Hivemind: Crypto's Leverage Hangover, Hyperliquid's Resurgance & What's Next for Markets?

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 solely our own opinions, not financial advice.

Hello everybody and welcome to another edition of The Hive Mind podcast. Jose is not here today, so I'm doing the intro. I am Ceteris, head of research at Delphi. We've got Jason Yanowitz, head of markets. We've got Yan Yanowitz, ventures partner, and we've got Duncan, um, Duncan Yanowitz, venture scout. Um, so I guess we'll just start off with markets. It's been kind of a weird couple weeks. Uh, there's been a few random stuff happening, but we got like FOMC today. So yeah, I don't know how maybe Jason Yanowitz, like, how are you feeling overall? I guess since like the October 10th perp ADL massacre, it's been like 19 days since that now. So now what have you kind of like seen since then?

Yeah, I don't know. Like, I usually after you get such a massive like extinction event, for trench warriors in crypto, right? Like people bidding things that aren't Bitcoin, ETH, you know, things that don't have an institutional bid or don't have like a structural bid from them, from like, you know, revenues or whatever. Um, like when you get an extinction-level event like you got on the 10th, like I got, I got wrecked, right? Like I got, I got hit pretty good on, on a bunch of, uh, leverage positions I had on that were like, you know, super, super low leverage. Um, I mean, you know, relative to crypto standards, that just got like wiped out, right? So like if I got wrecked on like that, every, you know, tons of people got, got wrecked. So it kind of like kills the appetite to bid, you know, tons of, tons of assets. And so like in the aftermath of those liquidation events, you pretty much just like go through a period of like consolidation or just like you just like kind of oscillate sideways until you kind of like find like a new level of equilibrium. You let like people repopulate the books. People, you know, like figure out what their new thesis is after that, like if things have changed. If not, whatever it is, right? Like it usually takes a bit of time for the market just to kind of like digest it and, and let the dust settle, uh, before you, you know, either break down further or, you know, reclaim some key levels and, and move back towards like the highs. Um, and that's kind of like what you've seen, right? You had like a little bounce and then you had like another dump and then you've had like another bounce and and it's like been kind of like volatile in that sense. But like when you like zoom out on like a daily chart, it's all like happening within like, within like that, that candle's like wick for the most part, right? Or like the, the, the main portion of that candle, it's just like oscillating within that. And typically like the severity of like the liquidation determines how long that goes on for. So like the more severe liquidation, the longer you get that, you know, choppy, weird appetite in markets. At least from my experience. So like, now that, you know, you said 19 days, so, you know, almost 3 weeks moved on from that event. I don't know, like, I think if things were going to break down further, they probably would have already. You know, stocks are back at highs every day, it seems like. So like, I don't know, I feel like that's like, that was probably like a good event. I mean, like, if you have money and something like that happens, you have to bid, right? So like, if you bid, I think that's probably still going to be a pretty decent entry on things that like are still showing kind of strength, right? There's been a few alts that have kind of retraced that, that candle. Like, Pump's done pretty well. Hype's retraced that. Like, there's been some pretty good, you know, recoveries across the board. So I think you just probably want to look at the names that have showed some kind of signs of life and focus your attention on those.

Do we find out if any like market making firm or exchange got fucked?

I haven't seen anything.

Maybe there's been, I think there's been like some decent size ones, but nobody like systemic.

And no one, I mean, it's hard to be systemic at this point from a market making perspective. But it looks like everyone just took a hit, but no one is insolvent. Or at least not yet. You saw Wintermute come out and, um, all the, uh, the kind of the documentation. It seems like it was market making firms and just, you know, individual traders that got, uh, that took the brunt of it. Um, yeah, some charts got shared around on Twitter where people just did kind of, uh, historical analysis of, of, um, events based on like, you know, degree of OI wipe. And, and I, I hear you on, on the time. I think that makes a lot of sense. And then, but, but Generally when you have, I forget the threshold of OI taken out and then you look at 1, 3, 6 month returns after that, they're historically pretty strong. I guess it depends on what you anchor to, right? Is like, is zero the bottom? Then sure, right? Everything is gonna look great from there because that wick. So I think maybe digging deeper into what they're using as a starting price, is it the wick low? 'Cause then that kind of invalidates the, the results, or, you know, if it's something like, uh, what the price settled at a day or two later, and then going from there, because that's like a realistic entry. Um, yeah, it seems like macro is, is still really strong. You have a lot of the Mag Seven reporting this week and FOMC, so, um, that's definitely going to be a big one. But it's, uh, I think the, the, the worst part for crypto is just seeing equities rip and then crypto kind of sitting there. You definitely saw that, that rotation from gold to BTC. I think that kind of took us to the current level and now we wait. Yeah, it seems just like a gradual accumulation game. You know, you don't have the DApps bidding, but it's also, I think, a bit of a blessing to not be fully reliant on them because then The second they stop bidding, you get a sell-off. So I think, you know, that, that to some extent is priced in. Um, you have MicroStrategy potentially still being added to the S&P in, in, uh, December, which is probably roughly like $20 billion in, in passive bid from rebalancing. Um, but it's not— I don't think that's a shoo-in by any means.

Yeah, you've still had these like pockets of something's doing really well, like Zcash has done insane over the past month. You've had some of the on-chain stuff, some in like, uh, like MetaDAO, Clanker, other stuff in the base ecosystem. Um, you have some like robotics plays, which I don't know how legit these are, um, but they have had like this narrative with the X402 thing. Um, so you still had these pockets of speculation where some assets have done very well. With like, it's kind of, yeah, there's kind of like 3. It's like the majors mostly recovered back. Then you've had these different like niche assets that have like massively outperformed. And then you had a lot of stuff that sold off that is still like where it sold off at. Right. And so yeah, I guess that's not too surprising to me. It kind of makes sense.

I mean, like the way, like at least like the way the market feels to me, right? And like, I'm kind of like, I'm going to look more into this, right? But like, I've just been like kind of thinking about like at what point, like over the last several years does like the market feel, feel like, right? And like, it's not like a very scientific term, but like to me from like, I don't know, like July. Until like now, it feels like where we've just kind of, you know, been chopping sideways above like 110K or whatever for like 3 months. Um, it feels a lot like the summer of last year where we were pretty much like between like 55 and 70K for like 6 months, 7 months, just like whipping up to the top, whipping down to the bottom. You had the yen carry trade blow up in August, which like wicked every chart down a ton, and then things recovered and took a couple weeks.

But we didn't like break out until the election.

Like, that like Exactly right. It was like March to November and we pretty much just went between $55K and $70K for like 8 months. And like, yeah, I know it's only been 3 months versus 8 months, but like the choppiness of it at the price range is what it feels like to me. Like it doesn't feel like macro top-y to me. It feels more like that. It's just like, yeah, just kind of like just consolidating near at all-time highs for the most part.

Yeah, you've seen a lot of like the big macro— Tudor, uh, was, was on CNBC the other day and, and everyone's kind of in this consensus that it's late '99. Basically, there's a— it's a Goldilocks situation, but the setup is into a blow-off top, but by no means are we there yet, and you should still be heavily allocated to risk.

Yeah, you know, someone— do you guys follow Alex Kruger on X posted a really awesome chart of like price versus earnings in like the dot-com bubble versus now. And it's like in the dot-com bubble— can I share my screen? Am I allowed to do that? Like, I thought this chart was really interesting. So it's like you have the price versus earnings and it's like there is obviously like an insane divergence. Um, in, in the dot-com bubble that was hype, whereas like ChatGPT, and this is like earnings is keeping up like pretty much in pace, like earnings growth is keeping up pretty much in pace with—

yeah, earnings growth has been strong. It's, it's like, it's such a, it is such a weird market, like Amazon Today I saw a tweet from Jeff Park like an hour or two ago and it's like, this is what makes it so hard for the Fed is that like economy is doing well, inflation is just coming down, but like Amazon just laid off 30,000 employees.

The automation, brother.

Yeah, automation. Plus they like overhired massively during pandemic. They're still kind of working through that. Yeah, I mean, you see the comparables, but I agree, earnings are still holding up, right? So you don't have this kind of similar dynamic of what you had in the late '90s of, you know, your dark fiber and basically, you know, spending CapEx on building out infra with the hope that it'll be used. Right now, every ounce of capacity is immediately used. I guess the counter to that is basically, you know, you have the circularity arguments, but I don't think that—

But I don't really get the circular arguments if it's like, you're basically financing your customers is the, is this is what's happening. I know, but at the end of the day, you actually are like creating something of value, right?

It's being used, right? It's not like empty server and empty.

It's not just like we're trading this fucking thing back and forth. It's like you're actually making something that people are actually consuming, which is like the new net capital into the equation is like customers paying for these services. But that's obviously not enough to fund the build though. That's not enough to fund the build.

Because like ChatGPT is hitting some degree of, of saturation, right? Like they, they, they have a, a lot of users already. And, and so I think the next wave is basically people building on top and building apps and, and trying to, like, there's a lot of that stuff that hasn't been built. And I think a lot of the future growth is predicated on the use cases that haven't really come up yet. And, and all of this is, is building towards a world that enables these things to be possible.

I think people look at like the CapEx spend and everything and how none of these, these companies are profitable and they're like, oh, this is a bubble. But it's like, there's a lot of money to kind of keep this going for a long time before you actually need to— people are going to stop funding these AI companies and then like the revenue will completely matter. Right.

But the other thing is like the actual penetration of AI into like most businesses, I feel like it's still so low. Like obviously like the really fast moving tech firms are like uptaking it pretty quickly, but like in terms of actual like penetration into like personal use, yes. Amongst like the younger generations for sure. Amongst the older generations, I'm sure it's like slowly creeping in, but amongst like kind of like small to medium-sized businesses, which is like a massive part of the American economy and stuff, it's probably so fucking low. Like, There's probably so much to go to actually, you know, in terms of customers that are willing to pay for it and like efficiency unlocks that just like we really haven't realized yet. 'Cause like these machines are like so slow moving and it just takes a long time to kind of update systems and, and integrate these new technologies.

Yeah, the impacts on GDP growth are, are still not really felt.

I'm with you.

Do you want to talk more markets or do you want to go into some of these? There's like a bunch of random stuff that happened.

Yeah, I guess we can transition from TradFi markets into their proliferation into crypto and into Hype's resurgence.

And yeah, what do you think about the NASDAQ on Hyperliquid?

I mean, pretty cool. Pretty damn—

are you back on the hype train, Duncan?

Galaxy's just a lock, so I'm, I'm holding strong on that.

But have you, uh, checked out the, uh, HIP3 markets?

Um, yeah, well, I think that it's honestly really cool. I'm just like curious how this plays out because I was thinking like a few months ago when I was thinking about Hyperliquid, I was like Well, there is a chance that like stock trading does, like they're like the main venue for that. And now it's like kind of happening. But I think there's like, are the banks and like the traditional people who actually fucking have all the volume gonna let this shit happen? Like, or are they just gonna kind of sneaky get away with it because the regulation's not clear and they can just like build a base of liquidity and traders from like offshore traders especially, maybe. I think it's fucking awesome that they're doing it. I love to see it happening. I think it's like a really net positive for this space. Like if they can be the exchange and you can trade, you know, all these things.

I think that the demand is definitely there, especially with, you know, if we assume we're going to have more companies go public and just the advent of AI, right? Previously it was crypto was the only place to get some, you know, insane returns. But now with equities popping off, I think that shifts a lot of demand. Plus I think people in crypto just want to get broader exposure with there being less, in terms of quantity, obvious alts to just sit in. The question, I guess, it becomes whether it's Hyperliquid that wins with their model or kind of like an Osteum or somebody basically you know, you have baseline funding rates for perps being 11%, and I think, you know, for a buy and hold, that, that's prohibitively expensive. For leverage trading, I think that's fine. Um, so whereas like, you know, I think is a bit lower. So I guess the question is like, that's the minimum rate on Hyperliquid? It's just like the baseline rate for, for funding in general. When, when it's, when it's balanced, it sits at about 11%.

Yeah, so these are not things you can just like go long and hold it, right?

Yeah, you could like, I mean, you could do like a 3x long for a short period of time and, right, and then that, that doesn't necessarily eat into it to the same degree. But yeah, it's, it caters to a, a trader, um, cohort rather than any kind of longer-term hold.

But like Hyperliquid already absolutely fucking lost him up in terms of volume. Like, Osteum on the 28th has 22 million stock and indices volume, and Hyperliquid has like 87 million today on NASDAQ alone. Like, Osteum, some days they do like, here this day they did 100 million on—

Yeah, no, I mean, the trader community is certainly there, right? And I think they're less sensitive to that. And so it makes sense. But if you're thinking, you know, these things are going to grow another 1 to 2 orders of magnitude, then you probably shift to some past—

Yeah, the thing is, if you're trading size too, you do get way better execution on Osteum.

Yeah, because Osteum's model is this whole vol bullshit, whereas like Hyperliquid is—

It's closer to like the payment-for-order-flow model.

Yeah, they just bridge liquidity to TradFi venues basically.

Oh, they do?

So you get much better execution. What?

Illegal. I feel like there's no way that's allowed, is it? They just take the position, these hedge themselves out on a TradFi broker. What if you're North Korean trading? It's like, oh, we just put on this friend for our— we just put on this position for our friend in over North Korea. Like at Hyperliquid, it's not really putting on the position though.

They're just hedging and you don't own— you don't own the underlying, right? So you don't have any governance. If it was, you wouldn't have North Korea guys.

You're just in like a 1v1 PvP off against—

well, there's a hyper— does the—

is HLP not participating in, uh, no, I don't think so, because they're all HIP3. It's like literally just like a 1v1. There's one side of the trade and the other side of the trade, and there's like two independent counterparties. But I guess it's kind of the same. I don't know.

No, no, it's completely different market structure. Hyperlink—

that the venue is doing it just seems a little I don't know how kosher that is. What do you mean? Like, I don't know how, like, is that— I feel like that doesn't sound right, but I'm not like, it's not how it works. Just like, I don't know if the regulators would be chill with that. Anyways, I'm curious to see how this space works out. I think it's fucking awesome it's happening, and props to these guys for doing it. If they listed Galaxy, you know, I'm an Ostium fan, I'll go check it out.

I honestly haven't traded, traded these yet, but I, I do think, uh, people should probably play around with that.

If I do— okay, the open interest cap's $1 million, but like basically if I buy $1 million of GALAXY long here, they're gonna go and buy $1 million on the exchange, like on the NASDAQ?

Awesome. Yeah, uh, I think so. You're not buying like some spot you're dealing with, uh, like they have order flow in the back end. Yeah, you're not, you're not just buying these like wrapped spot RW assets that don't have a lot of liquidity. This is kind of why their thesis is that this model is a lot better, because you don't get these crazy wicks, right? Like you saw the NASDAQ on Hyperliquid, Hyperliquid, uh, licked up a lot on the weekend, right?

Um, yeah. And so are they, are these markets also trading Uh, no, they're not.

I think they've reduced your leverage outside of, uh, trading.

I see the candles disappear between the opens and the closes, so I'm guessing they're not.

Some of them I think they might close down when the market's not trading, and then some of them they've reduced your leverage like significantly.

But yeah, because Hyperliquid will stay open anyways. It's pretty interesting. Yeah, I'm, I'm a fan of the innovation.

Yeah, it definitely though seems like a lot of stuff is going. And it's funny because like we've done this in the past and it was just so illegal and now it's just everyone's just doing it again and it seems to be okay.

So we'll see what happens.

See how it goes. Like synthetic, both Synthetix and like Mirror Protocol, right? We're like doing stuff like this.

Yeah, there's always been issues with models maintaining the peg.

Yeah.

Everyone's kind of had different solutions for it.

Any of you guys, uh, do the Mega ETH sale?

No. KYC.

Yeah, I was going to, and then the KYC was a lot. Like, the pump KYC was a joke. It was like scan a driver's license. And then the, the KYC for this one was super invasive. And then I started like thinking about it, doing the math on it, and, uh, like, there's going to be over a billion dollars of commitments. At the 1 billion, there's only 50 mil available. And then, then they're probably going to then prioritize people who lock for a year and then people who have like a really rich on-chain history. So, um, I don't know, I think it's good that they're doing a public sale so that people can get in. And I think they're going to try and be pretty selective in, since it's so oversubbed, and actually picking people who have been genuinely interested in like MegaETH for a long time. Um, And are just like pure retail people. So I'm hopefully like, you know, I don't want to shit on this too much because it's like we're doing, I think doing ICOs is great for like retail. But it's, yeah, I think a lot of people who are in this are going to get no allocation, which kind of sucks to go through the whole process of all of it and then get no allocation.

Yeah, it's kind of impossible to make everyone happy, right? It's, it's pretty zero-sum. So yeah, I think it doesn't make sense to— yeah, sorry, go ahead.

No, I was just gonna say like, yeah, like just make the, the people who legitimately are like super bullish on MegaETH the tokens. I hope that they don't— like there's over $50 million commitments for the locked, and so they could just like Basically, if you don't lock, then you're not going to get any allocation. Um, hopefully they still do some unlocks because I think it's good to get unlocks circulating earlier. Um, well, we—

okay, so we got Monad airdrop, we got Mega ETH airdrop, I guess, in a couple months, right? Um, like, what are you, Ceteris, specifically more interested in or more, I guess, like, excited for? I feel like this has kind of switched over, not for you, but like in general from like what I remember reading on the timeline like a year ago. I feel like more people were probably bullish Mega versus Monad, and I feel like it's maybe swapped. But I'm kind of curious, like what are you kind of excited for?

I mean, I'm biased cuz I, I say this every time, to be honest.

Assuming you, yeah, you, we know you're, yeah, we know you have your bag of Monad.

But like, yeah, even still, I'm still just way more excited about Monad because I just, believe in the, the like decentralized L1 model more so. I do, I do think MegaETH is going to do well though. It's like, I'm more excited for Monad because I'm more like in favor of the architecture, but I do think MegaETH is kind of a cool L2 architecture that is just going all the way to the one extreme. And I think they're doing some cool things with the token, like all these L2s that exist today, the token does not do anything. So MegaETH is actually going to use it for like sequencer rotation. They're going to use it for like these proximity markets thing that I can't totally explain because I didn't look into too much, but I think it's basically like bidding for like priority access, um, to like be close to the sequencer or something like that. Um, so they're making the token actually have a use, which is good. I think what I'm most interested to see coming out of this is like first of all, it's another liquidity drain, right? We've had like a lot of liquidity drains and these things don't help the whole consolidation thing, right? Like the more tokens you add, the worse the consolidation gets. I'm really curious to see how it impacts like Base, how it impacts like Arbitrum, Solana. I don't think either of these will have too much of an impact on like Hyperliquid, but I am curious, like if you, if you go with the assumption that users coming into crypto doesn't change because new L1s or L2s come to market, which I think is a fair assumption, then it's like, where is the distribution for these chains coming from, right? Is it coming from like ETH mainnet? Is it coming from base?

Did you guys see that chart of like the top 50 altcoins on Binance, like below the FTX? Most of the top 50 alts are now below their post-FTX crash level. That's how deep this bleed has gone.

Yeah.

I mean, I think if you showed price versus market cap, there'd be a difference, right? Unlocks.

For sure.

Wait on this.

This is CT in a picture. This is like CT's mental health in a picture.

It's like literally billions of dollars of tokens dumped on everyone's head with no money coming in to bid the alts. This is a tough one.

But even still, the people who made— people blame like VCs and all this stuff for the unlocks. Jose was like saying this last podcast, the only people who made money on all this was like the Binance Launchpad BNB holders who just bought all like the unlocked tokens day one.

They didn't really get that much money on it.

I mean, Binance gets like 10% supply of a lot of these tokens.

Yeah, but like, it's— you probably get pretty small airdrops. Like, BNB is a big token. You're getting whatever percent. It's definitely not nothing. I guess it adds up over time, but you know, just same way Monet airdrop, right? Like it's, it's when you actually do the per person return, it's not that.

Yeah. I do think that the unlocks will be less of an impact moving forward only because the valuations have come down so much that it's like you're getting projects now that are launching And they're trading fully diluted for less than like their last raise.

Yeah. Well, that just needed to have, that just needed to happen.

The degree of the pain of the unlock is also a function of just how much volume, like if, if, if the unlocks start and no one bids and it drops off, it doesn't actually drain that much liquidity because no one bought, right? Like price nuked 50% on, on no volume because there's just zero appetite. So in that sense, right, there wasn't that big of a liquidity drain. Liquidity drain is there's massive volume and a lot of exit and it's like, okay, now those investors actually got money out. But you can argue most of that stuff usually gets reinvested anyways, right? And so if you need new apps to launch and, and something compelling, then to some degree it's not the most extractive scenario. But yeah, I think people have wised up. You've seen even like DoubleZero, right? That thing's kind of traded like trash since launch, and that was obviously a really interesting project. It's just, No one's really looking to pay those VALs when value accrual is kind of nebulous and adoption is still slow.

I don't know.

I'm hopeful that, because we've always talked about how we need apps to kind of start to come in and tend to bridge new users in. And so, you know, there's the hope that MegaETH and Monad, which have been really focused on trying to bring over interesting apps and grow ecosystems. Can be a bit of a boon if, you know, at least one of these can really take off.

Hytopia announced their launch date November 14th. Disclosure: Delphi is an investor. Hytopia, the Roblox of cryptocurrency. Roblox x Minecraft of crypto.

Haven't they been live for like a couple of years?

But they're doing a relaunch and their metrics are actually growing quite a bit.

Oh, nice.

So that— are you ready for the million billion person onboarding event?

Yo, you should launch a pump stream and stream yourself playing.

I want to, dude.

Sure. But I don't want to sell people a token.

But I also know the game, bro.

You're selling people entertainment.

Okay, watch this. This is just—

wait, watch.

This is 10 seconds.

What is he about to show up?

This is nice. Holding alt is Bitcoin chop round. This has literally been the last 2 years, holding alt. Oh fuck.

Yeah, except I'm not wearing the armor, dude.

I'm just getting fucking destroyed.

Like, imagine signing up to do this.

This is, uh, Iptronic coded in that thing.

Okay. Yeah.

I don't know. I am hopeful for like the Moneta, MegaETH ecosystems. They, they, they do have a lot of like, um, like there's a lot of new, uh, prediction market type things that aren't like traditional prediction markets. Like a lot of these different kinds of plays on prediction markets. That I think are kind of cool. All, obviously all the social stuff. Yeah, I do think that, yeah, someone just asked me, like, we're writing our year ahead reports, like, what are the themes? What's like the main theme? Because a couple years ago when everything blew up, the theme was like the Great Reset, right? And for me, it's basically this like whole institutionalization thing, obviously, but then revenue and like Valueless tokens are like actually valueless now, right?

Wish I could pull up our chats from March 2024 when I was saying this shit. I was getting giga clowned.

You were wrong then.

I was getting giga clowned.

Like valueless, no shit, revenues the fuck.

Sorry, I know that was, I know everything in crypto. Yeah, I know. I'm not, I'm not like picking on you. I'm just being like, this is like, in hindsight, I feel like this is so fucking obvious. But like, a lot of people were deluded into this vapor having a lot of value.

Well, because it just boils down to the flows, right? If when flows are strong, you just want to be in the trashiest trash that's untethered to fundamentals.

But it's also like, things you can— like, the, the more time goes on, the less you can kind of dream of some of these upside scenarios. Like, the reason why a lot of DeFi tokens traded high value without any real fundamentals is because it was like this new thing. And you can like kind of— I remember there was like this whole, like, remember the whole Sushi DCF and everything? And like UNI traded at like $20 billion or something. Like, that, that chart that you showed with the top 50 alts being below— the reason that chart came up is because I tweeted the UNI chart, um, about how UNI's below its FTX low. Yeah, which is insane because Uniswap is like the most well-known DEX protocol. And so people are just like not buying these tokens that—

but that never once traded at a reasonable valuation.

No, but you have this for a lot of tokens and even like the good, even like the good DeFi tokens.

Yeah, the good projects even traded at—

Dude, we talk about, we've talked about like AAVE on here a few times. AAVE is like a great protocol, massive, tons of TVL, but it's still very hard to make the case for the AAVE token, at least to me, because it's just like, you need so much more revenue for what it is. And the market is just kind of doing that. And then this whole like dual token equity structure, you've seen a big movement in that area too, where like, you know, it's like MetaDAO is doing these ownership coin things, which you have the token and it's actually tied to the business and it's actually tied to the IP. And it's like, that's how this stuff kind of should be.

Yeah.

Like, it's stupid how you have the equity in the token separate all the time and the token doesn't do anything. And so I just think the market it is going to— and I know Pump is doing their ICM thing. I don't know what those tokens are going to look like. Hopefully they're not like pure meme coins. Hopefully those will get like revenue streams and stuff too. Um, but you're seeing the market move to this, like, we no longer are willing to like bid. Like, if you have a product but your token is bullshit, yeah, I'm not going to bid your token anymore because we kind of know that game now.

Yeah, no, no, for sure.

Which is healthy. It's good.

I, I, yeah, it is healthy. I guess like still with stuff like Solana or Ethereum or Bitcoin, I guess just like the kind of net, the tokens that more derive their value from like kind of the quote unquote network. Like how do you think that shakes out?

Um, I think that like Bitcoin's different.

Uh, cause I think like when we were talking about ETH before all this DAD stuff, like we were all kind of agreement, like ETH's kind of cooked and like the fundamentals haven't really improved at all.

I still think ETH is mostly cooked, but like, yeah, exactly.

Well, like the price has gone up a ton, but that, as Yann was saying, you know, in the short term things are driven by flows and that was the DApp flows. So like, do we just think ETH is cooked continually or Bitcoin, you know, rises, then there'll be enough money to buy and it's going to have a really bad drawdown? Like what, what do we kind of think?

ETH is like super simple to me. It's, will people really value this thing as money or not? And that's all it is. And it's like, I can't tell you the answer to that question. It's never going to justify its fundamentals. Whereas I do think that like Solana fundamentals will keep getting better from like financial perspective. Um, and so that's why for me it's like, it's easier to hold SOL over ETH because I'm just confident. Like I know 1, 2, 3, 5 years from now, like every year Solana, uh, one is just going to be doing like way more. Obviously things can change and like competitors can come and whatever, but it's like, I just believe that though their metrics, their on-chain metrics will just keep getting better and better. Whereas ETH, it's like, you just gotta believe if, if, uh, you know, I feel like this is a topic that I don't really feel like even talking about anymore because it's like, it is what it is. It's ETH becomes this big monetary asset that people hold because they think it's like an alternative to Bitcoin, or it just trades a lot less.

What about Zcash?

Zcash is like, exactly, it's like, how are we talking about privacy? I don't know with Zcash either, man. It's like, I mean, Naval's a great KOL and Mert is an amazing KOL too. There is a real, there is real tech with Zcash. Like they do have real tech. They're the only project that has an actual light client, which is like pretty pretty sick.

Um, it has got like the shielded thing really quick. Yeah.

Uh, yeah, well, they have like a transparent pool which just works like Bitcoin, so you can see everything. And then there's a shielded pool where if you put your assets into there, then it becomes like private, right? And the shielded pool has been, you know, growing pretty substantially. Uh, over time, especially recently. And yeah, it's still though, like, again, it's another store of value asset, right? Um, and again, how many store of value assets are people— obviously Zcash is tons of distribution, it's got a lot of good momentum, there are like new teams working on Zcash, so there are like a lot of new faces in working.

But it's like Bitcoin, like you can't really program it, right?

Uh, no, but you can, uh, you can probably do like L2s and stuff easier, um, with C-Cash.

So I guess like my, my thing is like I'm trying to gauge like, is this ridiculous run-up simply a result of something that's like pretty— I mean, I would assume it's relatively supply cornered for the mo— or could be for the most part, how, how long it's been out, right? Um, so you have that perspective, you have— or like that factor. You have obviously Naval, right? KOL, Mert KOL. It's attention, it drives flows. You have that. Um, you have, I guess, like the privacy narrative, like, okay, like, you know, using that as like another kind of way to sell the story from the KOL perspective. And then you have, um, you know, to your point, people are actually like doing stuff. So like, how much of this is pretty much just like front-running things like nar— or, you know, like events, like, you know, it has its halving thing coming up, it has all these, you know, people pumping it. Well, not pumping it, but, you know, talking about it. Has like all of these things going on. Um, and how much of this is people just kind of like front-running these flows, or just like a momentum trade versus like an actual shift in like the underlying view of Zcash and, and privacy, is like what I'm trying to gauge. Versus like, if it's one or the other determines like if I want to build a position over time or look to buy on dips in the future or whatever.

Yeah. I mean, cop-out answer is it's definitely a combination of everything, right? The question is just like the weights.

Yeah. That's, I'm trying to gauge like what you think the weights of that are, right?

Like Zcash, like Near's, Near's and TentBridge has been really good for Zcash. You can now, you can do like swaps on Solana, like buy 100K of Zcash with like less than 10 bips. So it's becoming more accessible for, for everybody. There, there's, yeah. Yann, I don't know, you wanted to say something.

I was say it's also just like the main pure play bet on privacy, right? So I think there is something to be said about there being one asset everyone coalesces around for a narrative. And so you don't have—

I mean, yeah, it's like kind of proven that, I guess, the— because like when it first started pumping, I was like, I'm not buying this. And then I looked at things like XMR, right? Um, even Nochain, right? And I was like looking at these things that are, you know, like additional, like, you know, betas to the privacy narrative, and I didn't buy anything because like effectively it's like I might as well just buy Zcash at this point if I'm gonna buy something. Because buying the— I don't know, buying the— to me, buying, buying the betas don't ever work.

Think about if Zcash and Solana had a baby, Jason, wouldn't you want to invest in that one?

I just don't know if people— my thing is Zcash. My thing, my thing with Zcash is like disclosure, um I just like, once the momentum runs out, I don't know how many people who have, are buying recently are gonna like want to keep holding it while other stuff starts to go. And then you start to get more of these.

It's also like not listed in many places, right? Like it was delisted a while ago.

Yeah, they're trying to— Mert has been talking about this. It's really tough, especially in like the UAE and stuff. You can't get exchange listings for it. Um, I think in like UK it's probably pretty hard. So yeah, exchange listings, that's why though getting it on Solana I guess has been pretty good. Um, it's opened up an easier path for a lot of people to buy. I don't know, Zcash is one of those ones where like I'm totally comfortable sitting on the sideline and if it goes up a lot, like good for them. Like I, I think Zcash is, you know, it is, it has this weird mix of people who have been in crypto a long time that have kind of just like value bag held it for a long time and like people have been working on it, you know, over the years. Um, the tech is legitimately— it's like, if Zcash goes up, it's not a bad thing, right? It's not like Vapor. It's, uh, you know.

Yeah.

I mean, it's not insanely— it's at like 5.5, right? That's not outlandish for—

that's the thing, right? It's not like— yeah, I don't know.

Noc is 300.

It's—

yeah, it's like, it's just tough to buy. 7x up in the past month.

Well, you could buy NOC up 2x in the past year.

Yeah, I feel like maybe I'd love to buy like a little bit and then I bought some, I bought some at 5 cents.

You got to buy some to get your real entry because you know it'll nuke right afterwards. How much do I need to buy for this thing to nuke? It's a sliding scale. The more you buy, the more it nukes.

I actually think like it seems pretty cool.

What do you like about it?

It's like, it seems like it has all the privacy of—

you're talking about Noxchain?

Yeah. But then they— but you can actually build apps on it. It's like literally like Ethereum.

That's not the cool thing about Noxchain. You're a bad shill. Great. I don't own— I'll watch you. Yeah. Delphi owns Noxchain, right? Uh, but Avi had a good post, right, uh, that he put on the portal. Basically, the, the, the thing that's kind of cool about it is that all the miners in NoctChain compete for new, uh, rewards by like generating these zk-proofs, right? And so basically, the better you are generating these zk-proofs, the more rewards you get. And then that makes the chain like faster because you're now creating better proofs. And so it has this very nice kind of like flywheel aspect to it where miners—

wait, did it make the chain actually faster?

Um, or have I just— yeah, like the proofs, they're more efficient and faster and everything. So it's not like Bitcoin where all your mining computing power, you're not improving Bitcoin or anything. You're not making it faster or anything. You're just putting more. Where in this case, if you're actually the miner, and then also in Bitcoin, your chance of getting the rewards is directly proportional to your like hash power basically, right? It's just like random chance where in this case, if you're like actually a really good miner and you're like innovative and you're going to, you know, so I think that's kind of cool. Will it gain like big adoption? I don't know, man. It's, it's, uh, how many like of these chains are going to really go mainstream, right?

Yeah. But like you could build like private versions of apps that exist on like Ethereum on it, right?

Yeah, but like, what's the market? I mean, well, this is the whole 5.5 billion according to Zcash.

It's a 20x.

Yeah, but do people want to do— there's a lot of stuff that you don't want privacy for though. There's a lot of stuff that you don't want privacy for. Like, you don't want privacy for DeFi because you need to like see, uh, as much information as you can to like keep the system solvent and everything, right?

And so I'll accept a few percent of Ethereum's market cap as the private version.

Yeah, we'll see. I'm still— yeah, uh, I don't know, it has good momentum, C-Cash.

What did you guys— if, uh, if you don't mind switching gears— what did you guys think of the, uh, the PumpFun acquisition, the Farcaster stuff? Uh, seems like some M&A type activity in crypto is continuing to heat up.

So this was kind of like that whole dual token equity thing I was talking about before. I think these were really good, um, two kind of sides of this where in the Pump acquiring Padre case, it's like Padre had this token, but there's no legal rights or anything. They said they were going to do things with this token, uh, and they didn't. And then Pump bought Padre. They didn't buy like the token and everything, right? They just bought the equity in the business that was not attached to the token. And then the token, they were like, we're just going to rug the token now. They took like a snapshot of the Padre holders and they're going to get them pumping and like return and everything. But there's no like actual legal reason for them to even do that too, right? They're doing that for like optics and, you know, wanting to, you know, not come across as like rugging the Padre token. Whereas in like the Forecaster situation, like they bought the Clanker token. And like the Clanker protocol, which is like this launchpad that is like integrated into Farcaster. And they started doing buybacks right away. Right. And so like very aligned for like in that case, if you're a Clanker token holder, Clanker went from like $20 to now trading at $115. So like that's a great acquisition, right? Like whereas in the Padre, it went to zero equities, right?

Like if you own a stock that gets acquired, right, the price just kind of gaps.

Right. And that's what you want. That's what you want. You don't want the Padre situation where it's like, again, they're giving them like tokens. Pump is, but like, there's no— you don't want the ability for just to like rug the token. And, and Padre token holders, I don't know how much they're going to get of Pump. Pump can just give them whatever they want because it's kind of like a goodwill thing, right? Um, so again, this just goes back to like, for instance, if you were to, if you were to, if, if the Padre token was like a MetaDAO token, they would have actually, since the IP is attached to the token, like they would have had to actually buy out like the token. Holders, which I think is the way these things should be.

Like, yeah, I mean, the difference though is like, is Forecaster doesn't have a token and Pump does, right? So if they're acquiring, they need to shift that value flow to their own. So I mean, like, you know, they, they could realistically give Padre holders their dollar for dollar equivalent pre-acquisition and it's like, yeah, it's, it's a rug to some degree, but you're getting what you could have sold it for. You're just losing all the upside. So you probably lost opportunity. Opportunity cost and whatever you're sitting in for Fondry. But that's probably the fairest way to do it. I mean, I think it's super bullish pump though, right? Because this is, everyone's been, you know, there's always been this disconnect of, yeah, they have this balance sheet, but like as a token holder, you're not actually getting access to that. This is kind of the ideal way to get access to it, right? They are using it to buy companies and using the value generated by those companies to buy back pump. So like, this is the cleanest way as a token holder for them to monetize the balance sheet to favor you.

Oh, as a pump holder, I had no— you know, but it's like, it's just, it's, it makes you realize if you're buying, you know, a lot of these tokens, they give you zero rights if like something like this goes down. And, uh, if people— I think this like there's a token— equities have like this equity premium thing. I think tokens are going to have this like this token discount thing, right? Where like if you own a token, you need to value it. And that's why you do see a lot of tokens, like even Pump's token trades at a very low multiple, right? Whereas if the Pump token was equity, it would trade at a much different multiple. It's the fact that it's a token that it trades at such a low multiple. People are just discounting tokens even though Pump has like shown this whole time that they, they're doing everything they can. To be good for the token. It still trades with this— it's still not like 100% clear, and there you still don't have legal rights and everything. And so it trades at this pretty big discount.

Um, yeah, it's definitely a gap that, that was not appreciated. Um, I'd say, you know, in like 2021 period when everyone— there was just unanimous consent that tokens were the best capital formation tool because of the flexibility and, and and the, the path to liquidity and, and kind of enabling some form of utility alongside the economic value that they, that they came with. And then, right, and then when things go to shit and you realize you don't really have the protections that you thought you had, and so that gap wasn't really obvious when things were going great. But, um, on the bright side, it is going to be gradually corrected, right, with, with all these launchpads and, and just the approach and people being tired of being burned and kind of voting with their money and ideally forcing the protocols to give holders some more certainty.

Yeah.

Can I talk about the Galaxy off the note?

Yeah, go. Why did Galaxy dump? As a Galaxy shareholder, I was very upset with Duncan yesterday.

You should be happy. Listen to this deal they got. So they raised—

look at this deal they got.

They, they raised a $1.15 billion exchangeable note, which is different than a convertible note. I learned all about this with my friend Chat yesterday.

Do you have it on, on your Twitter? You want to share your screen or—

I can just explain it. Okay.

Yeah, that's fine.

But basically, so it's $1.15 billion they raised, and then they could raise another $150 million after that. And essentially, they, they struck the call portion of the note at $55. So I think that was like a 37 premium to 37% premium to the day's close. And it's like half a percent interest per year. So basically the note's due 2031 and they can choose to pay it back in cash or shares. With like the conversion rate starting at $55. Um, so basically if it's like way above $55, they'll probably just, you know, pay it back in shares. But if it's like around that price or something, then they can just, you know, um, you know, pay, pay them cash one-to-one. They'll kind of decide what, what's best for the company at that point. But basically, like, you know, their crypto business lines grew massively in Q2. Like, their trading volumes were up 140%. Their loan book grew 60% from like $1.1 billion to $1.8 billion. Their staking business and like assets on the platform, their AUM grew from $9 billion to $15 billion just from like one quarter to the next. So like their crypto business lines are like growing really, really quickly. And so like there's lots of opportunities to deploy capital there. Plus, you know, they're expecting to get another $800 megawatts of power capacity approved at their Helios data center. So this would give them like a lot of capital to kind of fund the equity component of that, which is like super lucrative if they can.

Yeah, it seems fine. It's like rational for the market to kind of like sell off a bit.

But then the other thing where it's like the market doesn't make sense is they had a convertible that they issued in 2021 at like a 3% interest rate and like the strike price was like $36 or something, but they can essentially refi that convertible with this one and pay those people back in cash and lower their— not only lower their interest payments, but also lower the dilution that they would've incurred if that got exercised. So they, they just got a better deal and they can just roll that through. So it's actually their interest that they have to pay goes down and their dilution that they would've incurred goes down if they pay it back in cash and they still have like $700 million left.

So the, the 2021 convertible note was for how much?

I think $400 or $500.

Okay, so that's why you can pay some of it back. Is that something that they can actually use this for? Is that like one of the—

yeah, that, that will— because basically it's like at that point they struck like not as good of a premium and a higher interest rate. So now they've struck a lower interest rate and a better premium, so they can—

instead of issuing those shares, I think it would have been like, uh, instead of issuing those shares to pay down that note, they're just going to use $400. They could.

Yeah. And so it's actually less dilution if they do that and less interest payable.

Got it, got it.

Kind of a giga chad move.

That makes sense. What do you, uh, see about crypto stocks? What do you guys think about that EZLA thing?

Oh yeah, we should have talked about that.

The data, they, they— so yeah, quick, EZLA is like, it's not one of the top 2 Ethereum dApps, but it's one of them. And they sold ETH to buy back their shares.

Did they sell or did they just move it?

They sold.

Oh, they sold it and it also moved Bitcoin. That's what it was. Sorry.

Okay. So EZilla sold 50 mil of, 40 mil of ETH to buy back their share because they're trading below NAV. And like, this is like in a vacuum what kind of these things do. It's like if you're above NAV, you issue shares. If you're below, you sell the underlying and buy back. I think people were kind of surprised that they did it at this point. Point. What's also interesting is that I think they still had like a lot of cash on their balance sheet from their latest raise, but they didn't use the cash to buy back their shares. I think someone was saying that like legally the cash has to be used to buy ETH. So trading below MNAB with this cash balance, instead of going out and just buying ETH or something to maybe— that can like help—

or they actually sold, um, Ethan, it's like if you're going to do it, you want to be first, right? Like that's the rule. You always— not, I wouldn't put this in the panic bucket, but more so in terms of like rational approach. If you panic, you want to panic first. And if you're going to do this, you want to do it first, right? Because the second order effect is that now your stock becomes more attractive. And I think in the grand scheme of things, you will have like, you know, what can drive an MNF premium and, and its management style is one of the things that I think can do that, right? And so if you have a management team that will actively optimize for ETH per share, then, then as a passive bidder into ETHDADS, you would choose this one over the others, right? So I, I think them doing it early, doing it first is, is very constructive for future bid and, and MNF premium because they know that They're not really going to move the ETH price by selling 40 million, but they can do quite a bit to help their, their like ETH yield, you know, on a per-share basis. And so, yeah, I think it's a good move.

Yeah, I agree. I also thought it was like a good move. A lot of people were upset because they're like, oh, these aren't like the Sailors of the world that are just gonna— these aren't like— Gabe was so upset. Gabe was like shaming them so hard on Twitter.

I'm moving to Onad.

Okay, wait, I can— these are the exact numbers, but just to show—

you want to go back over this Galaxy? I thought we were over with Galaxy.

I know, but it's just cool. So we're never over. They can sell, yeah, like 8 million shares, oh, like in the future at $55 a share to avoid like having to issue 13 million that would have had to happen in December 2026, or they like pay this back in cash. So even if they use the $445 million to refi, they still have $700 million of cash and then avoid that dilution. Plus the interest rate is half a percent versus 3%.

Is this your thread?

No, this is probably your written house.

I'd follow it. This is the goat written house. The goat of data centers. Um, yeah. And then that, that declines their interest payments by $7.6 million a year. So I think like basically what happens is when, when you issue these convert— these like kind of convertible type instruments, um, some of the funds who like participate will short the stock, um, to like hedge themselves in some sort of way. So like that, maybe a little bit of that's happening, but like giving them another billion, like $1.3 billion potentially of cash, given all the, you know, good opportunities they have to deploy it at a very low interest rate. As a long-term holder, I'm very happy with this move.

Hey, Galaxy, I think Galaxy is my biggest. Yeah, it's my biggest single stock.

Bigger than Camco?

Yeah. Shit. Well, Camco, I just like didn't put a lot into when I bought it. So like it went up a lot, but pain. Cool. Uh, I mean, we're up on like close to an hour. I don't know if anybody has anything else they want to talk about. Um, I feel like FOMC is going to be mostly a nothing burger today compared to like past ones. They're going to cut and then they'll say some stuff, but then—

So Jason, I hear that there's no way they're hawkish when the government shut down. Is that true? Is the rumor true?

It's what I've been told, you know. I don't have, uh, the red phone to Jay Powell, so I can't confirm, but good afternoon.

Yeah, I mean, it's like, it's hard for them to be— even you have job cuts and all this stuff, it's just like there's too many reasons for them to—

yeah, it seems—

yeah, Polymarket says it's a pretty much a lock, 98% chance there's a 25 basis point cut.

Everything I've seen is pretty much like it's a lock.

Yeah, yeah. I think people are expecting like 4 cuts in the next 5 meetings.

This guy betting no in the comment section says, my mom works in Fed, she said Powell will not cut. Wow, this guy's got some crazy inside info. We can make a quick 50x here.

I mean, 100% priced in. If you actually bet no, you would make like a shit ton.

Yeah, it's 1.6 cents to buy no.

It's a good hedge. What's your—

if this guy's mom works in the cafeteria, she overheard them in line.

Yeah.

Oh God. All right guys. Um, yeah, I thought that was a pretty good episode.

Honestly, we probably gotta turn it off. The market keeps going down. It's been going down.

Yeah.

We turned on the stream.

Yeah.

It's been straight down for the last hour. Um, yeah, anyways, uh, yeah, I hope, uh, everybody enjoyed the episode and we'll see you all in a couple weeks.