because you just know liquidity dries up and markets really— and, and these things really tank 80%. And so more from coming at that standpoint, like building a long-term position in things. I just— I— one is a speculative gamble as you go to Vegas on a weekend. The other one is, are you an investor? And I think like there's always been a part of crypto that is very much speculative-driven. And look, I'm not here to fight or short irrational degen behavior. However, I think something like Ethereum and Solana and some of the other networks— yo, it's just to ask folks, you know, all the Ethereum maxes, the Solana maxes. I'm not here to just take a stab at Ethereum, like Solana as well. Pretty much every L1, L2, like, look at it. But like, double-clicking on Ethereum for a second is you constantly have this, like, investors, even the most successful funds out there, well, you read their LP letters and they're all saying kind of the same regurgitated thing, which is it's a world supercomputer, uh, all this flow is going to get tokenized and it's going to move on chain. And, and like, I don't think anyone is discounting that. Larry Fink is not discounting that. Jamie Dimon is no longer fighting that. The regulator was not discounting that. The question is, you have all those headlines and prices are going down. So it was very much priced in. It was, it was. And so there was zero margin of safety. The question is, from a— as soon as you start showing that traction, the market was like, oh, okay, yeah. But still, from an MEV standpoint, most of these networks are not capturing 100 times more fees. And you need to kind of see a path towards growing the user base 1,000x and the users and the fees attached to that 1,000x, which is not here yet. So why would I go out of my way to buy something that is priced to perfection? Because it takes a mouse fart from Powell and Nvidia's earnings to be down that quarter to blow up that thesis and be down 80, 50, 60, 70% on the position. I just have no, no interest in doing that anymore. I've been around this game far too long that I don't want to round trip all this stuff.

You could 1,000x users very quickly without 1,000xing Prices. I mean, I think you're, you know, shout out to Inversion Capital. You guys are kind of proving that, right? Like, launching new blockchain tech is commoditized. So Ethereum and Solana aren't like digital New York City anymore with limited real estate where you have to own Ether or SOL to capture, you know, economic activity on chain. Like, you know, you're building new economic activity on chain on your own chain, and I guess, what does that mean for the rest of the space? It's kind of like, all right, maybe this is when the valuations compress and then we'll get another dip to buy because I'm not giving up on you. I think users will come in way faster if the valuations are normal. Um, you can see that from token launches, like when a token launches at a fair price, uh, the community thrives a lot more over the long run than when people buy the absolute pico top and get dumped on.

So maybe 100%. I mean, you saw, you saw that a lot with, with, with Hyperliquid.

This episode is brought to you by Zcash, the decentralized digital cash that is encrypted to ensure agency and safety. With a fixed supply of 21 million and proof-of-work consensus, Zcash is encrypted Bitcoin. Buy, store, and spend encrypted Bitcoin using the Zcash-powered mobile wallet Zashi. To find out more, visit their website or click the link in the show notes. Thanks to Zcash for making today's episode possible. Shout out to today's sponsor, Katana. Katana is a DeFi-first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR, Katana is launching with notable ecosystem of primitives, assets, and partners like Morpho, Chainlink, and more. Katana's 1 billion CAT campaign is live. Bridge and deposit directly into vaults in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. As always, investments in blockchain technology involve risk. Terms and conditions apply.

I do like when I go back to the original thing that you were saying, which we were talking a little bit about like the dream, like all these tokens, their valuations are driven by the dream. And that, Joni, you said tokens don't go bankrupt. And we've all probably had this idea somewhat. Okay, well, yeah, in 2022, things got totally out of control, but people made a ton of money. Things went up a ton. We said this in 2017, oh, ICOs, most of these are useless, but then Cardano sticks around. And so everybody's question always becomes, How, why are you not wrong now? Like, what is like, what is happening now that makes it so different than everything else before? Whereas realistically you could have made this same argument 8 years ago. Oh, valuations are going to come in. I will say like, it does seem like things are changing right now. One thing that really stood out to me recently is that EOS got delisted from Coinbase, and I think that was the first time I've seen like a truly like next gen. At one point EOS was the hyped, it was the next generation blockchain. It was the thing that was supposed to eat Ethereum and it just failed massively and it turned into a massive value extraction event. And there was a lot of, I think real estate bought in Sardinia because of that.

So that, that was nice, but it was, it was the highest purchase price in Italy was bought by Brandon, I think.

Brandon.

Yeah. Like for 160 mil. But it's like, it's nuts because Now we're starting to see, okay, I think it kind of starts breaking the spell a little bit when something like EOS goes down where you go, okay, you can raise $4 or $5 billion. You can be faster in theory than Ethereum and it doesn't matter. It doesn't potentially matter.

I wouldn't argue this time is different. I think this, it's like every other cycle. There's huge drawdowns in the space. Even though the top 10 composition didn't change, you have huge drawdowns. I mean, Bitcoin, I would argue, is graduated now. Like, the volume in Bitcoin probably continues to go lower as you have more, like, institutional flows and ETF products. But for the rest, you're, you're sort of— nothing changes this time around. You should expect to see 80% drawdowns, 90% drawdowns on these things from majors. And it doesn't change because, again, it's all self-referential. You're in this loop that It's all like crypto is a great capital formation vehicle, 24/7, 365. Anyone that doesn't— ex-US can now invest in NASDAQ, levered NASDAQ plays, and YOLO and roll the dice in the casino. Great, 24/7, 365. I don't think that's worth $1.5 trillion because you churn through that constantly, like, you know, in the same way that people like punt their paycheck to paycheck. And so you see these drawdowns, severe drawdowns, because there's no real economic activity beyond speculation anchoring the valuation of these things. And, and like, liquidity really does dry up. Like, when you're in a macro bear, you need like stimulus checks to really get people to come back and like punt your altcoin of choice. And so I don't think this time is any different. Now, the position that I take is the most important metric to follow is active users on-chain, and a16z came out with a great report on that. And that's really the, the silent— the elephant in the room is when are we going to actually break and grow the active user base on-chain because that number hasn't really gone up. Yeah. And the same with the people. There's only so many people that can go into the casino and survive long enough because the longer you exist in the casino, the higher likelihood that you're going to be served a drink, you're going to get drunk, you're going to get liquidated.

The vig is pretty good too. A lot of transaction fees, 1%, 2%, 5% per trade.

Totally. Like, like the, the MEV of networks like Solana I'm— what I tell people is I want to build the largest chain in terms of active users. That doesn't mean that my chain is going to be the largest in economic activity, the largest in user bases, because we'll acquire businesses, we'll bring those businesses on-chain, and make— then the value extraction, like the, the fees that how I monetize users, is very likely going to be lower than how you— like the MEV attached to meme coin trading, that's very, very extractive. And, and, uh, and you're churning through that user base, right?

Um, so yeah, it's not good. I mean, the other thing that's cannibalizing at least ETH is L2s. We haven't talked about that yet. Like everybody wants to talk about mega ETH.

I think we got, we got, well, I got specifically flamed for that because people, people, people weren't happy by me saying, oh, it's, uh, we don't need another L2. The issue is not throughput, the issue is activity. And I mean, I do think those two things are correlated, but I don't think that we are bound by throughput right now. And I mean, at some, at some point we will be, but it's not right now. But, but people, people were coming after me for calling MegaEthan L2. I read, there's this guy Brad who kind of like puts out who's, I guess, part of, part of Mangeth. And he sort of wrote a rebuttal to me that I think, like, I really respect him for trying to engage in good faith. But I think at the end of the day, it's still like, hey, like, we're trying our hardest to bring people onto our chain, but I can't show you anything that's like actually real that will be used a substantial amount more than the current applications already exist.

So it's like, I think, yeah, look, I'm an early investor in MegaETH, and I think I'll, I'll always on the venture side be interested in investing in people that want to solve some of the problems. The last 4 years, like, to your point, block space is increasingly a commodity, and the price of the block space has come down a lot. You're no longer in a state of affairs where you're paying $1,000 per transaction. No one in their right mind really would want to use the L1 with when, when fees spike. So, so Ethereum is kind of cooked from that standpoint. Uh, the analogy would be, imagine, to your point around real estate or federal government, it's like Ethereum acts like a federal government, wants evaluations of federal government, but only collects state or city tax because most of the tax is being collected by L2s. And so, and so the revenue generation of Ethereum, the L1, no longer supports a really valuation like a credible $300 $400 billion valuation for ETH. And so that's kind of cooked. The, the point around Mega ETH is true for most teams that I sympathize with. It's like you have really smart folks trying to like push the limits on throughput and decentralization consensus. That's fine. Like again, we've invested over $100 billion on infrastructure. It's like in the internet phase, there was overinvestment in fiber. You need like the smartphone, you need consumer applications to actually like eat up that excess of infrastructure. So block space, I think people just need to update their priors. Like block space is no longer scarce. How are you going to fill that? And you want to fill that with quality demand for it, not pure speculative activity that is highly cyclical and self-referential.

So just to the point about quality demand for block space and what you were saying about how it's about to get very illiquid as people get sort of ejected from the casino or liquidated or or they go bankrupt or face ruin, basically, or just rage quit crypto, which we're seeing a lot of lately. Those two things could kind of converge, and there might be an interesting trade from the long side. Hyper liquid, I think, provided there is economic activity going on on-chain there that isn't pure meme coin gambling. Like, again, levered, to your point, levered trading of both stocks and tokens is a useful innovation for retail globally. Um, so if they're buying back, if you have like a third participant, which is the Hyperliquid Foundation using trading fees from real economic activity to buy back tokens in an illiquid market, I could see that thing squeezing pretty hard to the upside, maybe. So maybe that's what's going to happen. We're going to get like the dark fiber phenomenon of tech in the 2000s, to your analogy, where most tokens go down. Maybe things, quality assets like hyper liquid, which could be considered like an Amazon or a Google of crypto, uh, gets sold hard and then the real economic activity, um, jacks it up over the following, uh, you know, the subsequent months and years. Just have to— you just have to stay solvent to be able to play for that and not get, you know, get long at whatever it is, wherever it's trading, $37 right now, and have it go to $5 on you because of some collapse.

Yeah, I mean, look, I'm not disputing like the long-term promise of, of these technologies and like tokenized stocks. And you see it like opening financial markets and tokenizing stocks for the rest of the world is a massive, massive opportunity. You could probably make a solid argument to your LPs that, you know, Hyperliquid is a $40 billion asset and, you know, it's all The burns are there. Just, you know, I come from a world of investing in enterprise software, and so you have contracted revenue on enterprise software, multi-year. You can really underwrite behind that. It's recurring. You can't really get behind run rating. Uh, pull up Blockworks dashboard, like, REV of these networks, like, over the last 30 days, 90 days, you know, go through that list. Solana over the last 90 days, $150 million of, of, of REV, total revenue. Revenue, not earnings, right? Ethereum, similar. Hyperliquid is, you know, $5 million. So a lot, a lot of analysts in crypto or, or investors just look at that and say, I'm going to run rate that to the peak, you know, and it stresses that. All I'm saying is, how do you think that cost, that revenue stream behaves in a down market? Because we're not in a down market yet. I think people are feeling the crunch. You, you kind of listen to earnings of like Chipotles of the world and the consumers feeling a pinch, you know. Other than XAI, everything else is kind of in a slog, like not just in crypto. You need to really get behind— like crypto is a hyper macro asset class because you really, really depend on liquidity flows. Like you, you have to believe central banks inject money into the economy and that people have enough money to come in and gamble in the casino, whether it's Polymarket to whatever it is that they're punting— stocks, meme coins, fundamental tokens, whatever. And, and so that's where I think most of, most of investors in crypto play the relative value game, which is, hey man, Bitcoin's a tenth of gold's market cap, or less than that. Well, there's room to grow. And Ethereum is only a fraction of Bitcoin, and it's, you know, worth $400 billion. What if it gets to Bitcoin? Oh, by the way, Zcash is only 10%, it's only a fraction of Bitcoin. Then you go down and Solana is only worth a fifth of Ethereum. Again, maybe on a relative basis you outperform, but the name of the game here is to your point around staying solvent. Are you making money?

Million-dollar question for you, Santi. Let's say that you're right, which I agree that you are, that this $1.5 trillion, let's call it non-Bitcoin space, is it should not be worth $1.5 trillion and you could see an 80% drawdown. Let's say that— or maybe let's just make it a little bit more benign. Let's say that it goes from $1.5 trillion to $700 million as the vaporware gets revalued by investors and, you know, dumping. What does that do to Bitcoin, if anything? Or can it occur exogenously?

I think, I think there's a credible stance here, and you've already seen that this cycle Bitcoin holds and it's less volatile and It's just a different class of its own. And I could see a world where Bitcoin may go down to $80K or $75K, um, and then— and but the drawdown on the rest of crypto is much more severe. And there's a world where Bitcoin rallies and tokens just don't move as much. And you're already seeing that, the cycle. So like, you're just— Bitcoin's like a commodity, right? It's very different than— then I would characterize everything other than Bitcoin as a tech stock. And that's evaluation. You're competing for attention and flows against AI against other parts of the market, and you're constantly believing and praying that those flows continue to show up and people continue to fly to Vegas and punt. And we built a 24/7, 365 casino, and, and that's, you know, pretty good. But just to give you some perspective, um, OpenAI has 800,000 users. It's a trillion, you know, likely IPOs at a trillion. So, you know, on a per-user basis, that's, that's, I think, the math you got to do, right? Crypto, $1.5 trillion excluding Bitcoin, and you have 40 million users. So you're telling me you have 20 times more users for OpenAI and, and the valuation is not too dissimilar? Like, like that, that's the gap that we have on active users, right? And if you tell me, Jonah, hey, look, crypto is— say, say crypto doesn't move from now and we wake up one day and we have actually 500 million users on-chain, you're like, okay, I can actually start to get behind the valuation for the rest of crypto. And mind you, some of that valuation, 1.5, includes stablecoin circulation. So again, you know, you want to see certain things show up, but the most important thing is just active users. Wallets moving money and where they're going. The beautiful thing of this, you will actually be able to underwrite that with high precision because you'll understand where flows are going. You'll understand if they're using Polymarket versus, you know, Hyperliquid versus Uniswap, or a gaming application like Godzilla. I don't know, you mean, but the quality and the activity also needs to be diversified away from speculation. We're nowhere, nowhere near yet. I'd rather candidly buy OpenAI at a trillion and go long that than hold any position in crypto. And look, there's, there's always like gems in a bull or bear market. Like, there, there's pockets of crypto I'm not suggesting like categorically just chop everything. However, um, you know, I, I think there are certain protocols in DeFi and DePIN that you can wrap your head around evaluation and say, okay, gosh, it seems to be overlooked, and maybe with regulatory clarity you'll be able to connect the token with equity and do all these things. I think it just takes longer, the regulatory clarity. And so why would I— again, it just goes back to I never want to underwrite something with like stacked assumptions. X, Y, Z needs to happen. I want to make sure that Jensen Huang doesn't puke. I need to make sure that Powell has a good day and that regulatory clarity shows up and there's no government shutdown. And then, and then people continue to want to punt this and that, you know. So like probability of A, B, C, D happening, you stack all those together, you're likely going to be wrong in your underwriting process. It's not a clean bet.

Yeah, no, I'm, I'm, I, I personally I'm willing to take that risk on the regulatory clarity right now. That's, that's, I think that's it. That's the only part that I'm, I'm pretty, I'm pretty happy about. Like we're seeing, we're seeing Uniswap move forward. I guess the question that, you know, Jonah and I try to answer a lot and that we think about is there, there is a shift coming. Like we, we believe that there's a, there's, there's a massive shift coming where of that $1.5 trillion in outside of Bitcoin, a substantial amount of that is held in sort of the quote unquote wrong areas. But when you look at things like Uniswap or you look at things like Hyperliquid or Aave, or there are DeFi protocols that if you take the revenues and you look at the pricing, it's like, okay, these things could be actually fairly reasonably priced. And so one of the things that we're trying to think about, right, it's like in a drawdown like this, like when stuff starts going lower, can we get a period of time? And my answer to this is, is, is yes. But I'm curious your answer, but can, can we get a period of time where you get things like syrup and Aave and Hyperliquid and these other assets are going up while the rest of the market is going down? Because everyone's just like, okay, like I'm, I'm out of Cardano, right? Like I'm, I'm out.

And this is where I'm probably mid-curving it quite a bit because this is where I've been wrong the most. Which, you know, sitting there investing in DeFi in early 2020s, and you would have, you would have like really under— and we were successful underwriting that thesis, but still the entirety of DeFi was worth less than Dogecoin. So this is where like markets have become hyper-financialized, and I'm not here to discount the social memetic desire. Like, that's, I think, a huge part of the valuation underpinning that. Maybe someone can come in this pod and say, dude, that, that guy is crazy because he totally doesn't understand how flows and crypto markets work. It's like total mid curve, $1.5 trillion for memes is, is very supportive, and you could probably construct some analysis behind that. And some things, good calls, but you have to believe on— like, it, it's fluffy, and I can't really wrap my head around that. I'll go back to cash flows, and I'll go back to activity, and It just makes me nervous because I think we're like in the second half of like broader market cycle, like valuations everywhere. The market's gone up for a couple years, you know, mean reverting is something that I constantly think about to just analyze and make investments in crypto and markets and wherever. Like, I can't— and so I'm a bit more cautious now. I think I want to be sure that the things that I'm holding, I can say, hey, look, this thing is actually cranking out, you know, X amount of cash flow, and I can wrap my head around that. And if it falls 20-30%, I'll actually put way more on the line and double the position and triple the position. I struggle with, um, valuing and creating a reasonable framework for memes, even though I think they're super important and they could be worth $10 trillion. God knows. I mean, I constantly am surprised of the degenerate energy and activity in crypto.

This episode is brought to you by Zcash, the decentralized digital cash that is encrypted to ensure agency and safety. With a fixed supply of 21 million and proof-of-work consensus, Zcash is encrypted Bitcoin. Buy, store, and spend encrypted Bitcoin using the Zcash-powered mobile wallet Zashi. To find out more, visit their website or click the link in the show notes.

Notes.

Thanks to Zcash for making today's episode possible. Shout out to today's sponsor, Katana. Katana is a DeFi-first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR, Katana is launching with notable ecosystem of primitives, assets, and partners like Morpho, Chainlink, and more. Katana's 1 billion CAT campaign is live. Bridge and deposit directly into vaults in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. As always, investments in blockchain technology involve risk. Terms and conditions apply.

So I guess just zooming way out for a second, macro-wise, Um, the reason why I'm pretty darn excited about Bitcoin and the broader landscape for crypto is that I think that, you know, I do think we're going to get it. Like, affordability is the crisis of our time right now. That's what's being communicated by the recent elections. That's what the Trump administration is focused on. Inflation is global. Basically, um, people are struggling, you know, some people are— a lot of people are struggling to afford daily life. So Against that backdrop, there's kind of two routes that governments can go to solve it. One is socialism, that's bearish for everything, uh, all assets. The other is stimulus. And I think that the current political backdrop in the West is still, you know, you're looking at governments that are run by people who are going to lean towards stimulus, not like Pol Pot or Mao-style redistribution. Um, and so I think that in general, that plus the fact that Blockchain has already disrupted financial back office applications and just hasn't been allowed to proliferate until 6 months ago when it went from being illegal to now legal. You're sort of setting up from, you know, short-term cash inflows that should buoy all assets, including speculative ones like our space, as well as like a longer-term mega trend, maybe tech in 2000, where it doesn't just happen— oh, you don't go to 2025 level tech prices overnight, but you're, you know, you're at the beginning of a 25-year you know, just sort of upswing in crypto, maybe stablecoins or things that are hard to invest in, but just adoption of crypto. So like broadly, I'm constructive. The current price set, I agree, is challenging. So against those sort of two conflicting features of the market, Santi, I kind of wanted to just ask you, you're about to— or maybe not about to— you're at some point, you've talked about launching a token and you're launching a blockchain. How are you thinking about doing that in such a way that, you know, token holders benefit but you don't, you know, have to get forced to give up too much of your FDV in a bear market?

Yeah, look, excellent question. We get asked this a lot, like, why would you launch another chain? We don't need another chain. And I'll say for a very specific reason. Um, we'll go and acquire businesses. And plug in this technology to make them more efficient. We'll cut costs, we'll improve unit economics. We drive all that activity on settlement to our chain because we don't want to leak that value. Like, there will be apps in the Ethereum ecosystem, stablecoins and DeFi protocols and deep-end protocols that are going to benefit from bringing a user that has just not existed in crypto before. It's a user that doesn't care about speculation, that's not here because Bitcoin's at $100K. It's a user that doesn't even realize that crypto's working on the back end, they'll feel the impact. You know, they'll get a loan, the rate is lower, they'll get a stablecoin that for all intents and purposes for them is a dollar and they're earning yield like a money market account. And, and I think that's where we see a path towards becoming the largest chain in terms of active, real economic activity. Our KPI is, can we buy businesses where there's, there's a core service like mobile or some other utility and make those businesses, you know, financialized, becoming banks, right? And bringing that activity on-chain. And I think that's where, again, going back to why we have this issue in crypto, I think is I want to bring a not casino flow into our chain. I want to bring real economic activity. And I think the multiple attached to that chain should be very different than the multiple that you have in other businesses that are in other chains that are just very cyclical And that's why we have a chain, right?

Yeah.

As we think about like this idea between tokens and equity, look, it's very simple. I want people to look at the chain and say, gosh, these guys own 100 businesses. And those businesses are, there's a stream of activity coming through because we own the user relationship. We'll direct that flow to the chain. And so you can underwrite that from a, if there's a billion dollars in fees that is generated by our chain, you could say, Yeah, these are real businesses. They own them through their fund and other businesses that can plug into the chain. And you say, okay, I can actually underwrite that from a reasonable multiple perspective, and people can come to their own conclusion about that.

That's why I asked the question though, because like— sorry, Avi, I won't ramble too long. I just, I asked not because our listeners, our listeners tend to get upset when we try to go into like the lore behind blockchain development, but more just like you're, you're familiar with trading, you're familiar with tokenomics. You're familiar with all of this stuff and you're launching one right now. So basically, listening to you, I hope that our listeners walk away with some idea of like what's in an idea of an example, a concrete example of something that's investible in this market, you know?

Yeah. Look, we'll, we'll have a private equity fund acquiring real businesses that you have to be accredited, you have, there's a number of, you know, constraints there. But we'll have our Inversion chain, and we will have an Inversion token, um, and we'll use that to, you know, to, to settle all the activity on the chain. Um, we raised a round earlier this year for Inversion Labs, which is, you know, we're building a blockchain. We're hiring kind of like a Palantir model. We have forward-deployed engineers, product people that parachute into companies and, and do the transformation. I was just with one of the larger, um, investment banks here in New York, and they historically have been very anti-crypto. And now I was talking to their investment bank, their private bank, and they're saying, gosh, a lot of business owners call us today and say, how do I use stablecoins? Like, I want to implement this. I hear Stripe's doing it, and I hear JP Morgan's doing it. I can tell you from our standpoint, we don't have a problem with sourcing demand for companies that want to get acquired or want to utilize this technology. Um, so we're going to focus on that. And, you know, of course, as most projects in the space do, you know, we'll launch a token. How we do it, I think, will be— we're paying a lot of attention to, A, the regulatory environment, how to map out, you know, all this cash flow that can be generated as you make businesses more efficient, and how we connect that to the chain. But in a very simplistic way, you'll have a lot of, a lot of durable recurring fees in, in terms of MEV and blockchain fees settling. So you can think of it like, if you want to do apples to apples to a network like Ethereum or Solana, you will kind of do this analysis, right? And, you know, blockchains you can inspect in real time. Hey, how much is MEV being captured? How much fees are being captured here? How many users do they have? What type of activities on this chain? So I don't know if that answered your question. Like, of course we got to be guarded, but, you know, paying a lot of attention to.

No, Santi, I need to know exactly what company you're buying right now so that we can go in there and bid it up.

We've looked at public companies.

But that is sort of a real question is like, what type of business benefits the most? Like, like what type, you know?

Today, look, long-term, it's like you're sitting there in early 2000s and saying every business is going to use internet software. And that, that's a transfer. That's just what's going to happen over the next 20, 25 years. Businesses are still running on spreadsheets, especially like small businesses, um, like middle market businesses. A lot of those we're looking at, family-owned businesses, like they just— technology is not core to what they do, but they can be made more efficient with technology. But just for fun, hypothetical fun exercise here, it's too big for us right now, but Western Union— you've heard me say, talk about Western Union. Trades at 4x P/E ratio.

Now you tell me, better than any crypto.

Again, this is like price dictates a return that you get. The core thesis that I have personally, after— I'm a huge techno optimist. I love technology. I think technology is what makes businesses more efficient. However, I think because of this, the market is drunk on that sort of techno optimism and leaves certain businesses for dead. So Howard Marks talks about price being the main determinant of returns. Now, market pendulum and momentum swings in the extremes. Business fundamentals kind of don't deviate as much. So again, you know, steel mill operators that are going out of— they were going bankrupt, traded at 8 times P/E ratio. I look at a business like that, I get excited. Like, I'll start doing work and say, why is it trading at 4 times when the market is trading at 25, 30 times? Again, mean reversion. And, and I think margin of safety is the name of the game. And so we look at a business like a remittance operator, and then you start digging deeper and say, okay, they have a lot of trust. Western Union is a very recognizable brand. If you're a migrant, if you're an immigrant in the US, you're likely going to go want to go to Western Union as opposed to MoonPay or whatever. And so can you make that business more efficient with technology? Can you make that business more efficient with stablecoins? Then you start saying, okay, well, they pay most of their fees. You look at their cost structure and say most of those fees are sourcing liquidity in local markets. If you, Avi, want to send money back to Israel or whatever, well, they're going to charge you 2, 3, 4%, and they're going to hose you on the FX conversion rate. They'll kind of hide it in a very interesting way, and then they'll have to pay a local merchant, convenience store, whatever retailer in Israel to source that liquidity to go back to the Israeli, uh, currency. Well, what happens in a world where on the back end your family member doesn't have— doesn't want to actually go to local currency because now they have a digital wallet. So you basically now can cut that big part of the cost structure for that business. Cutting cost is the name of the game here, gents. It's like, I don't ever want to underwrite that we're going back to like financial engineering and private equity thing has been a thing, right? It's like, oh, let's buy a business, put a bunch of debt on it, fire half the workforce with AI and That sounds like financial engineering. Financial engineering. Look, that, that, that's not the game we play. We simply can first look at a business of, does it have scale? Does it have distribution? Does it have trust? If it has trust, you can do so much with that business.

Okay. So here's a follow-up question. Sorry to interrupt. Um, so a lot of chains are trying to do what you're doing, but without the private equity angle. So instead of buying businesses and putting blockchain into them, they're just there's a blockchain angle and they're building a business. Like Maple Finance is a great example. Plasma is another great example of that, right? They're building a stablecoin network, uh, which is, you know, supposedly gonna have real economic activity, and there's a token too. But anyway, like, I guess my question is, um, what, what's the difference between, you know, as investors look at Inversion or other tokens in the altcoin space that's very fraught with risk right now, when they ask themselves, hey, okay, Santi says there should be real economic activity in order for me to to invest in one of these tokens. Fine, we're all in agreement there. Digging up one layer deeper, the question for you is, what, like, what's the difference? Okay, if there's some economic activity, if that box has been checked, what's the difference between being like an equity holder, or in your case, like a private equity LP, and a token holder? Does it have to be like hyper liquid where the token needs— the project needs to say, all right, 95% of these, this real economic activity is going to buy back the token in order for it to be— you get the green light on it as a token investor? Or is there some other way that you're going to link real economic activity back to the token holders?

Yeah, look, in a perfect world, you map out all the cash flows that you make back to the chain. Um, we're observing the regulatory environment and, and we'll adapt based on that. Uh, we've got to work what we have. So very— again, going back to Hyperliquid, if we have one user, a whale in Hyperliquid, It's trading, right? It's using hyper liquid. It's generating fees. Think of our go-to-market in a company that we acquire is that whale. That company is bringing massive amounts of flow that, by the way, is sticky because we control it. Unlike Maple, for instance, a lot, a lot of the RWA protocols are doing the BD game. They're convincing, they're finding, they're underwriting businesses. And look, all the credit to Sid, you know, they go out, they underwrite the deal, they'll bring it on chain. I think there's a kind of a principal-agent dynamic there. We're putting equity on the line, like we're putting our money on the line to buy the business and we control it. And because we control it, we can direct that flow to the chain. And so there's a very clear connection, right? And value creation story, which is where the incremental business that we buy brings more value, more stream of settlement fees to the chain, right? So that's a simplistic way to think about it. I'll tell you why. I guess a lot— a big part of starting Inversion was going and talking to a lot of the projects in crypto. And look, this technology has come a long way. The UI/UX has come a long way. The biggest problem that we have as an industry is the go-to-market, right? Convincing businesses, convincing users to come into the— and use this stuff is very hard. And a testament to that is we haven't really grown the number of users on-chain. So I went and talked to, you know, Coinbase of the world and Building distribution is very hard, time-consuming, and expensive. I want to acquire distribution at a really good price. Again, if I buy a business like Western Union, hypothetically it's like $4 billion, okay? You know, that they already have an existing user base that we can kind of activate without them thinking about all these things. Like, we can abstract away all that complexity. And so, so again, it's customer acquisition, right? And it all really boils down to unit economics, right? If it were easy to convince businesses, if it were so easy to convince users to come and use this technology, then I wouldn't be wanting to acquire these businesses and take a private equity approach. But it just isn't. If you look at the evolution of technology, it's kind of really hard to convince these businesses. So like, there's a couple of things that you never want to assume, like changing consumer behavior. People are lazy, man. They don't want to switch bank accounts. They don't want to try new shit. And, and it's a fair question to ask. Like, if you're a skeptic of crypto, I think we don't have a good answer when someone says, hey man, look, I hear you on stablecoins. Carlson Brothers are hyped up on it. They say it's room temperature semiconductors, greatest thing ever. Now you let me know why we haven't— we don't have more than 40 million active users. If this— if stablecoins are truly amazing and everyone wants dollars, you let me know when we have a billion users use— using this stuff. And so again, as you think about relating it, like, so how do I invest in, in this thesis? 'Cause stablecoins are going to continue to proliferate. I think you invest in this thesis by, again, investing in companies that are going to use this technology and benefit from it in the same way that you can build a thesis around AI. Like, who's going to build more value? Like the AI startup or Facebook or, you know, some company that can use, like a law firm that can use AI to fire half the workforce and like, you know, be 10 times more profitable on a per-employee basis. Like, that's where the things like value accrual historically has been, like, it's going to accrue in the infrastructure layer. But I think user aggregation theory is very true. Like, if you control the user, you monetize that, and then you utilize this infrastructure that is open, public, decentralized, and is lowering the cost to become a financial services company, and you can capture that flow. And so that, that's my thesis here. Like, the last 10 years have been Succinctly, the last 10 years have been $100 billion invested in infrastructure. If you were early Solana, Ethereum, Filecoin, whatever, you would've made a ton of money. I don't think that thesis and that, that strategy works over the next 10, 15 years. I think you want to now think who's actually gonna capture more value, Robinhood or your new startup stablecoin issuer? Who's gonna capture more value? Uh, yeah.

Yeah.

I think this did, this happened a little bit. Sorry. Good. I thought you were on.

No, no, I think the point was made.

No, I'm with you. I think one of the things that I realized probably a few years ago is that at the end of the day, like you need applications that are driving a substantial amount of activity to a platform. And the reason that people were investing in infrastructure from my personal perspective is that there were no applications to invest in at the time, or you didn't necessarily know what application was going to win. And so people viewed it as an easy, safe sort of catch-all, like, let me invest in the infrastructure at some point. This, this will give me exposure to the idea, even if the specific investment does, is not the thing that works in 10 to 15 years. It gives me access to the idea of, of crypto. And I think what we've sort of come to now is an understanding that it's, it's about the actual, and always has been, it's about the actual applications. Like people used to make sort of, you know, they would say things like, well, you know, the underlying crypto network is like the underlying email protocol. And that to me was always like a really bad argument because the underlying protocol like shouldn't make a ton of money in my personal opinion, long-term. Like it should be the things that live on top of the protocol that end up making money. And then at some point, yes, the underlying protocol can make money. But I think when you look back also to like the early 2000s and you go, you think of the internet boom. There were obviously today tremendous amount of company value created by startups that were the first to implement internet technology. However, there was also a ton of productivity gained by companies that had nothing to do with the internet that just ended up taking like restaurants, right? Like setting up a website, I'm sure the bookings went up for, for, for, for individual restaurants, cuz people were able to find them and go to them and see them. That's why like food and beverage spending is up in the United States. It's easier to go find these things now, like over versus, versus 30, versus 30 years ago. And so I think that's kind of what you're doing and thinking about in crypto is that yes, there are companies that will be created crypto first and will win and will be huge. but you're missing the forest for the trees and that there's like a huge other sector here where you going to have to actually integrate crypto at some point one way or the other. And I can take advantage of that. Now the, the question is like in crypto, um, like everyone I, I think is still focused on the wrong stuff and I kind of figured this out with the mega ETH and then everyone's really excited about Monad and I'm just not, same as you, like I'm just not excited about these things. Anymore. I'm excited about what's being built on top of them. And then maybe by extension, the thing itself, which again is why, like, I know Plasma's gotten a really, really, really bad rap recently just because it just keeps going straight down in a straight line. And that tends to make people upset with projects when they go straight down in straight lines, people get very upset. But at least like, you know, they're basically trying to build a neobank and I respect that they're trying to build a company, not necessarily a platform.

If you look at the— you did the tech analogy just now. Like, if you look at what happened after 2000, everybody did the same thing. Like, Cisco was— it had— was that like the biggest company in the world for a hot second? I mean, the craziest thing is it's, it's playing out exactly the same way in crypto, where everybody thought you had to invest in infrastructure, but what actually came out of that sort of tech bust and subsequent 25-year supercycle was The things that really rallied, like Google and Amazon, were apps. They were applications. They were real use cases. So I think to try to like sum, sum all of this conversation into one like little nugget, it would be the paradigm has shifted. Ignoring Bitcoin for a second, the only thing that's investable here on out is the— is basically killer apps. And if you're investing in infrastructure, you're investing in Cisco in 2000, AT&T in 2000, whatever else garbage like nobody local, local broadband cable providers in 2000, like the stuff that didn't 1000x. And I guess, you know, Santi, you're trying to buy killer apps. Somebody else might make one. Maybe Hyperliquid is, maybe it isn't. But like, that's what we got to look for is killer apps and probably not at current prices because they're terrifying.

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I am kind of bullish on Bitcoin still. Like, I'm still, I'm still bullish on BTC. Like, I, I do think that just, just to like throw a little sprinkle of trading in here. I think that we've gone down too far too fast and like regardless, regardless of anything, like you probably see a bounce soon because it's very rare that everything goes down. I mean, gold is going down. NASDAQ is going down. Like AI is going down. Ford is going like uranium is going down. Like every single thing is going down. And what that tends to mean is that it's, just like general repositioning and deleveraging. And then once that's over, you get at least some sort of bounce. Now, like how high that bounce goes is sort of like, I personally don't think the stock market bubble is over by any chance. I wouldn't even necessarily call it a bubble. I do think that we're going to have a good end of the year when it comes to crypto. I'm out ex-BTC. I'm a lot less optimistic. Like I'm, you know, I'm back to being an ETH hater.

I'll say a couple quick points on that. Like, John, you're absolutely right. Uh, look, Cisco never recovered from its all-time high, and I think it's one of those things where I think a lot of these things are grossly overvalued, and that's just a downtrend that is hard to overcome. Uh, you have some fundamental architectural issues of value capture, like we discuss here on Ethereum. You also have just overvaluation. The most important thing to solve is distribution, and people— like, let's not forget, this is open public decentralized infrastructure. And Stripe launching Tempo is kind of a warning shot. It's like, you know, I get the Switzerland model, but you know, this could be co-opted, this could be forked. Um, and so I think it just, to your point, Avi, I also agree with you. Like, I feel very comfortable holding Bitcoin. I think Bitcoin serves a purpose in pretty much everyone's portfolio. Getting off zero, you're going to continue to see that trend. I'll underwrite that. Like, I actually like Bitcoin here. Um, I'm rotating a lot of stuff into Bitcoin and I want to hold it in some measure in my portfolio. Um, but as I, like, as I spend, you know, the— I love this technology, I love crypto. I think the most important thing is the value capture will happen to deployers, not infrastructure. And there's still going to maybe be some incremental protocol that creates a better kind of mousetrap, better infrastructure, you know. I'm not totally discounting that thesis on the early venture side, but there's just an overinvestment on infrastructure. And, and what we need is, I think, more value be captured by the Apples, the Googles, the Amazons that realize, hey, 2000s are very different than the '90s. We actually can use a lot of the software and internet, and the price of that technology has come down dramatically. And again, block space has come down dramatically. So what can we do with that beyond speculation?

Hopefully, uh, hopefully make a lot of money. Not a lot of money for everybody involved.

Not a lot of money out there right now from the long side. People are hurting, my gosh. The sentiment is so dire. Although I— what I will say is like, you know, Santi, I want to get your take on this too as we get toward the end of the podcast. I think I like Bitcoin too here. Um, I'm not a short-term trader as everybody knows, uh, but I will be adding if it trades down below $90K, which we're getting close to. I think that the OG selling is not going to happen here. I don't think we're going to get forced DAT selling of Bitcoin. And I think that, um, I do believe in the Bitcoin to a million thesis. I think that we're going to get, like, the affordability crisis is bigger than crypto and governments are not going to solve it with communism or socialism right now. We're like, look who's in charge. The guy wants his face on Mount Rushmore. He doesn't want to be the next Herbert Hoover. We're going to get something big and I want to be holding Bitcoin when that debasement occurs.

Yeah, and even if it goes to a million, you'll be still at a fraction of digital gold. And look, something like Bitcoin is the perfect meme. It is. And there's only one real digital gold here. Maybe people can argue Zcash is, but, um, yeah, you know, I think, I think you're absolutely right. And, and, you know, institutions can't really pronounce LANA or Ethereum. Uh, they definitely now understand Bitcoin, and, you know, they're gonna continue. I think, I think that That is a secular trend that I'll get behind on over the next couple years. And so I, I'm there with you.

I've got a great question for you. Um, you're talking to institutions, you're doing like crypto x trad fi stuff day to day. We on this podcast, Avi and I, are constantly going back and forth about how as the infrastructure eats financial plumbing, flows will come into crypto. What does that look like? Like, when you talk to institutions, are they like, well, in order to replace some payments rails with crypto rails, I'm going to open an Ethereum wallet and buy $1 billion worth of ETH? Like, obviously not. Or is there something different they're telling you? How do you view that inflow occurring?

It's a trillion-dollar question, I would say. I was this morning just with one of the larger banks in the world, very, very old school, traditional. They historically have not wanted to get exposure, not even offer Bitcoin products or crypto ETFs to clients. Their board last November said, hey, we got to figure out something here. And now they're offering ETFs to clients. So I think like it's, again, it goes back to distribution. Like, what are these financial institutions going to want to offer their clients? Like, one of the paradigm shifts here is Wall Street can make money off of this industry. So Larry Fink is the perfect evangelist. So this is my point around you had all of these perfect headlines and prices are going down. That just tells you everything you need to know about where we are. Like, just there's a massive overinvestment and overvaluation in some of these networks. Um, but yeah, I, I think, you know, JP Morgan launching, uh, the deposit token on Base is pretty telling. Like, I don't know exactly what went into that thought process, but it was something probably along the lines of they've had an internal team working on blockchain since 2015, Onyx, then Connexus. They've been, you know, experimenting with that. And most banks have teams, dedicated teams internally, to try to figure this out. Like, hey, repo 24/7, 365, like settlement over the weekend. Like, these are some pain points that they want to solve. They're looking at Figure, you know, what they've done there to streamline a lot of that workflow, where they're going to deploy. I would get behind the argument of like most of them probably look to Ethereum first before anything else and likely just stick to Ethereum. You know, JP Morgan launching on Base is probably like, hey, you know, that doesn't mean they're buying ETH.

That means they're launching stuff on Base.

Yeah, and, and this is, again, it's such a nuanced take, but it's a super important one because just because we have more adoption doesn't mean the value capture is going to be there. Like Ethereum, okay, you launch in Ethereum. Where in Ethereum did you launch? Well, JP Morgan launched on Base. Okay, what do you need to believe for Base to accrue all sequencer fees? Well, it doesn't have a token. Okay, you can't invest in that, so maybe go buy Coinbase stock. Okay, is that trading reasonably? Well, um, okay, what do you need to believe to support a price-to-sale ratio of Ethereum coming down from 200 to 400x? Like, I want to buy stuff at like 10x for the sales. Like, you know what I mean? Like, Ethereum is $400 billion, it's generating maybe $1 or $2 billion in revenue, not earnings. Goddamn, you need way more Larry Finks and Jamie Dimons of the world to get behind that too. So again, it's not there. And the last one I'll say is like, you saw this a lot in the tech boom. Like, you— businesses like Uber just didn't have good unit economics. And it's one of those things where, like, great service, but don't confuse great service with a good investment. Uber penetrated markets, expanded rapidly, delivered a phenomenal service to people, but it wasn't profitable in the unit economics basis because it— the customer acquisition costs were so goddamn high. They were offering incentives to people. And that goes back to my point earlier, which is Building distribution, even for a beautiful service like Uber that competed against taxis, which provided terrible service, was goddamn very, very hard. And they— it took them— they just barely started becoming profitable in core cities like San Francisco and New York. Some cities are still not profitable. And so again, everyone's a genius when rates are zero, and there's so many businesses that like got off the ground because we were in record low interest rate environment You needed that. But building distribution, whether you're in tech or crypto in any other businesses, is very, very hard. And so I'd be a little bit cautious to just do the simple math around the institutions are coming, they're going to deploy in Ethereum over any other network. This is a path to a trillion. It's like, not really, man. Like the value capture is not there for Ethereum.

Yeah. Poor Tom Lee, just eviscerated him in his, uh, in his Ethereum thesis. But yeah, no, it's, I think those get clicks, man.

But like, you know, it does. I'll say this. Just because you're a guy in the bank, like, listen to Bankless and somehow believe that, you know, this is a world supercomputer. Yeah, man, you know, doesn't mean that Ethereum is going to be worth $1 trillion. I'm sorry, guys. It maybe is worth, you know, at this price, like 10 times sales, maybe.

You know what it is? It's like it's a holdover of what crypto used to be like in 2021 and before, where you just, you joined a camp and you stuck with it. And whatever the actual reality of the situation was didn't matter. It was, I got in through Ethereum, or I got in through X, or I got in through Y. Like, I'm a Chainlinker, or I'm a Ripple holder, I'm an Ethereum holder. And it's like, that's what the dApps are kind of like reintroducing in my opinion, in a way. And they kind of like need that to be true. Like Tom Lee needs it to be true, obviously, to make a ton of money, but it's just not true.

In any, in any meaningful way.

So no, I'm, I'm, I'm with you. I'm back to being a hard— I made, I made, I made a name for myself over the last 2 years by being the biggest Ethereum hater that's ever existed. 2, 2 and a half years ago, I said that Ethereum was going to be the Ripple of this cycle. And I think, I think it's like kind of heading that way, except Ripple's actually done pretty well.

We even got an angrily worded letter from both of the Bankless Podcasts.

Yeah, they, they, they, they They said they sent us a cease and desist. That was pretty funny.

Oh, wow. Look, man, I'll tell you a thing. I'll leave you with this, like price to sales, because when you look at MEV, these dashboards, they all kind of say MEV, you know, those are— that's revenue of these chains, right? And they confuse that with earnings. Like they'll, they're, they're juice. They'll throw in there like staking rewards. I'm like, that's, that's not, that's not revenue. That's not earnings, right? Look at cash flow of these businesses. You know, you have category killers in the public markets. Like anything above 10 times price to sales is growing dramatically. It has contracted revenue. Like even the, the best SaaS companies in the world, you know, they have maybe 10, like 10 to 15 times ARR, recurring revenue. Make— underwrite a thesis. If you're Tom Lee, I mean, I think he's a very good, like, you know, public speaker or whatever, but like fundamentally walk into a committee and give me the reason why I should buy an asset that is trading at, you know, 100, 200, 300, 400 times price to sales when revenue is not recurring. Even though, even though you could say it's high growth, like maybe, maybe get behind the growth piece because all the institutions are coming. All right, great, you know, but again, it's, it's one of those things where you just got to stay disciplined, man. And rule number one is never lose money. Rule number You know, rule 2 is don't forget rule number 1. And this is why I titled my blog post today. I said, you know, thank you, dear LPs, we outperform Ethereum, but the fund's still down 80%. How many times, how many, if you have fund managers, how many times has that goddamn letter been written?

Too many. Hopefully, uh, and hopefully never again.

At least not by any of us.

This time is not different.

It's Avi.

I know, I know, I know.

It's, it's, it's, we're gonna, we're gonna go back there, but at least At least for now, we got people like you coming on podcasts like this, spreading the, spreading the truth to people. So, we, we do, we appreciate you coming on, man. This is, this has been fun. This is awesome as usual.

Yeah.

Amazing.

I learned a lot.

So please forward all the, all the, the criticism and whatnot.

Oh, we will.

Don't worry.

You think I'm taking, you think I'm gonna hold onto that for myself?

It's going straight to you. Yeah, I appreciate what you guys do. Thanks for having me on and really good discussion.

Likewise, let's do it again sometime. Thank you, Santiago.

For sure.

Take care.

Thanks, John. Take care.