Hivemind: Crypto Is Dead with Dougie DeLuca

This is the first time I've really seen crypto-native startups and builders and investors get challenged by the outside world. And I don't expect that to change. We need to accept where the puck is moving and kind of realize there's a much bigger pie beyond like our little world. And the people who actually bridge that gap really well are going to do very well.

Nothing said on The Hive Mind is a recommendation to buy or sell securities or tokens. This podcast is strictly for informational purposes only, and any views expressed by anyone on the show are are solely our own opinions, not financial advice. Hi everyone and welcome to another episode of the Hive Mind podcast. Goal of the podcast is to provide an inside look into what we like to call the Delphi Hive Mind, bringing together some of our brightest minds from each of the divisions to share insights Alpha and shitposts. Today with us, we have a special guest, Dougie, who wrote a viral post, uh, that we'll discuss, and called Crypto is Dead, which, uh, we'll discuss during this episode. And then we have Yan Lieberman, managing partner of Delphi Ventures. We have Jason Yanowitz, uh, who's the head of markets at, at Delphi Digital, and myself, um, who split my time between Delphi Labs and Delphi Ventures. So Dougie, you wrote this, this article on Twitter that got a surprising amount of love considering how depressing at least the title was. I think the title was more depressing than the, than the article itself, to be honest. But it was called Crypto is Dead. And I've actually been working on a similar draft, which, which is phrased as a question, is crypto dead? So we wanted to invite you on to just discuss the, the, discuss this, discuss the sentiment, maybe to, maybe to start with. You could just summarize your article for us. Like, what, what are you saying in that article? What is dead?

Yeah, definitely a more probably aggressive title and like depressing title than what the article is actually saying. But it's kind of talking about how, like, I've been in the industry, I don't know, better part of the last like 7, 8 years, more or less. And like, since I've gotten in the space, it's been like a super insular space. Like, you either are crypto native and you get it, or you are not crypto native and you don't get it. And things have basically been built for crypto natives. Founders go out and like think about how to get in front of crypto natives, how to get crypto native users to use their things. And that's kind of just been the prevailing mindset for the most part since I've been in the space. Um, and you know, things are labeled as crypto and not crypto, and there's a pretty thick divide between those like two worlds. And the article is basically saying that like, I think we are moving towards a future pretty quickly where like that divide really no longer exists. And what's crypto and not crypto becomes like almost impossible to tell because going forward, the majority of people who are building using the tech are just building products they want everyday people to use. They're solving real problems, making things better, creating new things that couldn't exist before. Um, but it's not like you have people who are using it because they love crypto and they just want to be a crypto user. It's just like, I like this product, I want to use this thing, and I'm building this because I want to build this product and it just needs happens to need to be on a blockchain. And so yeah, that's like what the main point of the article is. It's not really saying like, we've all been wasting our time, like go work in AI now. It's quite the opposite. It's just like the people who realize this shift, whether you're a builder, investor, anything in between, will do very well, I think. But those who refuse to accept it, I think for the most part will be left behind. And I'm also like just not saying like the casino speculative, whatever part of crypto is dead either. I think like that's also just gonna merge into the rest of finance. Like if you look at equities, there's certainly that component at play there. And so I think like you don't have to be crypto native to want to gamble or speculate. That's still gonna be a big part of the space. It's just not gonna be the only thing. And so it's a long article that's like kind of really what it's about. And I just like, the reason why I wrote it was like I had a lot of conversations last week with people because I've been thinking about this for a while. I think a lot of us have, quite frankly. And I just started saying it because I was like, you know what, like, I'm just going to start saying the quiet part out loud and see how this is received. And everyone I spoke to was like, yeah, we've been thinking the same thing. Um, and then I was like, well, if everyone's already thinking this and like clearly people aren't talking about it enough, like, I should just write an article on this and see how that's received. And surprisingly, yeah, I was not dunked on nearly to the extent I thought I would be. Uh, and so clearly I did just like kind of say the quiet part out loud, and it wasn't that original thinking or anything. I think just like Sometimes you need to put words to it for people to be like, yes, like that's the thing I've been struggling with for the better part of the last year.

But to, to what extent isn't this just a, a cyclical thing, right? Like you had, you sort of had like Bitcoin and then you had a bunch of like weird alts that, that got crushed. Uh, and then you went back to Bitcoin and then there was like the blockchain, not Bitcoin phase, right? Of like 2017 and all that. Mania, uh, you know, Bitcoin doesn't really matter, but like it's the blockchain thing that's cool. Um, and then you had like, obviously that crashed, uh, and then you had the institutional blockchain phases and, and kind of a Bitcoin maxi renaissance in like 2018 and 2019 where it was, you know, all alts are trash. And then obviously in 2021, that all went out the window. 2020, 2021, we had the bull market again and, and it, everyone was very bullish on, on blockchain and crypto natives. Um, and, and obviously now with, with sort of the, the, the price performance of alts, we're, we're kind of, uh, toggling back into we need to solve real problems. I wonder, like, would you say that what's, what's different this time? Because I do think this time is different, but I'm, I'm, I'm curious what, what you think.

Yeah, I mean, that's definitely one of the things I've been thinking a lot about because like people have said this before. This isn't, I'm not the first person to actually say this, like far from it, quite frankly. Um, I think there's a few things that are different. I think like in the past, honestly, like it wasn't really possible for crypto to get in the hands of like quote unquote non-crypto natives. Uh, whether it was like UX barriers that existed, like things that were super hard to actually abstract from people, regulatory stuff obviously as well. Like it was virtually impossible for non-crypto natives, uh, at least on the business and enterprise side to like, or institutional side even to like really meaningfully interact on-chain. Um, and I think that's all starting to change, uh, kind of at around the same time. And so now that we're actually seeing like the rest of the world have the opportunity and ability to actually come on-chain, that's where like this becomes, I think, so impactful because like it's the first time, like in my opinion, that our insular world is like meaningfully colliding with the rest of the world where like we have institutions like BlackRock, you know, getting very involved on-chain and like you see all these companies like moving in the stablecoin direction. And so I think like this is the first time I've really seen crypto-native startups and builders and investors get challenged by the outside world. And I don't expect that to change. I think it's just gonna keep on picking up. And I'm not saying like we're gonna lose, they're gonna win. It's just like, I think for us to win, and there's no really no us and them, but like kind of feels like it sometimes. Um, we need to accept where the puck is moving. And kind of realize there's a much bigger pie beyond like our little world. And the people who actually bridge that gap really well are gonna do very well. And so yeah, like there's a chance that, you know, the macro's crazy in the next year and like I kind of eat my words because like all of the stuff that, you know, has dominated the past several years of our space comes back. But I still think like over a long-term time horizon, like this is the future we're moving towards and there'll always be like peaks and valleys towards it. But I think like in 10 years, like what I'm saying is gonna hold true.

Yeah, no, I mean, I think looking back, you needed the— so in the, uh, right after 2020 and, and that whole DeFi phase, I think that was necessary in order to build all the primitives to allow all this other stuff to exist, right? You needed exchanges and money markets and all these things to flow, and, and those made a lot of sense because it was a very zero-to-one moment in terms of, you know, opening up the surface area for what can be built on top. And I think the capital flowed in and everything was exciting. Um, and so at that point, I think it made a lot of sense to build for crypto natives because you, you, you had a lot of capital flowing in and you, you needed to, to immediately show— like, it was still going from zero to one, so there needed to be outside, uh, perception of there being, you know, massive adoption. And the way to do that is to cater to the audience that exists, and that audience was massively growing. And, you know, I think we gradually shifted towards more and more casino-y type setups. I think one, you know, potential issue with the dynamics of the current casino is that across both perps and memes, it's— you have a very power law distribution in terms of who wins and who doesn't. Right. And so if you kind of have this grinder that exists, it is difficult to sustain it on this pure, you know, 2 to 10%, um, of users win and everyone else kind of gets, gets blown out over time. I think you, you tend to, to churn through and, and that creates a lot of, uh, knock-on effects in terms of, you know, both the existing users in the space and the appetite of new people to move in. You know, people— what got really everyone really excited is it felt like a, a great place to, to to take risk and make money on various opportunities.

But I don't think it's, I don't think, 'cause it's just that before, people believed in the assets, right? They believed in a much bigger story. And so the casino, it was, there was a casino element, but it was like you're building the rails of a new financial system and everything is gonna be an NFT. And like, you know, Tasha's 2021, like if you have a diamond on the blockchain and you lose the diamond, you don't actually lose the diamond. You know, like that's, that to me is like peak 2021 energy. Your NFT of the diamond's worth more than the diamond. There was all these stories that people believed in. So it, you weren't, it wasn't a casino because it was like positive sum, right? It's like we're creating all these new things.

Casino came later for sure. I'm not saying that that was the casino then, um, but I think you needed to, to build those primitives then. And, and at that point, you know, like you mentioned, everyone's imaginations were going wild, um, in terms of what the actual potential of everything can be. And then as there were elements of disappointment in, in some areas, in terms of what can actually come to fruition. I think it naturally shifted towards casino because it's just, I think, the way it works, right? It's, it's like a lot of people are here purely to make money, and so you kind of try and cater to them. And so you have some kind of reflexivity where the building was happening for the, the casino users. Um, so I think now, you know, you're at a point where Some of these, so like, you know, looking at some of the successful apps, I, I think Athena, right, uh, as a, as a yield product has a lot of appeal outside of pure crypto. I think, um, memes are, are, you know, they're an element in crypto that I think will kind of continue to do so, betting on, on kind of social sentiment and, and, and attention. And so I think Pump, you know, made sense as a way to both try and cater towards existing users, but also a way to bring on others, whether it's through streaming or other forms. So I think, you know, you need to basically try and— I agree with these apps need to be useful to outside users, but I think it's hard to purely build for them. There needs to be some degree of overlap. And so, you know, prediction markets, I, I trying to create better margins out of sports betting, I think makes a lot of sense. And, and ideally that could be a way to bring bring users on. But no, I fully agree that apps need to be built and kind of compete with their non-crypto components or kind of opponents or comparisons rather than purely growing the pie from within the existing user base.

Real quick, Dougie, it kind of like, so how much of this do you feel like this, like it kind of like dovetails a little bit to Zay's initial question, right? If I was to like gauge sentiment in crypto right now, like it's like FTX level.

Yeah.

Like it feels like, I think it's worse.

It could be worse. I think it's worse.

So it's somewhere, it's somewhere around there, right? We can agree on that. And that's like, despite all of the actual like clear signs of maturation in the industry, right? With institutionalization, all of that stuff, right? Is it, do you think it's just like mostly price driven because people in crypto are simply just they just don't own the assets that haven't gone down 90%? Do you think it's, or is it like more of a deeper kind of like exhaustion or fatigue with these casino-style speculative elements that we've been discussing? Or is it kind of a mixture of the two? Because when I was reading this article, uh, it actually reminded me a lot of our conversations in, in Montenegro, Jose, about like, uh, it was like kind of like a—

I was trying to, trying to bearhole you, right?

Yeah, it, it's, it's kind of like a core, it's, it's like adjacent to it. It's not exactly the same. It's kind of attacking it. From like a different angle. And like, when you like look at this cycle, right, like prior cycles, like bull markets, when, you know, liquidity is going up, everything's risk-on, like crypto is like the very clear place for speculative capital to flow. And like, it's not really the case anymore. There are other viable, very cool tech pioneer sectors that are effectively vampire attacking that speculative bid that would have otherwise flown into crypto. And this is something we wrote about in our year ahead report as well. So I'm kind of curious like where you like kind of gauge it. Is it just like a price-driven sentiment thing or is it more of a deeper exhaustion in all of these things we've talked about? Kind of.

Yeah, it's a really good question. I think what Jan started to touch on is like something I actually think a lot about in terms of like tech adoption cycles and how markets tend to respond to them. I label them as like the imagination phase and the post-imagination phase. And very clearly like 2020 to probably sometime in 2024, we were in the imagination phase. Everyone literally thought like crypto was going to disrupt and change the entire world. Uh, whether it was everything's gonna be an NFT, whether we thought corporate structures were gonna be revised to like decentralized governance structures, like the list just goes on and on. People's imaginations were running wild in terms of like, how much impact they believe that this technology would have in the world. And because they were early, they were gonna profit enormously due to that. And then I think like, you know, some point in 2024, 2025, like that phase came to an abrupt end and we're now currently in the post-imagination phase. It's where reality sets in and you look around you and you're like, have we actually accomplished any of the things that I believe this industry would? And honestly, I think the answer to most of those questions, there's perhaps some exceptions, is a resounding no. And the result of that is people start to lose conviction, lose faith. They believe that like some of the things they thought would happen are not gonna happen, and everyone starts to get very uneasy and nervous. They start to be like, am I just like moving in the wrong direction? And it's especially hard when you look around and you see AI, for example, in its imagination phase. People are making extreme amounts of money just like they used to crypto. And you're like, wow, like, am I swimming in the wrong ocean right now? Pretty much is the question. And I think like that is how I best describe like what the industry is feeling right now and why I don't think it's just prices. I think prices are a symptom of it. But Josie, I think you want to say something, so I'm gonna give you the floor.

Yeah, I think that's, that's the biggest difference to me between now and it's like in, in 2021, people believed in all these crazy stories, right? That Tasha tweet to me is like the pinnacle of, of, of that sentiment. But people believed in, and, and all, all these things, right? The ownership economy, Web3, we're gonna reinvent social media. DAOs are gonna take over corporate governance. Yeah, crypto was gonna impact everything and it was the biggest story in tech. And, and like the background to that I think is that tech was in a pretty dire VC was in sort of like a local bottom too, because it was just, everything was the latest, like unimaginative SaaS app, you know, or like frivolous consumer app, you know, dog walking or whatever was the meme, right? Like Silicon Valley was in a crisis of meaning. And when crypto came along and had all these big promises, it like just captured the imagination. It was the most exciting sector to be in. And I think nowadays it's totally different where there's, there's AI is taking off like Robotics is taking off, uh, bio sort of powered by AI and also by just China deregulating and forcing the US to move faster is taking off. Like defense tech is, is a whole new sector. Like venture capital is in kind of a golden age. There are so many interesting narratives to capture that speculative sentiment that I think even if we have a coordinated global central bank liquidity expansion, I just don't think we see another alt season like 2021, because people just don't believe in, in these stories anymore. And there are no— there, there aren't new stories. I guess the, the thing I would say that people are throwing out the baby with the bathwater is that there are— we kind of know what crypto is good for to some extent. Like, at least we know the things that people are willing to pay for, right? Um, and I think there are basically 3 things that, that people have shown a willingness to pay for to the tune of like billions or tens of billions of dollars a year. And, and those are in addition to the store of value, right? Which, which we can kind of say is, is, is like the, the first killer app. I think there, there are 3 others and it's basically like token issuance, which you can say like L1s are part of that. Pump is part of that. Memes, like altcoins, ICOs, like tokenization I would put as part of this. Like clearly that's something that, and, and you can measure this with, with in a bunch of different ways. Stablecoins and then, and then perps, I would say are sort of the, the three things that, that really have, have achieved some form of product market fit. And like, not just some form, like they've literally spawned some of the most profitable companies in the history of the world by employee, right? Whether it's, it's Tether or, or PumpFund, and also some of the fastest revenue trajectory ramps in the history of the world. So I do think like within those three sectors, it's, it's, and I agree with Jan, it's like you kind of want to, wanna, like, the way I'm playing it personally is owning the winners in, in, in, in those three sectors. And, and, um, but, and then of course there's like a lot of sectors that have potential, but they haven't shown, uh, product market fit yet. I think those are the, those are the three that, that have— I think prediction markets obviously have potential. I mean, we've been, uh, like excited about crypto gaming for ages. I think privacy should eventually like catch, catch a bid, but like realistically these are the things that people are willing to pay for now. And I think the issue with that is, first of all, it's very different from the crypto promise of everything being decentralized and you have like a censorship-resistant, you know, permissionless financial system, because the winners in these sectors are, are pretty much like centralized companies. You know, like Tether is literally an IOU for a dollar in a bank account, like an alleged dollar in a bank account, because we still don't have reserves, you know, this many years later. You know, PumpFun, you know, is, is, is, is like a front end for, for creating, for creating meme coins. You know, when, when you look across like even, even Athena, which I'm incredibly bullish on, it's, it's not like the, the DAI MakerDAO, like decentralized money vision from back in the day, right? It's something, something very different. And I think that pragmatism is something that's really hard for a lot of crypto. It's the combination of a lot of the stories we believed in didn't work out, and the ones that did work out are nothing like what was promised in the sense that they had to make so many trade-offs to the ideals of decentralization and stuff that actually make this, this space interesting. But I think people get— are very jaded and throwing out the baby with the bathwater. And I think in these three sectors there are going to be winners, but they're competing with the giants of TradFi, right? Like Stripe is going to come after the stablecoin market. Robinhood is coming after perps, you know, and token issuance. So that's also the issue is you can get exposure to these sectors without actually touching any, any crypto coins. I am. Yeah.

Yeah. I mean, I think it's all a spectrum. Like, I'm not willing to be like, oh, privacy has failed. Centrist resistance has failed. Like, the founding principles of our space have completely failed. Like, I just think they're not for everyone, and that's okay. Like, I think there is a crowd out there who, like, do genuinely— I mean, clearly our space exists, like, who does clearly care about and is willing to pay for these things. I think, like, people just often mistake, like, that crowd for the entire world. And like the whole point of my article was like, it's time to start like going to the world instead of expecting the world to come to us. And that's like the central problem I think I've identified in our space is we just expected the whole world to become crypto native and that's never gonna happen. And that's fine. Like we're gonna have things that are super crypto native that carry on for a long time and are valuable. And then we're gonna have things that are built on chain that are not crypto native in any way, which is exactly what you're saying, José. It's also fine. So I think like it's time to start like identifying who is your customer, what problems are you solving for them, why do you need to exist, and then go win that customer. Whereas in the past, like, we've just been like, we're going to build for crypto natives and that's going to soon be the entire world, and that's the end of your plan. And like, that is not how, in my opinion, like the next generational companies in our space will be built.

Yeah, and I mean, I think that the decentralization element is not really that big of an issue anymore in the sense that I think the idea that max decentralization is the optimal path went out the window a while ago, right?

It's—

there's trade-offs and ultimately a bunch of the elements of decentralization don't really matter that much, particularly when you need to sacrifice quite a bit on the performance and UX side to make them a reality. So We've seen the kind of the winning of CeDeFi, but and I think that's kind of going to be the case going forward when, you know, there's enough kind of enough elements built in to help you avoid an FTX type scenario. But you're not obviously going, you know, DAI, DAI, DAI maxi where, you know, you have trust or decentralized collateral to, to create, to back a decentralized stable. Although that kind of went out the window with USDC that was, you know, uh, backing a bunch of DAI, but that was back in the early days.

Yeah.

I mean, everyone kind of wants, I think everyone wants to see apps, right? That, that, that kind of exist. And, and so part of, you know, what we've always tried to, what we've recently, recently in the past years tried to look for in these apps is, you know, obfuscating the crypto element and, and only making it something that, that exists if you want to interact with it or if you want to touch on certain benefits. I think, um, we haven't really seen too much of that happen. Um, you know, there's been kind of some of these viral apps that, that had, uh, unsustainable loops and, and unfortunately, you know, they just kind of get, uh, speedrun and then unwind pretty aggressively. So yeah, the, the tricky— I think the, the bigger risk is that are, are the best founders going to keep building in DeFi? I think you, you are in crypto. I think you had that for a while where you had really, uh, compelling kind of, uh, people trying to build because, yeah, the promise was huge and the opportunity set was massive and, and it was kind of the Wild West. And so the risk is that you have this kind of, uh, euthanasia roller coaster element, um, happening because You just don't really have compelling builders that want to, want to go here. I think, you know, AI is a very— building in AI is a very specific skill set, right? So you, it's not as if you can have people going to build there. It's, it's not as if everyone is, you know, well equipped to do so.

I think you can. There's loads of application companies and like consumer companies built on top of that. There's like a whole, you don't have to build foundational models. There's just like so much stuff happening.

Like it also doesn't have to bifurcate where it's like AI only. I think you can like take on some elements of crypto, whether it's ownership of assets or trying to pick on smaller elements of crypto. Like, you don't need to go full crypto, right? There are worlds where users don't interact with the crypto side at all, and then there's their worlds where if they want to, they can tap into that and actually dive in. And then, you know, the two kind of feed off each other. But yeah, I think Viral apps are what we really need because it's hard to really iterate on these successful primitives, um, at this point, right? We've seen that. I'm sure there will be new DEXs that come up with novel methods, and the question is basically, will existing ones implement what makes them— can existing ones implement what makes them novel since they kind of control the user, or, or is it, is it going to be limited? Um, Yeah.

Yeah. I mean, I think, Jan, what you said is like exactly what I hope is the case. Like my goal for our space is that like people just build on-chain because it genuinely enables them to build things that they couldn't otherwise, or makes their products better than they would be on using other tech. And you don't have to be forced with this like big, do I want to be in crypto or not? It's just like, I'm going to build using the tech stack that best enables whatever thing I want to build. And I think that is very much possible. And we're already, I think, kind of starting to see that phase start to happen. And so I hope that is the case in that there are founders who identify blockchain technology and, you know, the benefits of building on-chain and these things and do so, but are very quiet about the fact that like they are in crypto, quote unquote. That it doesn't matter to them. They just want to build the best thing they can.

I, I just think in that world, like, if people are just really just using like stablecoins and, and, and, and like, yeah, making use of crypto in, in that way, crypto is just worth so much less than it is now though. Um, and I don't— and that's why, like, I don't know, I, I, I kind of partially take the other side of, of that too, in the sense that I think our rails, the crypto rails, have proven to be insanely good. And I think when people look at crypto, a lot of the time they say, like, you know, look at all the, like, billions or, like, tens of billions of dollars people trade this crap. Like, it's what a scam. But actually, it's like, you can say, like, look at what people are— look at how much people are trading, like, stuff that's literally valueless. Imagine if there was assets with real value behind them being traded on these rails. And I think that's also what we're seeing now is people like Superstate and, like, Metal X and others. Bringing on like real-world assets or like just tokenized shares and all these things onto crypto rails. And I think that's like the other side is maybe the world does come to us in the sense of we've built really good rails. We just need like, we have an asset problem, right? There aren't enough interesting assets to trade on this. And maybe like bringing on real assets actually makes these rails, uh, like way more useful. And I think that world does result in a much bigger Uh, 'cause I think if crypto's just in the background and being used as like the, the stablecoins or the, the way that people, which is like the main use case, I think people talk about when it's like using crypto. I don't think, uh, it justifies like a half a trillion dollar Ethereum or a, you know, $200 billion Solana or whatever.

Yeah, it all kind of feeds off each other, right? Is like if you bring those assets on chain increases activity and, and makes the one, the other base primitives as in the financial primitives more valuable because it obviously leads to more volume and activity. But I think it also opens up the surface area of kind of new applications that can be made because you have a variety of users that are interested in a lot of different things available on-chain. Like you no longer have to move them on-chain. They're already here and are much more willing to try the next thing rather than going from like no chain to on-chain?

I mean, from where I stand, it seems like it seems more likely we're heading in, in, in this direction versus like crypto just kind of being in the background. Like, I don't know, like everything you see with, with like the, the Buildo Fund, uh, like, like everybody's moving towards this, right? Obviously you have like the more crypto native type equity companies like Galaxy, you know, kind of pioneering it with like Galaxy on Chain and stuff. But like, to me, it seems way more likely like that is probably closer to what the end state looks like than crypto just being like a passive facilitation of value in the background. Like it, I don't know, like, like it's very like, it's very clear, like, to, to, to, to Zay's point that like, it is way better to trade on-chain, like, with, with these rails than it is— like, anybody who's traded with Interactive Brokers or in TradFi or with bonds, like, via Bloomberg terminals, compared to the experience you have transacting on-chain using, you know, crypto-native rails, it's, it's night and day. It's, it's infinitely better in, in so many ways. And I just can't see a world in which TradFi doesn't just use it. It's so much better for all of their purposes as well. So like, I don't know, it seems way more likely that the outcome is, is, is that world to me then, or something close to that world than not.

Yeah. I mean, I agree. I don't think it's going to be like people just forget that these chains exist and that like these companies are using them. I think it's just going to be less of the focal point.

Yeah. And I mean, like you also have to like, and this is something LTR wrote a lot about in the, in the, in the year ahead, right? Like most companies probably coming in aren't going to use existing blockchains in the way that we think they are. Like there's no reason for them to pay rent to existing, you know, L1s. Like they have all the users, they might as well just build their own things, right? So like things are gonna look different and maybe that compresses value in, in, in, in the short term because like, again, like I don't think a lot of these corporate chains are also gonna be like really great investments either, right? Like, um, again, LTR, I think everybody should read this. He, he kind of like looked at like WorldChain as like a case study and kind of looked at it from like the, their token as like a CAC token or a customer acquisition cost token, right? And effectively what they do is like, it's not like a great investment obviously, but what it is is they are effectively able to onboard billions of users without having to really pay any cost outside of, you you know, the token. And most of that cost is, is bared by, by, uh, you know, users via inflation. And when you look at like the chart of, right, like user growth, right, it's up into the right. When you look at the chart of coin price, it's down into the right. But when you look at market cap, it's effectively like flat-ish for the most part, right? And like Seeker Mobile came out with like their tokenomics, right? It's pretty much the same type of model where it's like they pay people to use their phone, right? You see this throughout TradFi, like that was like the big PayPal thing, right? Pay, you know, pay everybody $10 to sign up to PayPal originally. Base is probably going to do something similar, right? I would imagine. I can't imagine it's going to be something that really siphons value away from equity holders. It might be a way that they, you know, use it to acquire that, you know, additional customer down the line, right? Uh, Kraken, Enchain, probably something similar because they're going to IPO, so they have to balance that with their equity. So you have all of these things, right? And I think we're just kind of moving in this new direction. You just have to like, to your point, just like kind of accept where we're moving, like what these new dynamics are, and then just, there will be value and opportunities there. Uh, and if, and if there isn't, at the very least, it, it helps you avoid a lot of things as well, which is equally important.

Yeah. I think you touched upon like the 3 probably biggest debates happening Uh, at the same time and like all spot on, it's like L1 valuations, are they, you know, fairly valued or not? Should we expect like a massive correction due to kind of what you just said? Um, to what should be the role of the chain going forward? Should these chains vertically integrate more or should they just sit in the way that like Solana and Ethereum do right now? Just like kind of bottom of the stack backend things. Um, I forget what the third thing you said was, but like spot on, like, oh, in terms of equity token split, like in a world where these companies have equity investors and they're launching a token, how do you make that work? Should there only be one vehicle, equity or token, or can you actually have both coexist? And for me, like those are the three biggest questions that like I'm consistently thinking through and challenging myself on. Cause I think like those answers will be extremely impactful. To like how this space evolves, uh, going forward. And like, I don't have, I think, firm beliefs yet in, in any of these areas.

Yeah, absolutely. Um, and like I said, we— I mean, quick plug, right? Obviously we're in the process of publishing all of our year aheads. So the markets one was published on Thursday. We talk a lot about stuff like this. To, to Dougie's point, right, it's been a, a topic on a lot of people's minds for, for a while now. The apps one I think went live yesterday and I think infra goes live today, right? So just quick plug for people who are still listening that all those reports are live.

And how are you positioned, Dougie, for the— like for this? How does one position if you have this thesis? Because it seems like there aren't many tokens that benefit from, from this.

Yeah. Are you speaking like personally or as like my— because I'm a VC by trade, I guess. My day. Yeah, my day, my, my actual job and what I spend most of my time doing is like investing early stage. So I guess like I'll answer both. Early stage-wise, I'm looking for just like teams building things that actually I think solve real problems and can access like real people in the world, not just like this very small pie. I'm totally down for someone who's like, hey, I'm gonna dominate crypto first and then like transcend the industry and this is how I'm gonna do it. And I'm seeing actually teams have a lot more thoughtful ways to get in front of the rest of the world. Like more teams who are, thinking through like viral marketing on TikTok and things like that. Uh, and like that was something that was very unpopular, uh, a few years ago in crypto. Um, or, you know, if you did it, you kind of look like Murad sometimes, who, you know, did an okay job of, of it, long story short. But, um, so like, I, I do think like in terms of my, what I'm investing in for the fund, like it is way more focused on like exactly what I'm saying in the article. Um, and there still is infrastructure that I think like needs to exist, like, but my perspective in infrastructure is like What problem is this infra solving for application builders? And if I identify a clear problem that's like preventing applications that I think should exist from being able to exist, and like, that's a great investment. But I don't think there's like a huge appetite anymore for like a new general purpose L1 or L2. Like I think there definitely will be exceptions, but like as a whole, like that was like the VC game for a long time. And I think like that game has mostly come to an end at this point, unless there's like a damn good reason for you to exist. So that's kind of how I think about it through like the, you know, VC investor angle. Personally, I was talking about this before the show. There's like a very short list of tokens out there that I think like do meaningfully capture value and like are building things that I think will, you know, hold up well over time and will grow in terms of, you know, uses, usage and importance and impact and stuff. And so like those are the things that I'm pretty much concentrated on. I used to be someone who thought—

And what are those? Tickers, sir.

Tickers are tough.

Stop loss.

Not financial advice. I'll answer it this way. The things that you go on-chain and you actually use because you think they meaningfully impact your life. Like you want yield in your stablecoins, you go here. You want to trade something, you go here. You want to go levered long somewhere, you go here. Uh, the things that you actually use, uh, and think you will continue using. I think those are usually the best bets to make if like you're a personal investor who wants to buy a liquid asset. Um, because I was going to say like, I used to think I was someone who was like super savvy from the macro lens. Uh, I don't really think I have a good take on like the macro right now. And so what that pushes me to do is like be ultra high conviction in the things I have exposure to, because in the event that they go down, I want to make sure I have enough conviction to buy more or hold through it. In the event that they go up, okay, like, do I think this business can grow more and by how much? And should that influence like how I manage this position? And so it's way more like looking for quality. I used to be way more thinking about like the, you know, narrative plays, the metagames being played, where we're at in the cycle, how many more marginal buyers I think are going to come in. Like that game I don't really play anymore. I also just don't have the time for it, but I think like You know, we're seeing a rush towards quality, and that's like ultimately the sign of a maturing industry.

No, I echo the same things as somebody who used to love the trenches and the narratives and the metagames. Um, it's not the market for it.

So yeah, yeah, exactly. That's the thing is, is like, there will be pockets of that, right? The whole alt season, it's no longer just this broad-based alt season. You have pockets of outperformance, and usually and, and it kind of rotates over time because everyone kind of looks at what happened before and they try to speedrun it. And, and obviously the same strategy can't work over and over again, so there is some element of trying to, to, uh, front run or get ahead of narratives. But, um, at a period when there isn't new capital flowing in, it, it boils down to like the EV is just much higher on trying to play higher conviction bets. With larger percentages rather than, um, these other games. It's more kind of, uh, blow-off top-y, or, or when everything else has run up, right, you have the, the final rotations into the, the, the purely speculative stuff. But it seems like, yeah, there's going to be just kind of a coalescing around. Um, and then it's also trying to understand, you know, all these things like in TradFi trade at different multiples based on the conviction of and the defensibility of those earnings and the perceived growth rate.

Yeah. I mean, it's kind of like TradFi, right? Like, I mean, when you look at TradFi, right, you could own the index and do well, but like, if you go out and try to like pick names, right, the vast majority of the outperformance is siloed to a handful of equities as well. It's not really that much different over there. But I guess, you know, the main difference is the volatility, and the names that don't go up don't also go down 90% like in crypto. But like, from the like disparity of returns, it's, it's very similar, right? Like, I kind of have likened crypto at this point, like, absent some major shift in like liquidity, risk-on appetite, whatever it is, right, to just like get people buying shit again, like stimmies, whatever, you know, SBR, whatever, absent things like that, right? Like crypto has effectively become like a stock pickers market. Like you can't— it's not like prior cycles. You can't just like look at like, oh, throw a dart. Okay, I'm up 15%. Like 2020, 2021, 2020, it was amazing. Like you could like be the worst investor ever and worst trader ever and just do amazing because everything would do well, right? Like, um, and maybe that environment does come back at some point in the future when the bazooka of money gets unloaded and you go Weimar or something, who knows? But like, it's clearly not here, hasn't been here for years, and it clearly isn't going to be here until something big changes. And it'll be pretty obvious, I think, if that is going to happen. So like, yeah, it's a stock picker's market and you just have to pick the 5 to 10 names that are going to go up, uh, and it just like, it just is what it is. Um, I'm curious though, Jose, do you actually have liquid crypto exposure still?

Me?

No, Jose.

Oh, you do.

I know you do.

Yeah.

Um, I have— I don't have much. Like, uh, I have less than ever before by, by quite a lot, but I still do have some. Yeah. It's just hard to, to get excited. It's just hard, but it's also hard to just sell all your crypto. I don't know. I find that, I find that a great, challenging, challenging thing to do. Yeah.

I mean, the tricky thing with the environment right now is that you kind of need multiple things to go right. Like the EV just isn't there, right? There's, there's quite a few more negative surprises than there are positive ones. In general, and you need a lot of stars to align for things to go all right. We've had so many— we had multiple times where equities do well and Bitcoin doesn't. And so regardless of your individual token's performance, you're not really gonna— outside of really random pockets of like Zcash outperformance and something else, you're not going to do well when Bitcoin doesn't do well. So you, you like first and foremost are making a bet on BTC, and then after that you're like, see, like each bet has multiple bets baked in with their own probabilities of failure, right? So it's just 1 minus the probability of failure for all of these and compounding that on these individual bets, which I think has kind of been a headwind. And that's very reflexive because if once people realize that, then they're less inclined to speculate. And so, and that just makes the, you know, the value lower for everyone else. And so I think you kind of need this washout period of apathy and then a gradual bid in the face of selling exhaustion and kind of flows. And then I think risk appetite can come back very quickly because when it does, you do have these massive moves. So yeah, there's definitely still risk appetite that exists. It's just waiting for enough people to kind of deploy cash while selling abates.

Anyway, Dougie, I know you had a cold. Do you have to— can you stay on?

I know At this point it's too far gone. I got to bounce like 5 minutes, but yeah, I miss the days when underperforming was being up 2x versus 5x. That's what it felt like in 2021. It was like, oh, all my friends are up 5x, I'm up 2x. And now it's like, oh, I'm down 80%.

I mean, the other thing with crypto is, and the reason I guess like I still have the crypto exposure is it's just really hard to I don't know, there's been so many times where sentiment was like, you know, maybe not as low as this. I genuinely don't think sentiment has ever been as bad as this in terms of the number of people just completely checked out. It's actually the first time, you know, people always say like, Max Payne is up. I actually think this is the first time in history of crypto where that's like close to true. I mean, it's never true. Obviously Max Payne is always down, but like there's so many people sidelined that I actually think, you know, it's the closest it's ever been. But crypto can just rip in your face without much reason, and then the reasons come afterwards, right? Like, uh, this has happened so many times in, I don't know, I recall so many conversations between Jan and I over the years, uh, about this stuff. And I don't know, so, so it's tough. Like, and I also think a lot of the arguments people use against crypto, and it's, there was a point in the Hasib Santiago debate that I think made sense. Like, Santiago was like, all this stuff is like really overvalued, and it's like, and that's why price is down. But it's like, did people just realize this like, you know, 2 months ago? You know, like, the, the, the stuff has been overvalued on any fundamental metric you can choose for, for years, right? And, and so, yeah, that, that's like, I guess, the other side of, of things. I, I just think it's the first time in that, that I really see like meaningful opportunities outside of, and meaningful narratives outside of crypto that what we really want to be a part of.

Yeah.

And I think the big thing is going to be bringing those into crypto because the rails are still like unparalleled, you know, and anytime you interact with, with tradfi, with traditional, you know, buying assets, secondaries, anything like this, and you have to deal with a myriad of lawyers and banks and closing times and customer support, you kind of quickly realize just how good the rails are in crypto. But yeah. Um, just think we have an asset problem.

I think to like end this on, or for me at least on a positive note, uh, I always believe that like when conviction is the lowest, the opportunity is the highest. Um, when people are giving up saying, you know, things are dead and it's all over is usually when you want to be looking for opportunities the most. Uh, and I think most people as investors struggle because they do the opposite. Uh, when everyone believes in something is when they're most actively involved versus like what I just said. Um, and so like, I think like right now is when like you see opportunities like Solana at $10. And if you're someone who follows your convictions, does research on where you believe the puck is heading, and position yourself accordingly, I strongly believe that like you're going to be rewarded down the road for that. The question is like, what are those things and are you willing to hold through the pain, essentially? I'm not saying go all in now, uh, be responsible, but you should be spending all of your time like thinking about what the next thing is going to be and figuring out how to position yourself to benefit from it. 'Cause I can tell you that has been, as an investor, my most common success story is I've managed to invest when everyone basically said not to, and I picked the things that actually rebounded the most and showed the most promise as things started to get better. Certainly have been wrong as well in those picks. Like I'd recommend diversifying. Again, all of this not financial advice, but just kind of anecdotal, you know, stuff that I have done. And so I really do think like we are heading towards a better time. It might be painful for the next few months. I have no idea, quite frankly. But I do think like the people who stick through and position themselves well right now will be rewarded. When the time comes. Nice.

That's a nice note to end on. Is there, is there anything else we wanted to, we wanted to chat about that happened over the last 2 weeks beyond Jason Yanowitz, Dougie, anything like pressing you guys wanted to discuss?

No, I think this was, uh, this covered most of it, honestly. Like, there hasn't really been too, too much new in crypto over the last 2 weeks since we, uh, last did this, it's been pretty boring to say the least.

Yeah. But all right.

Yeah, I really enjoyed the article, Dougie, and thanks for joining. This was great.

Yeah, thanks for having me on, guys. It was totally worth missing my call for.

I appreciate it.

Yeah, it was a good discussion. Thanks very much for joining and thanks everyone for listening and we'll see you again in 2 weeks for another episode.

Oh, will we?

I guess we will. Yeah, we'll see you again in 2 weeks for a last episode of the year of The Hive Mind.

Cheers everyone, see you guys, see ya!