It’s A Bull Market But Not The One You Wanted With Rob Hadick & Santiago Santos | Weekly Roundup

Like, let's just get back to the core of what we wanted, the core principles of, you know, what Satoshi wrote about. And honestly, you and I cut our teeth in this industry, really in DeFi, and that was what got us really excited about how that DeFi could change the way financial markets worked. And that continues to be the best use case. That is what I continue to be excited about alongside everything that goes in with that transfer of value.

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Welcome back everyone for another segment of The Roundup. Uh, we are joined now exclusive with Rob, who's taken over Jano's seat, I think, permanently. Pretty much, yeah.

No, I could, I could never replace him.

Uh, how's it going, Rob? How are you doing?

Good. I'm excited to be here. I am on the back of a, you know, weekend with beautiful weather in Cannes, and now back in New York where it is hot but less beautiful, but excited to be here.

There you go. Um, so Rob, you've been on the road for like 4 weeks. It sounds like you are now the stablecoin person. So I feel like you're going around all these conferences, uh, talking about stablecoins. And it— look, you and I were talking about this earlier in Cannes. We were we met up, it feels like it's moving much, much faster. Uh, so why don't we start there? Like, I of course I'm wearing the proof of attendance for ECC. I'm coming back. Um, but tell us like, what, what is the sentiment in the room? I mean, you were at Goldman's conference, uh, a couple weeks ago. You're at ECC. What's, uh, you know, some insights there? We'd love to start there.

Yeah, so if you're thinking about stablecoin specifically, I will tell you, uh, at Goldman's event, so this was Last week, I think it was last Wednesday, I spoke on the first panel of the day. It's just, you know, Goldman clients primarily, and it was standing room only. And I've been to this Goldman Sachs, you know, digital assets event 3 years in a row, and this was by far and away the, the most well attended. And so you look around, there's 400 people, family offices, trading firms, like big asset managers, and they really only want to talk about a few things, of which number one was Circle. And stablecoins. It's like very clear that this has caught the, you know, it's in the zeitgeist right now. It is in everybody's, uh, mind and really at the forefront of how they're thinking about, you know, the future of this space and the thing they want to put money into. It, it's not surprising to me considering, you know, how Circle, uh, you know, how well it has done in the public markets. But then maybe what has been surprising to me, to your point, is just how quickly, you know, we're seeing like the banks move, just how quickly we're hearing large corporates talk about wanting to be, you know, involved or using stablecoins. And how they think they can do, you know, call it a cross-border, like, global money market movement. Um, that has been, I think, the, the real surprise to me, because these are places that typically do not move quickly. Now all of a sudden they're all looking around and they're saying like, oh shit, like, I need to get on top of this. And in fact, I was talking to someone at Goldman and they were saying the exec committee is now asking us like, are we deep enough, right? Like, this has gotten to the very top of Goldman and they're saying, do we know enough? And are we playing in this space enough to be effective in stablecoins? And that's what's happening everywhere. And so it's, it's really the topic du jour.

I guess, like, this is not new. You, you guys have been investing in stablecoins for a number of years. Um, anyone that's been in crypto has used stablecoins. It's sort of like you stop using wire transfers, you fund most of your deals in stablecoins. What's changed? Like, for anyone that's just kind of waking up and like, you know, stablecoins have been around for a while, what was the inflection point? Are there one or two catalysts What would you point that to?

It was Stripe. I think we all owe Stripe like a debt of gratitude a little bit now. But, but even more seriously than that, you know, 18 months ago I would say, you know, and I see all these companies— to your point, we've been investing for a long time, so I've talked to a lot of people. 18 months ago, if you went and looked at stablecoin volumes and you had a good insight into what was happening, it was basically all trading activity. Now it is still by far and away the majority trading activity, but I can tell you for a fact today that there are hundreds of billions of dollars worth of actual economic activity happening in stablecoins at businesses every month, right? And so, uh, I'm sorry, not hundreds of billions every month, hundreds of billions annually, and it is growing every month. And we're starting to see, you know, everything from payouts and pay-ins to, you know, simply like trade finance and just like global, like treasury movements as well. We're starting to see a real excitement about the future of programmable money. That's what's changed. And that is on the back of Stripe going in and telling everybody, this is real. And everyone looking around and be like, oh man, Stripe's the best payments business that exists in the world. So maybe we should, you know, take a look at this. Maybe we should do this too. Yeah.

I mean, certainly like when, when Stripe Card Bridge for $1 billion, to me it felt like the Instagram, Facebook Instagram acquisition. Um, you know, Stripe has just so much distribution, it's so embedded in so many businesses. And so when you try to like really push this to enterprise, to your point, like, it's going to get adopted much faster. And then of course they've extended that vision now acquiring Privy. Um, how— when you talk to enterprises, um, do you get a sense that they really truly understand how this is going to be used and embedded in their workflow? Or is it just a directive, like, people looking at Circle trading at where it's trading at and the multiple it's trading at, and it's sort of like, let's scramble to get our act together? Or, or do you find that enterprises have been thinking about it, are thoughtful Is there a coherent strategy in these organizations to like embed stablecoins?

So it really depends. I think some people are really thoughtful. They've been working on it for a long time. I will tell you some of these things that are happening though are like complete nonsense. They're just like just headlines. And I think they're broadly— so the crypto market, you know, or if you're on crypto Twitter, people see a headline and they're like, this is awesome. And you know, this company with distribution and these customers, they're going to do stablecoins. And then you go and talk to that person, or you think about, you know, what that, that person does, and they have absolutely no capability to go and actually transact or to build a business that transacts with stablecoins. And so I actually put, um, and maybe I'll get a little bit of hate about this, but I'll actually put this like Fiserv headline out there, like, okay, Fiserv is going to issue their own stablecoin and they're going to distribute through all these community banks and they're going to do it with Solana. And for a day, everybody was tweeting like, oh, this is like a game changer. And if you actually take a step back and you think about, okay, like what is Fiserv? Like they're an old school processor and banking core provider and their banking core like falls over all the fucking time. It is terrible non-cloud native tech stack. The community banks themselves have no ability to actually transact in a 24/7 market with programmability in the transactions themselves. Like, there's no way that these community banks and, and Vyserve go and build a big stablecoin-specific, you know, linked business. What will happen instead is that, like, you know, some startup will come and replace them. And that is what we're, we're going to see. And so everybody's like, you know, acting like there's going to be, um, all of this inflow from these businesses, which I think is trying to happen. But what I expect instead is they're just going to be a replacement. A lot of those businesses. And that's what, uh, where I think the real kind of like tailwind and sea change happens.

Yeah, you have a great blog post, uh, titled Stablecoins and the Collapse of the Legacy Payment Model. I would encourage everyone to, uh, to take a read of that. I'm curious, like, um, what are some of the things that people in crypto get really wrong about stablecoins? Because you often hear, you know, stablecoins are going to transform the financial system, and the reality is it's more nuanced than that. Like, you still have to interact with certain pieces of the legacy system. And conversely, I'm curious to get your thoughts around what is something that people outside in the industry get wrong about stablecoins. So maybe like just—

yeah, yeah. So I think on the crypto native side, people are starting to understand that like if you have to transact within fiat, that for a lot of things like stablecoins are actually more expensive. Like if there needs to be a swap back into fiat due to the FX and liquidity concerns and due to the compliance there, it can be more expensive than traditional rails. And so this continuous, like, conversation around, like, oh, stablecoins are, you know, essentially, like, low-cost, you know, direct transfers doesn't really take into account, like, how payment flows work. And so that, I think, people are starting to understand a little bit. But what does that mean? It means we need to be more on-chain, right? And I think that gets to, uh, you know, what do, you know, call it traditional people misunderstand about stablecoins on the other side, which is that there is a world in which Like, we don't need to be in fiat, right? Like, a lot of payment flows can happen on-chain, right? Like, there's, um, a business called Rain right now who issues cards, right? They issue cards that are stablecoin-backed by stablecoins that are in your wallets. They do just-in-time receivables financing and securitization with a protocol called Credit Coop, and they pull that capital when they need. It's much more capital efficient. And then they, uh, settle with Visa in stablecoins. And so there's— this is a payment flow that does not need any sort of fiat interaction. And all it really needs is it needs, you know, more credit. And so that's like kind of the elephant in the room. And because you're replacing the bank, and what banks really do is they provide credit, you need to get these alternative lenders in there. But if you do that and it's entirely on-chain payment flow, and Now it is a lot cheaper, but, and there is a world where we, we can go there and we can be entirely on-chain. And so I think that's really kind of bringing those two people and those two points of view together.

Yeah, definitely. Like, we, we've been looking a lot of like cross-border payments, which I think is one of the areas that, um, you know, it's really picking up. Like, like for instance, the US-Mexico remittance corridor, it's, it's actually really efficient because there's just so much volume. But where, where we have spent a lot of time on is consumer behavior, right? If you're, uh, you You're the end user and you're interacting with Western Union. You know, Western Union has built a pretty decent moat because they have just a very robust network of agents where the convenience factor is what people care about, right? I want to be able to withdraw my cash and withdraw it immediately once my relative in the US tells me that he sent the money. Now, what I, you know, conversations with Bridge and a couple other providers, they're saying there's been a pretty big shift in consumer behavior where now you don't have to off-ramp, right? Because you, you receive, like Western Union would force you to off-ramp to pesos, the local, or the local currency, but now you're able to maintain dollars, a stablecoin in a digital wallet, might earn some yield. And, and so that has been pretty powerful. I mean, it sounds simple, and it's kind of crazy that people are not able to do that, but it's a, it's a very big shift in consumer behavior. Um, so that's to your point around if money stays more digital and you don't have to off-ramp, then you just kind of are able to unlock a lot of these efficiencies, right? Because where, where there exists a lot of friction still is in the on and off-ramping. And creating like a network where you, you need to, you need to be able to offer that same convenience to the end user.

Yeah. All of the extra costs are at the off-ramp and the on-ramp. Right. And so it's, it's a significantly better product experience if you stay on-chain. That's what people, we need to get to. I mean, it's also, I mean, I know we'll talk about this later around like the tokenization of some of these other assets, but the, this, this like hybrid model that people are trying to solve for, or there's like this off-chain piece and this on-chain piece. Like, these are the worst of both worlds. Like, these suck. Like, you, you really should pick one or the other, if I'm being honest. And the goal is clearly to be on-chain. And if we can get to being entirely on-chain, like, it's going to be, uh, much better for everybody involved. It's going to accrue more value to the retail users. It's going to disintermediate the banks, and it's just going to be a better digitally native or internet-first experience.

Yeah. So give us like your 1-year, 5-year forecast on stablecoins. Like, everyone now is trying to launch a purpose-built L1 that has you know, focused on this, the stablecoin chain. Then you're going to have JPMorgans of the world issue their own stablecoin. Who are the winners? Who are the losers in this kind of tectonic shift of financial rails?

You have to own the customer or you have to own, call it the, like the compliance and like KYC, KYB and banking, uh, tech stack. So why do I say that? That's really, those are basically the two endpoints. So I talk about this a little bit in that blog I wrote that you mentioned, but, uh, basically the entire middle of the transaction flow is getting completely collapsed. Somebody like a Stripe, who today is already the merchant acquirer, is already the processor and gateway, they can also become essentially the card issuer. They can become the token issuer, and they're essentially the central bank, and they're the issuing bank in those cases. And they can also, if it's entirely on-chain, be essentially the, the network, right? So, you know, you don't necessarily need a Visa. Maybe you need Visa for auth, but you don't need it for, you know, all of the settlement piece. And so if you, if you are able to collapse that entire middle piece, then the people who win are the people who own the endpoints. So what does that mean? Is like, you either need to be like a big global bank or someone with a big— with a lot of big global bank relationships who can understand how the complexity of KYC, KYB work, or you have to own like the end of the distribution, right? Like you have to own the end customer. And so I think what we're going to see is we're going to see somebody like a Stripe who— or, um, you know, maybe a more crypto-native newcomer that kind of looks like a Stripe who really is, is really good at product and tech— that will be a huge, huge winner. You'll see maybe the most digitally native bank be a huge, huge winner. And then you'll see the people own the end customer. And, you know, maybe it's a new bank, or maybe it's a digitally native, uh, crypto-native, new global fintech, right? And those people are going to be— going to be, uh, the big winners.

Yeah. On that point, uh, Peter Thiel this week announced with, uh, founder of Oculus and I think Andreessen, um, the— a crypto-friendly Silicon Valley Bank rival. Uh, any insights there? Any color? Immediate reactions when you saw that?

Yes, so I knew it was happening.

They, um, you know, this is called Erebor, which is a weird name for a bank, but let's put that aside for a minute.

Yeah, and it's renamed and they've had a couple of iterations and they've done a few things. Um, and people see like clearly— I, this actually goes like beyond crypto and it goes back to my earlier point, which is that the bank core and the bank tech stacks at the vast majority of banks is like a complete nightmare. And shit show. Like, digitally native banks— not just crypto-native banks, but digitally native banks— have been taking market share and continue to take market share. And being stablecoin first, clearly there's a way to go win a market. And banks are, you know, they're, they're great ways to make money, right? So they're— you see it kind of in fintech more broadly, but, you know, every tech company eventually wants to become a bank, and every bank essentially wants to become a tech company. And that's because the banks make way more money and the tech companies get way better multiples. Well, this is obviously trying to solve for that, right? And so I think, considering who they are, they're probably going to build a humongous, fantastic business. And like, I don't know how you would get in front of that train considering, you know, their, their experience and their relationships.

Yeah, I mean, a lot of this like path dependency, it's like, are you able to attract talent? And it's very self-fulfilling, like they do have an unfair advantage. So, so, so yeah. Anything else on the stablecoin front? I mean, there's just a lot to unpack. I mean, we've covered it at length, but people should go and read your blog posts. Simon Taylor is another really good one. There's an analyst, I think, at— what's another fund? I forget which one. Ultimator. She's been tweeting a lot about tokenization, stablecoins.

Yeah, Frida Dwan, right?

Yeah. Yeah. So people are like, we talked about this in the podcast that you were on a couple of weeks ago, which is this is the benefit of more crypto companies going public. For better or for worse, there's just more attention, there's more coverage, um, and it just brings more legitimacy to the space. And now, you know, if you want to draw attention at the board level, it's very easy to point to a public company like now Coinbase or Circle and say, well, you know, you got to pay attention, right? It's just a, it's just a very in-your-face kind of thing.

I mean, I think people have to understand like how are decisions made at these big companies. They're made at that board level, right? And the board is going to tell management, these are like the 3, 4, 5 things that you need to care about, and these are going to be the focus for the next few quarters. It's much easier for them to say, yes, stablecoins need to be a part of that thing that you do or that you focus on, and as a core strategic initiative for us. When they see Circle go out and trade up to $60 or $70 billion equity value at these crazy multiples and You know, now all of a sudden it's like, oh man, the right thing for shareholder value is to have stablecoins in my business.

Yeah. Last spicy take, because Rob, you know, doesn't shy away from that. You tweeted a couple of days ago. So JPMorgan, which is an underwriter, and I don't know if it was lead left, but it was, you know, top underwriter.

I think they were lead left. Yeah.

They were lead left. Yeah. So they, the equity, this guy Kenneth Worthington, he is also the analyst that covers Coinbase and has been doing for a long time. They put out an underweight initiation report on Circle with a price target of $80. And, and you're— I, I quote, I can't emphasize enough how crazy the Circle IPO has been. And now with an unprecedented initial coverage report from the lead underwriter that has a price target almost 60% below current. Not sure I've ever seen the lead underwriter's initial report be this bearish.

Yeah, listen, I mean, but, but the funny thing about it is $80 would have seemed so bullish.

Uh, I don't think anyone was underwriting like expecting $80, you know.

No, nobody was underwriting $80. And then, you know, if you're— to be fair, I don't envy his job because as you're the sell-side analyst and I get, you know, there's a Chinese wall, et cetera, but these guys feel pressure to come out and put out like, you know, pretty nice reports around people that they just IPO'd. And so he's sitting there being like, shit, what do I do? How do I like stay true to who I am, but also, you know, um, account for how the market has reacted. And the market did not care whatsoever. I think that it's $188 again today.

$187, it's up 5% today.

Yeah, exactly. And, and, but the funny thing is there's also a lot of crowding. I think, um, GS, who was also an underwriter, was at an $83 price target. Then there's a bunch of people around this $80 mark who are just like trying to figure out like how not to, uh, make themselves look like idiots, but also to, uh, try to stay true to some subset of like fundamentals.

Well, you know, ladies and gentlemen, if, if you're complaining about low float, high FDV coins, well, let me tell you, it's not different in TradFi because like, okay, so, so objectively speaking, like, there's this lockup period, right? So people that are like totally unaware of how this works, like, there's only so many shares that are offered and it's, it's, you know, not super thinly traded, but there's not a lot of shares that go around. And so, you know, if you want to short this thing, you can't actually get much because there's not that many shares out there. And so it lends this dynamic during the, during the lockup period where you can have these crazy spikes in, in, uh, in price. But, um, you know, we'll see, we'll see what happens after the lockup, right? I think it's 90 days, give or take.

Uh, I believe, yeah, I believe we're actually mostly 60 days in this one. I'd have to go confirm, but I believe it's mostly 60 days for Circle. Um, the, the one thing I would mention is I was talking to like one of the companies, uh, or a company and a founder who would know about a lot of the flows and was actually like looking at the tape and saying like figuring out like where all the flows are coming from in Circle. And he was like, they're all the retail brokerages. Like, this is all retail bid. This is not institutions coming out and saying, yeah, like, we need access to, you know, payment stablecoins. Today it is like, it is basically a meme coin, uh, at least according to this person that I talked to.

Yeah, yeah, I'm not surprised. I mean, and this is kind of, um, you know, it IPO'd to what, $6 billion-ish?

Yeah, so $31 was a little over, was a little over $6, close to $7.

So yeah, I mean, this just like it doesn't take much capital to push these things up. And in a similar way, like, you know, everyone's now charting M2 and Bitcoin price. Like, as much as crypto has grown to a, you know, pretty sizable— is a $2+ trillion asset class— like, it doesn't take much capital to push these things up. And like, there's a dynamic where like, if you're a large hedge fund— I don't know if they're putting a position on Circle or not— but like, there are all these arbitrary thresholds that you can't— like, if you're a massive fund, you can't really invest in anything sub $10 billion. and then once it crossed $50 billion, so these are all these weird things. Like when Coinbase got listed into the S&P 500, right? You know, it just, the, the flows movement just, it's just ripped, right?

Yeah. Uh, the other thing is I got my first couple, uh, like emails like, hey, I'm, you know, I'm leaving Circle. I'm, you know, looking for my, my next opportunity. Might take a little bit of time off. And I think the, the employees are, are excited about what's happening. Yeah.

Funny enough, I was looking at the data, right? Cause, uh, I was close with one of the early investors in Circle and I remember going back to 2014, 2015 and, and And my whole thesis was like, does it actually outperform Bitcoin? Because that's, I think, always the barometer, which is whatever you're investing in crypto, it should, you know, outperform the underlying. And it didn't. As much as it's been a fantastic return for them, like, you know, it didn't outperform Bitcoin. Uh, and, and so you wonder, like, as an allocator of capital you are, um, you know, uh, what you, you know, where to park your capital. It's, it's very, very hard to outperform Bitcoin.

Yeah, but, but who is the biggest shareholder in, in Circle? Like, I think it was Marshall Wace, right? Because could Marshall Wace have gone and like bought a bunch of Bitcoin in 2018 when they did that deal? They couldn't have, right? And so this is—

General Catalyst and Breyer Capital, I think, were one of the seed round.

Yeah, full bunch of money in like 2018 through 2020, I think.

Yeah.

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The institutional allocators prefer to invest in startups with legitimate teams that they can underwrite, go to committee, and there's this like, you know, they get paid to do that, right? And I think it would be hard to like put a couple billion or whatever, how much capital Circle raised, in just Bitcoin.

Beyond that, by the way, there's also like, my LPs want to hear me talk about, you know, who my founders are and like why we invested in them. They're not going to pay me $2.20 to buy Bitcoin because they can just go do that themselves. The question they have to answer is like, do they want to put money into my fund or not relative to just buying Bitcoin? But once they put money into my fund, like, they do not want me to do stuff like that. They want me to go and tell them like what is changing the way financial markets work and why do— and how do they have exposure to that.

Yeah, maybe as a side note on that, like, has the conversation with LPs really changed over the years? Are they more focused on this type of stuff, or do they take an interest in particular areas? I'm kind of curious if there's general insights that you've observed over the years.

Yeah, it's definitely changed a lot. The LPs, you know, call it in, you know, pre-2021, they didn't really have any access to the space. You know, some obviously the more sophisticated ones had bought Bitcoin, but the institutions hadn't. They didn't really still know the story. Maybe they had, you know, thought about it a little bit in 2018 when we ran up to $19K or a little bit earlier, but they just didn't know that much. And you really had to walk them through what was happening, why it was happening, why blockchain rails and why crypto were, you know, a good asset class for them to be investing in. 2021, everyone got just so much FOMO. It was just, they were looking around, they were looking at the price action, they were looking at the CNBC headlines, and they were like, I am going to get fired if I don't actually get some exposure to this thing, and I've got to put money in as quick as possible. But there was still extremely little amount of knowledge about like why blockchain rails were good for money movement, like why there was a reason for DeFi to exist and how DeFi could potentially replace certain types of traditional financial instruments. Now today, frankly, all this, all the LPs pretty much get it. They understand the story. They may or may not believe you. They may think, I think you're full of shit. But what they do believe is, or they do understand why it is going to exist. And almost all of them believe in Bitcoin at this point, and at least that Bitcoin will continue to be a store of value, whether they think it should be or not, because they, for some ideological reason. And so now it's about telling them, like, this is actually the future of money, this is the future of capital markets. And if you want somebody to get you exposure to how capital markets are going to exist 10 years from now, you have to invest with me because I'm the one who has that expertise and understanding. And so it's a different, it's same sort of the same story, but less education needs to happen.

Yeah. Yeah, definitely. Uh, transitioning to something else that has been ripping is HOOD. This is Robinhood stock. I mean, it's been on an absolute tear. Uh, they were, I mean, we're here to talk about insights and news stories of ECC. There's really just one, and that was Robinhood announcing this tokenization of like certain private, um, you know, uh, companies' stocks. Uh, should we just spend a minute? I'd like to just— the next chapter of the segment just covering all of that. Um, so for a little bit of background, feel free to jump in here with the particulars, but like Vlad was in Cannes and he was— unveiled this opportunity to— for Robinhood users. I think it was only EU users.

So it's only EU users, so Robinhood EU, which is just Bitstamp. By the way, before we even go into the specifics, how good did Vlad look in that, you know, that suit? So you got a little glimpse of him at the event. You could kind of see through the shirt.

Like, he was, he was, he was, he was, uh, like, he was a pure capo there. I mean, someone, I saw someone comment of like, uh, Vlad went to his stylist and said, make me look presentable. And they, and somehow they made him look like a crypto scammer. But look, we appreciate, it was boiling hot in Cannes. I don't know how he was like weathering that, but, uh, There's a lot of people in that, in that event. You're starting to see how companies like Robinhood, like we talked about Stripe and how forward-looking they've been. Robinhood, again, founder-led organization. Vlad has been all over it and it's not new. The Bitstamp happened a while ago. They've been integrating that. Um, let's, let's talk about that. Like, so I think there's a lot to unpack, but like at a high level, this gives people an opportunity to have exposure to these private companies. And I think it was like OpenAI and SpaceX and maybe a few other companies, right?

So there's two different products that they announced. And so like, let's— maybe we'll level set on two of them, or both of them. So on the, uh, they announced the public company side, like tokenized, like public equities. And I think it got a little confused, and I even tweeted about this a little bit, um, that with the xStocks announcement, which was also what, you know, uh, Kraken and Bybit and Gate and a few others are doing on Solana, But maybe on the Robinhood side, basically what they announced was that they're going to do a— or allow you to enter into a derivative contract with them that trades 24/5, so still doesn't trade on the weekend, cannot be taken off platform. So they'll give you a token, but it looks in your wallet like no different than if you just own the equity itself. They're charging a 10 bps FX fee. So because they're your Bitstamp or, you know, Robinhood Europe user, you have euro, but then they're swapping that euro for 10 bps into USD, and then they're swapping with up to a 50-bip spread to go buy the token itself. It's there. It's still T+1 settlement on the FX side. And there, you know, it looks essentially in every way on platform, like it's, you know, our traditional equity. And so you ask like, what, what problem are they solving? And the problem they are solving for that product is essentially just that they don't have the license to go offer equities, right? Like, like that is the problem they are solving. Like they're competing in Europe. With, uh, Revolut and with a bunch of these other, um, you know, fintechs who have the right licensing in Europe and have— are offering US equities through like DriveWealth and Alpaca and like these other, you know, providers. And Robinhood just doesn't. And so they're, they're made a big deal about the, the tokenized, you know, equity piece. And, and, but it's, it's essentially just, you know, a kind of, I think, a little bit of a regular for them right now. Now they do say that they're like setting themselves up for, you know, a future of being much more on-chain, and they want to have their own chain. That's on Arbitrum, et cetera. So I'm excited about where they're going, but I just want to be like very clear about like what that product is today.

Yeah. It's, it's a Robinhood chain. It's deployed on Arbitrum and it gives European customers the ability to buy tokenized, um, US stocks. I think over 200 and ETFs, right?

Yeah. But, but it's, it's, there's no interaction with any permissionless chain for you, the user, right? Like they're going to settle, they're going to batch settle. Um, today it's actually going to be entirely on Arbitrum. The, the, in the future, it sounds like it's probably going to be, it's going to use like the Orbit tech stack, but it's probably going to be directly settling into ETH instead of settling into Arbitrum. So it's not going to be like an L3 or a sidechain. So I think we'll, it's like kind of unclear. Um, the private company stuff is a little bit different. And so like, that's the public company, the private company stuff. There was obviously some, some hoopla about this on, uh, on Twitter yesterday because they said that they, you know, uh, they were giving you, uh, private company stock and then OpenAI came out and said like, are definitely not allowing transfers. And it turns out that it's— the, the structure of it is pretty similar to what you've seen in other types of structures where they are buying, you know, or they've been able to buy or source some equity from, you know, OpenAI employees or early investors, you know, same thing with, um, uh, I believe it was SpaceX. And they're putting it into an SPV and they're allowing you to buy, um, some fraction of that SPV in a derivative contract. Again, and, um, in a kind of, again, like a, uh, completely permissioned, like, you know, in their, um, app, uh, program. And so again, it's, it's, it's tokenized, but there's not necessarily like any interaction with crypto, at least today. So again, I think it's important to say like it's exciting that we're having these types of conversations, but the, the product as it exists today, um, isn't solving a lot of problems for much of anyone other than frankly like a little bit of a regulatory arbitrage for Robinhood specifically.

Yeah, yeah, you know, I, I've looked at the video and look, I'm sure they thought extensively about how they were going to position it, but I, I think it's important if you're a founder of your company, like, I don't know if it was a feature or a bug, but I would have done it differently is all I'm saying, because you should have— like, what happens, like, retail— like, Robinhood is a retail focused platform. The worst case is, imagine if all users are flocking and buying this thing, because, you know, these are companies that people want to have exposure to. You know, in a worst-case scenario, you have a ton of interest, a ton of people unsuspectingly buy this thinking that they're going to get on the cap table, and that's not the case. And if you're not on the cap table, then, then this might fall apart. I mean, it has a whole set of nuances and considerations where Obviously there's backlash with OpenAI. Some companies like Stripe, for instance, doesn't allow— there's all these transfer restrictions on stocks. I mean, as far as I'm aware, Stripe, I think it's like $100 billion in secondary market. The company tenders back shares. If you're an employee, you want liquidity, the company pretty much like every quarter or so is buying back these shares and they're very, very guarded as to who you can sell them. And most companies are like this. Yeah, I think it's— I would have done it differently. I wonder why they didn't do it this way. Maybe they were intentionally opaque about it or just, you know, but it's just a word of caution because if you're in crypto, what you don't want is— this is what we have wrong as an industry, you know, just be transparent, maybe hold off on the announcement or maybe go talk to these companies. If you take the long path, like now you have backlash from OpenAI and now there could be more scrutiny. And so I wonder if this actually jeopardizes their capacity to maybe do something interesting where you go and structure these things and get employees liquidity. I don't know.

Yeah. My, uh, maybe my, um, my perspective here is that the biggest problem they made to your point was just how they talked about it. It wasn't actually the product itself, right? Like it's actually really exciting that people can get, you know, more access to like, you know, private equity, you know, um, Tesla and, or sorry, um, OpenAI and SpaceX. It's, you know, exciting that people in Europe can get access to these public equities through, you know, the Robinhood platform when they couldn't before. I— my expectation, or my, my concern, is that they talked about it in these big kind of like crypto promise ways, and to get everybody like super hyped up about it. And, and even the event, I mean, I don't know if you went, but, but I was there for part of it. And, you know, they kind of— there's this air of like, oh, it's like really exclusive, like everybody is staying at the best hotel, they're getting on a a shuttle that only the shuttles could go up to this essentially this like chateau that like then was like they were— he was presenting and it was really all about this like air of exclusivity that they were trying to, to go out and foster. And then they talked about a product in a really opaque way that really is like not— it's pretty simple. And it was really about this like future looking version of like what they want. Their on-chain, or maybe what they want their like on-chain future to look like and how they want to interact with permissionless blockchains. But it got people expecting something different than what the details actually were. And that is the worst thing you can do. Like, you need to have clarity in language, you need to have clarity in the way you communicate. And that is why there's been so much confusion and backlash, um, at times at least, you know, on, on Twitter and elsewhere.

Yeah, yeah. I mean, look, if it were up to me, I'm sure there's some regulatory stuff, but it's like, hey, this is a derivative contract, it's going to track the price of the secondary market of these things. And look, if you you've observed, we're going to give you like, this is maybe how the oracle works and we're going to take a weighted average and this is the calculation. I mean, maybe as I understood it, that it's sort of like that. You're, you're gonna, and then I have questions around, well, how are you calculating this and who's shorting it? Like who's, who's taking the other side of the position? How are you managing that?

And like, so they did come out eventually and I, I don't think this was a public release at the time. So they came out eventually and now what they've said is they're using, uh, like Carta and Forge secondary markets as sort of like a pricing agent. To, um, try to kind of pin or, or track the, uh, the price that you're seeing on Carta or Forge. I think there's like very a lot of confusion still around like, you know, do you own common, do you own like a pref, like how— what should a common or pref trade at? Um, you know, I think it's very unclear around— or it's not unclear, you actually, you know that you have no actual rights. So like, what is your legal right, you know, relative to Robinhood? And then Robinhood is actually you know, has this SPV and are there other owners in this SPV? Like, some of that, like, legal structure is, like, is unclear. Um, but they did at least say they're going to try to use, you know, secondary markets at Carta and Forge, um, and have some sort of, like, pricing agent to, to help you, like, bring some sort of transparency into that pricing.

Yeah, look, I don't disagree with you. I mean, in the best case, we get more liquidity, more transparency into secondary market. Like, crypto is a good engine to bring price discovery with liquidity. And so, you know, it does play into access. Like, most people don't have the opportunity to, like, invest in US stocks, which is a huge win, I think. And then there's obviously a lot of people that don't have access. Like, most of the value generation over the last, you know, two decades or so has been in the private markets. Companies are staying private longer, and, you know, not everyone can get access to that. So, you know, hopefully you see the promise of where it can go, but I do think we have to go a long way. And, and as an industry, just be a little more measured in how we like make these announcements, because I, I think there's— especially in moments like these, there's a lot of hype, there's a lot of expectation, uh, especially as a public company. And so I, I think, um, yeah, yeah.

Well, and by the way, Robinhood stock was up like, what, 12% after the announcement? Just like completely ripped. And I would say this, like, I would contrast this a little bit with, um, like Republic had an announcement about also distributing private shares, I think specifically of SpaceX, uh, like last week. And they did it in the way that you see these things are typically done, which is that they did, I think, a Reg CF. And so like everybody could, um, they could only distribute up to $5 million over a 12-month basis. Everybody had to be, you know, KYC'd, AML'd on The Republic platform. The, um, The Republic was telling people that we don't actually have the shares yet. They were very clear about that, but If we get up to, you know, $5 million of interest, we will go and acquire the shares. This is what we think the target price will be, which I think on their platform was they were targeting between a $400 and $500 billion valuation for SpaceX, which is like absolutely incredible. But that was the way that these things are typically done. They're done in a regulated manner, and in— and, and Republic deciding to do it in kind of like this unregulated manner is a little bit odd. And then on the public equity side, to your point, Like in Europe, people have access to cheap US stocks. And so the, the distribution point for the users doesn't really make a ton of sense. It makes sense in India and Southeast Asia and places where people actually don't have access to, uh, public equities. But in Europe, they already— people already have that access. And so it really felt to me like, hey, we want to tell a really good story for the public market, and then we want to do a little bit of regulatory arbitrage.

Yeah, totally. To your point on Republic, I like the way they called it, which is mirror tokens.

Yeah.

And that I think name is more reflective of what this instrument actually is doing. So as they called it, mirror tokens, a new type of token tied to the performance of the world's most valuable private companies. I think that's a very elegant way of saying it, right? Yeah. And so that's probably a big contrast there. And Republic's been quietly doing this for such a long time. I mean, they've been— I was a seed investor. Or an advisor at some point can. It's good to see them come out of like, uh, you know, it pays to play the long game. And, you know, they've taken the higher, like, the harder path, which is, you know, trying to do this in a very regulated manner and, and, and never compromising, I guess, their ability to operate, which I think is so essential in the space. Like, we're just getting started. Like, don't do anything that puts you out of the game, you know. Uh, so it's good to see this.

Yeah. And I think the one thing I would, I would maybe end us with, or maybe we move on to like xDox and some of the other solutions. But the, the other thing I would say is like, there is going to be more regulatory scrutiny on a tokenized equity that is, you know, trading on-chain, if and when Robinhood allows these things to be transferred on-chain, than there is on like, name your token today that trades on Jupiter, right? And so like, we do need to be, I think, a little bit more thoughtful around how we think and talk about these things. Because if we get too ahead of ourselves, like, you're going to have a bit of a snapback against even, you know, this regulatory regime, which is obviously, you know, much more friendly to the administration or to us than prior administrations have been. And so I think that's an important point. And I think the other thing here is I expect we'll continue to see more and more transfer restrictions and language on transfer restrictions in shareholders agreements be, um, uh, be tweaked. To include things like affiliates and subsidiaries and SPVs so that, uh, because the, the companies, especially the private ones, they don't want this to happen. They don't want their stock out there trading, you know, especially not permissionlessly. And even within Robinhood, unless they facilitated themselves, they control the environment. So I think we're going to see more tension directly with people like OpenAI, which you've already seen here.

Yeah.

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Have you seen the movie The Big Short?

Yeah, of course.

You know, those scenes are like Richard Thaler or Selena Gomez or, you know, Margot Robbie goes in there and explains like this weird, like, complicated financial thing. So let's just do the same here. Mirror token. So nothing stops you and I, Rob, from entering into an agreement where we bet on the outcome of a particular company. So like, let's pick, you know, OpenAI. I say, hey, OpenAI is going to be a trillion-dollar business. And you say, you are absolutely out of your mind. I take the other side of the bet. I say it's going to be X.

And then we would never do that, more than a trillion.

Well, you know what I mean? Like, so say that you were not agreeing with me, but you would find a counterparty that would take the other side of the bet, and that's how you would structure as a normal bet would, right? Patriots versus Chiefs, no different than OpenAI. You just select the price and then the, you assign some sort of payout structure and you enter in a handshake agreement. No problem, right? Derivative markets are vastly larger than spot, like notional markets. Like they're just huge, huge, huge. And that's, as I understand, like this is, I think nothing stops you from doing that. I mean, there's some like regulatory considerations and stuff, but So that's effectively what this mirror token is in some ways. Uh, you need a— like Synthetix tried to do this back at like back in the day where they had the Synths. And I think if Kain were listening, you know, a lot of people were not as sophisticated because when you were minting sUSD, you were basically shorting. And so you had to like make sure that you didn't accrue bad debt. Um, so these are the hard problems, like you've got to manage the book in a very good way. And so you're somehow trusting these platforms to like if you're not doing it directly, as you and I have like done it right now, someone is going to have to do that for you. And you're hoping that there's no counterparty risk because, oh, there's always counterparty risk. There's always, always kind of— you, Rob, run away and don't honor it when we try to settle. There's a whole myriad of counterparty risks that could— you're trusting Robinhood or you're trusting Republic and how they're doing it, and then maybe the company's, you know, there's backlash, you actually maybe not be settled, and so you never get the shares. And there's a whole set of things that if you don't do it the right way, it can really backfire, right?

In Robinhood, I think they're like, there's like 3 or 4 layers because like you're trusting like Robinhood Europe, then you're trusting like the US broker dealer that is, you know, acquiring these shares or has acquired these shares for the SPV. Then you're, you're also trusting like the SPV administrators, right? And so like there's like 3 people there and then you have OpenAI on the other end. And so like, I mean, you know this and you know, it's maybe something that's a little foreign to, to some of the listeners. But counterparty risk is probably the number one thing I used to talk about when I worked in traditional hedge funds. Like, more than anything else, it was always about counterparty risk.

Yeah, no, totally. I mean, uh, Lehman, like, these organizations blow up. Yeah, because, uh, these things can get really out of hand. Um, speaking of counterparty risk, I was just on a panel of ECC, I guess, and we were talking about DeFi, and, uh, we ended up talking about this because, uh, the whole point was there was like a couple of folks there from like traditional like, I guess not traditional, but like DeFi protocols. And it's so common. These people just like talk a very big game. It's like, we're going to blow up JP Morgan as we know it. It's going to cease to exist. And I find it all a lot. It's odd, but these people like haven't worked in TradFi. So it's like, well, not really. But I've been now enjoying like ever since my ParaFi days, like, can you walk into and talk to your friends in TradFi and not mention crypto, but mention like the underlying mechanism and system and get them excited, right? Can you talk about stablecoins without calling them stablecoins? Can you talk about DeFi rails without— and one of the things, as you were saying, counterparty risk, this is one of the like core primitives that— it's not to say that DeFi is going to blow up TradFi, but like the way I would describe it to folks at JP Morgan, it's like, hey, imagine if you had the ability to assess collateral 24/7, 365, and you can inspect that in real time. You not like, like entity level, system-wide, protocol-wide, And so you never get yourself in a position where you can actually monitor counterparty risk in a more precise way in real time. And if you just say that, they'll be like, oh, that's really cool. And you're like, oh yeah, well, that's DeFi. And they're like, oh no, no, no, we can't touch DeFi. This is terrible. This is snake oil kind of thing. But these are some of the properties that I think as an industry we're better off. And your point around stablecoins, just to go back there for a minute, really does that well, which is Yeah, don't necessarily think about what you're gonna disrupt, but more of what is sort of like a new primitive or a new benefit that was just not possible before. Flash loans, composability, atomic transactions, you know, 24/7, 365, reducing counterparty risk, your ability to measure risk in more real time. Like, these are some of the things that if you're just taking the very narrow view of like, what are we displacing, you sort of miss perhaps even the bigger picture of what is possible with this technology that I think is worth I've seen sort of the best founders think like that, that, uh, uh, where—

by the way, this is like the way you are supposed to get people. You're— this is how you sell. You don't go and sell to somebody by saying like, hey, like this, we're going to disrupt your business or somebody else's business. And like, nobody is like, oh yeah, sign me up for that. You go and tell them like, I'm going to make you money and I'm going to make your life better and I'm going to reduce your risk and this is how I'm going to do it. And then they're like, yeah, sign me up. Like, absolutely. Right. They never are. You never go, you never say you're going to cut costs. You always say you're going to add revenue every time.

Yep. That's very true. Um, what else should we talk about? Um, is there anything else on the tokenization stuff that we should cover?

Did you want to quickly touch on X stocks? Because, um, those are actually being traded on, uh, on Solana right now and on Jupiter and Radium. And, um, you know, you can use it as— you can do securities lending essentially on Kamino.

Yeah, let's do that.

Yeah, so just quickly, maybe I'll, um, talk about how they're a little bit different. So these are, uh, in somewhat of a similar manner. You, you go, uh, and you can buy them through right now Kraken or Bybit. I think Gate is going to sign up as well. I expect we'll see other, um, other exchanges sign up. And you, you know, KYC, AML, You go and you put in an order to, um, to, to, to order to buy one of these. You know, they mint a token, and what's happening on the back end is a company backed up by— is acquiring that equity into an SPV that, um, that they control. And they're regulated in the EU, I think, through Liechtenstein. And then they're minting that token, and so you now have that token like on in your Kraken, um, wallet. But now actually those tokens can be transferred to, you know, your Phantom wallet or any self-custodial wallet on Solana, immediately supported to do securities lending on Kamino, immediately supported to go and swap on Jupiter. And so we saw a lot of people, I think, tweeting about this and getting really excited about this because now it's like, oh, equities are in DeFi. You know, I think I had a tweet about this that I think there's a lot of, again, like structural issues here that created a market that are probably going to create a market that is kind of the worst of both worlds that aren't really allowing us to completely take advantage of being on-chain. And also we have a lot of this, you know, call it counterparty risk and, um, and risk and off-chain and regulatory risks that exist. And so, um, you know, that's— that was xDox, and I think that was kind of caught up in the Robinhood announcement. But that even is a step farther because it's in many ways sort of like the Robinhood announcement, but now you can actually use these things in DeFi.

Yeah, there's a decent amount of liquidity. But what's a— I saw some comments around like the price was just being totally off, there's not enough liquidity in there. I'm curious, like, what, um, and what you've observed— obviously it's early days, but like, what could go terribly wrong? And then what is— let's just focus on the downside of how this could break, and then we could talk like the upside everyone kind of knows. But like, how does this actually break, and what's the worst case for this type of stuff?

Yeah, so there's been about, uh, I think there was like $8 million of volume yesterday, and so there's a little bit of volume on-chain. Um, but actually, if you look at Amazon, there's like 700 bucks of liquidity right now. And so there's zero, uh, essentially. I think, um, Tesla maybe had, uh, uh, was it Tesla? No, it was Apple who had maybe like $70K. And I think Tesla actually had like a million bucks of liquidity. And so these are, you know, in Radium pools, you can swap it through Jupiter. And so you're seeing kind of like a wide disparity of like where people are willing to, to provide liquidity and where they, where they want to put money into the AMM pools. There's I think the concern I have, and I talked about this a little bit on Twitter, was there's actually like no real way to market make these economically on the weekends. Uh, after hours is also really tough. And so what I'm concerned about is there was essentially like this immediate, oh hey, we're going to, you know, do securities lending against this on Kamino. We're going to immediately allow for swapping on Radium and through Jupiter and there's this likelihood that there's no sophisticated market makers on the weekend. And if there will be market makers on the weekend, they have to go and hedge off-chain. Well, you can't actually hedge if you're a, um, if you're somebody that is, uh, if it's during, I guess, off-market hours, if it's not on, um, you know, during those market hours. And so they actually have to hold that market, manage to hold that risk for that entire weekend or those after-hours time frame. And to be able to hold risk for an entire weekend when the world is changing as quickly as it is, they're going to have to like blow out the spread and pricing is going to get like all wacky. And it's going to be uneconomical for professional traders. And you're just going to see kind of like, you know, unsophisticated retail trading these during those periods of time. And I, and I'm worried that now that they're going to be used in Kamino and potentially derivatives on top of that, you're going to see a lot of like cascading liquidation risk. On-chain. And so that's one of the things that I think is, um, we need to be thoughtful about very early on.

Yeah, no, absolutely. I'm gonna— I'm trying to share my screen here because, uh, maybe you can see it or not, but CoinGecko has actually a good dashboard here that tracks, uh, I believe this is correct, like xStock's ecosystem. And you have, uh, just to your point earlier, now like you have the most amount of volume on a 24-hour basis is the S&P 500 xStock. And that has 1.6 million of volume. And then it drops off pretty dramatically. I guess Nvidia had a lot, you know, sorry, Robinhood, XDOX, Circle, and Nvidia, but it's, it's very thin liquidity, right? Um, and, and so just going back to the, on the problem that you observe on the weekend, let me know if this is terribly wrong, is because you, someone needs to take that risk over the weekend, uh, there's a counterparty in there that, you know, you're gonna have to settle on Monday. And, and if there's a lot of movement over the weekend or, and, or it's especially when it's thinly traded, it lends itself for like these very big fluctuations. Someone can be caught off guard really, really badly there.

I mean, all of us, I think, who have been in crypto long enough understand or have seen how these like thinly, like low liquidity weekends might just like cause like cascading issues. And these are even for like much more liquid, uh, liquid markets. And to your point, like there is a market maker out there who will make this market, but they might, you know, blow out the spread by 5%, right? Which means that like you might just be taking a 5% haircut the second you buy this, this token on the weekend, and you don't have the upside of like a meme coin. Like I had a bunch of people tweet at me like, oh, you know, haven't you seen that people are willing to take, you know, 10% slippage or 15% slippage to go and buy like Fart Coin? I was like, yeah, that's because everybody thinks Fart Coin is gonna like 4x or 5x.

100x or bust, you know.

Yeah, exactly right. Like, you're— are you really going to take a 5% haircut on day one to— in hopes of making 7% or 5% or 2% on an Apple move, you know, pre-market hours on Monday morning? Like, in the vast majority of cases, no, right? And but the sophisticated actors, like, that's what they're going to do because if they realize that, like, retail doesn't care and there is that demand otherwise.

Yeah, yeah. I mean, excellent point. Like, imagine if you're using these shares as collateral and there's a huge fluctuation over the weekend because there's a whale that wants to liquidate issue. Like, we, we've seen this like pretty adversarial environment in crypto where people can, you know, because people are seeing your position in real time. I mean, I don't know if these are like accepted as collateral, but let's just say that in Kamino you can borrow against— yeah, you can borrow against Circle shares, right? You want to go short Circle? Yeah, there you go, ladies and gentlemen. None of this financial advice, I'm not— but you know, it, um, right now it's tracking fairly closely, I guess, like 187. But, but over the weekend, be really interesting to see how this plays out.

I mean, some of the low liquidity ones were trading at it like a— I think it was Apple I was looking at today. It traded at a solid like 7% discount at some point. And like I said, there's only like $70K of liquidity. I mean, it's early, right? And so we'll see what happens. But there's— I think there's a lot of DeFi risk here that especially because like you can't orbit easily, right? So somebody, if you want to orb the transaction or the price differential, like you have to go back to Kraken or, you know, Bybit or one of these places. You have to be KYC, AML. Then you have to go and redeem the token for whatever the off-chain price is, not the on-chain price. You pay 25 bips, and it's getting— those transactions, that redemption is getting batched. And so there's no way to go and do like automated, you know, high-frequency arbitrage trading here. And so it's like really hard for any sort of like sophisticated actor to go and figure out how they want to actually, you know, play this in times where the equity markets aren't open, right? Equity markets, when they're open, it can be okay. Equity markets, when they're not open, especially on the weekends, like, it just strikes me that I don't know how these are going to work on-chain until more of the flow is natively on-chain, until we have primary issuance natively on-chain.

What do you mean by that? Because people might not appreciate that.

So these are essentially like secondary transactions, right? Somebody else is buying them and they're selling you a, like, a wrapped version. Wrapped versions of things exist all through traditional finance, right? Like ETFs are wrappers, right? That doesn't mean it's a problem, but you need to have like a native market on-chain that is separate because that way people can actually hedge more easily on-chain, right? And it doesn't also matter if there is a structural reason that a thing trades at you know, a discount or a premium because there is the native version of that that can be used to, you know, to short, to hedge, etc. And so, um, that market I think actually will be really interesting. There's people like Superstate trying to figure that out where it's like, okay, well, you know, put 95% of your float with Compuserve, like, you know, and put it on the NASDAQ, and then put 5% of your float with Superstate and put it on to you know, an AMM pool and into DeFi. And if that's the case, those markets are completely separate. They're not dependent on an oracle. They're not dependent on each other. And so you will just actually see like really sophisticated actors play them separately and they don't have to hedge off-chain in that case. Yeah.

Because it's not a wrapper, it's like natively issued on-chain. And so that, even though the float might be low, there's still a native, uh, so you don't have to go through this like multiple-step process to actually do the ARB and close the gap, right?

Right. Because if liquidity gets pulled on this thing on-chain, it can actually go to zero, right? And you know, and you, it could actually go to zero unless you go and you, and you redeem it and you redeem it for that off-chain price, right? So like, that's the, that's the, the, you have that, um, right to that off-chain, like, you know, um, price that is coming through the oracle. If it's native, it can also go to zero, right? But it's entirely dependent on the liquidity and the supply-demand dimensions. Of like what is happening on-chain. You don't ever have this like gravitational pull back to whatever that, whatever that off-chain price is.

Yeah, definitely.

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A lot happening in tokenized stocks. I mean, let me ask you a question, Rob. If we were to have talked like a year ago or even 6 months ago, would you have expected to be in a state of the world where in July recording and saying all this is happening now? Does it feel surreal? Were you expecting it?

Um, no, it's, it's surreal, man. I, I have to be honest, like, I expected a lot of things to happen this year. I expected there to be, um, just a lot more, you know, regulatory clarity. We haven't quite gotten that yet. It looks like Genius Act is going to get, uh, passed pretty soon on the end of the reconciliation, but it's taking longer than people expected. I think there's a lot of concerns around when clarity gets, um, whether that gets passed or not. But I expected that to happen. I expected people and institutions and traditional trading firms to continue to dip their toe in, but I didn't expect there to be a few people on the stablecoin side and Robinhood to accelerate as quickly as they are. Even if it is a lot more like window dressing, it is at least the right direction, and it's something that we should all excited, uh, be excited about. And, and I tell you, actually, the most surprising thing to me is just how shit the alt token market has been relative to everything else we're talking about. There's so much excitement about some of these equity stuff. There's excitement about actual, like, you know, equity public company treasuries that are buying crypto tokens. And yet there is no excitement about, like, all of the tokens that people were investing in and talking about a year ago.

Absolutely not. Yeah, I mean, there's, uh, all the liquidity has been pulled and is going, uh, you know, um, you know, to public markets. What does that tell you about the state of crypto? Um, you know, is there— is this anything more than a casino? Like, are people— like, what happens, like, you know, in a world where you have now these tokenized public vehicles and people are like playing the NAV premium? And you know, you know how you kind of know how that ends. But, um, what's your like prognosis maybe like for the next year or particularly like the next 12 months? Like, do we continue to just see more and more interest, more and more, um, you know, ability to, you know, people investing more in the public markets and just all just don't catch a bid? Or I know you guys are mostly focused on venture, but like as a, as a personal opinion or view, like how do you see that unfolding?

It does feel like, at least in the near term, like there's— it's gonna be really tough for liquidity on, you know, all these alts. I was at this— so I was in Cannes, as you mentioned, and I was at this other event over the weekend that was kind of like high status, high value, um, you know, kind of, uh, GPs, LPs, some founders that were just talking about the state of the market. And they did a VC panel and I wasn't on it. Um, I was in the audience. But the VCs that were up there spent like literally like 60 or 70% of the time that they had to talk about what they're excited about in crypto, to talk about these treasury companies. That's all they talked about. And these are like venture capitalists, right? And they, you know, I mean, this is what we— I am too. And I'm really focused on, you know, early-stage companies and everybody's looking around and they're like, how do I figure out a way as an asset manager to make money? And they're all pulled into the shiny new thing of public companies. Because there is no bid by the trading firms for alts. I think that's been the concern. And I was telling somebody else this, this morning, like, there are clearly two different markets. There is the, like, on-chain crypto-native, like, degen market who mostly just cares about, like, a few, you know, revenue-generating type—

Hyperliquid and a few others.

Yeah, Hyperliquid, Athena, Aave, like those types of guys, right? And then— and, and that's not a lot of liquidity because then the other thing those people care about is fartcoin and, you know, pump when it launches and this stuff. They don't care about any of the other stuff that, like, you know, people are talking about. And then there's like the institutional bid, right? And to go back to what we talked about earlier, like, you know, when I was at the Goldman event, the Goldman event talked about a couple things. Talked about Bitcoin, talked about ETH, it talked about Ripple, and it talked about Canton. Those were the things they talked about. They didn't talk about— there was a little bit of conversation about Hyperliquid in there as well, But there wasn't conversation even really about Solana that much, a little bit. And I actually— there's another conversation to be had here about how I think like Solana is the Silicon Valley token and Ethereum is like the Wall Street token. I actually think that like I have this mental model for this that's happening right now. But those are the things that they wanted to talk about at Goldman. They didn't want to talk about any of the other things happening in crypto. They want to talk about that and stablecoins.

Well, you know, go study the history of innovation and crypto markets. And I think if you're a builder out there, Um, you know, do you really want to be doing the next public company tokenization strategy? No. I mean, I think you— now the meta is revenue generating tokens. I mean, like, okay, like you should have been building that. Like you always, you always should be building revenue generating things, ladies and gentlemen. But yeah, I think, um, you know, price is obviously very distracting. Uh, and it's funny how Wall Street just gets obsessed with these things. Uh, But, but look, I mean, if you objectively, like, going back, like, over the last 9 months, you had a total 180 in the regulatory, uh, stance. We have 4 years of really getting policy right. There's been a lot of work. Um, the stablecoin stuff is not new, but it's getting a lot of attention, and that bodes— that has, like, ripple effects into other— the other stuff that's happening in crypto. And, you know, you might be in a position where the design space for tokens actually improves. And so Um, who knows? Like, one of the things that would be really interesting is, um, so, so the circle effect for stablecoins is— it was important in a world where you have Anchorage or Fireblocks or Chainalysis or what's— I guess the, the exercise is what are the next 5 companies that are going to go public in crypto, putting aside these like treasury vehicles, and what is the second, third order effect in the crypto ecosystem? I'm kind of curious if you have a view.

Yeah, I mean, I, I, um, I guess I didn't like fully answer your last question, so I do, I do want to take a quick step back, which is to say I actually am long-term bullish to the same thing you said about markets. Like, markets are cyclical, you know. The second that everyone calls for the death of Ethereum, it trades back up. The second everybody calls for the death of all alts, like, they will trade back up. And there's a reason for tokens to exist, or a reason for builders to use tokens as part of the way that they, you know, align incentives and trust and, you know, potentially even as a, you know, a form of ownership in the future. And so I think, you know, your alts will catch a bid. Maybe, maybe not, you know, your specific shitcoin, whoever's listening, but like—

I thought you were talking to me, Rob. I feel attacked.

I'm gonna let that fly by. He's like, it's behind me now.

No, no, for— You're telling me my book is gonna catch a bid? Thank you. I'm licking my wounds here.

Uh, no, no, no, your, your, your specific coin, I'm sure if you ever have one, would catch it. Humongous bid. But, um, no, I, I, I think, you know, tokens will catch a bid again. But I think, you know, to, to the point you said, I, I, I'm, I'm long-term bullish. Go and build. Like, it is a good time to be here. And don't be so distracted by price. It's easy to do it. But also, like, by the time that everybody's doing a public company, that means the trade is over, right? By the time that, like, everybody is talking about stablecoins, that means the trade is over. When it becomes consensus is not when you make outside returns.

Yeah. Uh, last chapter, uh, I know none of this financial advice. I mean, we could talk about other new stuff, but I actually, on that point, like, um, you guys have been through and through investing through cycles. Um, you're one of the larger funds. Um, I'd say you don't necessarily invest where the, you know, fair wind investors, if that's a term. What are some of the, what are some of like the key buckets that you are excited about to deploy capital behind?

Yeah. I remain excited about the things that I've always been excited about. Like what do blockchains do? Right. Like they, they send data and value, right? Like that is what they do really well. Right. And what is a permissionless decentralized, trustless system that sends data and value. What does that do well? It does finance. And so I continue to be really excited about the things we're talking about, right? I continue to be excited about payments, and I continue to be excited about, uh, stablecoins and DeFi and real-world interesting use cases of bringing people on-chain to give them those things in a better system with a better user experience than they have before. And so that's what I'm really constructive on. Like, it's not You know, we continue to look at AI, we continue to look at some of these other verticals, but at the core of what this industry is— and I say this as someone who spent my whole career in fintech, so I'm obviously biased— but the core of what this industry is, it is bringing global internet-native financial markets that are better than what we have today to the world and to the masses. And that is what I want to continue to invest in.

Yeah, yeah, it's almost like, uh, you know, I feel that as an industry, we always come at it from a defensive position because look, people outside in, crypto is still not a relatable piece of technology. It's starting to kind of become more relatable, but objectively speaking, most of the world still don't understand how the hell this technology is going to fit into their daily lives. It's said differently, AI is so relatable. Why? Because you go to ChatGPT and it's a prompt that, like, search is so native to people. That it doesn't require like new mental processes and habits to form. Crypto is not relatable. The exciting part is, to your point, like I think as an industry we constantly every cycle need to justify our existence by saying we're gonna like do crypto AI and then, and then, and then some sort of like new zero-to-one primitive. That's like, honestly, go back to the very, very early reasons why you got excited and why this industry exists. It started post-global financial crisis to bring more transparency to a system that is really opaque. And, and, um, I mean, you know this as well as I do, like, it's not to say that banks don't want to adopt this technology. The only department that keeps growing in these places is back office and compliance. Like, they are very motivated to adopt this. And, and the best part of this is like, there's a lot of info that's been built. And the exciting part of this cycle is you can actually start seeing it be integrated into the financial system, integrated by large players like a Nubank, a Revolut, Um, you know, some JPMorgans of the world. And, um, it's not to say that, you know, all of a sudden they woke up and said, oh, okay, great. It's like, no, like, there are very clear catalysts that allow them to do this. Uh, you know, as a public company, yeah, you're not going to do something that can jeopardize your business. So if, if the commissioner of the SEC is telling you not to do it, well, you're not going to do it, right? And, you know, it's, it's, it's, it's, I think, just a reminder to go back to those core primitives, like, like I feel that we're in this state of the market where anyone that really understands payments, like people outside of crypto that are now looking in, maybe that altimeter person out there, uh, have— are now more excited about what crypto can do and the type of transformations that it can deliver to particular businesses in the public markets than crypto natives. Because yeah, their altcoins are not pumping, and so they're all now bearish, looking for the next meta. And it's like, you don't necessarily need to look for the next meta. It's like stablecoins, financial system, that's going to transform a lot of companies. And if all that settlement and flow comes on-chain, yeah, protocols are going to crank revenue. And it's, it's more users come on-chain, that's going to have, you know, a lot of impact to protocols that are built really good technology.

Yeah, we are at the precipice of like getting what we wanted. The people are using like blockchains for like real economic activity that is not just speculation. It is happening. You know, I like, we talked a little bit about like a little bearishly about these products earlier, but it's undeniable that the trend is, you know, there are going to be a lot more users and mass adoption of doing economic value and bringing economies on chain. Like this is what we wanted. And yet we've like kid ourselves over time that like we should be buying like random shitcoin for like some sort of protocol that's going to like reinvent the way we think about like some sort of social media that nobody actually wants, right? And then the token doesn't pump and then we're all upset about it, right? Like, let's just get back to the core of what we wanted, the core principles of, you know, what Satoshi wrote about. And honestly, you and I cut our teeth in this industry really in DeFi, and that was what got us really excited about how that DeFi could change the way financial markets worked. And that continues to be the best use case. That is what I continue to be excited about alongside everything that goes in with that transfer of value.

100%. I mean, I remember in the early days, this is Bitcoin in 2012, and it was trading like sub-$100, and I was comping it to— what's that, right? It's $100. I think it was like $60, right? 21 million. I'm doing the math here. It was like $1.2 billion. And I was looking at that, and I was like, the remittance use case is like, wow, I can move money cross-border. I can hedge this out, the price volatility. And then I was comping it to like Western Union and, and, you know, like Western Union is, uh, hold on, wait, ladies and gentlemen, 3 billion, 3. I was trading like pretty distressed, but back then it was like, I think trading at much higher, but like, you know, it was like a multiple of where Bitcoin was. Um, and so like, as we sit here today, you know, crypto including Bitcoin is a $3.4 trillion, I guess that includes stablecoins, but, um, anyways, Bitcoin's like $2 trillion and then everything else drops off after like Ethereum's like $300 billion. But, um, you know, if you just stop here, if you don't innovate like zero, like homo, fully homomorphic encryption and all this other stuff, if you just say, okay, stablecoins and then some very specific use cases around that, you could argue and you could still underwrite that this is a venture-like return if it starts.

Yeah.

You know, and, and so a lot of that's the point, like don't, don't overthink it. Yeah.

You know, I mean, if you just use Metcalfe's Law and you just think about the value of networks. And you think about the amount of users that are going to start to come on-chain, the amount of economic activity that is coming on-chain. Like, it is so easy to see how the right smart contract platforms just go massive from here. Right. And so I don't know, it's, it feels like we're overthinking it. It feels like people just want that quick win. There's just a lot of, I think, uh, fatigue due to some of the 24/7 market dynamics, et cetera. But I'm so bullish right now about the future of this space. I'm just bullish in the pockets that make sense, and I'm not bullish on like all of this other crap that people talk about on Twitter.

Yeah, you know, uh, as we wrap up the segment, I know how much you like Hyperliquid. Uh, I can't wait for our fellow Kenneth Worthington at JP Morgan who, who put out this report on Circle. The next report is going to be him comparing Coinbase, who is now launching perps, to Hyperliquid or Uniswap. I can't wait for these comparisons because, to your point around network and how networks are vastly more profitable, like, you have, uh, you know, an organization on the left— like, the table is something to the effect of Coinbase, massive overhead, employees, and, and footprint, and has to, you know, this cost structure, thousands of employees. And then you have Or even Binance and you have Hyperliquid, which has, you know, this better than anyone, 12, 15 engineers.

Yeah. I mean, they've, uh, I think they're like in the 20s now, but, um, I mean, the amount of that code base that like Jeff Yan wrote himself is honestly the most insane thing that I've ever heard. It's just absolutely crazy. And I mean, I think, I think you might've seen, we talked about this a little bit, but like DEX to CEX volumes as a percentage, the amount that are in DEXs. Like continues to just go straight through the roof. Like, we're going to be at all-time highs in terms of like DEX volumes relative to CEX volumes. People want to trade in really good product that isn't necessarily Coinbase or isn't necessarily Binance or Bybit. They love Hyperliquid. And but you're starting to see it not just Hyperliquid, you're starting to see it in spot as well. And so there's— it's not just that Hyperliquid is a, is a better product, it's that people are getting more comfortable with being on-chain. And it is a better user experience.

Totally. Yeah. And candidly, I mean, people might start interacting on-chain without even realizing it, right? At the user aggregation layer, companies that might abstract away, like, make crypto invisible. Um, absolutely. I mean, I remember, uh, when I was at ParaFi, like, we, we were very actively trading on-chain, and, and one of our strategies was, uh, stablecoin arbitrage. And, and there came a time where trading stablecoins, like, if you wanted to go a pair of, like, USDT, USDC, It was actually more efficient to do it on Curve than Coinbase. And so, you know, that's like a, for us, like that moment where I remember we were sitting there and saying, oh, like you start seeing a window where the common criticism that people are not active on-chain might totally miss, which is no, there's actually a lot of efficiency, even oftentimes more liquidity on-chain, and then liquidity begets more prices, better price discovery, and that flywheel just gets going. And I think in a best-case scenario, we're going to see that for tokenized stocks and private company stocks and bring more price discovery to these markets. If we do it the right way, whether it's Republic or Xstocks or Robinhood, collectively these experiments are being net positive for the industry. I think we just got to be measured and, you know, doing it the right way and, you know, managing expectations, so to speak.

But there is nothing that crypto Twitter is worse at than managing expectations. Uh, and so you're speaking to the choir, but I don't know if you're going to get anybody to listen to you.

No, definitely not. Um, anyways, Rob, this has been great. Anything else that, uh, you want to talk about? No, we're kind of a little bit overboard, but I'm curious if there's anything that caught your attention this week.

No, I'm, uh, the only thing that caught my attention was just like how excited people were. And by the way, I am, I will say this, I took a little bit of a mea culpa because I went out and I kind of tweeted about how Cannes was a weird place to hold ETHCC, but I will tell you it's beautiful. And you— everyone showed up. Yeah, I don't know if they showed up to the actual events. I mean, they actually did, but you know, they showed up to the beach, and so at least people were in proximity of each other, and that's great. Yeah, so I take it back. Cannes is a great place. Put the HCC there again. I think it's going to be for like 3, 4 years.

Yeah, I mean, it's a fantastic place. It was a bit hot, but I definitely agree with you. It seems like people are having a good time and a lot of side events. Uh, we were there at the Salini conference. We overlapped, and there was the RWA conference that you were speaking at as well, and that was very well organized. And then obviously ECC. And so I'm sure there's a bunch of side events that I wasn't graciously invited, but that's okay. Um, any— yeah, I'm a dinosaur. Uh, how, um, any content? You've been on the road, planes. Any books or movies or series that you're, uh— we always like to wrap segments with that.

I, I gotta tell you, I have been so consumed with work that I have not watched a new thing other— I've been watching like The Office like replays, and I have not read a new book in like a month. And so I've got, I've got nothing.

The Office is the kind of shows you put on and like, if you want to have like a 20-minute or 30-minute like meditation of like not thinking about anything, like that, that'll do it for you.

Yep, it's great.

That's good. All right, uh, that's, that's good for, for the week. I'm actually headed to New York next week, so we might do an in-person podcast there. Rob, if you're around, I don't know where else in the world you're going to be talking about stablecoins and, uh, with big banks.

We'll be talking about stablecoins with you in New York, I think.

There we go. Maybe we record in-person pods. Just hit differently. So maybe we'll just get the keys to BlockTricks office. We'll, we'll let Jano not be there and we can record in person.

Sorry, I know you've been replaced.

Yeah, well, that's, that's what happens. Anyways, guys, Rob, thanks so much for joining us. It's great to have you on. And, uh, thanks everyone for listening, uh, and, and we'll see you next, uh, we'll see you here next week. Have a great weekend.

Thanks, Dabu.