Hivemind: Ethena Founder, the GENIUS Act & Overvalued L1s

Where are the 3 places in crypto that produce $10 billion of cash flow a year? It's Binance equity, Tether equity, and the futures market in terms of the basis that's sitting there. Athena is still pretty tiny now relative to the whole derivative market. We're only like 6-7-ish percent of the entire market. And I think like an end state of that is we could be 20-25% in total. So $20-30 billion if the market doesn't grow a huge amount from where it is now.

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. Hi everyone, my name is Jose Macedo, and welcome to another episode of The Hive Mind Podcast. The 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. So today with us we have the usual crew, Ceteris Paribus from institutional research arm, Jan Lieberman, managing partner at Delphi Ventures, venture partner Duncan, also known as Flood Capital, myself, and we have a special guest, Guy Young, founder of Athena. So really excited to get into some of the stuff they've been up to recently. So maybe to kick it off, Guy, you guys had a big announcement this week in terms of this USD vehicle getting into the treasury company game. Do you want to maybe give us some high-level background on that and why it matters?

Yeah, for sure. I think we're actually approaching this vehicle back in December or January at the beginning of this year. So this was, I think, before you'd got to sort of the level of froth that we've seen within the market now, where you seem to, you know, seem to see one of these vehicles now pretty much every single day coming out. I think the view that we took was following the performance that you saw of Circle in the public markets, it became very clear that like the demand for this kind of theme or narrative within TradFi just so far exceeded the supply of ideas that you could express that view. And the amount of capital that's sitting within those markets that wants access to these type of themes was just an interesting sort of opportunity for us. I think at like a super macro lens, I've had quite a bit of concern, I'd say, in the last 18 months broadly around like flows within altcoins in crypto. If you look at the peak notional market cap for altcoins in 2021 and then 2024, It peaked out at pretty much the exact same number, which is just under $1.2 trillion. And to me, it was a pretty strong indication that maybe that's how much money actually sits in the world to bid what is largely 99% complete vaporware tokens. And there is, I think, a maturation that we need to go through as a space, which is if you're going to take that step from $1.2 trillion to something that's a much higher number than that, you actually need a sort of like put these assets on the plate of investors who sort of deal with real size in equity markets. And so I think the thing that was compelling to us was less around the sort of what I view as a very ephemeral moment in time where these things are trading at crazy premiums to NAV, but more actually just opening up an investor base where even if you're giving access to your token at 1x NAV, that's better than just having no access at all to these markets. So I think it was just a very interesting matchup for us of the theme that we're sort of building within is clearly in extremely high demand within TradFi. And then I also think we have an extreme flows issue within crypto and this is actually the way to solve it.

Yeah.

Yeah, makes sense. I also realized I didn't even ask for you to introduce yourself, which I probably should have done. So maybe you want to give a quick intro and we can clip this back to the beginning.

Yeah, for sure. My name is Guy. Founded Athena around 2 years ago now. And for those that don't know, Athena issues 2 distinct products. One is a synthetic dollar and the other one's a normal fiat stablecoin called USDE and USDTB. We came out to the market around 15 months ago with the core product with USDE. It was the fastest scaling dollar to ever reach $6 billion of supply. So it did that in under 12 months. And then right now we're sitting at just under $7 billion of supply. On USD and 1.5 on USDTB. So yeah, that's the brief background behind the products. Yeah.

Yeah. And apologies for my shitty moderation. Just back from a festival. I think my brain's still a bit slow, but yeah, we'll maybe clip this back. Maybe we won't. We'll see how we feel. Yeah. So it's exciting on the USD asset. And so when does this like actually start trading and how much was raised and like maybe all the details around that. You also had this tweet about how it's the highest cash-to-asset market cap ratio, or Athena Labs did, which, yeah, maybe a few more of the details on that would be cool for people.

Yeah, for sure. So the total vehicle size initially at the moment is around $360 million, and then $260 mil of that is cash. I think the important point here is that the cash component is by far the highest out of any of these vehicles that you've seen because a lot of them have kind of just become exit liquidity vehicles where people are just putting in tokens in kind and then hoping to sort of flip them on to someone else in the public markets. I think we had a very strong intention here that we actually wanted new cash to come into the vehicle to sort of, you know, help with some of the flows issues that we're discussing earlier in this chat. And I also think that, you know, the majority of the vehicles that you've seen to date have been focused on the majors where if you just express the amount of cash that's been raised relative to the circulating market cap, Athena's was roughly 8% of the entire circulating market cap that's been raised and is there to actually purchase the coins in the open market. And the next highest one there is actually Hype, which is sub-2%. So it's really quite out of market in terms of the size of the vehicle relative to the size of the underlying asset. And I think there's going to be an interesting sort of reflexivity that results from that, which is the cash amount that's raised here can have a pretty significant impact on the overall sort of token where $500 million doesn't really move the needle on an ETH, for example. That's awesome.

Yeah, I think—

sorry, go ahead, Jan.

No, I was gonna say what's really compelling, right, to thinking about what makes these vehicles successful. It's the structure of the vehicle, which a lot of people have figured out how to get these things to be pretty lean. I think it's, it's the, the way that the cash is used, right? And, and so I think you guys are doing it in a unique way where it's, it's basically being immediately redeployed into the spot asset, which like you mentioned kind of creates that flywheel and makes the value accrual for the equity side really compelling. And then the other is what you, what you really need for this to, to have legs is the demand for the stock, right? So you drive that one way through, uh, this, this way to generate an increased amount of tokens per share. So what a lot of these things generate in terms— or they call yield— is increasing the amount of, you know, Bitcoin per share of MicroStrategy, right? And so in, in this environment, you have that ability to do so because of, of the, um, the ability to buy from the foundation at a discount. And that's certainly, you know, one of the reasons that make it appealing. And I think the other that, that most of these outside of probably Bitcoin don't have is, is their is a very large amount of, of kind of appetite for this pure play equity exposure into stables. So you have the regulatory environment becoming really friendly with the passing of the Genius Act, and then the, the obvious elephant in the room is, is Circle and what that traded at, and just the insane amount of appetite and, and price action on that asset. And, and so, you know, we can chat through kind of the, the headwinds that Circle faces from a, a, a treasury rate perspective when, when, when that gets cut and then kind of how that's counter to, to your business in the sense that, uh, when, when, when funding rates come down or when, when Fed funding rates come down, crypto funding rates go up. And so I think, you know, there, there's going to be this really big rotation from, from Circle into your vehicle. And I think that, that the kind of trifecta of those elements really makes it an appealing play.

Yeah. And for the, maybe, yeah, like adding on to that question for our extensive audience of public market investors and institutions, maybe you could give like what the pitch would be for them in terms of how you guys, how USDT outcompetes like the big two stablecoins out there, like how you can actually outgrow them.

Yeah, I see them as actually just fundamentally different products. So I think the use case for stablecoins or dollar-adjacent assets is actually quite varied. So it could be trading collateral on centralized exchanges, which is still one of the biggest use cases today. It could be dollar rails for like the developing world. There's payments, remittances, all these different pieces. And I think where the world's going is actually each issuer is actually going to find a niche that it's particularly good at and try and dominate within one of those niches rather than trying to be everything to everyone. And so I think actually Athena's been quite honest around what are the use cases that we can actually do 10 times better than everyone else. Because I think when you're a startup trying to compete with, you know, multi-tens-of-billion-size businesses, if you're coming in and, you know, it's quite an arrogant point of view to think that you can provide a better product across all of those axes. And so I think the view that we have is for the savings use case rather than like a payments one, a dollar with a structurally higher return is a better savings piece of savings technology than one without. And that sort of can be carried across into different use cases, whether it's trading collateral on centralized exchanges where you can use it as collateral to trade perps, whether it's embedding it into different DeFi applications and using that to sort of build net new products. I think that's the niche that Athena sort of found an area to actually grow relative to those competitors. I think one other thing to just point out is that it's important to remember actually the impact of being able to generate like 18% on your AUM rather than 4%. So average APY for USD was roughly 18% in 2024. which is, you know, 4 times higher than what Circle was producing on a gross, um, gross interest income basis. And so you actually look at the AUM of Athena, if you're adjusting for that, we're actually sort of at $28 billion of supply relative to where Circle is right now, if you adjust for it on, on that basis. And so I think that that's one piece that people just need to consider, which is you don't actually need the balance sheet of this thing to be $50 billion for it to be of a sort of similar size in terms of revenue generation versus those businesses. And I think one of the points, just with reference to both of those competitors, I think we see actually Tether as more of a partner and someone that we work with rather than against. Well, I think Circle looks slightly different. So I think one piece that people don't understand is that actually Athena, I think, is one of the top 3 or 5 largest holders of Tether in the world. And the reason for that is that actually to margin derivatives in CeFi, you actually need Tether for your collateral, i.e., 70% of the PERP market is actually denominated with Tether. And what that means is actually a dollar of collateral that's coming into Athena roughly translates into $0.70 of Tether supply growth as that's happening. And if you take a step back and actually just think about why is it that Tether doesn't pay yield? Well, it's because like the futures market and the basis within centralized exchange is paying the yield for Tether on their behalf, if that makes sense. So a huge amount of the demand that comes for Tether is people doing what Athena is doing outside of Athena. And so all we've done is actually productized the use case for Tether to capture basis within CeFi and made a new product out of that. And so in some senses, like Athena is like a reward-bearing version of Tether and the vast majority of the collateral that sits within Athena there is actually Tether itself. So I think we're actually pretty helpful to the growth of Tether more broadly and, yeah, you know, support each other in terms of doing that.

Yeah.

And Guy, just, I'm sure almost everyone who's listening is familiar with Athena, but maybe could you just walk through how you generate the yield on Athena?

Yeah, for sure. So the very basic idea is, you know, a cash and carry or basis trade where you're long spot on one side and then you short the future or the perp on the other side. And there's this concept of a funding rate within crypto, which I think you can kind of loosely analog here is kind of the proxy for the cost of capital within crypto to be long. And I think the very simple way to think about this is just naturally these markets drift up through time. People want to pay to be long crypto on leverage. And all Athena is doing is kind of harvesting that speculative excess that sits within the derivative markets. I also think there's a pretty good comparison here, which is all forms of dollar assets or stablecoins within crypto. Is actually just a form of lending. So when you're buying Circle's USDC, you're just lending to the US government and you're getting an IOU in return. When you're buying Sky's DAI, you're just lending overcollateralized against ETH in DeFi. And then USDE is just you essentially financing the loans within CeFi in crypto. So you can always think about dollar assets as just lending to someone and you're just getting paid a different interest rate for doing that.

And then, yeah, that was a good explanation. And then, so in 2024 versus 2025, Um, with kind of like the explosion of the ETFs and, you know, basis coming down quite a bit because now these more institutional players who previously— like, I think the basis trade in, you know, 2021 cycle was elevated at 50 or 60% on some of the major coins for like months at a time. But now with like, you know, more liquid futures market, um, for these, you know, professional money managers and ETFs that they can, you know, post as collateral I would assume a basis is obviously contracted quite a bit. So like, how do you kind of, you know, what are the dynamics you guys have experienced internally and how do you see that playing out as like, you know, the Solana ETF comes out and kind of you go down the longer tail here and, you know, these professional money managers can get that opportunity?

Yeah. So I think the pools of capital that are actually doing the basis with the ETFs and the CME are actually completely distinct to the pools of capital that are doing it within crypto. So like a Millennium, as an example, literally cannot put a dollar of their collateral into crypto because you need like a custodian that has like a AA rating as one example over there. And so there's actually just these enormous pools of capital within TradFi that do these things in the CME because it's almost perfect credit risk to be able to do that, but just literally cannot touch crypto. And so you actually see extremely wide divergence between the CME basis and what you find within crypto. which is almost accounting for some of the credit risk that you find within the exchanges within crypto. So just looking at the numbers from '24 on a cash-adjusted basis. So one important piece here is that you have to cash fund the CME. You can't put down just pure collateral like you can within on portfolio margin within crypto. The basis was kind of like 6.5% last year. So like 150 basis point spread to treasuries while USD was at 18 last year. So you're talking about a gap of like 1,000 basis points wide. While people could do this in the CME when that was happening, the view that we have though is that for a bunch of different reasons, it's more efficient to do things through Athena than doing it yourself. I.e., a lot of hedge funds who are doing this actually just put the majority of their fund within Athena because not all of the funds that are— I don't know if you want me to get into the details of like the dual staking.

Yeah, yeah.

There's a bunch of different reasons basically why. You basically can amplify the yield because not all of the amount of USD is actually staked within sUSD. And so to the extent that it's being used as money in AMMs, in order books, all these different pieces, you're never going to have a 100% stake rate while that's happening, which means that Athena is always strictly beating whatever you can do yourself when you're capturing the basis. And so the view that we have is actually, yes, basis will contract through time, but when these institutional flows of capital come in to do it, we want them to do it through Athena because it's a more efficient conduit for them to be able to access things themselves. So this is part of the thesis, right? I think one of the criticisms was like, yeah, basis is going to come down from 60%, which is where it was when we launched. And it's like, yeah, obviously it's going to come down and that the person that's going to push it down is Athena and we're going to get a lot bigger when we do that. And that's just like a very natural thing that happens in all financial markets, which is you've identified some sort of excess spread or alpha. and you just say, I need $10 or $20 or $30 billion of capital to bring that down to an interest rate that makes sense. So all Athena is doing is kind of actually bringing down the cost of capital within crypto to an interest rate that actually sort of makes sense to people in tradfi and isn't 20 or 30%, if that makes sense.

Yeah, that makes sense. And then Jan and I have discussed this before, but I'm really curious to get your take on it. So just like kind of zooming out a little bit to more like broader leverage in the market. Typically, like, you know, a sign people really look for is super high funding rates across certain coins. But now with like Athena, you know, you guys have helped dampen those funding rates and you're not necessarily like— so you bring down those funding rates, which can kind of like mask maybe how much is on the long side or how speculative the positioning is on the long side. Do you have any thoughts on that? It's something I'm pretty curious about.

Yeah, no, I think it's true. I think things are more overheated than they appear on BTC and ETH than before Athena existed. I think one way to clean for this is basically looking at Hyperliquid funding rates. So if you look right now, Hyperliquid's at like 25 while Binance is at 11. There's a couple of different reasons for that. One is that the retail flow on Hyperliquid is obviously much more organic than what you see within centralized exchanges, which is generally, you know, would have more institutional investors sitting on there. And then the other piece is that you don't have portfolio margin on Hyperliquid where you can fully collateralize with $100 of BTC to short $100 of, of perps on the other side. And so you kind of have to like halve the funding rates that you see on Hyperliquid to make them comparable to what you see within CeFi. Anyway, the reason I'm giving that context is that Athena doesn't yet operate on Hyperliquid. And so you can kind of think about that as like untainted views of like real retail flow. Which doesn't have as much institutional capital sitting there, plus it doesn't have Athena. And so I think Hyperliquid is actually a very good reference point for how heated is the market actually without some of these impacts.

Yeah. Thank you.

Yeah, appreciate that. Yeah. And then this year, this week rather, we had something that crypto has been begging for for a long time with the passing of the Genius Act. It's the first federal law tailor-made for stablecoins. And today you guys announced this partnership with Anchorage, which makes you kind of the first, I guess, Genius Act compatible stablecoin. Could you maybe talk a bit about the Genius Act, what you think of it, and then what exactly this partnership is and what it means for Athena? Because I don't think I actually fully get that.

Yeah, for sure. So all that's happening in the background is we're just moving the issuing structure from offshore BVI entity into one that's actually having Anchorage issue USDT themselves. I think the important piece here is that you basically have an onshore regulated bank. So Anchorage is the only federally regulated bank that deals with crypto in the US. And this is going to be a broad product suite that they bring out where it's almost genius as a service for different issuers who are coming through to reach that level of compliance. I think the view that we have in different product approach here is that USDT right now is not accessible to US retail, which is a bit of an artifact of like the last administration when we sort of launched pre-Trump coming in. And the view that we have is we almost have like a dual approach where USDTB is obviously, you know, once we get this in line with Anchorage, is going to be there compliant with Genius and able to be used within the US. In any place that sort of like payment stablecoin status allows. And then USDT, which is more of something that exists within DeFi offshore and isn't there within sort of like the regulated financial system within the US. And so I think they're both going to be important markets going forward. But I think broadly, actually, the learning that I've had is we're obviously extremely excited to be able to do this within the US. But I think the learning that we found is that the main use case for stablecoins actually kind of exists outside of the US. Like most people in the US have access to instant digital cash in just a different format, whether it's in Venmo or these different applications. And it's also going to be a much more competitive market when it comes to your ability to extract revenue from that market, because it's so intensely competitive when you have a money market fund sitting alongside stablecoins. So I think the view that we have is we're sort of pleased to be doing this, but actually the offshore markets that exist outside of the US are still the most interesting places to be operating. And I think that Tether is just the best example of this, which is that's the strategy that they took from day one. And you can kind of see that that's paid off very well, very well for them through time.

Yeah, that makes a lot of sense. You think Tether is going to come onshore for the Genius Act too? Because they've said in the past they weren't going to, right?

I saw some news article out yesterday, which is I think they're going to issue a different form of USDT that is basically compliant within the US. I can't confirm whether that's true or not. It was just something I sort of read online. Uh, but I think that that makes perfect sense, which is it's kind of similar to the approach that we're taking, which is we'll issue something onshore, uh, which fits the mold of what they're after. And you can sort of keep the core product, um, operating in the way that it is now, um, in the markets that we do.

Yeah.

Yeah.

I think it was confirmed that they are just in, uh, like Saks mentioned.

Okay, how does that kind of fracture liquidity, or if at all, for, you know, all of these USDT margin, you know, perps on centralized exchanges? If they issue a new token, is that, you know, are they fungible at some level, or what's US-based, I think, versus internationals?

Basically the dichotomy.

Yeah, exactly. So technically no one in the US should be trading on those offshore venues anyway. So I think, uh, yeah, if it's going to be on Binance US or whatever presumably they'll be using the local Genius-compliant one. And then I think anyone in the US shouldn't be accessing those exchanges anyway with normal USDT.

Yeah, that makes sense.

It's going to be pretty simple. I mean, if it's anything like the EU one, like the EU regulation kind of banned using certain stablecoins as collateral, and then Binance just invented this, like, Binance Futures credits. Just like auto-converted you to that. It was like, yeah, pretty, pretty dumb, but such is life in Europe. Yeah, I'm curious, like, we're seeing a lot of just like stablecoins are heating up, like everyone's talking about them. Every big corporate has like a stablecoin strategy. There's a bunch of kind of infra startups, whether it's, you know, the kind of Tether chains or some other stuff being built. What do you think? Like, you probably have a pretty good pulse on this. What's the most interesting stuff being built? Maybe what's like overrated and what's underrated right now in your mind in terms of the stablecoin market?

Yeah, I think I'm quite bearish on like new issuers basically coming to market and being able to compete with the incumbents. I think everyone's clearly excited about the theme and sort of struggling to find a way to express that view, if that makes sense, where One issue with this is that because the product is so commoditized, it's extremely different— difficult to actually differentiate yourself as a startup versus the incumbents. And so if you take a step back and just think about what are the 3 axes that you can actually compete, what does a stablecoin need to do? It needs to be a dollar. And if it isn't a dollar, then you're out of business like the next day. You need to be liquid. And you're never going to be as liquid as trading $100 billion a day as Tether on day one. And then the third axis is return. And if you're backing your stablecoin with just T-bills, um, it's going to be a race to the bottom, right, in terms of the margin they can extract. And Circle now is already starting to run that race in terms of how much they're sharing with Coinbase and all those different parties. And so I think I'm actually quite negative on the unit economics and business models for stablecoin issuers going forward. I think Tether was basically the exception to the rule and existed in a very unique moment in time where they could build moats within centralized exchanges that are very difficult to unseat now. And so I think everyone looks at Tether as the best business model on earth, which I think it is, but no one's going to recreate basically what they did, which just came in a very unique moment in time. And so I'm actually very bearish on new issuers who are coming to the market and sort of say, we'll share 90% of the yield, and that's kind of the angle that we have versus those incumbents. I think that, uh, that's a very difficult sort of path to take. And then also, like, to make the numbers work for a business which is just taking 5 or 10 bps on AUM, which is kind of where those things get down to, you need to be operating at like $100 billion of scale to be a venture-scale outcome business. And so I think that that's the piece of the market that I'm most bearish on, which might be surprising to say as an issuer of all dollars and stablecoins ourselves. Yeah.

Yeah, it definitely seems like a cost center for a lot of these guys to just increase distribution. than, than some new source of revenue. Um, yeah, Tether's business model is insane. It's just like they get to internalize all the margin just by virtue of being so ubiquitous and widely used that the liquidity they provide is basically the, the— that's their profit share is like, you're welcome for the liquidity and we'll internalize all the yield.

Yeah, you can kind of think about it in a different way as well, which is the guys who are trading the most on Binance BTC/USDT, they couldn't care less if you're paying them 4% a year because it's a high-frequency fund who's trying to save 1 basis point on execution when they're trading the pair 10,000 times a day. Um, so what you're competing with isn't actually like 0% versus 4%. You're competing with like the internal cost of capital for HFT funds and market makers who are trying to make 50% or 100% annualized. And so like that USP of like, we'll pay you a bit more yield on this collateral on the exchange. If it's just 1 basis point more liquid to USDT, no one cares about that yield basically for the biggest players. And so that's kind of the moat actually, which is the most liquid pair on earth is just the BTC-USDT pair on Binance. And until that isn't the case, then Tether can easily take all of the income to themselves.

Yeah.

One follow-up on that and then I'll let you go, Duncan. So you said you're not bullish on the issuers. Are you bullish on any of the infra, like stablecoin infra plays, like the Plasmas, the stablechains, but also some of them even more like— which one?

Sorry, Tron.

Tron.

Yeah. Insane amount of money on transaction fees. It's like a couple million a day.

Yeah. Yeah. I mean, if you overlay the USDT supply versus Tron price, that's kind of how you long Tether actually in the last 5 years. It's literally just a graph that goes up and to the right. I am actually pretty bullish on Tron if they can sort of continue to have as much share as they do in terms of actually transacting Tether. There's obviously quite a few new entrants who are coming in to sort of—

What about Converge, bro?

Slightly different angle there. And I think the scale of Tether looks slightly different in terms of transaction volumes there. But yeah, I think, yeah, Tron is interesting with the sort of mode that it has right now. I think it's going to be just quite difficult to unseat the sort of scale that they have. But obviously, a few of these different projects that are coming to market are pretty closely backed by either Bitfinex or the team around it. And so it'll be interesting to see how those play out.

I mean, the thesis for Plasma, right, is basically Tron. It's like, how do we capture some of that activity?

Yeah, I think that's fair. The piece I think that looks slightly different is my understanding is that they're also enabling like zero fee USDT transfers on there. And so, yeah, I don't know how the business model sort of compares to Tron given that. But yeah, I think that's like directionally correct.

Yeah.

Nice. I had a question on the Genius Act and just talking about incumbents coming in, maybe a slight counterpoint. So I'm pretty sure in the Genius Act it said that you'll be able to issue stablecoins against bank reserves held at the Fed. And so after 2008, they did all this QE. So the Fed buys a bond from a bank and then The bank holds that cash on their balance sheet. The Fed holds the bond, but that to kind of like prevent that money from flowing into the real economy and starting like insane inflation or like stimulus, they started paying interest on reserves. So you basically have, right, I have the chart pulled up, $3.5 trillion or $3.3 trillion of like reserves from banks. I think they're held at the Fed, but The Genius Act, I believe, will allow you to— and so if everyone like went to their bank, withdrew that money, and then spent it in the economy, that'd be super stimulative. But a lot of people keep their money at the bank. But I'm pretty sure you're— now this will enable, um, banks to issue stablecoins against these reserves, making the money way more liquid. Uh, do you have any thoughts on that, or is my understanding correct?

Yeah, I'm not as actually familiar, uh, around that piece. I think the the one area which I do think is interesting, which is getting along the same lines that you are, which is like the transmission mechanism to actually get credit into the economy is always through commercial banks, right? And so it's like money is sitting within a commercial bank, they'll go and relend it out to everyone else. And so actually, like your bank deposit sitting there within a bank has a hugely, you know, very large impact in terms of like credit creation throughout the entire economy. If every single dollar that's out within a deposit account was withdrawn into a money market fund or a stablecoin, that actually kind of collapses credit within the economy, um, unless something sort of changes.

I think it would be like kind of a double dip where it would stay there, but it could also be spent as a stablecoin. Like, that would just be backing the stablecoin, is my understanding, right? And then, because basically the US has a huge financing problem right now, and, you know, they've continued to shift issuance towards the shorter end of the curve and find demand for US dollars at the shorter end of the curve. So like, this is kind of like a continuation down that path of, you know, enabling stablecoins and kind of sourcing some demand for the US debt.

Yeah, I do think it's also an interesting question for even— and I do actually believe foreign countries are starting to actually get concerned around stablecoins, and particularly within the EU, where if you're actually pulling all of your banks out of all of your money out of European banks, to put them into stablecoins, you actually have massive issues with not only the banking system, but then also your currency as well. And so there is a level of scale when this gets to a size where, like, literal nation states start to have issues with the growth in these products.

Yeah, I was always worried about how they're going to manage that. If they have stablecoins readily available in the US, paying, like, flowing through the interest, why would I hold money at my bank versus holding a stablecoin where the interest is flowing straight through? Those deposits get taken out of the bank, then, you know, there's, like you said, massive issues for them, you know, providing commercial credit. So maybe this is kind of a solution to that where it's like, okay, the banks will issue their own stablecoins. They can keep their money like in the bank, but which they can also lend against, but the people can spend it more freely.

Yeah. All right, guys, let's move to markets. I think we spent a good amount of time on stablecoin stuff.

This is like insanely bullish markets if this happens. Because it's like $3.5 trillion and then you make that liquid to people and in stablecoins, especially like crypto markets, you assume some of that money goes into Bitcoin. It's pretty exciting.

Yeah. Um, and on the crypto markets front, since we last spoke, markets have been pretty good. ETH has been outperforming. ETH/BTC is back above $0.03. Solana also has been is looking pretty good, or pretty bad, I guess, in that denomination. How are you guys feeling here? Do we go higher? Where do you think we are in the cycle, I guess? Maybe Jan and then Guy will be—

or maybe—

I was going to say—

because you haven't spoken yet.

Yeah, either Guy or Setters first.

Yeah, I don't know. It's like— It seems like there's a lot of momentum. The thing is, a lot of this is just driven by the treasury plays. So nothing— it's, it's like a market that when this stuff starts happening, I don't really have any sort of like edge. Like, how much longer are people going to keep aping these treasuries at like 2x and like running this? Seems like there's a lot of flows and that's good for crypto because those things kind of get like put in these vehicles and then they're not like super easy to get out. And so they're pretty good sinks and it gives people an easy way to kind of like ape them in their brokerage. Personally, like I would never buy one of these treasury vehicles on the open market. Maybe that's like mid IQ, but I do think they're kind of dumb for the most part. But it's like, yeah, I don't know. Tom Lee came by and he started like pumping this narrative and he is a big influence and you're kind of just like going with the flow for now. I don't know if I have like any good insights. It's just like we have a period of momentum right now. Like nothing else has changed. Like what has changed other than people seem to be getting more and more fired up about these treasury plays?

Like nothing really has really changed on the regulation, the Genius Act and then Clarity Act market like that I think is going to unlock a lot of capital. I honestly think this whole Genius Act thing is really important if they allow these banks to issue their own stablecoin, because that like $3.3 trillion in these bank deposits that could turn into stablecoins is fucking huge. And I think Bessant used the number $3.7 trillion in stablecoin demand he sees over the foreseeable future. So like that is a massive, you know, stimulus to the crypto markets.

Yeah, I think that just plays out over much longer time horizons than these markets in the interim. It's almost like week by week, month by month, whereas that's like a, you know, a long-term support. But ultimately the fluctuations will be driven by more acute things.

Yeah.

Yeah. What do you think, Guy? I'm curious. I know at some point when we spoke you were pretty worried about ETH. Um, ETH pumping I think is good for everyone, especially since you named your company after your project after it. But I'm curious, yeah, how are you feeling about markets, about ETH?

Yeah, I think on a long-term basis, I'm still very negative. I think ETH, but then also L1s, I just kind of broadly think L1s are kind of the most overvalued financial assets that have kind of ever existed. And yeah, I think in the short term is obviously very different. Angle and narrative that ETH is playing right now, which to me, I think in a very simple term is it stopped sort of punching down to Solana to try and compete for user activity and, you know, actual usage on the chain and has basically sort of rebranded itself to compete with BTC again, which is kind of like TradFi piling money into these vehicles to come in. So I think that that's kind of the only change versus where we were 2 months ago. And I think the, I think the market can basically continue going up so long as these vehicles are trading at 2.5 to 4 times NAV. I just don't see how it goes down while that is the case. I think the real, like, indicator to me that I'm concerned about is when some of these multiples start to move and drift below, like, 1.5 times towards 1. I think that to me is going to be the signal that you're probably coming towards the end of the cycle, basically.

Yeah, it seems like the obvious signal, right? Like when the premiums start collapsing. Uh, but that— maybe it'll be that easy.

Yeah, I think premiums will start collapsing when, um, new vehicles stop coming online, right? So right now all the capital is getting deployed doesn't require an equity bid to come in, right? It's these new vehicles and there's still a bunch of them for, for Bitcoin, for ETH, that have money to deploy. And so that props up the underlying asset, and the momentum will carry over into the equity vehicles of the ones that are live. So I think in the same way, you know, if you think about like what happened, like ZIRP and VC collapse, like once the last money stops buying, then everyone before them starts to fall off. And then so here you still have this new supply of bid that doesn't require— or new supply of capital doesn't require a bid on the equity side to support it. And so it's— it may be, you know, it— the collapse will probably happen when these existing vehicles are now forced to do at-the-money sales, right? And now you're actually forced to have a supporting bid in the equity market. And, and maybe you do have one, right? And so that'd be great, and you get another cycle of, of kind of everyone raising dry powder. Um, but I think, yeah, that's kind of what to monitor is new vehicles slowing down because you've basically tapped every major geography, and, and so you can only run the same place so many times in each market. And, and that's when, yeah, the potential collapse could happen. It's just hard to— it's hard to be bearish because the question crypto is always, you know, who's your next buyer? And, and that tends to happen in, in very momentum-heavy assets, and we have a clear one now. And And so it's, you know, you kind of just don't want to overthink it. And that's why you see, you know, people— you ask people like where they think the top is, some people say, you know, I could see $130, I could see $200. And ultimately it just boils down to, you know, if you do have another large buyer. We haven't really seen, at least publicly, any kind of nationals buying. Maybe they're doing it in private and will eventually announce once bags are filled. But I think that would probably be what can really continue to carry this thing forward. We just saw Saylor announce the next tranche and they upsized it from $500 million to $2 billion. That was earlier today. So it seems like the appetite is still there. All, all of the, the, um, prefs he's been issuing in the market are trading higher than, than where they started. And so you can do at-the-money sales there. Um, yeah, seems like things are going to kind of continue on that front.

Yeah, but, and so you think basically slowdown of new vehicles then leads to the collapsing sort of MNAV premiums and then kind of end of the cycle?

Or not even just like new vehicles, it's just like the existing ones are starting to drift towards not being able to raise as accretively. And then I think you just have a view that the forward flows just don't look as attractive as now because like when they're trading here, you know for a fact there's more money coming into the market like next week. From one, almost by definition. And I think it's, yeah, when you're starting to feel like they might not be able to raise cash at like above 1, that's when you know that the flows are going to turn the other way. Yeah, it seems very obvious to say, but yeah, and that was more of a response to— I'm not like thinking about an actual price target on ETH or BTC. I think it's actually just looking at those numbers rather than the price of the underlying that makes more sense.

Yeah.

Yeah, that makes sense to me. But if you think ETH and L1s generally are the most overvalued assets on the planet, doesn't that bode terribly in general for the alt complex? Because most alts are priced versus these L1s in some way, right? Whether it's all L1s or the actual just altcoins on these L1s. Isn't that like, if ETH is If they are all the most overvalued assets on the planet, isn't it like all carnage other than the very few who have cash flows and some fundamentals?

Yeah, and I might— obviously not talking about my own project, which would be a bit inappropriate, but I think the broader view that I have is that Hyperliquid is a great example here, which is like Hyperliquid has detached itself from any pricing of ETH or another L1, right? It's just printing cash flows, and if it continues to print cash flows, it's going to continue sort of growing through time. And that just looks and feels like a real business, almost pseudo-equity in terms of the way that it behaves. And so I think alts kind of need to go through this maturation phase where they're just, they stop being just kind of beta to the L1 that they're sitting on and sort of trade up and down completely in line. They've got to just basically grow up a little bit in the same way that we're describing. You can't just be tapping into crypto-native capital when, when, you know, the 5 to 10 alts that actually have real revenue, real businesses, real users have access to an equity market, there is going to be a different way that these things are priced, which is equity investors can look at these things and say, I'm actually just willing to bid this thing at 10 times earnings or whatever it is. And I think they actually start to decorrelate with some of the infra that sits in the background. So I think this is just like a painful process that we have to go through, which is, I think like BTC dominance should be like 90%. Alt L1s should be basically a tenth of the valuation that they're sitting at now. And there's going to be 5 to 10 equity-like businesses, um, that I think look like hyper liquid, uh, which has been an incredible story of the cycle, uh, that can sort of come out and, and emerge in the same way that Coinbase and Robinhood has this year. So I think that's kind of where I see the market structure, um, going through time, or, or like an end state that makes sense to me.

Yeah.

And for Athena, so I think USDT is $6.8 billion right now. Like, how much do you think the market could support? Like, if everyone knew about Athena and knew that you could get you know, this yield there, what do you think like the, you know, futures/perps market could support right now?

Yeah, it's an enormous market that people underappreciate how big it actually is. So like OI is roughly $110-120 billion and it was spitting out 15-20% yield on $110 billion. So if you think about like, where are the 3 places in crypto that produce $10 billion of cash flow a year? It's Binance Equity. Tether equity and the futures market, uh, in terms of the basis that's sitting there. So you're operating in a market which is producing enough cash flow for, for that to be a very large outcome, just as like a general comment. Um, I think, uh, it's obviously extremely dependent on like leverage demand within the system where if you asked me that question back in December when funding rates were like 30% and Athena had just grown to 6.5%, we should have been at like $20 to $30 billion, I think, in size if we're doing our job properly. For funding to be at like 10 to 12%. And so if, like, if we pretend that, let's say Athena is plugged into some institution that sits in TradFi, whatever, say BlackRock for now, and they could put unlimited amounts of capital to basically compress that rate down to a rate that is sort of like appropriate to them, I think we should have been at that size basically in December to get to an interest rate that makes sense. And so kind of my job right now is just putting in the connective tissue to places like that where when the demand for leverage sort of reaches those levels, you can sort of adjust to it very quickly. So the simple answer is that like Athena is still pretty tiny now relative to the whole derivative market. We're only like 6-7-ish percent of the entire market. And I think like an end state of that is we could be 20-25% in total. So $20-30 billion if the market doesn't grow a huge amount from where it is now.

I think like my biggest issue with this thesis is that all these apps that are revenue generating do it because we have L1s that are valued a lot. Like Hyperliquid makes all its money off of trading like Bitcoin, ETH, SOL. Athena obviously needs ETH to be big. I know you guys do a lot with Bitcoin. Maybe only if only Bitcoin was around, you could still run it. But like, that's not a reason for the L1s to be valuable, right? That's like just the reality that if the L1 tokens become less than a lot of these products that are built around it. Um, like, there are very few businesses in crypto, um, I would say, like, Pump was one, and who knows now, um, seems like they're losing a lot. But like, these, these launchpads don't really rely on having big valuations to make their money, um, they just make it off of like new token issuance. But, uh, I fully agree with you.

Yeah. And I wasn't disagreeing with Zay's comment, which is like, if altcoins are worth a tenth of what they are, BTC dominance is going to be 90%, which is kind of what I described earlier, which is everything comes down and is worth less. I'm just saying that there are equity-like businesses that can sort of like come out of that and produce products that, that, um, that are worth something. I'm not saying apps are 10 times undervalued where they are right now.

That, that wasn't like my Yeah, it's just like the general reflexivity of the whole market where it's like a lot of people earn yield that is correlated or earn revenue that's correlated to these like inflated, you know, L1s. So I think that like as those come down, just general revenue numbers will likely come down as well.

Couldn't you have said this at sort of any point? I guess in— I mean, you could have said this at any point in crypto's history, but maybe in 2021 we still had this, these like rose-colored glasses of NFTs are going to be big and social networks are going to be big and stuff. So, but maybe after 2021, once, or from 2022 onwards, once it became clear that a lot of these things, you know, had failed to find product market fit, you could have kind of said this thesis at any point then, right? Like L1s are the most overvalued assets on Earth. They actually looked even worse, right, at the, at the bottom on a multiple perspective. They need to come down a lot and you're going to have these revenue-generating businesses. But somehow we keep finding bids, right, for these assets. Yeah, you're shaking your head.

Well, I mean, like, yes and no, right? Like, if SUI hadn't done the run that it had done this cycle, would you say that, like, the Alt L1 thesis, like, was still alive, basically? Like, on a relative basis, right, all of these things are down massively versus the rest of the market. Do you know that?

Yeah, I mean, more so like ETH and SOL are still up like pretty significantly from the 2022 bottom, right? Is more so what I'm saying. Like there keeps being demand for buying these assets.

Would you agree generally though, that like the sort of like infra launches and just like consistent stream of these pieces of infra have just literally gone to zero? Like there is zero bid for any of these things. Obviously there's some lasting power to ETH having existed for 10 years and that kind of stuff. But directionally it does feel like that's what's happened in the space, right? Where last cycle you had like 4 or 5 L1s that reached $100 billion of valuation. Obviously had Solana do extremely well the cycle and outside of SOL and ETH, none of them sort of got to those heights.

It's true though, like SOL has kind of hit, SOL has hit like a ceiling. The SOL was a good trade for like the end of '23 into like Feb of '24. Um, and it's kind of just like oscillated for a long time now. And ETH has been a good trade for like this past month, you know. Um, after 3 years of bad— and it's true, like, yeah, a lot of the other L1s are just down only. Um, which I know this is something we've talked about a lot, but I do Yeah, like I do think you could see a market where you do have some winning apps that start taking like the, like, I don't know what the app dominance market cap thing is, but I think it's fair to say like you're going to bet on Bitcoin dominance up, app dominance up, and L1 premium down. And that's kind of like how that L1 premium gets distributed a bit. I know you're already seeing tokens, you know, go away from their L1s, like Pump, right? It's kind of diverged from Solana recently.

I just don't know if it gets distributed in that case, because yeah, like if you're not bullish, like everything is priced versus, or a lot of things are priced versus these L1s. So I think if these L1s lose their bid, I don't feel like it gets distributed into apps for kind of the reasons we discussed before.

Yeah, maybe it just goes out.

I think you get distributed. You have to think about the size of these L1s versus the size of these apps, right? Like, obviously not fully, but even if you get a single-digit percent, that'll materially move the needle on these apps.

That's fair.

Well, I feel like L1s get bid and they get bid early in the cycle because people just want to be bullish again. And so they're like, what do we bid? And we bid the L1s. And then later, I don't know.

Yeah, it's like the opposite of the dilution thesis, right? It's just like if everyone can agree on one thing to get excited about, it becomes more compelling.

Yeah, yeah, yeah.

I don't know, we've talked about this a lot. Like, I know we disagreed about this, but it definitely is clear to me that we're moving to more like, you know, obviously there's some outliers like XRP or whatever. But for the most part, we are going towards more like people want to see real numbers to buy this stuff.

Guy, it's just funny that the crypto top 5 looks so similar to what it did like 4 or 5 years ago.

Network effects, bro.

It's almost the same.

Guy, what outside of Athena What Hyperliquid, what is like, I guess, one of your favorite crypto projects that you think is like carving out a good niche and generating revenue?

Yeah, I do have respect for SKY and what MakerDAO have done. I just think the longevity that they've had, you know, flexibility to change this cycle. I think we respect them a lot and obviously work quite a bit with them. I think a couple of projects which impressed me a lot this cycle were Maple Syrup and then Euler. I don't know if you guys have seen the TVL charts for both of those products, but it's like literally imploded and went to zero. And I think 99% of the builders would have basically just thrown in the towel and gone to do something else or raised for another token. And yeah, I know both of the founders there, and I think just the grit that they showed to basically just like knuckle down and then come back in the way that they did, I think was just an amazing example for everyone in the space to look up to in terms of how to persevere. So I think those are probably the two stories that I was most impressed by this cycle outside of the success that Hyperliquid found. And I also forgot to mention, I think Fluid had a pretty similar story there. And I think the innovation that they had around a DEX almost being embedded within the dApp of the money market is interesting for like stablecoin looping rather than just like volatile assets. But again, I think they had another great story which was kind of like left for dead and then came back with real innovation that just like forced an outcome out of the whole thing. So I think those are the stories that I like the most.

Yeah, that's a good answer. Those are some good projects.

Yeah. All right. We talked about apps. I think it's pretty relevant to PumpFun, which I know we discussed last time. I don't think any of us expected it to be trading. I think it's trading sub-$3 billion at this trading.

Yeah. $2.8.

Oh God. It's getting down to crazy value.

Yeah. What's crazy is that the, the ICO sold out, I think quicker than a lot of people might've expected. It was like less than 15 minutes.

Yeah.

I feel like there's no way they don't. Have some tricks up their sleeve for this thing.

Yeah, so I set the stage on, on this if you want. Um, so yeah, basically, you know, pump, uh, darling of, along with Hyperliquid, of Q4 and, and Q1. Um, revenues were, were through the roof. They made $700 million in, in about a little over half a year. The, the, I think the concern was the trends. This is one of the most kind of contentious, uh, raises we've seen for a host of reasons, right? So the trend being one of them, um, it, it was declining more so function of the, the kind of appetite and interest in the meme coin market, um, since there's direct proxy. But on an absolute basis, the, the business was still doing really well, uh, on On top of that, they made about $700 million, and, you know, rumors basically that they still have $600+ of that on the balance sheet. Then on top of that, they went out with— initially went out with a raise of $200 million from privates, $800 million public, and that raise took place, I'd say, about 6 weeks ago. And then in the weeks leading up to the ICO, there was a huge change, and so that raise again was $200— private, 800 public. They were raising a billion. Then all of a sudden it pivoted to about 700 private and 600 public, right? So that they upsized the private from 2 to 7. They downsized the public from 8 to 6. They've raised, so $1.3 billion there. The $600 million of the public sale sold out immediately. You know, reasons for it being contentious, other reasons being that, you know, why do they need so much money? That's an obnoxious amount of money. There's been countless stories of people raising too much and failing with it. I think that the easy counter is if the money's there, you usually want to take it, right? Because you never know. And ultimately, you're better off having it in the bank than trying to speculate on potentially being able to raise more later on. So the raise wraps up in 12 minutes, but the token doesn't go live for, I think, 3 plus days or so. And in that time, Bybit and Hyperliquid and a handful of others launched perps. Hyperliquid dominated the perps market because Bybit had limitations on size. So everyone was just trading on Hyperliquid, and that was really kind of where we saw proper price discovery. It traded up as high as 6.5 or almost 7 before the token launched, and then it traded pretty well afterwards as well. Um, then it started trading lower. Reasons why it traded lower, I'd say, you know, Bonq being the big, a big competitor, was, was taking market share. They, you know, unconfirmed, but it seems like they, they strategically kind of paid some of the largest, um, token issuers based on the fact that they all kind of moved simultaneously, which seems more than coincidence. Uh, that allowed them to capture a bunch of market share. They've been doing a great job on the marketing as well. I think the recent thing they launched where 1% of revenue goes to like the top 5 pairs is a big one because ultimately what do you need in this space to drive excitement is you need a few runners to really hit billion-dollar valuations, right? Because that just means the ceiling is raised on everything else and the EV of participating goes through the roof and that becomes very reflexive as capital flows into the system. At the same time, the Pump guys have been fairly radio silent up until the interview that took place yesterday. So they were pretty quiet and, you know, people were naturally anxious. On top of that, the entire supply was unlocked, which is fine because it's not as if this was an unknown, right? Everyone knew it was unlocked, so everyone has the same information. But you started to see capitulation, then it's becomes very obvious on-chain, right? So everyone can see when people are selling, and, and it— that also becomes reflexive. Uh, so you, you saw kind of some of the bigger whales sell, and, and I think it makes sense if you're a big fund, you just deployed $100 million, and all of a sudden it's worth $150 on paper. There's some fiduciary duty to realize a 50% move in, in, in a matter of days. So that naturally led to more selling, and, and that created a lot of pain because at the same time the rest of the market was ripping. So you had massive opportunity costs, and everyone sold SOL and other things that then moved materially in their face while their Pump position kind of dragged. And so, um, you know, people are still anchoring to the idea that they have this $2 billion cash. Then comes yesterday where Elon goes on Thread Guy's stream, and this was basically the first time that they spoke publicly about, um, about Pump, and it was a bit underwhelming. It seemed like they had a bunch of answers that, that needed to satisfy kind of legal requirements, right, where they had to be kind of cagey and, and couldn't really disclose too much. But ultimately, you know, I think the, the response to that is, is why do this knowing that, um, you couldn't really give the information that people wanted to hear? And it's not necessarily that you have to give them the answer that they want, but I think people were just looking for a vision and an idea. Because what it boils down to is, can they spend this $2 billion in a, in a, in a creative way, and, and the market wants to get confident in that idea. And so I think they didn't really get that confidence across with the interview, um, and, and so now it just kind of continues to sell off. And, and so now you're hitting this point where there's a bunch of kind of liquidation prices, and, you know, the market naturally tends to move towards max pain. And so, um, you do have that element against that though. Everyone is up big. So I think a lot of capital can come in to, to provide additional cushion and, and move those liquidation prices down. So I don't necessarily think that that is going to be a reason for those to get hit. But yeah, so now we sit at it with like $2.8 billion in market cap or so. They do have $2 billion in cash. They've done one acquisition for KOLScan that was broadly accepted as being kind of underwhelming. Um, I know there were rumors of the Axiom acquisition, which I think people would be pretty against considering the cost relative to what they'd be getting. They'd be buying the top of this platform that they could realistically kind of build themselves with enough capital and talent at like a huge fraction of the cost, or like a very small fraction of the cost rather. So now, yeah, I think, you know, I kind of view it as a pretty good risk-return here because you know, the reason that they are down is, is, is something very solvable, right? It's messaging and narrative. It's not something fundamental. There's no real change from why people invested at $4 billion. Obviously part of it was just because it was unlocked and people thought of it as a trade, so there's certainly some of that you need to work through. But ultimately, if you think that they can spend this money at least somewhat interestingly, then it, it seems like this is a great opportunity. I Um, but that's just me talking my bags.

So, Jan, you think— so people bought this at $4 billion, you know, a week ago, two weeks ago, and you think they're just like chasing and puking it, or what is the big cause for the move down below that? Because I thought that that should have acted as a decent floor, but it seems like it did until that interview happened, right?

Like, right now it's just narrative construction. Can we reinvigorate the trenches? I think market share in this space is insanely fluid and not sticky. I think, yeah, Bonq did a good job of capturing it, but with enough incentives, you can easily capture it back. This is like the most mercenary group of capital, and they'll just flow to where they think they can make money. And it's still a relatively small market. And I think, you know, the opportunity is there because the rest of the market is doing well. So people have cash to deploy. It's just the EV of the game needs to be higher. And I think in order to get there, you need to have some of these runners do well. And so, you know, we were talking about how potentially you can kind of artificially stimulate some of them and, and, and get things going that way as, as one potential solution. But I think you just need— there needs to be some kind of coherent vision for how they plan to spend the money. And it doesn't have to be insanely granular or transparent, but, but still something kind of thought out rather than, um, what, what seemed to be, you know, kind of high level and, and, and just cagey.

So you think otherwise it is just people puking it because they, you know, the market's running and they don't have a lot of confidence and it's selling off. It's like momentum.

I mean, yeah, Twitter was littered with people that were just capitulating.

I don't know, it's pretty clear to me, like, they, uh, the opportunity cost of things started ripping right away. Uh, a lot of people evidently were looking at it as like a free money quick trade, and then when that doesn't happen and then other stuff is— stuff is ripping, you get put in kind of a weird spot because you don't actually have any conviction or belief in what you bought into, right? Um, and there's a lot of money that did that. And so then it kind of becomes like an easy decision to sell, and then more people do it. And then at the same time, Bonk has gotten more market share, right? So all these factors together, I mean Yeah, it kind of— I mean, it makes sense. Um, but yeah, yeah, they have a lot of like— I didn't think this was gonna happen. I thought it would be trading probably at least like 50% up at this point, even with like selling. Um, Bonk has obviously done a good job controlling the narrative. Uh, but I mean these guys have a lot of money and they've been doing this for a long time. Um, I definitely wouldn't like call it over. I think there's a lot that they can do here right now, and they haven't really done anything yet with the money that they raised. Uh, what do you think?

Yeah, sorry, go ahead, Setters.

No, I'm just saying like, listen, I don't know, one thing I've been getting better at is like not trying to catch when it's falling, because I probably would have bought this at like $4 again, and then I probably would have bought it like $3.5 again. But I don't know, there's— it's been, what, a week since? And it's been like 2 or 3 weeks since all the deployers moved from Pump to Bonk, right? There's like a lot they can do. I think also, though, like overall, the meme coin trenches have not really been the hot area of the market either, right? Even with like Bonq doing pretty well, coins are still not kind of like running how they were in the past, right? So yeah, there's definitely a lot of headwinds.

I'm curious what you think, Guy, because I know you actually met these guys back at the Dragonfly Summit at some point last year. and we're impressed at the time. But yeah, I'm curious what you think of Pump here.

Yeah, so I think one caveat is I do hold Pump myself, and then I'm actually reasonably close to one of the founders on like a personal basis. But I think one piece that is actually slightly different here, which I had an argument with someone about on Twitter this week, is also just the float dynamics of the whole thing look very different to a normal launch where pretty much every launch that comes out now, except for Hyperliquid or Pump, is basically artificially controlled in terms of how much actual supply is sitting there in the market. And the number that you see on CoinGecko is not actually the real number in any way. The amount of capital that was actually sitting there on float for Pump is just a very different number to what you normally see. And to engineer that sort of like up and to the right graph in the beginning, it's just almost impossible with like a very real float that's sitting out there. And so To me, this is actually what organic price discovery looks like when you haven't got tight, tight control, which is like stuff happens, people change their mind, and you can actually see it sort of expressed in the way that it is. I have a huge amount of confidence, I think, in them personally, just, you know, the conversations I've had and knowing them as individuals. I do think it's a pretty ruthless part of the market, which most of crypto is, and it's extremely mercenary. And I think this is just like a very good indication where shows how quickly like things can change basically overnight and how weak or like non-existent like moats that you perceive to be there really are. And so yeah, I have confidence that they can turn it around, but it is like a difficult space for them to be competing within right now.

Yeah, yeah, I don't know, I'm pretty— I would be kind of— I'm buying here, and but I would be buying a lot more. It just feels like for me the main thing that's tough is just this equity-token dynamics. And obviously, like, most crypto projects have this dynamic where there's a labs entity and then a token. I think the main difference is that for most crypto projects, the token has to go up for the founders to do really well, whereas here there's an equity company which has, you know, $2 billion in cash, call it, plus 75% of the revenues going into it, and they've already pulled $1.3 billion out of the token. So my main kind of concern is, is just like, to what extent are the founders— like, to what extent is it in their economic self-interest for the token to, to do really well and to, to like really pump value into this token, considering how much cash they have in the equity? They probably own a lot more of the equity. Um, yeah, that, that's really my honestly my main concern and reason for not like really buying in size here.

Yeah, I think, I think it's a valid concern. Um, I'll just say what I know of them as like individuals is that I think they are motivated by just more than that. And I think, um, for founders who have sort of come into the success that they have and made that kind of money, I think like the incremental $100 million on top of like $2 billion doesn't actually change anyone's life at the stage that those guys are at. And so I think it does come down to like, are you actually motivated to make a point and prove something to other people? Which I think that they do want to prove something just based on the way that I see them sort of like behaving and interacting.

Yeah.

And what's the— yeah, what do you think, like, what are they going to use that $2 billion for? Like, what's the— maybe for everyone here, like, what's the biggest bull case you guys see for how they could deploy this $2 billion to really make Pump successful? Because I think you were the one that put me onto this guy, but really seeing them as social fi, like TikTok competitor with like financialized, you know, this isn't the social fi we thought we'd get, but it's the one we deserve to some extent as an industry. And it's like, I do think it's a really interesting path, but I'm curious if you have any other insights or things you know or or see there?

Yeah, I think that that idea of, you know, like trading and investing almost becoming like a social sport. If you think about the way that people sort of interact on Reddit, the way that we interact on CT, it's almost become like entertainment to sort of like trade and speculate with your friends. And I think the same way that TikTok had that plurality, I could sort of see that as a different form factor that people engage with each other to speculate. And I could see that becoming popular. The thing is that these are like venture bets, right, on like an unknown market within crypto right now. Which you don't know if they're going to be able to go and capture and execute. I think that's one of the difficult things which we've run into as well, is that, like, people almost presume when you've done something well with your first product that you're able to continuously sort of roll that success into new ideas and new products. But in the beginning, these are things are still always venture bets, and your ability to sort of carry them through, obviously, pretty low probability given that. The one piece that I was quite surprised by was that they didn't at least until now, like think about some sort of cross-sell into perpetual swaps, because in many senses, like they own the most valuable customer in crypto, right? Which is like the most retail individual who doesn't know what MEV is, will cross any spread. They'll pay 100 bps, like both ways in. Like that's actually the most valuable user in crypto, which like even Binance is jealous about that if you actually own that user. And I think your ability to actually take them from like spot casino gambling on meme coins and actually cross-sell that into Perps in some way, I think it's actually a very valuable user base. So I don't know if that's sort of like the skill set of the team, but to me that felt like a very natural way to give a very profitable product to a very valuable user base that they already own. But yeah.

Yeah, I'm in a similar camp where if you have that distribution, you kind of tack on other reasons for them stay on the platform and then you bring other users and while they're there, they're going to try out other things and it becomes kind of very synergistic and just a way to build a broader user base that— and then have them access products that they maybe initially wouldn't but now will because money's on the platform or whatever it is and now they can try different things.

Also, by the way, for—

yeah, same with us. I think we're about— we're finished here, honestly. Talked through most of the topics we wanted to. Thanks so much for coming on, Guy. This was awesome.

Thank you.

Appreciate the time.

Yeah, thanks. Thank you, guys.

Thanks so much.

Thanks, everyone, for tuning in. See you in 2 weeks.

See ya.