Ethereum’s Valuation, Saylor’s Next Move, and Prediction Markets | Weekly Roundup

The ideological phase of crypto is over. The phase of crypto we are in is in the institutionalization phase. We are in the mass adoption phase, and that means that you cannot be ideological to make money. The— you cannot be ideological when you think about your investment decisions.

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We are live yet again. We keep promising people that we're gonna have a prediction market to at least understand if episodes with or without Jano, like, which one performs better. But we have been yet again abandoned. It's just you and me, Rob.

I don't think we've been abandoned. We went out and we asked, do people want Janno on the pod? We, you know, we did this kind of like A/B testing. He wasn't here, you know, he came back and everyone was like, no, we don't want Janno. So now he's gone again, right? So we're just like, we're trying to do what's best for the pod, you know.

In these tiring times, ladies and gentlemen, um, we are doing with what we have. Um, Look, uh, why don't we just get straight to it? There's a couple of things we want to talk about on the pod. Obviously, state of the market, it's been all over the place. Um, prices have just, uh, been quite volatile. Uh, let's talk about that. Let's talk about MicroStrategy. I feel like I've fielded like 7 different calls from reporters saying, is MicroStrategy going to blow up? Are they a forced seller? What does that mean for Bitcoin? All these different things. I'm sure you've probably gotten the same. I heard from Hasib, I was debating with him, a very lively debate that everyone should go watch on the Thread guy, whether L1s are overvalued or not. Not that we should talk about that here. I'm more interested because he mentioned something when we were recording, pre-recording. He said that you guys hosted a founder event in your office. Robbie, you're looking surprised. I don't know if that was the case or not. I certainly didn't get to make the cut.

No, we did. We did. It was like a founder dim sum lunch. Lunch, but you said like a founder event, and first time I was like, wait, what is that? No, it was like, it was like a white elephant, you know, holiday lunch. So it was like very lighthearted.

Um, let it, let it be known that I received no invite for said lunch. I, I have, I, I have not— where are—

what country are you in right now, Rob?

You didn't know that?

I, I knew you were not in New York. You would have been invited, I promise. You are invited to everything else. You know that.

I was starting to worry there because, you know, I'm debating my lead investor on the pod and, you know, I was like, you know, is there a refund on the docs? I went through it and I think we're good.

You know, we're too far past. You can't get your money. I'm not taking my money back. You're keeping it. So I also— Santi, like, you're kind of, um, you know, you're a healthy guy, right? And I didn't know if dim sum was right for you. You know, I thought maybe it was like too many carbs.

So fair enough. Fair enough. But I heard that there was an interesting debate. Um, one of the things that I think you guys do really well, A, you put great events, I've been at a few, but, um, there's some chatter around like, how do you, how do you measure, we're going to talk about prediction markets as, you know, of course that's like the new stablecoins, but like, how do you measure a change in opinion? And in a perfect world, Hasib and I were talking about this is like, okay, in this case, it was like, are L1s overvalued? You shouldn't measure like the who won the debate. By the total vote of a poll, you should measure on how many people came in thinking that they were overvalued and changed their mind and vice versa. Because I think that's sort of the measure of, and I think you guys, I think it was George from my team mentioned that he had been in one of your like debates and you did that. So I thought that was pretty cool.

Yeah, because you go into a lot of these things and people are, you know, maybe like one of these debates that we did was around whether like DApps were good or bad. For, uh, for the crypto industry. And so we'll talk about MicroStrategy, but something like 70% of people just thought dApps were bad for the industry. And so, you know, when you come into a debate with like that level of bias, like, you are— the person doesn't win by convincing from going from, you know, whatever, you know, 70 or 30% to 60%. They win by going from 30% to 40% because they were clearly able to influence more people than the other person was during that debate. Rate. So, which, by the way, I saw a poll on your debate with Steve. Um, did you lose? Like, what happened? Like, what— talk a little bit about the debate.

The debate. So I've been writing more, uh, really originally inspired around this idea of, hey, let's, let's make sense of these valuations. If Ethereum is worth $380 billion, is it worth $380 billion? And, you know, the fundamental— now, you know, value investor that I've been pre-crypto, just that part of my brain kind of was irking to kind of put it out in the open. And it triggered a lot of debate. Hasib obviously came out and his very eloquently written piece about the belief in the exponential and the potential of technology. But so it was a good debate around that. Like it's not so much discussing the potential though, has he really loves to anchor it back to that. And I was like, is it priced in? You know, because, you know, I think we're at that point in the industry where most people kind of would agree that there's just a ton of potential. You want to be on the right side of history and be involved in this space in some way, shape, or another. But it's like, is Ethereum worth $380 billion? And I, you remember that I played the, I kind of tweeted about this a couple months, a couple weeks ago. I said, what would you rather own? And I think that's, I'm actually going to build an app around that. Like, would you, would you own Ethereum at $380 billion, close to $500 billion at the peak, or SpaceX? Would you rather own Stripe at $100 billion, or Solana at $85 or $100 billion? Would you rather own Tron and SUI at $30 billion or RAMP at $32 billion? And so it, I feel like these juxtapositions really force your brain around, am I, am I actually holding an instrument that like, it really exposes the, am I getting paid enough to take this level of risk? And so anyways, I thought it was a good debate. There was a guy from Eigen who kind of used an AI model to predict who had won. Unclear what the black box does. Um, but then I, I tweeted, uh, there's only really one way to settle this debate, which is put your money on the line, which is why I think prediction markets do very well. Um, I wanted to get a Polymarket up, but I, I think this— I'd ask two questions and I, I want you to answer them if, if, if you, if your compliance team's okay with it. The first one is, um, will ETH reach a trillion market cap this cycle? Um, I was thinking about putting in range bound, like end of 2026, but like this cycle, will ETH reach 1 trillion market cap? Yes or no?

Uh, what do you mean by this cycle?

Correct. And that's— it's, it's ambiguous. Again, I call it wherever you think we're on the cycle, like, and by the next two—

you know, I'm like not a— I'm not like a cycle guy, right? Like, I'm, I'm like a firm believer that like You know, uh, the business cycle matters, the macroeconomic cycle matters. I don't believe in this like 4-year Bitcoin cycle, and so especially not today. And so, okay, so ETH is $375, $400, right, today, right? Yeah. Do I think it will go between, you know, 2.5 to 3x from here in some reasonable time period over the next, you know, couple of years? I do. Absolutely.

Call it over the next, um, because like you all discount the NPV or whatever, but like by end of, end of 2026, middle of 2027, call it in the next 2 to 3 years, does ETH hit a trillion dollars? A trillion market cap?

By middle of '27, does it hit a trillion dollars?

Like by '27, are, are you seeing ETH at a trillion market cap?

I think before the end of this administration in the US. ETH is over a trillion dollars.

Fair enough. That's more than that. Is that what, 3 years left in this administration?

That's like 2. Yeah, it's going to be like 3 years, 3 years left.

Okay. Let's, let's use that within this administration. I like that. So you're saying yes, ETH will hit a trillion in this administration. Fair enough.

Okay. Second, I believe so. Okay.

Second, but you're yes, by the way, right now, not financial advice. Correct.

Correct.

Right now, um, a third of, um, right now a third of participants agree with you. 52% disagree with you. So 52% of people say no, which is interesting. That, um, by the way, very different, right? Because my, the, the hate commentary on my bearishness, the overvaluation of these has invited a lot of maximalists to come out and say that I'm terribly wrong and stupid and make curving it and I should leave the space promptly and go do something else with my life.

Anyways, the second, which by the way, you might have been like the single most active angel in crypto token projects for a long period of time. So it's not like you haven't given and put your money where your mouth is in this space for a long time.

I'm still here. I'm building, I'm dedicating my career and an irresponsible percentage of my net worth to this space. Now I, that, and this is sort of the thing that I, I will actually love maybe your perspective on, which is you can simultaneously be very, very, um, believing in the potential of something, an optimist, but being skeptical. That doesn't mean that you're a pessimist or a cynic. And I think that's something that— a nuance that most people kind of don't appreciate. Like, Rob, I mean, you're in the business of producing the best risk-adjusted returns for your investors and absolute returns. Um, it's like loyalty to what? Like, you don't— you mean like if, if something were to run up dramatically in your strategy, you, you reallocate, you take risk off the table. You mean like you're a professional investor? And I think that's some— it is hard to kind of argue with the crypto crowd because they will immediately— imme— they love the narrative painting that Hasib's so good at. They hate anytime you suggest that perhaps, just maybe, Ethereum shouldn't be worth $380 billion. But I still haven't heard a very compelling argument as to why it should be worth $380 billion.

I, I will say something that I'm not sure if that's a crypto-specific point as much as it is like a general like Twitter discourse issue, right? Like, discourse online today is terrible. It's awful, right? You, you get a lot of— so under Nikita, there's actually, um, there's a guy based 16z who, uh, who wrote a post today. It's an anon, but, but He's also, I consider him a friend, um, in person, but he's also an anon online. And he wrote an article that was kind of like, uh, short degeneracy. It was basically being like, maybe we've topped in terms of like the amount of like gambling people want to do and the amount of just like the financial nihilism that exists. And maybe we'll get to a point where, you know, people are doing less of that. and we've, we've, we're gonna have like a snapback. But also the point was just around how under Nikita Beer's, um, kind of stewardship of the Twitter, yeah, just the Twitter algorithm, uh, and just like generally how everything works in the world of AI, that there's now this essentially, um, crowding that's happened where the, you know, the, the thing that is most viral is way more viral than the thing that is third viral, right? And there's like this crowding that's happened where being number one or being like the most, you know, the largest topic, the thing that people care about the most that day is now the only thing that people see, right? You see 90% of things, right? And there's just a lot more dispersion in interest now and a lot more dispersion. And so the reason I say that is because of that, you now have to be just more insane to get people to react and to get people to see your, your stuff, right? So you have to be more controversial, you have to be even more insane, you have to be even, you know, call it, um, more out on, you know, the left or right side of the curve. And what does that mean? That means that also people's reactions are more emotional, they're much more, they're much stronger. And so it strikes me that now people are trained to like just really reflexively fight with everything because like that fighting gets them seen at a higher rate. It also means that, you know, the things that they're engaging with are things that are meant to be more viral and to, and to re— meant to make them have an emotional reaction more. So I don't know, I thought that was interesting. That's a little bit of an aside, but I just think the state of Forrest is awful.

Yeah, you— it's this idea of you feel that you're more connected doesn't mean you're more informed, right? Because— and, and that's a nuance and it's powerful. Uh, second question. So you're saying yes, Ethereum can hit a trillion dollars in this administration. Second question, which I think is probably the cleanest way to settle the debate because it's a point around overvaluation or not. It's like, which outcome has a higher probability of happening this cycle in this administration? ETH hitting $100 billion market cap or ETH hitting a trillion market cap?

Oh, so ETH goes down, what, it goes down 75%?

75%. Yeah. Versus, uh, you know, I kind of was debating whether the web bookmarks, but I feel to me, you felt to me like that is an appropriate kind of range.

Which one's more likely? I, I personally. Think that it's more likely that it hits a trillion dollars, then it goes down another, you know, call it 70% from here.

I wanted to ask Kassib what percentage of the book is on Ethereum, like ETH, the liquid part. He kind of— and then I told him if I gave him $100 million, how he would invest it. He kind of dodged that question. I'm not going to subject you to the same scrutiny because I would assume compliance is going to say, you know, however—

we're venture investors, we— you know this, we are venture investors. Like, we're not buying ETH, we're not buying Bitcoin.

Uh, someone was asking me this today, but you, you do, you still have some liquid part in your, in, in your funds, right?

I mean, we have a, we have a, a small, a relative, relatively small fund that has liquids in it that is, uh, that we don't take new, uh, new capital into. And, uh, and we've told people specifically we're not gonna do, you know, we're not gonna buy like Bitcoin in ETH, right? Like it's meant for liquid.

So.

Yeah.

Uh, but anyway, so, so the market there, well, the, the poll there I should say, is actually more, um, more contentious. It's 52% says there's a higher probability of Ethereum hitting $100 billion. 47% say, um, $1 trillion.

So yeah, by the way, that's expected, right? Like the fear and greed index right now too is like 10, right? Like it's like max fear.

Correct. And I wanted to structure these. I learned this from Danny Kahneman. I worked at a health startup called Elysium Health studying aging, and he was an advisor. And he is a guy who wrote Thinking Fast and Slow. Nobel Prize winner. Like, just a true legend in the sphere of behavioral economics and incentive design. Great book. Great, great book. There's others on Richard Thaler and Dan Ariely, but I learned a lot about incentive design from Danny, and he, he says the question you ask influences the response that you get. So really focus— it's this sort of idea that Einstein has, which is focus on asking the right question, because that is what you spend—

80—

so I think he says something around spend 90— 80 to 90% of your time figuring out what the right question is, and then the solution comes far easier. And so I think like that's why I like introducing these two questions, because it to your point earlier about like, how do you measure the real answer? It's like, I feel like it's a marginal or the discrepancy between how people like just might have a very strong opinion but express it in different ways that is totally like divergent.

This episode is brought to you by Zashi Wallet, your gateway to buying, storing, and spending encrypted Bitcoin. Zcash is decentralized digital cash encrypted to preserve agency and safety with a fixed supply of 21 million and a proof-of-work consensus. Zcash is encrypted Bitcoin. With Zashi Wallet, you can swap Bitcoin or any other cryptocurrency into Zcash and stay shielded by default. Thanks to Zashi Wallet 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 KAT 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 think you're hitting an important point, which is like lack of liquidity in the market, right? And to your point around musical chairs, and that's an access issue, that's an interest, uh, in terms of issue. It's some, some of it's just a volatility issue, right? But it's also things like, you know, we were going to maybe touch on this later, but, um, you might have seen that Vanguard is now allowing their wealth managers to sell crypto ETFs, right? And they were like basically the last holdout, uh, right? And so as we have more and more of this access, more and more of this understanding that financial markets are coming on-chain, more and more just education, I do expect that there will be more, uh, less volatility and more long-term holders and more buyers, right? And, you know, we can talk about the ETFs a little bit because we had kind of— I think November was the only, only month that we've had, you know, Bitcoin, um, outflows on the Bitcoin ETFs. Yeah, in, uh, some— in a while, right? Maybe, maybe for the entire year.

For February, I think was pretty bad, but I think November peaked.

Yeah, November was like the worst. Um, and, you know, these, these inflows and these outflows, I think a lot of them have more to do with Uh, that people are using the ETFs as part of like basis trades with the CME, right?

But, and Rob, let me stop you there. What is, what exactly is the basis trade? Can I think you're— we need to oversimplify is what I've learned after the last couple weeks of just explaining to people fundamental analysis.

Yeah, so people are going, uh, long the spot, meaning long Bitcoin, which I think they're using the ETF to do if they don't want to— if there's some sort of regulated entity or an entity that does that would rather deal in a share than deal in like holding, you know, Bitcoin physical. And then they're, uh, shorting the future or shorting the CME futures, uh, to pick up a funding rate difference, meaning they're getting like— they're delta neutral, so they're not exposed to the volatility, the price risk of Bitcoin, but they're picking up the funding. And so I think that the ETFs are being used as a way to execute that without having to actually buy physical Bitcoin because for people hold the shares—

not to get too complicated on Options, uh, 101, but are they— they're, they're buying options around the, the ETF to hedge? Um, how exactly?

They might just be long the ETF, right? So they're long the ETF and then they, they're shorting the future, the CME futures.

Got it.

Yeah.

And, and for context, you talk about funding rate, there's an Austin round, there's controversy around how to calculate the funding rate, how Hyperliquid does it, but every exchange kind of has similar, but you, there's nuances in like the funding rate. Walk us through like the funding rate, like what, when do you see really high funding rates? When do you see negative funding rates? They could be positive, they could be negative. Like how does that work?

So the funding rate is a mechanism of, um, how, when I am going to be long, something on leverage, how much am I willing to pay to be long, right? And so this is a weird thing in crypto where, uh, every exchange basically decided that the like base funding rate should be, uh, 10.95% annualized essentially. And so the, uh, when the market is typical, the funding rate is typically— I'm willing to pay basically 11%. To borrow, let, uh, to go long, uh, yeah.

And that, uh, that funding rate is a collective figure of, of the, yeah, all the shorts and long. Um, that doesn't necessarily mean, well, he has— obviously if someone is 100x levered, they're going to pay higher versus someone that is 10 times levered.

Uh, no, not necessarily. That's not necessarily right.

No, no, you're just— it's the same funding rate no matter how much leverage you have. But of course, if you have more leverage, ladies and gentlemen, there's a higher risk that you're going to get liquidated.

Yeah, we're just going to get liquidated more, more quickly. And you're paying, obviously, like, you're paying the same rate, but you're paying the same rate, much more notional, same rate for everyone. Yeah, yeah. But the, um, and so what happens is, like, when the market is very, um, greedy and people are really bullish and people are thinking the price is going to go up they're willing to pay a lot more to borrow to get long, like, you know, get long. And so sometimes the funding rate blows out, right? Um, and then when you're shorting, right, you're picking up that funding rate because when you're shorting, you're essentially lending, right? So, so people go short the CME future, and the funding rates are structurally lower on CME than they are in, like, on crypto venues. But, like, if I'm short the CME, I might pick up call it 8% of, you know, Bitcoin-denominated interest, uh, while I'm delta-neutral Bitcoin itself, right? So I'm essentially picking up 8%, but I'm delta-neutral the price. And like, that's pretty good trade, right?

Uh, it's, uh, 8%, uh, implicit in that is I think probably, uh, you could be doing a whole different other strategies. Sure, you're committing capital to that. You probably say, probably the hedge fund that's doing this, and we talk about kind of who are the suspects here, but like the large hedge funds, sophisticated hedge funds probably say, hey, this thing Bitcoin probably has legs, probably structurally, like probably, probably kind of long, probably kind of think I would accept it as a payment in kind. I'm going to take the gamble. Uh, it feels like a better way to express, uh, kind of where in a scenario where Bitcoin kind of goes higher, I'm going to get 8% in Bitcoin and Bitcoin 10x from here, I made 80%. Is that usually how it goes?

Well, no, I mean, if you're, if you're, if you're 1-to-1 delta neutral and you're not, and you're not like super highly levered, right? Then like, You're, you're not getting exposed to the price whatsoever. If you're, if you have, if you're not matched 1:1, you're not actually delta neutral, then yeah, you could actually get, um, more leverage.

So yeah. And, and what percentage of the shops are doing strictly delta neutral and like how much of the market's like not delta neutral?

I think a lot of it's delta neutral, but I think, you know, a lot of people might be called 2:1, uh, especially like on CME though. Like people, I mean, like crypto degens, right? Like there's there's a lot more leverage in crypto degens than there is in like people who, you know, play in CME. I think people playing CME are typically, you know, the hedge funds that like if they can clip 10%, uh, on what they see as a relatively low-risk trade, like that's huge for them because if they're up 25% on—

yeah, the name of the game is, um, the Sharpe ratio on that is pretty high because if it's truly delta neutral, then getting 10% risk-free is 2x of what you get with, you know, that, that's a, that's a good trade as a hedge. How can that trade go wrong, and what does that mean for the rest of the market?

Uh, well, I mean, there's counterparty risk, which is why you see a lot more— so people are willing to actually do this with an ETF and a CME even though it's, um, it's typically lower funding rates. And the reason for that is primarily because of the fact that, like, one, they might just want to deal in a share instead of dealing in physical, right? Because that's easier, it's a better setup for, you know, how they already trade, right? Because they already deal in shares all day, right, if they're trading equities. Uh, and two is they would rather take CME equity risk, uh, or sorry, counterparty risk, versus like, you know, call it maybe, you know, Binance or Bybit or Coinbase or custodian or whatever.

You're implicitly kind of like indirectly exposed to that, but you don't want to kind of do it directly.

Yeah, exactly. And but there also is, I mean, there are times where like the market really dislocates And when the market, you know, trades down a lot, like, you know, if you're levered, you might have, call it, um, potentially like P&L you can't realize, or like what we have had on 10/10, uh, which was the people got auto-delevered, but the short and long leg got, you know, closed at different times, right? And so like that delta neutrality broke. Um, and so there are, um, in times of increased volatility, the, this kind of, you know, call it ability to be neutral, uh, truly delta neutral kind of breaks sometimes.

Yeah.

Yeah.

Let's bring it back to current state of the markets. Um, you know, you're saying there's a lot of, there's a lot of nervousness in the market. You're saying, hey, look, a lot of people are closing these trades. Uh, why is that? It's just because the funding rates have come down, you're no longer getting paid 8%, or, or what's, uh, what's the sentiment out there with hedge funds?

Some of it, by the way, is just that like, You know, people are— it is December 4th. It has like, you know how this works in traditional markets. We're 3 weeks from Christmas today, right? You know, I got a holiday party last night. I have one tonight. You know, I've got, I've got 3 next week, right?

Um, people are gonna get invited to any of those, or, you know, are you—

yeah, well, I'm waiting for the Inversion holiday party, right? So my workhorse are inviting me. Where's the Inversion holiday party?

You know, Rob, I might send you a little vest, uh, but otherwise, all right, there we go. There we go. There, we'll keep you warm.

Uh, no, but, but the, in traditional markets, uh, where people are not used to trading 24/7 and don't think that like they need to make all of their gains like at certain periods of time, like you see this in crypto all the time. People are like, oh, like there's parts of times in the market where like you're gonna make, you know, huge gains. So you had to be on at your, your, uh, at your computer all the time. In traditional markets, like, people, if they're up 20% this year, 25% this year, like, they're closing their positions, they're moving into the end of the year, they're clipping their carry, like, they're going in, like, relaxing, right? And so the people that are more likely to be in an ETF are, like, a lot of those people, right? Not, like, the crypto natives. And so, uh, there's a lot of that happening, but there's also— there's a lot of macroeconomic fear. I mean, we should go into MicroStrategy a little bit because there's— if you look at what the bond pricing is right now, like, the bond investors are quite scared about what's happening.

What's the bond price on MSTR? What is it maturing, '28, '27?

Yeah, so there's a few of them. I think if you look at on the— I'll pull it up right now. But if you look at the perpetuals, the one that's like the most junior was trading at like $78 this week, right? And so, you know, they're, they're pricing in a significant risk in that this is going to, you know, this is going to be— it's essentially junk, right? Like, you're not going to be able to get your money back. Um, yeah, the STRD Series Stride, which was about 12.5% effective yield, it's like junior to all of the others. It's trading at, yeah, about $78, $79.

Yeah. Put that in perspective. I mean, that, that, that I've seen, I've seen bonds trade all the way down to 12 cents, 10 cents. You probably see, it's interesting. What do you read into that? Because like, okay, Saylor might go out and say, wait a minute, folks, we, and there was a, I think the CFO that went on and, and I got pinged immediately by a couple of reporters. I got a quote on Bloomberg about this, but it was like, Wait a minute, I thought that the whole thing was that their capital structure is so sound and bulletproof that they're never going to have to sell Bitcoin. The interest is so low, I think it's like less than 1% on, on, on the notional, that you actually just with the cash flow of the business, like, you don't have to, you don't have to sell. You can cover interest payments. You're saying why the bondholders and why it's trading at that level, 70 cents, is, is it's bullet at maturity, so you're not going to be able to you're not solvent enough to pay this and you're going to get wiped. Is that, is that kind of what's going into that, or why is it trading at—

yeah, so maybe we'll like, we'll, we'll back up a little bit. But, um, so at $78, right, for, for Stride, which is that one of their preferred stocks, what's the most junior of the preferred, right? Like, if you do the bond math a little bit, it, it basically implies that the market thinks there's something like a 9 or 10% chance chance of default on that, right? So, uh, that's still more senior than common equity, but it's, you know, call it more junior than the other, uh, the other prefs and any debt that they would put on. So like they think like somewhere in the middle of the equity stack, or, you know, call it, you know, closer to the common equity, there's a 10% chance that they're not getting paid back, right? That's pretty high, right? But it's not obviously a death knell to your point.

This episode is brought to you by Zashi Wallet, your gateway to buying, storing, and spending encrypted Bitcoin. Zcash is decentralized digital cash encrypted to preserve agency and safety. With a fixed supply of 21 million and a proof-of-work consensus, Zcash is encrypted Bitcoin. With Zashi Wallet, you can swap Bitcoin or any other cryptocurrency into Zcash and stay shielded by default. Thanks to Zashi Wallet 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 KAT 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.

If you take a step back and like you think about what's happening at MicroStrategy, what is MicroStrategy? It is, you know, there was this— or now Strategy, sorry. It was this, you know, call it software company, but it was a software company that does a couple hundred million dollars of revenue. and then it's approximately $50 billion, uh, of $55 billion of Bitcoin, essentially, right?

It's like 3% of the total supply, like 625,000 Bitcoin or something like that.

Yeah, something like that.

Yeah, yeah, yeah.

And so it's, so it's, you have $55-ish billion of Bitcoin and it's at times traded at, you know, 2 times NAV or 2.5 times NAV, and that's when they've gone and like raised a bunch of capital. Because the story has always been strategy is going to outperform Bitcoin because they're going to be able to increase your Bitcoin per share because they're going to sell equity, um, at when, you know, it's trading at a premium to NAV, and then they're going to go buy more Bitcoin, right? So now it's trading back down. It's not, uh, it's not below 1, but it's been trading between like 1 and like 1.15 of NAV. And the CEO came out and said, well, hey, listen, like, maybe we would have to sell Bitcoin to— or we would sell Bitcoin to buy back shares, which mathematically makes sense, uh, for the shareholders if it trades below NAV, right? And that spooked the market. I think one day the strategy was down like 30%. The, the, um, the, the preferreds were trading, you know, kind of more of them were trading in junk territory. And, uh, people were, were scared, right? Because with the price of Bitcoin— and also Bitcoin went from $125K to $80K in basically, you know, a couple weeks, right? And so now Bitcoin's back up to $92K, and the strategy came out and they actually, um, raised a cash buffer, uh, and they came out and said, okay, now we have actually enough cash that we will not use to buy Bitcoin that can pay about 2 years of dividends for, um, you know, these debt-like instruments that we have. And so the market really liked that. I think it traded back up 30% right after that happened. Uh, and it was essentially like, listen, like this idea that we're going to get to— people are scared of this thing called a death spiral where it's like, okay, well, it trades below, uh, below NAV. So I sell Bitcoin to buy back my shares, but because I'm selling Bitcoin and I own, you know, 3 to 4% of it, now Bitcoin is trading down. So like I keep trading below NAV, so I keep selling more Bitcoin. And now this, you know, kind of spiral happens. I think, um, Sandeep from Polygon came out and said, oh, like, you know, I hope this isn't Luna, as if, uh, you know, this, this reflexivity between, you know, the, um, the US dollar stablecoin that Luna had and, uh, was, was the same thing. And it's clearly not. I think that's just like a pretty big misunderstanding about how like these like public market instruments work. But the, the market was spooked, like no doubt about it. So Anyways, they put out the cash reserve and now it seems fine. It's steadied. And also, like, you know, Bitcoin has steadied. So I'd be— I think this kind of like short-term scare will probably go away for a little bit. But, you know, if Bitcoin, you know, trades down another 15% from here in kind of rapid succession, we'll continue to hear more people talk about this.

So yeah, for sure. And just to put a little bit of more color into this, I think it's, uh, the, the UST reserve is to the tune of $1.4, $1.5 billion. They sold some Class A shares at the market. And I think one of the things that I would ask a lot is when you have someone so fanatical and, you know, so adamant about Bitcoin being the purest, most pristine asset in the world and everything else, you got to sell and cash is trash, had Aladaglio, and then it sort of concedes to the whims of the market. It sort of, an ever so slightly just change in tune kind of spooks a lot of participants. Do you think that there's merit to that argument in the sense that like if you're an RIA, if you're, you know, Saylor is kind of the chief marketing officer of like CMO of Bitcoin and you're now seeing that and you're saying, well, it, do you think it gives pause to people that would say, hey, this is interesting, like maybe we shouldn't be all hot and heavy on Bitcoin and Maybe, you know, maybe it just warrants a bit more caution or thinking about it. And, or, or is it just totally irrelevant? Is this more of a perception thing? I know, I know it's very hard, like hard to measure, but Saylor is like, for better or for worse, I think some hardcoin, like hardline Bitcoiners have said, we don't like MicroStrategy because it's in, it's counter to this whole ethos of Satoshi being Anonymous, and you have now someone that has kind of, for better or for worse, hijacked the supply and hijacked the, uh, the narrative. And is that good or bad? Uh, the— does that even compute? Does it influence decisions, uh, at the board level or, uh, RIAs, institutions?

I don't think so. Listen, I— the, the ideological phase of crypto is over, full stop.

Right, like, again, because your, your co-founder might heavily disagree.

No, the ideological phase of crypto is over. Uh, the, the phase of crypto we are in is in the institutionalization phase, right? We are in the mass adoption phase, right? And that means that you cannot be ideological to make money. The— you cannot be ideological when you think about your investment decisions. And is Saylor ideological in some sense? But I bet you less than people actually think. Right. So at the end of the day, you know, Saylor, of course, and you know, I'm not gonna go back through every statement he ever made, but if you go listen to the actual earnings calls with the people that work for him, the story was never strategy will buy Bitcoin and it is a black hole and it will never sell Bitcoin. The story is that strategy will outperform Bitcoin because they will increase your Bitcoin per share. Right. And so if you viewed it from that lens, which a sophisticated investor probably would have, then you understand good entry points, you understand what's happening to the market, and you're trading it appropriately, right? The people who are ideological, but like, oh, Saylor is the chief marketing officer of Bitcoin, and like, he's going to be the one to, you know, he's just going to continue to gobble it up, like that is ideological and I think was incorrect read of the situation.

So I think he's been fairly, um, um, cognizant, like very explicit about playing the capital markets, right? And, and, and his strategy is just, uh, you know, playing that. Um, I want to get, um, one of the things that I've thought about, like the Luna comparison is, is, is blown out. There is a, there is a, there is a kind of a silver lining there that, that is worth kind of like introducing because if you remember, the collapse of Luna. It's sort of the, could have Luna worked? And there's a version of this world where I think it could have worked. If you remember, look, not to get into the mechanics, but like your algorithmic stablecoin in some sense is trying to do this mechanism that SAILOR is doing with MNAP. It's not a perfect comparison. I'm not ever suggesting that. However, I do think that there is, the reserve is what I'm trying to zero in on. 'Cause Terra in the latest kind of stages was saying, hey, you try to diversify the collateral backing the stablecoin. In this case, for some history of crypto, algorithmic stablecoin Terra had a stablecoin, like there was a Luna ecosystem and everything that was backing that stablecoin was the token Luna, right? And they always kind of said, hey, look, there's going to be more demand, more, they have this CHAI e-commerce thing and merchants are going to adopt this stablecoin. It's going to be, you know, the payments rail, the internet, everyone in Korea is using it. You know, here's all our growth. And it was hard to always audit, which is why I never invested. I never got clear answers from Do personally when I met him because he was raising the seed. And then, well, I was with Parify. And then but then over time he sort of conceded. He said, oh, maybe, maybe it wouldn't be such a bad idea to diversify the collateral pool and go from pure, kind of like a pure, like fictitious thing, a social construct that gives value to the token. 'Cause they were paying all this yield and then they said, let's expand the collateral. And so they bought Bitcoin and that's where I think the market was like, oh shit, turtles all the way down. Which in some sense, like, Bitcoin is turtles all the way down too. It's like a pure social— the god-tier meme, and it's a digital cult.

Yeah, but, but I, I think the— I mean, listen, I, I understand how at surface level, like, Sandeep said what he said, right? And Sandeep's obviously not— he's a very smart person, and like, you know, he's, he's, you know, created Polygon, and he's done a bunch of other stuff and done very well for himself, obviously. Um, but like the, the, the price of Luna was essentially linked to the pre— to UST adoption, right? And so when people no longer— when people wanted to sell Luna, like, you know, or they wanted to sell the UST for Luna, and then they need the arbitrageur to be there, right? Those things were interlinked. And so there was like a reflexive thing that was happening between the two of them. The price of Bitcoin— while there is a person who owns 3% of Bitcoin and like, you know, theoretically I guess could decide to sell it to, you know, buy back the shares— one, they're not actually a forced seller. They don't have to do that, right? Because there isn't like— you don't need to run for the door. You— they can just decide to hold it and they can try to trade below NAV. Two, they, uh, the price of Bitcoin—

while, and by the way, it's a harder collateral, like you're holding something that you know, is separate from what is tied to your— I mean, they have other—

yeah, exactly right. Like, the, the— while the equity price is dependent on Bitcoin in some sense, it's not fully dependent on it, but the Bitcoin price is not dependent on the equity, right? Whereas in the USD price, the price were directly dependent on each other.

What you just said there is the most important distinction between Luna, Terra, and Bitcoin and MicroStrategy. You want to say that again so that people can internalize that? Because it's— if the FUD will continue, if price goes down— say that again because we want to clip it and we want to sear it in the brains of people that are making the same comparison.

In Luna, the price of Luna and the price of UST were directly related to each other, and they were— they affected each other one-to-one. In MicroStrategy or Strategy, the price of the equity is dependent on Bitcoin, but the price of Bitcoin is not dependent on the equity. And that is the difference.

Correct. Now, if MicroStrategy were the sole buyer, uh, or a very disproportionate buyer of Bitcoin, um, but that's not the case. Yeah.

And listen, if they, if they were in a, a liquidation event where they had to be a forced seller and they had to get rid of all of it, if you dumped 3.5% of Bitcoin onto the market right away, would we have massive, massive, uh, you know, decrease in price? Sure. Absolutely. But it's an extremely liquid asset. And you know what, a lot of people would buy it, but it's still only 3.5% regardless, right? Yeah, yeah, yeah.

So I mean, this reminds me a lot about—

no, the Mt. Gox stuff. Yeah, but I think one point I want to make too is I, I think to your point around Luna, they started thinking about, um, putting more collateral for USD. They— I think it was they bought, if I remember right, $6 billion of Bitcoin, right?

Yeah, yeah.

And it was like $6 billion of Bitcoin on an $80 billion Yeah. So it was still vastly, vastly Luna, right? Yeah.

If I, and I, and I like to play this like, what would've happened if Do Kwon would've come to this realization early on? But he was just like very maniacal in some sense, or in a lot of sense. What would've happened if he would've come to that realization way early on and expanded that reserve of Bitcoin to, it's like the banks have a Basel capital requirement ratio, you know, to kind of have a buffer. We should maybe talk about the Tether fund too. Uh, which I'd love to get your perspective on, but just around this conversation around Luna, was there an appropriate— a lot of the conversation as it went down, was there an appropriate level of Bitcoin reserves as a percentage of the total that would've given stability to the protocol and would've avoided this collapse combined with the lack of liquidity? Because the door on the way out was the amount of USDT in circulation. Like the door never came out, like the door never expanded to absorb all of the wind. And so the price really dislocated and just went into the spiral. But do you think there was like a— had that number not been 8%, had that number been 20%, 30%, 40%, like, what was there a number that where this would have fundamentally have changed the outcome?

Oh, well, yeah, I mean, absolutely. Like, if, if there was— if because Luna was dependent on UST and UST was dependent on Luna essentially, right, the— if there was some sort of collateral that was the majority of, you know, call it like, like if I think of Luna as equity, right, right. Um, and I think about like, you know, whatever, a bank, and a bank needs some sort of like, you know, tier 1 equity. Like Luna, obviously the tier— they saw like if Luna was like the equity, uh, it shouldn't have been more than call it 10 to 15% of what was backing, uh, UST, right? And so if that's the case, um, there would have been, you know, call it whatever, treasuries, it would have been Bitcoin, there would have been anything else. And but then the price of Luna would have collapsed because the usability and the reason for Luna to exist and the arbitrageurs to be there wouldn't have— wouldn't have made sense either, right? And so like the incentives were all wrong because the incentives were for the people who were running the protocol to continue to push Luna because that's where all their wealth was, right?

Yeah.

And that was the issue. It was like, it was an incentive misalignment.

Totally. Uh, just, just on this point alone, um, not Basel capital requirements are so important. People learned that the hard way in the global financial crisis. Um, but importantly, if you're a financial institution, just like a JP Morgan, you cannot use your shares to meet those solvency requirements. Which is an important point, which is in this case of Luna Terra, like they were using their own equity.

Yep.

For the market to believe that this was sort of like going to continue and you had to believe a whole lot of stacked assumptions and at some point the Jenga tower just kind of collapsed. So anyways, I feel like in crypto sometimes we speedrun a lot of the mistakes that TradFi has done over the years and like it's like it pays maybe to kind of go look at some of the things that have not worked in traditional finance and avoid them outright.

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Should we talk about the Tether fund? Do you want to?

I, I— so listen, I mean, I mean, Mr.

Stablecoin, I, I, I have to ask the question: is Tether going to be solvent for the 100 millionth time? Is Tether gonna be okay?

Yes, Tether's fine. They're okay. Whatever. I mean, they're, they're, you know, uh, you know, there's rumors out there that they're raising $15 billion right now, you know, at a $500 billion valuation, right, from some of the smartest people in the world. They— listen, I think— give us a—

give us like the TL;DR of like, why, why did this rumor come about? And it was Arthur Hayes kind of tweeted something, and then everyone kind of picked it up.

Yeah, I mean, listen, Arthur's like— Arthur's doing a lot of tweeting these days for a lot of—

Arthur also said that the— Arthur also said that the discount rate for, um, for hyperliquid and some of these crypto assets is like 5%, which is a risk-free rate.

So, uh, you know, yeah, so fundamental analysis is not sound. I think if you had a really real conversation with Arthur, he would tell you— to our conversation earlier about attention being the right currency— that what the— he is not tweeting what he actually believes because he's a very smart guy. He's tweeting what he thinks gets him attention. Right? And re-bringing up the Tether FUD is what get, you know, got him attention, right? You might remember this, but in 2021, there was a lot of very sophisticated hedge funds that were paying like 8% to short USDT with the idea that like, oh, like we think USDTether is going to collapse. Um, as I think at one point I heard of one fund, like the, the borrow ended up getting like up to like 20%, right, to short USDT, which is like Crazy. People were like lighting money on fire because they really believed that Tether was going under. But no, I mean, the, the concern has been that the, uh, if you look at the attestation of Tether that, you know, or USDT, it is not a 1-to-1 treasury-backed stablecoin in the same way that Circle is or some others are. They have a significant amount of gold, they have a significant amount of, um, uh, there's some Bitcoin, they have, you know, these like private investments. They have supposedly, according to Powell, like $30 billion of excess equity though, right? Which is like a pretty big buffer. And so you look at it and you, you know, maybe you, you have to make some sort of, um, I guess I would say like qualitative calls on how some of their collateral would be thought about in Basel, but they probably have like 10 to 12%, you know, tier 1 capital, right? Which is like lower than bank ratios are usually required. Like it's usually like 17, 18%. But 70-80% is pretty high, and that's a post-global financial crisis number. So like, it doesn't look particularly that less risky than, call it, you know, anything that exists in like the traditional banking world. And, you know, they managed their, uh, they managed their gold and they managed their portfolio. Like, yeah, then maybe they would go into Bitcoin, maybe they would sell gold, right? But like, it all seems pretty fine to me, right? It seems like appropriately risk managed. Um, and they're also at like such a size today that, uh, we're talking about like big numbers and there'd have to be like a huge run on USDT. Um, and one thing that they've done a pretty good job of is that, uh, it is actually really just impossible to redeem, uh, to redeem USDT today. There's like very few people who can do it. Um, and so like they would have a lot of time Yeah.

Feature, feature, not a bug, eh?

Yeah, I, it is definitely a feature, not a bug for them.

So I'm pulling up solvency ratios here just for the sake of the, of the crew to keep this number in the back of their mind. And then we should transition to maybe other stuff, Polymarket and something else, but prediction markets, weekly prediction market update. Prediction market update. Yeah. So, so solvency ratios. Yeah. The CET1 ratio is the most important one. The highest quality capital, common equity, retained earnings, the money that's truly available to absorb losses. That is 12%-ish, seems like minimum is 8% before buffers.

So typically, I mean, that makes sense, right? Like, it's not, it's not crazy here. And like, they, they, um, I mean, Palace said they have like $30 billion of excess equity, uh, and I mean, what is Tether outstanding today? Like, is it 180? Am I totally off? Yeah, yeah, yeah, yeah, yeah, 185.

Anywho, so, um, yeah, probability— you talked about the probability of MicroStrategy, what the bondholders at least are telling us, is somewhere to the tune of 10% of going back, you know, being in default. What would you peg the probability of USDT being insolvent, um, or, and, or, and, or depegging. Because I, I remember, I'm old enough to remember that there were multiple depegging events.

I, I, like, I mean, I think, like, you know, also depends on, like, what level of depeg. But, like, I mean, the depeg is essentially, by the way, just the market pricing in a potential insolvency, right? Like, it's kind of the same thing we talked about with bond. Um, or the, or the, the preferreds over at Strategy. But like, what the market right now is pricing that likelihood of like near zero, uh, and like my guess is like, you know, that it's pretty, you know, it's not zero obviously, but is it 1%? Like, uh, you know, I'd be shocked if, if, if anyone thought it was more than 1 or 2% that was sophisticated today.

Yeah. And like I said, important nuance. I was, uh, in conversations with this like super large conglomerate based out of the Middle East. And they asked me this question, we were talking about stablecoins and I think they said, hey, what are the risks? And I immediately said like, there's always a risk, of course. Like any time someone says there's no risk, run away. They're either naive or deceitful or both. And it's just, there's always risks. And I was, we were sitting there a really large financial institution, and the event was hosted by them. And I said, look, there is— you keep your family office here, there is risk of JP Morgan like doing bad loans and, you know, potentially being insolvent. And the same with it, no one believed that Lehman would ever go down because it was the premier institution. And so I said, the difference here is you have a transparent system that you can audit some of this stuff, that you can have proof of reserves. And, um, I think we've come a long way as an industry, but, you know, more of that is, is useful.

It says it's a more transparent system and Well, and I would say like for Tether, if you believe it is likely to be insolvent or you're pricing that in, you're the— probably the smarter, or like the, the, the way to get there that like makes more sense is you just think their attestations are false, right? And you think like, then you think, okay, well, they don't have real audits, they only have attestations because they aren't able to actually produce like the information required for an audit. And so we think it's false. But if you look at the attestation, you say, listen, I think these guys are going under. That doesn't really— like, that strikes me as like mathematically, um, I won't say— I would say not, not something that I think most people—

improbable. Yes. Simple question, and I think Paolo has gotten this question time and time again, like, why not produce an audit? Why just an attestation? Why not settle this argument once and for all? And you could say, well, an audit doesn't solve anything, because then someone say, look, Enron was audited and First Brands was audited, right?

Like, yeah, it was very sophisticated fraud, Enron was, right? Like, and it doesn't mean you can't commit some very sophisticated fraud, uh, in, in any sort of financial institution. It's harder, I think, when like the assets are simply like gold and Bitcoin and, you know, US Treasuries. Yeah, right.

And maybe Juventus soccer team or something.

Yeah, yeah, well, you know, luxury assets, that might, that might be the saving grace given where sport franchises are trading, and Juventus is not a bad team.

Yeah, well, listen, you and I are in the wrong business, or we should just, um, buy a soccer team or Formula One interest in a team, just tokenize it or something.

Can I get a— can I get an Inversion-sponsored You know, uh, like, like, you know, Premier League team. Can we do that? When's that gonna happen?

The valuations are a bit too rich right now. I don't want to get into that, but I've certainly, you know, I, I— content of the week, I'm fast forwarding. There's a book, Moneyball equivalent, for the guy that ran the scouting program for— I forget, I think it was Liverpool. And it's just fascinating stuff, just the Premier League earnings and whatnot. A great book. I'll post it in the show Any TBD, Rob, you know, I'm working hard here. Hopefully we get to a point where we can buy these teams.

Should we, um, should we do prediction markets again? Yeah, let's do it.

You're the king here, um, so give us one.

Uh, what's the news this week? So Cowshies— I think this has been rumored already, but Cowshies raised $1 billion, uh, led by Paradigm, I believe, at $11 billion valuation. That follows their $300 million raise that they did at $5 billion, uh, a couple of months ago. Um, obviously there's been this like, you know, kind of back-to-back-to-back fundraisers for them and Polymarket somewhat competing. Polymarket obviously raised, uh, $2 billion, or, or it was a little less than that in primaries. There was some secondary in there at a $9 billion valuation, and they've been rumored to raise at a higher— more money at a higher valuation as well. So, you know, the The excitement around prediction markets continues. Um, I think somewhat interestingly, right after that, uh, deal was announced, uh, Robinhood, who is about 60% of Kalshi's volumes, came out and said that they were acquiring, uh, the old LedgerX business, uh, to like vertically— and they were doing a JV with Susquehanna to vertically integrate a prediction market exchange, which through Robinhood Markets, that implies that they will replace Kalshi as their liquidity provider underneath the hood. And they're— so that's 60% of Kalshi's volume. So I'm interested in what, you know, the investors in this round knew or what they were able to figure out during diligence, uh, before, uh, that round got done.

So on that point, yeah. Say that you're the founder of Kalshi, the two founders, you know that's coming. Do you or do you not have a fiduciary responsibility to reveal that even if you don't get asked that question, like a material change in contract?

Uh, I think legally they would have no— they wouldn't have like a duty to say that.

No obligation. Okay.

No obligation to— yeah, legally, right? Um, if they got asked it, they should have answered appropriately. And if they committed fraud and they misrepresented what was happening, then like that's different, right? Um, I don't think legally have any obligation.

Paint me the hypothetical of the misrepresentation.

Well, I mean, you're—

you send a diligence request, we've all sent them.

Sorry. Yeah, I mean, listen, I think on— like, you send a diligence request, and by the way, we saw this with like FTX, right, where, you know, people would send a diligence request and they sent back financials that clearly were missing part of, you know, their balance sheet, right? Essentially, it was misrepresenting what the balance sheet looked like, right? Right. That very clearly, in this case, if you send across a diligence request or a question list and you said, hey, listen, you know, what is the nature of your contract with Robinhood? And, you know, what do you expect that to look like over time? And they knew that they might be losing the Robinhood volume, they would have to answer like appropriately, that like they had this understanding, right? So I, I don't know what happened here. I don't want to like imply that— no, no, no, anything untoward.

Yeah. But let's just say your paradigm right now and you're saying, holy shit, a lot of the volume might poof disappear. You go back to your diligence request and you say, hey, we asked them this question. Hey, God is Frank, or hey, Charlie, whoever led the round. Hey, man, what the hell happened here? I said, hey, we actually asked them about this contract and they said that they had been working with Robinhood for a while and that they had no reason to believe that, you know, They were never, can I answer that is what I'm trying to say, right? They were never like legally like, oh, we have no reason to believe that the con— you know, as you see in the risk disclosure sections of a 10-K. In venture rounds, you typically don't, like, it's not as thorough. Whereas in a 10-K, you probably would kind of spell out, we have material concentration with one party called Robinhood. If that ever were to go away, we feel that we are in a well-positioned, but it's a very competitive market. There's a kind of duopoly happening and there's, you know, there might be an adverse that because there's material concentration of customer here or a provider and liquidity provider volume source and there's a high concentration, just, you know, but you know, it is, I mean, the only reason why I'm bringing it up is it's a good lesson to not just in crypto, but as an investor, it pays to really do your diligence. And I found myself sometimes you want to win the deal, you want to be in good with the founders and it's a competitive round. And I tell my team this all the time, gotta slow down to go fast. Like you have to just always, when we interview candidates, never ever compromise on these 3 things. You can mess up all this stuff, but if we don't do references and we don't do that like in-person meeting, we can't hire a person. It's just fundamentally not gonna happen. And I think as an investor, it just pays you to really, really, really just not compromise on the unnegotiables, right? And it's hard because if you're doing a hot deal and probably, you know, Prediction markets are all the rage these days. You lower your standards, and I'm not suggesting that that happened here, but it's something that perhaps you could have maybe asked that question harder and harder and harder and harder and drilled out until you get a very satisfactory answer. I'm not saying this happened here, but it's just sort of a hypothetical. I remember you guys grilled me. There was nothing other than an idea and a pitch deck in my case, but you guys did very thorough, as thorough as it could get for just an idea and a pitch deck. You know what I mean?

Yeah, no, and you're right. I mean, the, the one thing that— and again, I don't know, uh, what was said, who knew what. Maybe this was, you know, they're also like— it's actually very unclear right now what exactly Robinhood's plans are and if like maybe they will continue to use, you know, some liquidity providers under the hood. And, um, you know, maybe they'll continue to route some, uh, some flow to Kalshi, etc., as this takes time to roll out. So like, it's all very unclear exactly how this is going to play out. And maybe this was, um, known and still underwritten, right? And, and that's fine. But I would say the one thing that we think about—

say that again. No, that's a fair point. Maybe, you know, Paradigm knew that and they were like, hey, we're going to fill this out with someone else.

Yeah. And they were like, we, we see the pipeline and like, it doesn't matter, right? Yeah. And like, we think this is going to continue to be, um, you know, on a rocket ship, which all— which both Kalshi and Polymarket have been. And so that's totally possible as well, right? And so it's always, it's always interesting. Um, the— but the one thing I will say is like, we talk about this all the time as we do, you know, some later stage deals. And when you see VC funds doing later stage deals there, that is a bit of a style, style drift. And so you have to make sure that you have the capability and the understanding and the process to still underwrite in the same way that like a private equity firm does, or a, uh, you know, call it a more public equity type firm does. And so, um, but when you get these kind of really fast-moving, really fast-growing businesses, uh, like the prediction market companies have been, like some of the stablecoin companies have been, and you get people that are going into maybe later stage, later, uh, and, and higher value companies, and they're, they're— and typically, um, you do sometimes see you know, call it things that are missed. And so you have to really be thoughtful of that. And I've seen that less this cycle than we saw in '21 as everyone got really excited. But it is top of mind for us as we think about doing, um, you know, some of these later stage deals.

So two follow-ups to this, and now we gotta probably close out soon. One, uh, did Robinhood ever have an equity— do they have an equity position in Kalshi?

Uh, I do not believe they do, but I don't know for sure.

Probably would have been smart, probably would have been smart for them to kind of produce a bigger lock, lock in by having them in the cap table now.

100%. Yeah. That's always a good idea.

If I'm that, I'm like, like I think Polymarket was smart taking ICE and a couple other very strategic investors. I'm like very personable, like well-known figures to dominate on the, they have phenomenal video on the app. But you know, we're, we're, you and I are both biased. People know this, like it's full disclosure. You know, I, we were investors in Polarkit. So, however, I want to maybe on that, removing ourselves just from Kalshi, but I guess now people are calling me Mr. Price to Sales or Price to Earnings. Do you think that these rounds are being valued on that basis? And furthermore, like, What is the moat of a prediction market? Because if this was true, like if, if you, if liquidity can be drying up and someone else is going to just launch their own, try to circumvent you, then it's particularly someone like Robinhood that has a lot of users, a lot of distribution. Like what is the actual moat here? Like are these businesses worth $15 billion or $10 billion or are they just going to be competed away by someone that has way more distribution like Robinhood that says, hey, this is something people, users want to punt. I'm going to get here and I can, I can copy the tech, I can deploy engineers. I'm just going to, I'm not going to buy this thing for $10 billion. I can actually do this for a billion and like, you know, sufficiently early on because there's not that much volume, but we can do this better.

I mean, I do think we're in a world where distribution matters more than anything than ever before. And like owning the customer matters more than before because like building the infrastructure is easier, right? So it's especially for Robinhood that already has the right licenses. And also there's all these DCOs that can be, um, that are up for sale for relatively cheap, you know. So I, I, I do really strongly believe that you should be giving more value to the people who own the end customer. And again, like, I'm biased because Polymarket, you know, uh, way outperforms Kalshi in terms of brand, in terms of, um, you know, search engine, and current term, their app has directly outperformed them. And like having people, um, those users directly interact through the front end, like that's significantly outperformed, uh, Kalshi, where Kalshi has been more of this infrastructure provider on the regulated side. And so I think that you have to own the end customer in these markets where it is hard to have a moat if you don't, uh, and you should be providing more value to that, right? And I think that's starting to play out. We're starting to see the risk of that, you know, clearly here, um, in this, this Robinhood deal. And, you know, you've seen, I think Fanatics, you know, launched like the, maybe, uh, uh, it was like, like maybe a beta version of their, uh, app, uh, like a couple of days ago. And they're using Crypto.com under, underneath the hood. Like how much value does Crypto.com get out of that? You know, Polymarket just launched their app earlier this, this, uh, week. Uh, in the US they're having, they're going direct to consumer, right? And the app was number one in sports on the iOS App Store, like within a day, right? Yeah.

And so I was, I was at, you wanna hear something funny? I was, uh, um, I was down in, in my parents for Thanksgiving and I met with, um, the president and as traditional as it gets of this, one of the largest industrial companies in the world. And we're talking because he wants to talk about crypto and how we could help them in that and all that. And I see his phone and he says, oh yeah, notice when he pulls up and he's like, yeah, yeah, Polymarket. And him and his son had it and they were talking about it. It was kind of surreal moment. You were like, oh, like, wow. Like we, this is to your point, like crypto is now in a very different place. It was something about that moment was like, Holy shit. And people love to talk about in dinners. Like, I've had so many dinners, people like pontificating about— everyone's a political pundit and everyone's— and now it's so such a great conversation. Like, no, like, the market like has just changed, and you anchor the conversation around the change in the probability. So it's kind of really neat, um, impacting, like, permeating into like the day-to-day. Anyways, that's my rant.

All right, I mean, listen, like, it's become very clear that Polymarket is as a brand, it's just like, it's in many ways, uh, it's become like kind of the Uber of prediction markets. Now, Cash App's done a good job about fighting back against that, but you know, there's— you talk to people, uh, internationally especially, and you know, people just refer to— they don't refer to prediction markets, they refer to Polymarket. Um, especially, you know, Cash App doesn't operate internationally. What's a Polymarket?

But anyways, to round out this discussion, Congratulations to the Kalshi team for raising the round. Uh, the found— one of the co-founders, Lua, is I believe the youngest self-made female billionaire or something to that effect.

I, I saw that and I wondered if, um, who is it? Lucy Guo?

Lucy Guo. Lucy Guo. I think she beat— apparently she beat that. And then obviously like some of the— one of the Kardashians or Kylie Jenner or some of these people. I forget. There's, uh, there's someone else, but no, anyways, nonetheless. Huge feat. Congrats. Um, impressive. I mean, congrats to them.

I mean, Shane is also like 26, Shane's 27, I believe. Like, you know, prediction markets are printing billionaires right now. So great. Great for them. Yeah.

So, um, totally. Any, um, obviously speaking of young folks, the Forbes 30 Under 30 list came out. Um, one of your founders, uh, Nick VanEck from Agora was there. Um, Nick, we hope, we hope you all the best. Congrats. But, uh, yeah, no, really cool stuff. I, I think, uh, I saw something else on Agora that was pretty cool. I think they hired some from Coinbase, I believe. Some pretty, pretty good hires. They've been cooking.

Yeah, they hired one of the, um, the most senior engineers at Coinbase to become their new head of engineering. So excited for them, excited for Nick to make it. Hopefully he doesn't, um, do, uh, follow in some of the footsteps of some of the previous Forbes 30 Under 30 Um, and then obviously, I mean, what are we gonna do?

Are we like, what, what are we gonna do? Forbes, what is it, 40 Under 40? Uh, not to reveal your age, man, you look pretty young.

Yeah, can I get that? 40 Under 40, you know, whatever. Um, but obviously, and also, you know, to talking about this and talking about prediction markets, Shane was on the COVID of Forbes 30 Under 30.

So, um, and then someone had the, of course, the odd— someone had the audacity, the, the, the, as the internet does, he had the Sam from FTX and, and Shane. But anyway, yeah, anyways, uh, there's a couple other news here. We've been running for over an hour here. Uh, anything else, you know, newsworthy that you want to call out? Uh, maybe the Kraken acquisition by Xstocks. That was pretty cool. I mean, tokenized stocks. I don't think we need to go into it. They didn't disclose terms, but that was interesting, I guess. I, I guess.

I mean, like, listen, like, I, I, I've said this, and, and I'll probably get a little hate for this, but like I didn't really think the product worked, uh, and you know, they were, they kept announcing some sort of like high levels of volume, but if you looked on-chain, like the on-chain volume was like less, was like $2.5 million a day for xDox. Like people weren't really using it on-chain. And then most of the, other than Kraken, there was basically no volume in any of the like reputable exchanges for it. But Kraken was saying they were doing a bunch of volume in it. So if that's true, acquisition makes complete sense. Like they'll be able to offer, you know, uh, now tokenized equities globally.

They were in a better Yeah, they're in a better position than anyone to understand that. They, they, they're pressed with these claims. Xstocks has seen an exceptional adoption since its debut earlier in 2025, surpassing $10 billion in combined exchange and on-chain trading volume within 6 months. $10 billion in 6 months, not bad. Uh, investors can trade 24 hours a day, 5 days a week.

Yeah, I mean, the only reputable exchange that's been reporting volume of Xstocks has been Kraken. Um, so they were in a better position than anybody, obviously. Uh, and then what do you think the price for that was?

Was that a big outcome for, for them, or—

I'd be shocked, uh, if it wasn't, you know, call it, you know, sub-$100 million.

But right, right. Um, and I—

but, but listen, Kraken's been all about the, the IPO, this, you know, idea of the Everything app. Right, which like Coinbase has been and others have been. And this helps them continue to offer like new products globally and, uh, and also for, for income, sure. And so I'm sure that's a big part of this.

Yeah, obviously Kraken operates, um, internationally. Interesting to see. I think this will be one where we might look back and say, did we over— overly engineer a product that was not there in the demand? I think you've had questions around, is the demand going to be there? And maybe the demand is a function of like solving the product and the liquidity and the market structure, which is still, you know, maybe nonexistent. But I think there's something true to the fact that like people outside the US have a, a lot of people have a hard time having exposure to your Teslas, your Apple, your, you know, Nvidias. This could be a good, good, and the same with stablecoins have filled a lot of the demand for dollars ex-stocks and tokenized stocks could fill a lot of demand ex-US and sophisticated developed markets for stocks. So we'll see, we'll see. Early days there.

All right, should we do content? Yes, sir.

I kind of gave one, so you're now— you forced me to be first last time, now you gotta go first. What's a horror movie of choice this time?

No, we're on Christmas time, okay? So I'm gonna give, I'm gonna give two things, all right? Uh, the Jonas Brothers Christmas movie, okay? It was, it was fun.

It was not in my bingo card, but okay, tell us more about that.

I'm telling you, listen, I like Christmas. Christmas is like the one holiday that I like to, I like to celebrate. It's fun. And, you know, listen, I, I, you know, the Jonas Brothers, it's not normally my cup of tea, but like, I thought the movie was fun. It was like—

show me your Spotify, show me your Spotify recap. Or I'll show you my Spotify Wrapped after this.

There's no Jonas Brothers on it. Uh, but, you know, like, listen, I thought, I thought it was fun. I thought it was, you know, kind of good production quality. There's like, you know, some good numbers. You know, I was drinking some spiced rum, I was watching Jonas Brothers, uh, holiday movie. I was setting up the, um, the Christmas tree in the living room. So I was in the holiday spirit. So I thought that as far as Christmas movies go, if you like Christmas movies, I thought that was fun on Hulu. Uh, and then the other one is the third Knives Out movie is out. I've always liked all the Knives Out movies. They're fun. I don't know if you've seen them, but that one's out now. Uh, I enjoyed it. Go watch it.

A personality question, sir. Now that we're on Christmas, are you more of a Grinch, Home Alone, or trying to think of something that might reveal your character here? Die Hard? Yeah, more— I don't know, nostalgic. I'm like a Christmas—

like Home Alone, Christmas Vacation, uh, it's a good one.

Grinch, or I'm trying like, what is the Nightmare— like The Nightmare Before What's your favorite Christmas movie?

Like, Christmas Vacation's a good one. I like that one.

Uh, I've never seen that. I'm clear.

Home Alone is probably the best Christmas movie of all time.

So yeah, that's pretty good. Home Alone 1 or Home Alone 2? We're having this debate internally, like, what was one movie that— oh, gotta go with the original. Fair enough, fair enough. I love Christmas too. Um, my content of the week will be go watch the debate that I did with Hasib and upvote that I won. Okay. Uh, no, but listen, uh, I self-shield here. I think it was a good debate. I respect Hasib a ton. As worthy of an adversary as we can have in a debate. He's very well trained. He doesn't answer the questions necessarily directly. He's dodging and he is a phenomenal, uh, he paints a narrative really well, but it was a good debate. I think we're going to try to do another one. Uh, it will serve us well as an industry. So. Maybe go watch that and put us in the comments of where I did.

One thing I'll add, by the way, is, uh, congrats to Thread Guy, who I think is like the new Up Only. So like, you know, he's doing a good job.

You know, on that point, Hashib and I were like discussing over the weekend to say, hey, listen, let's do this debate. Where should we do it? And we kind of like landed on Thread Guy. He's like kind of credibly neutral and he, kudos, a shout out to him because he let us like rip and he did not. Interfere. He did threaten to mute us, but he did— he allowed us to kind of make it a pretty good debate. I thought it was pretty good. But, um, yeah, go watch that. Let me know what you think.

I was on Thread Guy, uh, in July, and I think I was like maybe the first of like the non-meme coin traders he had had on, right? And now he's done a really good job, I think, of diversifying the— yeah, the, the, the people.

Why the hell is this guy here? I came here to be— if I should long fart coin, and this guy's talking about stablecoin adoption.

Literally everybody in the chat was like, who is this boomer? Like, why is this a boomer? This is so bearish for crypto. When are meme coins coming back? You know, and now you guys are doing a debate.

So congrats to Thread Guy. It was good. It was good. All right. Good, good place ever to end it. Thanks, folks, for tuning in. Rob, I'll catch you next week, I guess. Absolutely. Maybe, you know, maybe we'll— John, you know, will grace us with his presence. But nonetheless, we'll be here punching it out. Thank you, everyone. Have a great weekend.