No Top Signal In Sight | Weekly Roundup

If you think about all of these structurally good things that are happening to crypto, like, it's sign of a market that is maturing, a market that is doing well. Doesn't have to be the top, right? This idea or this allegiance to, like, you know, a market cycle, I just think is, is incorrect at a time when the U.S. and, you know, administration and government is actively pushing forward legislation that is going to bring this and has been bringing our market mainstream. And so I don't think it has to be assigned to the top.

Yeah.

Yeah.

This episode is brought to you by Geodnet, the world's largest decentralized RTK network, delivering real-time, centimeter-accurate positioning around the globe. You'll hear more about them later in the episode. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed. We're live. Let's go. Santi, unmute yourself. Rob, what's up?

What's going on?

What's up?

Yeah, I'm just excited for, uh, for, for week 2 of my co-hosting capabilities here. So let's see if I, you know, bring it to even another level.

Nice. I'm a little scared. First time Empire has gone live. The amount of stuff that Santi mistakenly says and then that we have to edit out is high. So, uh, well, I will, I will, for the record, will clarify something.

Uh, we always— I always like to listen back to the episodes to, uh, make note of all the dumb shit that I say in this pod. Perhaps the one that was brought to my attention is this idea that hedge funds cannot invest in ETFs. I had learned— I heard it, um, I was recording a podcast and someone made that point and I took it at face value, and it's incorrect. Hedge funds, if you look at 13Fs, they can invest in ETFs. So this idea that you want to create a DApp because a hedge fund can't go buy an ETF is, is not correct. So, um, it's just important. We've continued to be pitched that, and I think it's just— I just want to clarify that because I, in the prior episode, I'd mentioned that one of the reasons why you'd want to create a DApp is to allow, you know, hedge funds want to have exposure to these assets, and they can't touch the ETFs, which is actually not correct.

Have you come around yet on DApps? Are you investing in any DApps yet? Have I?

Yeah, I did do PEXI, but I did not contribute in kind. That was way back in the day. I did a cash deal, a very small part of my portfolio, and I have not done one after that.

Are we doing dApps already in the pod? I was like, I was thinking about making this a dApp-free episode. Yeah, free.

No, man, that's gonna blow up this fucking cycle. I mean, it's gonna—

we're gonna continue to talk about it. Yeah, Rob, give us the— give us the State of the Union on these dApps. What's going on? I saw— I saw the most ridiculous dApp I have ever seen yesterday with some criminal behavior going on, honestly, in this thing. So give us the State of the Union on these dApps. Wait, wait, before I go, can you tell me what was the criminal behavior?

Like that? You can't just say that and then not expand.

I mean, it's basically just people who are involved in it that shouldn't, shouldn't be involved, I'd say. Yeah.

Was it a $1.5 billion debt? Or was— how big was this debt?

It was a big boy. It was a big boy. And it's what they want to do with the money. Once they get it, they don't want to just buy the tokens. They want to, they want to start trading. And yeah, they want to, they want to do some things that shouldn't be done. So a levered up DApp, we could call it.

Listen, I will say on the DApps, maybe I'll give a little bit of the State of the Union. Clearly, the market is softening, right? And so the pace of these things coming out is just— it's tremendous at the moment. And there's a million Bitcoin ones coming out. There's a million ETH ones coming out, SOL. But now every other token is also having one. Launch now as well. Um, the amount of these things that are launching where people are trying to figure out other things to do to make them attractive is also increasing. Now, the ones that are actually still, I think, quite interesting and are still getting funded have some sort of like, call it like, foundation alignment and, you know, discounted tokens and this, uh, people around it that are trying to build for some sort of like longevity. And we do see those happening right now, especially with some of the— call it all L1s, or largest applications. And those, I actually think, are super interesting. But then you're seeing a bunch of really opportunistic sponsors— and I'll use the word sponsors loosely here— people who want to figure out a way to make a quick buck, who are launching ones in a bunch of other types of tokens as quick as possible with as many— or as much hair on it as possible and trying to get to market as quick as possible. And that— there's a misalignment there too, because like the right investors who will be in that vehicle for the long term, who allow this thing to trade well and potentially trade at a premium to NAV, they're not looking at those things. The people who are looking at those things are people who are trying to trade like the vol around them and immediately get out. So I actually don't know the one that you're referring to, but I will tell you, we're essentially seeing this like flight to quality. and this dispersion. And Santi might sit here and say there's no quality in dApps, which I think is— maybe it's relative quality. But it's definitely a flight or a dispersion to things that are aligned with the long-term perspectives of and furthering of ecosystems with those foundations.

What's the best dApp you've seen, other than perhaps MicroStrategy?

Yeah, MicroStrategy is obviously number one. I think maybe I— There's a number of ones that haven't launched yet that I do like. But one of the ones that I actually think is—

With what assets, Rob? The things that haven't launched, is it just more Bitcoin, Ether, and Sol ones, or you actually like more of the long tail of assets?

I do still like some of the long tail ones. For instance, we invested in the one Stablecoin X, TLGY, which was the Athena one. I just recorded a podcast with Guy, actually, about that. His perspective, which I think is the right one, is that we're not playing a premium-to-nav game. In fact, he had a pretty good tweet thread, I think earlier this week or late last week, that was essentially like, why does this exist? His perspective was Athena is a very interesting asset that is exposing people to a certain type of stablecoin and the growth of the stablecoin industry in the public markets. It's an asset that is really hard for people to hold in different parts of the world who aren't super crypto native. Providing access to that asset and to call it the yield of the basis trade, potentially, if and when there's able to be a fee switch or something like that, is actually, I think, quite exciting for him. His perspective is this may trade at a discount, it might trade at a premium. He actually said on the pod, do not buy this at a big premium, to NAV, like that is not what this vehicle is for. This vehicle is to provide you access at somewhere closer to NAV. And I actually quite like that because these, you know, these vehicles that are aligned with the foundation around furthering the ecosystem and around, you know, potentially providing access at, you know, even a discount to NAV, those are good vehicles. Those are distribution for an outside of, you know, what can be a really tough market to navigate, you know, an infrastructure to navigate. And so we're seeing a number of assets like that maybe on the L1 side or the L2 side. And frankly, I think every protocol over $1 billion will probably try to launch one of these. That should definitely not be true, but it's just a fact of life. But if it's a big enough protocol, call it $10, $15, $20 billion at least, you can probably do one of these things and have it make sense. And if it's aligned with the furthering of the ecosystem, I think it can be actually very valuable. But I think most of what we're seeing today is just some, quote unquote, sponsor trying to make a quick buck. And frankly, it's been, I think, pretty— I haven't felt good about what we've been seeing in the last few weeks.

Yeah. I think the most underrated reason why people are doing these is actually the marketing element. I think the reason people think that you do these is because you can use capital to buy the token. Actually, the most underrated reason is because you actually get like a— you now get to market on TV, and you get basically institutional marketing. And actually, Telegram was a really good example of this. They raised like $500 or $550 for the TON vehicle. And then I think the next day, Michael Saylor was on Fox Business talking about Telegram and how it's such a great— you know, it's such a great platform and how now an institutional investor is not going to go buy TON on Binance, but they will buy the TON vehicle. I thought that was an interesting example. Rob, there's a— this is a controversial— I don't know if I should even ask this, especially on livestream where you can't edit this out, but I will anyways, which is the price— I've noticed the price movement on these things is very— on the underlying token ends up being very similar. You can actually predict when a DAT is coming, because the token rips pretty hard. And then the day the DAT is announced, the token falls. So you can see something like TON token moving like this. And then in the weeks leading up to the DAT, and then the DAT launches, and then, and then the price falls. Why is that? Is that— I mean, is that not insider trading? Is that like, is that an acceptable form of behavior here? What are we looking at?

Um, I, I would say it's certainly not an ethical form of behavior, uh, but I mean, listen, people have different viewpoints on this because it depends on what you think the underlying is, right? So, um, obviously in the US, you know, what constitutes insider trading, uh, is actually pretty broad. Obviously we saw it with the, um, the OpenSea case where, um, I think it was— I forget, it was a Devin or some one of the OpenSea employees, um, got charged with insider trading because they were buying NFTs before they got listed on the front page of OpenSea back in 2021. That was actually recently overturned. And so the US has taken, I think, a narrower view recently on what can be seen as insider trading, specifically if the underlying is not a security. And so in these cases— sorry, it was Nathan. In these cases where there's— you don't believe, or there's not an expectation that the underlying token is a security, it's potentially possible that it is OK to, call it, trade these things, and it's not being insider trading if you're also not in, call it, been wall-crossed and you're in possession of an NPI, you're just understanding that all of these things will probably have some sort of public treasury vehicle. I think the crazier ones have been where we've actually seen some of the— call it when you've done PIPEs into the operating companies, you've actually seen some of the operating companies themselves increase by 400%. That is clearly insider trading, because you are clearly buying a security before there is an announcement of an investment into that security— and by the way, these are definitely being done on brokerage accounts where they absolutely know who you are. And so I'm not saying go and insider trade if they don't know who you are. But what I am saying is if you go and buy an equity before an announcement is made, before open on a Monday, and in your brokerage account, you are probably going to jail. There are analysts at Goldman who trade options pre an M&A acquisition and make $25,000, $50,000, and they go to jail. Anyone out there who's listening to me right now, stop insider trading if you are. Don't do it if you thought about it.

Yeah, good advice, good advice. Okay, let's get away from Dats because I'm a little Datted out here. Let's talk about Coinbase Convertible.

This week.

So, um, uh, let me— so for those who missed it, Coinbase is raising $2 billion in convertible notes. Um, and I'll just— I'll read the headline announcement. Coinbase's sale will be open to qualified institutional buyers to buy $1 billion worth of convertible senior notes that mature in 2029, as well as $1 billion of notes maturing in 2032. These notes can be converted into cash, shares of Coinbase's Class A common stock, or a combination of both after paying the necessary expenses, uh, associated with the sale. The announcement says Coinbase will use the proceeds for, uh, general corporate purposes including acquisitions, capital expenditures, working capital, etc. Um, I'm not sharing my screen. Here you go. There you go, Santi.

Uh, there's a great— there's a great tweet by Mike, your fellow co-founder of Blockworks, that said last time Coinbase did a convertible note offering And, and to which I, you know, politely commented, for the sake of this industry and your job, please no more like this. And I've now adopted the, the thank you for your attention to this matter without an exclamation mark. Yes, copying from our fellow president of the United States.

Yeah, Santi, take us, uh, explain what's happening here with the convertible notes and, and maybe why Mike, Mike might have said this.

Well, uh, you know, history repeats itself. I think, you know, Coinbase is, what, an all-time high now at $315-ish, right?

Yeah, down to $315. Had a nasty, nasty— I mean, bad earnings. They, they popped up to $440 and then, um, now down to $315.

So, so let's just unpack this from first one. So like, why, why would a company issue a convertible note? Rob, enlighten us.

Oh, you put it to me. Listen, these convertible notes for Coinbase are actually— they're pretty interesting. So these are actually very cheap capital, right? And so if you think about— OK, anybody who's taken a corporate finance class 101, equity is typically the most expensive form of financing. Debt is the least expensive. There's a bunch of stuff in between. Convertible is essentially a debt instrument, but it's a little bit somewhere in between those two things. These specifically were interesting because, OK, so they went out and said, hey, we're going to do $2 billion of issuance. They had enough demand to upsize to $2.6 billion across the two tranches. On top of that, it was a zero-coupon instrument. So people aren't actually expecting any yield back. They're not expecting any sort of interest rate. The call strike was capped at, I think, double the price at the time that these were issued. What does that mean? It means that these were very cheap, because it's not actually going to turn into equity unless the price doubles. That means that these investors are actually very bullish on where Coinbase is going. They're very bullish on the potential for them to, by 2029, double in price, and they don't need to get paid an interest rate between now and then to sign up for it. For Coinbase, what that means is they were able to go and issue a very cheap piece of capital to go and probably, my guess is it's mostly M&A that they're going to be focused on here, and to try to expand that business at a time when they've talked about trying to put together an everything app. And compete with Robinhood, who has been eating some of their lunch, honestly. I actually think this is a— maybe not to disregard what Mike said, but I think this is an extremely bullish sign that they were able to go raise this type of piece of paper this quickly with this much demand.

I want to just add a little bit more context there. There were two tranches in equal size, $1.3 and $1.3 billion. They're both zero coupon. Again, if you're the investor, your huge opportunity cost is you can go clip Treasuries like 5%. So like every year, you basically have to be extremely bullish on this to actually enter into this because the opportunity cost right now, we're in a persistently high interest rate environment, is just quite high. So it just tells you the demand, the expectations of the market participants. So anyways, the difference between the two tranches in equal size is one matures 2029, the other one matures 2032. And what else? The other component is— so I think they have different strikes, right? One has a— the shorter, I think, the coupon— the note maturing 2029 has a 52% premium.

Yeah, so they had different premiums, but they had the same capped call strike.

Yes. Yeah, yeah, different premiums.

Yeah.

And the other one has a 32% premium, right?

Uh, so that makes sense because of the duration.

The duration, yeah, that's right. So one is roughly $452 per share, the other one converts at $394 per share, right? Um, but yeah, it's pretty interesting.

I mean, so, so, Santi, explain to someone why, if there's no interest, right, if this is zero coupon, um, why, why would an investor want this?

Um, I'm not really sure, to be honest, who's buying this stuff.

Like, is it just that they want exposure to Coinbase if Coinbase rips, but they don't want the downside in case we go into a crypto bear market, right? Because if you go into— you're not taking the downside exposure, but you maybe get the upside exposure. Like, like, I don't know who buys this.

Uh, well, I'm just trying to like— okay, like, yeah, if you want to cover your downside, like, there are other strategies that you could do.

That's what I'm saying.

Just to be clear, convert investors are typically the same people. And so there's a subset of hedge funds that invest in, call it, the vast majority of converts. And often, they care about what the underlying is, but they also just care about the capital structure of what the underlying is, and they care a lot about the volatility. Of who the underlying is. They are pricing this based on essentially vol, not just who— not just like it may be like a long-term outlook on Coinbase specifically, or any other company specifically. Now, this was such a good piece of paper for Coinbase that it was actually quite rare. You really only see, call it like Mag 7, or be able to Shopify, etc., be able to raise these type of call it zero-coupon converts. I think Cloudflare recently did one, and Zscaler maybe did one. There's not a lot of these types of pieces of paper. That said, it's the same investors. And these are not the investors who would buy the public equity, or at least it's not in the pools of capital that would buy, call it, the common equity.

But Rob, let's just unpack that a little bit. So why would you buy this paper? To Jason's point, downside protection, right? You do not— like, if Coinbase trades down to $150, worst case, you don't convert, you get your principal back, you do not get the coupon. So the opportunity cost there, you didn't clip 5% for the foreseeable future.

Okay, fine.

But you have a slightly positive bullish skew on Coinbase doing, you know, converting. To that point, you need to look at the capital structure of Coinbase, right? Because you're junior to debt. So I forget how much debt Coinbase has, but reasonably speaking, you're looking at like the last 3 years, the peak to trough, like volatility and earnings, and you're saying, look, this is like, I'm fairly protected on the downside because, you know, in a truly, truly, uh, bear scenario, Coinbase like goes really under and you get wiped. But that's unlikely to happen because I forget how much debt they have on the balance sheet. But you sort of have to look at the capital stack and see.

I think they have— yeah, as of March, they had— it's almost close to $4.5 billion of debt.

$4.5 billion, and they're cranking out how much in EBITDA?

Yeah, it's not— I mean, they've got— I have to go back and look. But it's not— they're— their leverage relative to, you know, their cash flow, it's not that high.

Um, yeah, I was looking at the Kraken, um, primary and, and was looking at like the peak to trough of like Coinbase, Robinhood, and Kraken to understand, okay, like can these guys actually flex down in their, in their cost structure, like how much of it's fixed versus variable? Because, you know, we're gonna have another bear market and like earnings like just take a nosedive And, and it was just interesting because that's— if I'm a convert investor, I'll just kind of pay attention to that, which is what happens if, you know, between now and 2032 there's likely going to be a bear market where the, the earnings, uh, the revenue base of Coinbase like materially— this system goes down 50%— and how well are they going to be able to service the debt? And, and are you in a position where like— I don't think you get wiped, but again, that's like something that Probably these convert investors said, hey, we feel like we're reasonably well protected. The edge case of us getting wiped is very, very low because they don't have that much debt on the balance sheet.

Just to be clear, so Coinbase has— they did a trailing 12 months of like $3.7 billion of EBITDA. They've got debt that is approximately equal to 5 quarters worth of EBITDA. That's pretty reasonable, frankly. And not only is it pretty reasonable, it's obviously a highball name, and so it could potentially go through a bad bear market. But there's ways— I think it would be pretty easy for them to refinance and to roll that. Clearly, I think part of what you've seen here in the equity market has been a concern around dilution from these things. And I think that's part of the reason that common equity has traded the way it has. It was also a relatively bad quarter, as Santi mentioned, relative to Robinhood and others. But going back to the convert side, who is buying these things? It is specifically convert desks. And these convert desks, the way they typically price these things is they price them as options, right? And so you have the downside floor, the downside protection, So you're probably underwriting that the likelihood of not getting your money back based on what we just talked about in terms of the capital structure is very, very small. You think there's enough asset value there and they'll do well enough that you should at least get— there should at least be, call it, $6 billion or $7 billion worth of equity value or enterprise value that could come to you and the debt holders because it is a $78 or $80 billion equity value company. right? And so like your, your coverage there is, is really good and you have that floor. And then, you know, they're pricing the upside, uh, because of the fact that there is so much vol in Coinbase. Like you're— there's a lot of upside gamma here. And so like you're probably able to underwrite the potential to convert over that period of time in that duration pretty, pretty well, right? And so I think—

I believe that between now and 2029 or 2032, the price of Coinbase is going to exceed the strike and you're going to be able to pump out of it, right? Because they're fairly liquid instruments. Like, you know, you could probably sell— not as much as options, but you could punch— like, this convert will trade at a premium, right? If in a best-case scenario, the price of Coinbase goes to $500 and you're sitting pretty there because your strike is $450 or $390, and you're saying, oh, or what is it, like $390 for the other tranche? But anyways, in any case, that's probably how you get— you go to committee. That's what they were pitching, which is, to your point, huge ball. Probably Coinbase goes above that during this period. And you could probably—

is it reasonable? Yeah, well, you can hedge as well, right? And there's positive carry while you're hedging. So there is— These are good pieces of paper for the volatility that Coinbase has right now. If volatility gets suppressed, obviously, like, it's a different issue.

Would you have bought any of these notes? And if so, the 2029 or the 2032 note?

I mean, I'm not a convert investor, and I wouldn't say I'm an expert in any means. But these are pretty, like, scarce pieces of paper. And, you know, I'm structurally bullish, uh, Coinbase and structurally bullish, you know, the whole space. And so would I, if I had a convert mandate and have, you know, piled a bunch of money into, into both of these tranches? Absolutely, right? Um, you know, and I think that even at the 50%, 52% premium on the, the 29 tranche, like, yeah, definitely.

So guys, as, as to round out this segment, because I, I want to— there's some other stuff I want to cover, um, to comment on Mike's take about Coinbase is raising $2 billion of converts telling about where we are in the cycle. The last time Coinbase raised via debt was checks, notes, September 13, 2021, which, uh, was 2 months off from the pico top.

Agree or disagree that we're near the top?

I don't know, sign, sign of the top.

I, I don't think it's a sign of the top. If you think about all of these structurally good things that are happening to crypto It's a sign of a market that is maturing and a market that is doing well. It doesn't have to be the top. This idea or this allegiance to a market cycle, I just think is incorrect at a time when the US administration and government is actively pushing forward legislation that is going to bring this and has been bringing our market mainstream. I don't think it has to be a sign of the top.

Yeah. All right, we, we're going to end that segment. We are going to do something. By the way, this is our first livestream. So I think this is going pretty well. We are going to introduce a wildcard, which is an advertisement into this. So we'll see how this goes. But yeah, roll tape, baby. This episode is brought to you by Geodnet, the world's largest decentralized RTK network delivering real-time centimeter-accurate positioning around the globe. Powering delivering technologies that enable precise navigation for drones, autonomous vehicles, first responders, farmers, and robotics. Geodnet shows that blockchain can be a truly transformative force. By delivering real-time, centimeter-level accuracy, Geodnet enhances emergency response, boosts construction precision, and enables advanced navigation for drones and surveyors far beyond the limits of standard GPS. To find out more, click the link in the show notes or follow them on X. In an industry as hectic, fast, and complex as ours, it's incredibly hard to get an easy, no-nonsense stream of what's actually moving crypto. The memo comes from Matt Hogan, Bitwise's Chief Investment Officer. He's been on the show before, and he has this amazing ability to take the most complex topics and break them down with clarity. Trust me on this one, the Bitwise Weekly CIO Memo is really worth the 5 minutes of your time. Check it out at bitwiseinvestments.com/ciomemo/empire or just hit the link in the description of today's episode to get started. Carefully consider the extreme risks associated with crypto before investing. As always, investments in blockchain technology involve risk. Terms and conditions apply. Smooth.

That was easy.

Smooth. Geodnet, that ad slaps. That was a good ad. So Kraken is raising at $15 billion. I got a few texts from folks saying, hey, what do you think about doing Kraken at $15 billion? Coinbase— so I want to get your guys' take on that question. So Coinbase right now trades at $80 billion. Robinhood is at $100 billion. They have got some brokers who are taking this thing out into the market. When you are raising $15 billion, there are so many people involved in a deal like that, that I think it is now filtering out into the ether. The way that it is being pitched is, hey, $15 billion, this thing is going to just do a 1.5x or 2x upon IPO. Because I think people see Circle getting bid up upon IPO, they see uh, Figma obviously ripped like 4x. What do you guys think about, uh, Kraken at $15 billion? Are you doing that?

I'm not.

Why?

Um, I think it doesn't outperform Bitcoin. And again, If I did the exercise of looking at over the last like 5 years how Kraken relative to Coinbase and Hood was able to manage the downturn, and I appreciate there's been leadership change, but it just felt to me like it had a more rigid cost structure where they, they didn't downsize as much in the downturn. And so for that, for that reason, I just, I just, again, does it outperform Coinbase? Does it outperform Hood? Putting aside the fact that it's going to, you know, probably it's going to IPO in the next year and a half or so. I think it's been preparing for an IPO. Like, I never want to just make an investment on that basis, right? Which is like, okay, I think everyone— I would assume that a lot of the investors in Kraken in this round are probably saying, hey, we could have invested in Circle. Look at what Circle did. You could have bought Circle pre-IPO at, you know, call it, what was it, $3 to $5 billion valuation, if not less. And then, you know, clearly you've done phenomenally well. Um, so I, I don't want to make an investment banking on the fact that like the IPO market's going to be wide and there's going to be continued like demand for, for this. Um, I think we're just in like that state of market. But again, on a fundamental basis, I don't think the multiple is crazy. But I do worry about— like, I do worry about— and maybe I'm being overly punitive about how they were performing in like 2022, 2023, where like their margin really degraded and they just didn't manage the business, I think, as well as Robinhood and Coinbase did. What do you think?

Yeah, I would say I actually think it's probably a pretty good investment. To be honest. I mean, it's obviously for the right investor. If we think about what is Coinbase traded at, it's traded at something like 8 to 10 times forward revenue. What is Kraken's revenue?

Kraken's revenue is like $1.5 billion, right?

Yeah, they had like $1.5 billion of revenue last year. I believe they reported that themselves. If you extrapolate out their growth this year, my guess is they'll outperform that this year by, call it, something like 20%, 25%. Volumes are pretty bad part of the year. They were really good for part of the year. If you look at, I believe, Coinbase, Coinbase is up year on year, like 20-ish% on the first half, 24% on the first half. If you extrapolate out, like, okay, let's say that it's, call it, $1.8 billion of revenue this year, that means that $15 is probably fair priced or fully priced if you think it trades at a little bit of a discount to Coinbase for being number 2 and being smaller and I don't think having performed quite as well as Coinbase in certain periods of times. $15 is probably something like fair value. But if you believe that this market is going to structurally continue to get bigger, I'll give David Ripley and Arjun Sethi a bit of a pat on the back here. Their speed in shipping new product has materially changed over the last, call it, 9 to 12 months. From what we hear and see internally, I believe that that is an organization that is on the upswing right now in terms of their ability to execute strategically and to try to respond to the way the market is moving. I think it's probably a pretty decent investment, but it's for a pool of capital that is solving for a different type of return than I am. Do I think it outperforms Bitcoin? I actually think there's a pretty good chance it doubles, it hits $30 billion before Bitcoin hits $250K. And so, um, you know, over the, over the next 10 years though, yeah. Buy Bitcoin.

Yeah. So it's interesting. So I've started using, I hadn't used Kraken since like, let's call it 2017, 2018. I started using Kraken again. And, um, it's a really good, it's a, it's, it's a really good experience actually. Um, first off, so there's a couple of buckets here, like the support experience. I mean, Santi, you remember a couple months ago, kind of bitch, we were bitching about like Coinbase support. Um, And, uh, yeah, I mean, it's an industry-known thing. Coinbase has no support team, or, you know, maybe if you're only the highest level institution, but even if you're a really high institutional client, their support sometimes sucks. Uh, Kraken support, 5-minute, 5-minute replies every time. Like, if you need anything, Kraken's 5 minutes or less. Um, so that's been impressive. Uh, the other thing is they list tokens extremely quickly, and that's actually what originally pulled me over. You used to, like, if you wanted kind of a a weird, I don't know, a longer tail token, you used to have to open up like, I don't know, VPN into MEXC or something like that. And now Kraken, Kraken is like very, very quick to list. And then the, if you dig into their financials, at least their self-reported financials, their revenue per user is 3x what Coinbase's revenue per user number is. So I don't actually know how they're doing that, but that's a pretty material difference. So that might be the— sometimes the bull case for companies to just get into the product and see how it is. And like, sometimes I'll DM their team, like some people on their exec team, and I'll be like, hey, this product should be like this. One week and it'll be improved. That's a very— once you see that at a company, like, that's kind of what you want to see.

You're on mute.

I was gonna say, I totally agree with you. I think they have I mean, from a security standpoint, product standpoint, I was using Kraken way back in the day. I think it's— I don't— I believe they're one of the few exchanges that has not been hacked. Knock on wood. I mean, it's just been— they're super buttoned up, and the product probably ranks like higher NPS than most exchanges out there. So I don't— I don't disagree with that at all. Maybe I'm overthinking it. Probably I'm middle curving it for sure.

Yeah. Rob, do you guys participate in deals like this?

No, we, um, this is a little too late stage for us. It's not what our LPs are asking us to do. You know, we're, uh, well, you know, we would look at it, and, but we just don't have the right pool of capital today to be doing, call it, you know, quote unquote pre-IPO type investing. Yeah. You know, I will say that there was a some secondary going around on Kraken last year in the $3 billion range.

I saw it at $3.5.

Yeah. And we— Dragonfly did not invest, but we thought hard about it. And now looking back, I feel like an idiot. So maybe I was mid-curving that one a little bit too much.

Yeah, you and me both. You and me both.

Do you know who's the— what type of pool of capital is investing in this round? Is it like a pre-IPO?

Yeah, traditional investors, pre-IPO hedge funds. I actually connected a large pre-IPO hedge fund to them earlier this week. It's everyone that you could name, all brand names.

Let's talk Roman Storm, unless there's anything on Kraken. Or actually, sorry, before Roman Storm, Bullish is IPOing. Who else do you expect to see get out in the next, let's call it, I don't know, 6 months, Rob? Gemini, bullish. Kraken.

BitGo, I think, just announced again that they filed.

Figure.

Figure, yeah.

So that alone, we could see 5 crypto IPOs. That's pretty amazing.

Yeah, Figure, I think, is a little bit different because they recombined their crypto business and their traditional HELOC business. Now, The traditional HELOC business does use a blockchain, and that blockchain is validated by the HASH token. But it's basically a direct-to-consumer home equity line of credit business that has done very, very well, and has done very well because Mike obviously was the founder of SoFi, and he knows these types of credit products very well. But I think that one probably doesn't trade like a crypto equity. I think it trades based on being called a high-growth lending business. But I don't know, maybe I'm curving that as well.

Yeah. Yeah. OK, so shifting gears to a little more depressing note. So Roman Storm was found guilty on one count in the trial this week. So there were three things that they were charging him on. One was money laundering. Two was— I'm trying to actually remember the second one. But the third thing was operating an unlicensed money transmitting business. And he got—

so the second one, just to be clear, it was basically conspiracy to evade sanctions.

Yes, that's right. That's right. So he was found— actually, Jake Chervinsky had a good thread, which I can pull up. Roman Storm was convicted for conspiracy to operate an unlicensed money transmitting business under Section 1960. The jury was deadlocked on money laundering and sanctions. DOJ will decide in the coming days. If it wants to retry those charges in a new trial. Sad day for DeFi. The government never should have brought this case. Section 1960 should not apply to the developer of a non-custodial protocol who lacks control of user funds. This case should go on appeal. Hopefully the Second Circuit will correct this and many other errors in the case. This is a terrible outcome for Roman and for all of crypto. If the Trump admin wants the USA to really be the crypto capital of the world, then the DOJ must not be allowed to retry the two deadlocked charges. This is existential. If you've been sleeping on Section 1960, wake up. Um, Rob, I know, um, Hasib has been pretty actively commenting on this. Um, any, any comments on this?

Yeah, it's— I mean, it's sad, right? And so, um, I think we're all, you know, happy. And I think actually when you saw Roman came out of the courtroom yesterday, it seemed like he was upbeat and excited about the fact that the really, for him personally, existential threat was the other two charges, so the conspiracy to evade sanctions and the money laundering. The money laundering charge, I believe, had a maximum sentence of 30 years, uh, or a guideline sentence of 30 years if he had been convicted of that. Um, the money transmission sentence that he was— the one that he was convicted of, that is, I think, 5 years. So yeah, maximum 5. So very, very significantly different for him. I, I also believe, and I think he believes, that he has a very good potential to win on appeal for that specific charge. As I think Jake was trying to say there, FinCEN has actually recently given guidance that a smart contract does not count as control of customer funds within crypto. And so this actually goes directly against FinCEN's guidance. And what actually happened is that they tried to— after FinCEN gave that guidance, they tried to dismiss that charge, and there was a motion by, by Roman's lawyers to dismiss that, that charge. Um, and the, uh, DOJ and the court decided essentially to, uh, not dismiss that charge, and then meant that the jury had to follow— essentially, the jury had to follow, uh, what the court was advising them on and didn't really have the appropriate tool set to understand why this actually shouldn't be— he shouldn't be convicted of this. So under the way that, that the— and I'm just going to explain this quite as well as I should be— but under the way that the, um, courtroom proceedings happened, I don't think this is super surprising. But I think because of the way they happened, that he probably has a really, really good chance of appeal. What is also true is there's the BRCA, which is the Blockchain Regulatory Certainty Act, which has been attached to the Clarity Act, um, going through Congress right now, that would actually confirm in law that non-controlling developers are not money transmitters. If that is true, then this is like— he obviously, you know, did, did not commit the crime that he was convicted of, and he would, he would win on appeal. And so let's hope that they don't retry him for the other two. Then let's hope he gets through appeal on this charge. And, you know, then that should be— and hopefully will result in, you know, the best case scenario for him.

Yeah, it's very funny to me because you're getting very mixed signals from, from— like, you, you've— this comes a week after Atkins and the SEC said we got to move everything on-chain, right? And like, they're showing off graphics of, uh, you know, AAVE's docs and, you know, how Uniswap works. And then and then this happens. So it's kind of like, do you want us to move money on-chain, or do you not want us to move money on-chain? And it does feel like the, the really key difference here is that, uh, they're kind of telling us moving money transparently on-chain is okay, but it can't be done very privately. Um, if the government can't see where you're sending or spending your money, you're a criminal. If it can see where you're doing it, you're not a criminal. And, um, Uh, you know, I saw, I saw Mike posting about this earlier in the week, but like, it does feel like privacy is the kind of final boss here. And it feels like privacy— it's not really in the narrative today, but you got to give it one, one or two more years. It does feel like privacy will be a hotter topic. Yes, Santi, did you have—

well, I guess like for context, right, there is a jury out here that was randomly selected for this type of trial, right? Um, you're on jury duty, you get appointed. And I do wonder, is this more of an indication of public perception of crypto is still, is still quite bearish because of the last decade where people just still need to like remove that, um, kind of stigma that crypto continues to have, right? Because like, I, I would think that like, you have limited time to present your arguments. And like, I, I guess like, for a jury that's hearing it, I could imagine like crypto— not just this case, for any other case— like, you know, this is perhaps just a residual of all the negativity that has been instilled in people's brains, right? That crypto is you know, an industry that is used by criminals and, uh, you know, is for nefarious activity when it's, it's, it's actually like, you know, when you look at the data, it doesn't suggest that, right? You look at Chainalysis data, you look at Ciphertrace, like, but, but it's still hard to convince like a jury, I would say, like about some of these arguments, right? And like, so I, I don't know, that's just my reaction to it. It's obviously unfortunate, but I don't know if— I mean, I wasn't there. I don't know if you guys had reporters there, Yano, but I would be really interested in understanding like the profile of these— the jury and like—

like, yeah, we did. We had reporters there. I think one person on the jury was actually— I was very split. Like, there's a decent number of them were older, um, and then actually there was like a software engineer. There's, uh, someone who worked at Palantir, I think. Um, and like, no surprise, you can guess how those people voted.

Um, so, no, I mean, the, the thing I would just add here is, is I think Santi's point is apt and is correct, but I, I actually think there's a good argument for— like, like FinCEN specifically said, their, their guidance was that non-custodial smart contracts where users retain full control over their funds generally do not render a developer a money transmitter. But if the smart contract or dApp holds, transmits funds on behalf of users, then it is, right? When the lawyers for Roman Storm tried to get that charge dismissed after that FinCEN guidance, they did not define, uh, money transmission the way FinCEN defined it. And so the jury had to make a decision about facts based on the guidance that was given to them by the court. And the court gave guidance that was different from FinCEN. And the court gave guidance that was different from the BRCA, which is now going through Congress at this moment in time. And so it highlights the fact I think not so much about the jury, but the fact that we still don't have enough clarity from the agencies and from Congress to define how DeFi should be perceived and how DeFi should be treated. And if that FinCEN guidance had been in law, in legislation, this, he, this would have, that would have been dismissed, that charge, right? And so that's what it highlights to me is we need clarity. And we need to get with Congress to get that law passed.

Yeah. Yeah. The other thing that I thought was interesting was that, um, I feel like a lot of people don't know this, but it was Jay Clayton, um, right? Was, was Jay Clayton the attorney? Uh, Jay Clayton is the U.S. Attorney for the Southern District of New York. Um, right.

He's a, uh, he runs, he runs the SDNY.

Yeah, but he's on— is he on the board of Fireblocks? And he used to be the chair. He was the previous chair of the SEC. But I've always thought of him as being decently pro-crypto. I mean, at least like we didn't think that when he was the SEC chair. But then once Gensler became chair, he kind of moved into these advisor positions for crypto companies. I was like, oh, this guy actually likes crypto. But yeah, kind of a bummer to see him getting involved here. Rob, what else is on your mind? Santi, what else is on your mind? How big of a deal is this? So Trump, Trump is signing an executive order that allows private equity, real estate, and crypto and all other alternative assets to be in 401 and retirement accounts. Scale of like 1, this doesn't really matter. 10 being like, this is a massive flood of capital. that will actually move the market. Where do you guys fall?

Uh, pretty big, I would say. What is the scale, 1 to 10, 10 being the most?

Yeah.

Uh, well, I don't know the particulars, um, so, uh, yeah, I would like to read it, but it's pretty big. I mean, uh, yeah, people should remember like, um, what is it, 1979 was a landmark year where like Moskowitz portfolio theory, and there was a change in the law that allowed like pension funds to invest in alternatives, and it detonated a huge wave of like— it gave birth to private equity as an asset class. Um, so, uh, yeah, I'm not, I'm not sure of the particulars, but my bullish brain wants to think that it will have a similar effect because like, you, you, in fairness, like you are able to invest, uh, through your 401k into some of these products, right? I guess like that's what a lot of the demand for Bitwise back in the day was, like you could buy through your 401k and it was like tax advantage and whatnot, I believe. Uh, so you've been able to do it. I just don't understand what the difference is now.

Yeah, but maybe it's more—

Rob, I don't know if you looked into it closely, but I'm just speaking out of turn here, which is Maybe it's more of the fact that it's coming from like an executive order gives more confidence to these allocators to like make a recommendation and get off of like zero, I guess.

Yeah, I think, listen, on the 401k side, um, this is good of course, but, but it actually hasn't been, um, it has been true that potentially depending on who your 401k provider was, you actually were potentially able to buy crypto and retirement accounts already. The fact that we're going to allow a lot bigger, a lot larger amount of alternative assets into, call it, retirement accounts is probably a net good. But what you actually still have to do is you have to get the administrators to select that they want these specific assets and they want these specific vehicles in there. The vast majority of people in their 401s are actually in these target date funds that BlackRock and others put together. I think it is, call it a net positive. It's not clear to me that it's a huge game changer in terms of people wanting access. That said, of course, the tax-deferred access here or the tax-deferred ability to invest is certainly good. For people. And it's an asset that potentially has appreciation over a long period of time that is kind of unrivaled. And I think we all believe that on this podcast. So I think it's a good thing. I certainly don't think it was the thing— I think the market was up, call it like 5% right afterwards. It strikes me that that was probably an overreaction to the news.

All right, guys, time for another ad break. And then we will be back for content recommendations and a little data that I'm looking at. This episode is brought to you by Geodnet, the world's largest decentralized RTK network delivering real-time, centimeter-accurate positioning around the globe. Powering technologies that enable precise navigation for drones, autonomous vehicles, first responders, farmers, and robotics, Geodnet shows that blockchain can be a truly transformative force. By delivering real-time, centimeter-level accuracy, Geodnet enhances emergency response, boosts construction precision, and enables advanced navigation for drones and surveyors far beyond the limits of standard GPS. To find out more, click the link in the show notes or follow them on X. In an industry as hectic, fast, and complex as ours, it's incredibly hard to get an easy, no-nonsense stream of what's actually moving crypto. The memo comes from Matt Hogan, Bitwise's Chief Investment Officer. He's been on the show before, and he has this amazing ability to take the most complex topics and break them down with clarity. Trust me on this one, the Bitwise Weekly CIO Memo is really worth the 5 minutes of your time. Check it out at bitwiseinvestments.com/ciomemo/empire, or just hit the link in the description of today's episode to get started. Carefully consider the extreme risks associated with crypto. Before investing. Mantle is pioneering the blockchain for banking, a bold new category combining traditional finance with the power of Web3. With UR, the world's first on-chain money app, users can manage fiat and crypto side by side using a Swiss IBAN account in euro, US dollar, Swiss franc, and RMB, all posted to the blockchain. Backed by the Mantle Network, UR is the access layer that unlocks a purpose-built vertical platform for on-chain payments, trading, and asset protocols, including ME/TH, MI4, and functions FBTC. All economic activity within UR will be captured by Mantle Network to further drive value to MNT token holders. Follow Mantle on X @mantle_official for more. I wanted to take a moment to tell you about Cetria, the ZK rollup expanding Bitcoin's utility without sacrificing its security. Using ZK technology, Citria enables Bitcoin to function as a fully programmable financial platform. Citria is optimistically verified by Bitcoin, offering the most secure and native way to extend Bitcoin's utility to DeFi. With Citria, developers can build scalable payment systems, tap into Bitcoin's liquidity with financial applications, and build privacy systems. Citria is currently on testnet and approaching mainnet. To follow their progress, click the link in the show notes or follow them on X at Citria_XYZ. As always, investments in blockchain technology involve risk. Terms and conditions apply. I think the listeners were right. That's a lot of ads.

It's still— ladies and gentlemen, still bear market for Empire. We got, we got a lot It's a lot of ads. When you actually see through them, that some of them are like actually pretty— if you're looking at video, they're not bad, but not, not bad ads.

But man, it's a lot of ads. Lee Herfel makes the right comment: no 1.5x listing and have to wait. I'm sorry, Lee.

I'm sorry.

Um, all right, the, the last piece of news that I wanted to talk about was, um, uh, Ripple's making another acquisition. So Ripple just announced that they're buying a stablecoin payments platform, Rail, for $200 million. I would love, love your guys' take on A, this deal, um, but B, just Ripple as a whole. I'm, I'm just gonna say it, I think they're, I think they're buying their way into becoming a very real business, very real business here. Um, and I would love to hear you guys' commentary on this.

Well, again, we, I don't know the deal specific, we talked about it in now prior multiple episodes, but you know, Brad and team appreciate that they have a very valuable kind of currency, uh, that they are now using strategically to buy real assets. And, and, you know, uh, Rob, I'm sure you can talk more about the Hidden Road acquisition, right? But again, you know, this is, is very smart of them to, you know, use XRP and their strong balance sheet and, uh, and buy assets that I think, you know, they're sort of working their way in into real-world businesses and It's a sector very astute, I think.

Yeah, I don't have a lot to add beyond that. Asante kind of alluded to, we were large investors in Hidden Road, and I'm a board observer there until that deal closes. Clearly, between that and between RAIL here, they are very focused on the growth of RLUSD. They are very focused on trying to be a legitimate player in the stablecoin space. Actually, I think the first Empire I was on with you guys, call it 2, 3 months ago now, we talked about Hidden Road, and we talked about Ripple at that time. I think one of the things you guys asked me was, do I believe that Ripple could be a top 3 to 5 stablecoin in the next couple of years? I was like, absolutely, no doubt in my mind. I think the reality is they're going to continue to buy things that help them proliferate the usage of RLUSD because they have this strong balance sheet. They have over, you know, they have $100 billion worth of XRP and they can't sell that into the market, but they can certainly, you know, borrow something against it. They have, you know, billions of dollars of cash and they're going to go and continue to focus on building some of that original vision that they had, which was that, you know, there is going to be payments on XRPL there's going to be people using stablecoins, uh, or, you know, originally it was XRP to transmit value, right? And so I think they're, they're clearly doing a very good job. Uh, I, I happen to know, you know, without naming anything specific, that they've been extremely active in terms of, you know, kicking the tires and doing diligence on a bunch of different platforms across a bunch of different verticals, but almost entirely It has been obviously with this idea of finding ways to proliferate RLUSD. And so they're going to keep doing that.

Rob, any insights into the way they're structuring these deals? Are they paying part cash, some XRP, equity in Ripple Labs, combination of all three?

Yeah, so I won't comment on any one deal specifically, but it's mostly cash in a lot of these cases, right, with, you know, call it equity as well. You can't really use the XRP token for any, like, real-sized acquisition. There's a lot of tax considerations that happen there that typically make it, you know, not particularly worthwhile. Um, and they also don't want to be selling the XRP into the market, uh, for— or sorry, say that again?

Borrowing against their balance sheet?

Yeah, so they can borrow against the balance sheet and, um, and they can raise cash pretty easily. But also, they, they sell the XRP into market in a programmatic way. Every quarter, which allows them to raise cash. But, you know, they would— they haven't been as willing to do things outside of that programmatic selling into— to go and sell. Um, but they're— so it's a— it's been a combination of, of cash and equity, uh, in the, in the, in, you know, Ripple Labs or the, the top co. Um, and it's been a lot of cash. And they— and, you know, that's what people, people want. Um, and to get these deals done, that's what they've had to do.

For now.

Rob, uh, when do you think RLUSD becomes a top 3 stablecoin ever? Top 5? What are we looking at?

Uh, yeah, I don't know if it becomes— well, listen, I, I think, you know, Agora— Athena is number 3 right now, so, you know, obviously can't, can't unseat them, uh, as their, their largest investor. Um, and, you know, I think, I think Agora is gonna, gonna be there as well, but Listen, I, I think RLUSD— I don't know what it is today, actually, um, but I would expect there's, call it, you know, 5 to 7 stablecoins that matter in the future, and I would expect they were absolutely in that conversation.

Yeah, yeah, because I mean, if you get past— it's Tether, USDC, then Athena, then we get into Sky, USDS, and DAI, right? Sky and DAI. Um, then it quickly goes into like not people I'd consider as like very attackable targets. Biddle, which is— I'm not sure if that's a— I wouldn't consider—

I would call it a stablecoin. Yeah, different product.

Yeah, Ripple has 600 million circulation. It's pretty far down, huh? It's like, uh, you have even PYUSD has more circulating supply out there is close to a billion. You have Pax Gold, Falcon USD.

I've heard about— what is, what is Falcon USD?

It's, it's like an Athena competitor, I believe.

Oh, not related to Falcon X?

No, it's not related to Falcon X. Interesting.

Falcon USD.

Yeah, but Ripple has— I, I guess prediction-wise, we're looking at— by the way, CoinGecko has a great category of stablecoins and you can filter through that. Which is probably what you're seeing, you know. But like, yeah, that— it's, it's a very— to your point, Rob, it's a very concentrated, like, amongst the first two, really, Tether, USDC. And then it drops off from there. Athena being a really good contender there is close to now $10 billion, but that's still a fraction, right? And it just drops off from there.

Who—

how does this— I guess if you— if we're recording a year from now, how does this look who really wins here? Are we going to see one or two new stablecoins? You mentioned Agora, um, or is it going to be like JP Morgan Coin that just like catapults to top 3 because of their distribution?

Yeah, so it kind of depends on how we, how we define this. Like, like JP Morgan is going to launch this deposit token probably before they launch, you know, call it an actual stablecoin. Obviously they do have JP Morgan Coin as well. Um, if I were to just like, you know, take, you know, what is outstanding and sitting on like JP Morgan's balance sheet and throw it on this DeFi Llama page, would it be, you know, as big or bigger than the things that are on here? Like, absolutely, right? But does that have like real distributions and usage outside of the, you know, JP Morgan ecosystem? Um, my expectation is no, right? So I think these things will be really insular within, you know, call it the JP Morgan correspondent banking market, right? Um, and so it's a little bit like— it's a little— it depends a little bit on how you define it. Um, if we just start slapping those things on here, like, they're going to dwarf, uh, everything else we're doing. But, you know, if I start talking about, okay, well, like, who is actually, you know, getting used across a broad set of fintechs, like, I don't think that's going to be JP Morgan Coin or, you know, any sort of these big consortium type coins.

Uh, two points on stablecoins. There was an Apollo report on stablecoins that I, I got my hands on, and I guess the— to your point around like, I think to inform the view of how this changes over the next year, uh, you have to have a view on like what are stablecoins going to be used for, right? You have a couple of key catalysts. You have, uh, Bridge, you know, Bridge, um, um, Stripe obviously pushing that. You have the other competitor. I guess you guys are investors in Rob, I forget the name. Um, but most of the, most of the stablecoins in usage today is like native to crypto. Like a lot of it's just speculation, right? It's borrowing against crypto assets and just used on-chain. That's changing a bit. I forget the number, but it's like roughly like now 10%, and a lot of that's now B2B. Like I think as a category, I think I forget who put a report, I think you might have tweeted it like a couple weeks ago, right? Um, which is the fastest growing categories of stablecoin usage are like, I think B2B is, is shining pretty well, uh, and like non-speculative use cases, but they're still like sub— call it 15% of the total utilization of stablecoins. But I would guess that that— would you say that that figure really changes over the next year, or are we still going to have this kind of like very big, um, the lion's share of stablecoins are just going to be used for like speculation, I guess.

Yes. So I think you might be referring to a report that we put out alongside Artemis, our data platform. Yeah. And Castle Island. So B2B cross-border transactions are the fastest growing vertical within stablecoin usage. Now, we're talking— at the time we put that out, which was as of February, we're talking like $100 billion annually. In transaction volumes. This is still, to your point, relatively small in terms of, call it, total transaction volume. But I expect, to your question, that that continues to be true, that they are growing extremely quickly. Now, do I think a year from now that, call it, of the $2.5 trillion of stablecoin transactions, that half of that will be for B2B use cases? No, absolutely not. Do I think that $100 billion will gain more market share over the next year than any other vertical within the space? Absolutely. We're seeing it. I can tell you, I think there are 12 Fortune 100 RFPs out right now to do treasury operations in stablecoins and tokenized assets. Right, like, this is after the Genius Act passed. We're seeing everybody take this extremely seriously. Uh, people are going to start and con— and or continue to accelerate their usage of stablecoins for legitimate use cases and in places where it's obviously a better product. So B2B, cross-border, anything that gets you around the correspondent banking system, anything around treasury operations that has to go cross-border, across geographies, and across different types of assets Like, for instance, Coca-Cola gets 80% of its water from Western Africa. The reason they do that is because they like the mineral content, and it makes Coca-Cola taste better. If they need to send a wire from the US to Western Africa, which they will do regularly as part of their treasury operations, I would bet you probably 10% of the time that wire gets lost at a minimum. And it might get— even when it doesn't get lost, you're talking T+4, T+7 settlement times. It's capital inefficient. On top of that, a lot of these treasurers, they cannot— I was talking to one Fortune 500. They could only move their cash to a yield-bearing account twice a week. And so if you're talking hundreds of billions of dollars of cash on hand, and you can only twice a week move between those, a cash and a yield-bearing, like, money market fund or something, you're giving up billions of dollars of revenue and hundreds of millions of dollars of revenue at a minimum for a lot of these guys. And so I think what's really clear is that this is going to continue to accelerate. But so is stablecoin usage for trading. So—

I'm looking again at this report by Apollo. Stablecoin market cap roughly $250 billion. 85% of that is USDT and then USDC. Almost all of it is US dollar. Um, Apollo predicts— this is like their chief economist— says stablecoin market cap could grow to $2 trillion in 2028, currently $255 billion. Uh, most notably, stablecoin volumes have now surpassed Visa. So, um, yeah, compare— I mean, transaction volumes 2024, stablecoins $28 trillion. Visa, $13 trillion. Mastercard, $10 trillion. And so, yeah, I think the point that you made there around the Genius Act, that really, I think, is a huge, huge detonator. It's hard to underwrite because in all of my time in crypto, I've just been terribly, terribly wrong in my predictions. But Aave, for instance, I would have thought there, oh, maybe we get $1 billion in deposits. And it's now like, what is it, $30 billion or $40 billion? One of the things I've just observed, anytime— like, technology has this, like, anytime you remove friction— in this case, the regulatory burden was a big friction point to adopt stablecoins— it unleashes, like, this nonlinear demand. And to your point, like, it's— if you can improve the cash conversion cycle, like, any treasurer worth their salt, any finance department in any company understands that. And so again, it goes back to that insight that you had in that report, which is so great. Maybe we can reference it in the notes, which is B2B transfers is probably going to be the fastest growing category. Over the next 5 years, probably account for a very decent share of overall aggregate stablecoin volume.

100%. What was the number that the BlackRock guys put in there for stablecoin transfers?

You mean Apollo?

Apollo, you said it was $13 trillion.

I'll send this to you, but stablecoin transfers relative to Visa and Mastercard, $28 trillion.

Yeah, I will say I do— I hate a lot of those numbers that get thrown around because, um, you know, I referenced $2.5 trillion earlier. That's the quote-unquote adjusted number that the Artemis guys use. Um, a lot of these transfers are like, you know, call it like, uh, quantitative, like wash trading.

Yeah, yeah. In your report, you strip away all the just pure speculative, right?

And we try to strip away like MEV, we try and sandwich bots and like all that stuff that happens on-chain, which makes up a big portion of that. It's still a very big number. Right. But we're talking in the sense of like these blockchains can support these—

the movement, like the rails are robust enough to support the activity.

Right.

Which is— which, by the way, was not the case 2017, 2018. Like the point there, probably the more salient point there is like we built this core infrastructure for settlement that can support massive scale. So like that is no longer consideration, right? Like, the fees are very negligible. You can actually process a lot of this activity. Um, I know we want to go to content, maybe this is a good segue, but there's a fantastic, fantastic podcast, I think it's the Acquired podcast on Visa, that talks about this, which is, I think, the, the guy that, like, uh, not the founder, but the guy that, like, really was instrumental to the growth of Visa as, like, a coordination, like, like, network said, uh, something to the effect of, if we were to build Visa again today, we would most definitely build it on top of crypto rails. And, you know, obviously Guy, we could probably have in the podcast, but they've been fairly active in seizing the opportunity that they've seen in like stablecoins, I would say.

Yeah, they've been extremely forward-looking. Um, so they've— I'm a huge fan of Guy and his team.

Yeah, there was also an interesting Morgan Stanley report that, um, I can send to you guys that says— I thought there was an interesting line in here. It says, uh, stablecoins are disruptive to payment networks in the broader credit card industry. Stablecoins could disrupt existing payment networks which have historically had resilient business models. And it goes on to talk about how credit cards and payment networks have been one of the most resilient business models that we've seen over the last 50 years, and stablecoins are the first real challenger to that. So I thought it was great.

It's funny, the— all of these, um, equity research sell-side analysts— I, I wrote a report, uh, not to show my own content, but I wrote a piece that I've pinned on my Twitter, call it 6 or 8 weeks ago, about the collapse of the legacy payment model, specifically around this. And after I wrote that, I probably had 5 or 7 sell-side analysts from places like Morgan Stanley reach out to me and be like, hey, listen, we're thinking about the same thing. Can we chat? Right. And everybody across the street sees the potential for this and they want to understand, you know, what, uh, and what it could mean for, you know, the equities of the things that they cover.

Yeah, yeah. Um, all right, content of the week. My content of the week— this is actually, this is super nerdy. Maybe I will actually— pre-getting into content of the week, I just saw ChatGPT dropped. That's what I've been like distracted looking over here. Um, ChatGPT 5, GPT-5 just dropped. And I keep getting texts and people ping me different examples of what people are using it for. And we actually have a Slack channel at Blockworks called AI Kitchen where everybody who's working on AI, like, you know, using Claude or Google or, you know, ChatGPT or Vibe Coding or anything, just drops all their experiments in there. It's a really cool thing. I would recommend companies, if they do something like that, have like an AI channel to just show people what's possible. But I just, I just saw this thing. This guy, someone sent me this, this thing from Ethan Mollick, who's a professor at Wharton. He said, I had access to ChatGPT-5. I think it's a very big deal as it's very smart and just does stuff for you. But full write-up in comments. But this is a make procedural brutalist building creator where I can drag and edit buildings in cool ways and, and quote, make it better a bunch. I touched no code. And ChatGPT built this entire thing. So I will say I haven't had— as a segue into content of the week, I don't get really that giddy for products anymore. When ChatGPT launches a new model, I get giddy and I want to like cancel my whole afternoon, cancel my weekend. And that is my like— because I sometimes get giddy for content. I'm like, oh, like a new, new season of The Bear or like new season of like that's or like new Acquired episode just dropped. Santi, I know you love founders right now. Like, oh, new founders just dropped, get a little giddy. I have that content going with actually, which is so nerdy, but new models of, uh, new GPT models right now. So that is what I will be nerding out with.

Fair enough. Yeah.

Yeah.

You can play around a lot with that. I remember that, that site you, you did two that were pretty interesting. One where you could upload your podcast and it would rank like your, your presentation and it would rank you on like the delivery, which is like pretty, um, pretty insightful. And then you did the one of like, uh, swipe left or right for VCs, I think.

Yes, I built Story Score and then like a VC Ranker.

Yeah, yeah, it's pretty amazing. Uh, my, um, to be fair, I was, uh, I was driving and, uh, you know, I, I put on the Acquired podcast in 2x speed and this person that I was driving with was like, this is anxiety-inducing, I hate it. So I, I could— I, I've heard that. I love, uh, sorry, Founders. I love Founders Podcast, but I can appreciate like some people just don't like the the, the monologue, I guess. Yeah, but my content, um, was this report by JP Morgan. Uh, it was just a very brief note, I guess. Um, this guy who's pretty skeptical— I mean, he has like a very sobering look. Uh, he's been around for a while. He's Eye on the Market by Michael— some— I'm gonna butcher his last name— Symbalicet. Symbalicet. Anyway, he's been at JPMorgan for such a long time. And the note is something to the effect— I sent you a link, but it says, do JPMorgan's blockchain projects argue for building positions in Ethereum? And anyway, he has an interesting note around that. He talks about JPMorgan's Connexus product. You can listen to his podcast because he touches on a number of things, but this is a part of the content. I just found it interesting how they're looking at that. Really like this idea of you can use public infrastructure, does that mean the value accrual is going to happen? I mean, this has been a long-standing question, fat protocol thesis or not. And so it was, it was just an interesting— it's always interesting to see people coming into the industry and like comment on things that we've been talking about for such a long time. Um, and, and so anyways, I like that.

Yeah, that's great. Rob, do you have some nice fiction for us this week?

Uh, I, I— so I'm the fiction guy now. I like that. No, I'm actually gonna— I'm gonna go non-fiction. Um, so, uh, a new book dropped this week called The Devil Reached Toward the Sky, and it's basically like, um, uh, interviews of a bunch of people who are around the, um, the start— the building of the atomic bomb. Um, but, uh, by— it was written by a guy Garrett Graff, who used to be, I think, the editor-in-chief of Politico, and he's got a I think he was a Pulitzer Prize finalist, and he's written a couple of different books about like Watergate and other things that have happened historically. And I like the book because I've been really interested in that period of time. I liked Oppenheimer, but he actually includes a lot of interesting details that are basically not been heard before, different types of voices. And he also focuses a little bit on kind of what happened after the dropping of the atomic bomb, um, and, and Hiroshima, um, and so I think that's— and Nagasaki. And so I think that's been, um, it was, it was pretty interesting. So that's a— that's what I'll put out there. On the fiction side though, The Devil Wears Prada, that's the one that was what I was talking about.

Well, no, what's the actual name? The Devil—

what, uh, Devil Reached Toward the Sky, Garrett Graff. That's the one. Yeah.

Oh, nice, nice.

No, see, Santi was just trying to— or sorry, Iana was just trying to, um, disguise that he was actually looking at the Devil Wears Prada earlier. That's right.

Great.

Yeah, well, great. What was it you— that there's a great podcast on, um, the editor-in-chief of Vogue, right? Which is obviously the inspiration for the movie. I think you were the one that tweeted it, no, Iana?

Oh yeah, yeah, yeah, yeah. Her biography is actually fantastic.

Like, phenomenal.

Yeah.

Here you go, one more. If you want something more lighthearted, this director, Zach Greger, he did a movie a few years ago called Barbarian, which kind of like came out of nowhere and was like a really popular kind of like indie horror film. I'm into horror, so I'll just, I'll throw that out. His new movie dropped this week. It's called Weapons. It's getting good reviews. I'm gonna see it, I think tomorrow. So if you like— You're into horror?

Huge twist that I—

honestly, I'm not surprised.

Yeah, guys, I, I got to tell you, not, not to go way off the rails here, but, um, Eli Roth was raising money through Republic for his like new production studio, and if you put a million bucks in, he would kill you on screen. And I've never thought harder about burning— about putting money into a production studio than that moment right there.

So Well, you know, I've heard some crazy shit.

Wow. This might be the best clip that we're going to reuse for Empire. We should put it on TikTok. I would pay a million dollars to be killed on screen.

Maybe LaRusse.

Wow. Rob, there are so many jokes I could make, but I'm going to spare the audience and This—

I mean, if there's a better way— I don't think there's a better way to end any podcast. You all have a great weekend.

All right, folks, thanks for joining. Thanks for bearing with us on our first live stream. I thought this went pretty well. If you guys have feedback, drop in the Empire Telegram. We have a great episode on Monday with, um, Eddie and, um, I'm actually blanking on his name, unfortunately, but, uh, basically the GC and the CTO from Andreessen Horowitz, uh, gave a really good conversation about just like Essentially, how do you launch a token these days? How do you build a legal crypto company? What do all the changes in DC actually mean for you as a founder? This is really good, really good episode. So Rob, Santi, appreciate you guys.

Thank you, guys.