No, We Have Not Topped Featuring Roshun Patel | Weekly Roundup

Like August and September are just always slow. I think we'll have a great October and a great November. I think the market's frothy, but I don't think it's— I don't think the cycle has stopped yet. 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. All right, we're live. What's up, folks? Ro, Santi, how we doing?

Yo, what's good?

What's going on, guys?

What's up? Um, we're live. Uh, Ro didn't know that until about 2 minutes ago, and Ro always says some, some stupid stuff that we got to take out, so this is, uh, pressure on here, man.

I'm, uh, I'll speak slowly on this one.

Yeah, exactly. How's the week? How are things going?

Good, can't complain, you know, tweeting a little more, talking to people, chilling. You're trying to—

are you— you're pumping the Twitter up these days, huh?

I don't know, I feel like I got— I used to tweet a lot in like '22, 2020, '21, '22, and then I just sort of fell off, and now I feel like the algorithm hates me. So I'm just trying to—

you got shadow banned? Anyone who sucks at tweeting just always says, dude, I got shadow banned.

Yeah, people are like, oh, you got to get bookmarks.

I'm like, well, okay.

I gotta like tweet something people might wanna come back to later, you know? Like, so you gotta tweet some like 40-page report and be like, I just spent the last year working on this report cuz nobody actually wants to read it, but they're like, oh, I'll save that and bookmark it.

Oh, it's brilliant. It's brilliant.

Yeah.

Yeah. There's like this guy, this one account on Twitter, he just keeps tweeting like, this guy literally tells you how to do this. And it's like all these guides that he, but he uses the word literally every time and it just sticks.

Yeah. That's what it takes.

I don't know. Whatever.

Yeah. Santi, what's up with you?

Not much, man. I was thinking, like, has anyone run a correlation, uh, between like crypto asset prices and like, uh, follower count growth? Like, we've all seen the M2 Bitcoin.

We have a bunch of data on that.

Yeah, because like, I look at my account, it's so sticky. Like, I haven't been able to break through 128 and it's sitting there. I'm still, for the record, yeah, beating Jano. Uh, Jano has 127.8 as we record this now, and I have 128.2. Not that I look at this really, just leave it.

Not that I care, ladies and gentlemen, but I'm just saying It has been, it has been muted.

The growth has definitely decelerated and even the engagement's like super low. And, you know, this week is— we'll talk about markets a lot. Roe is here to enlighten us because I certainly don't know what the hell is going on in markets, nor, nor have I ever. But Roe might have a little bit more insight. But yeah, it's so— the engagement just drops off a cliff as soon as prices go down.

Yeah. I mean, most of the media companies, their page views went down 90% in the bear market. And you can't grow Twitter in a bear market either.

But wait, but hold on. I thought— I remember going back like 2 years ago when it was like at the nadir, the darkest of times, and you said we're actually getting a lot, a lot of page views.

Prices go up, we get page views. Prices go down— actually, we don't check page views, but like podcast downloads, new newsletter subscribers. Podcast downloads is the metric I care about. That rips in a bull. It rips when prices are going down. When prices are flat, it's really bad for us. That's when, when prices are just kind of like consolidating here. Yeah, because people are bored. So yeah, let's get, let's get into that. So I mean, the thing on everyone's mind right now is just like the market, right? Have we topped? I think would be a fair summary of what we should talk about here. And you've got all these what people would call— everyone wants to be a top signaler, right? Everyone loves to call, try to call the top. And, uh, here, here's Chow from Alliance saying Chamath spot, uh, SPAC filings, right? August 2017, 3 months before the top. Feb 2020, right before COVID dump. September 2020, nice trade, got to give it to him. June 2021, 6 months before the top. Uh, you've got Bitcoin obviously ripped higher and then has been pulling back. Uh, you've got, uh, you know, folks like Yuga Labs CEO saying, you know, quote unquote, this cycle is different. You obviously have all the dApps, and the mNAV of the dApps is starting to compress. And then outside of crypto, you have things like a company that makes cold mattresses raising $100 million for an AI-powered sleep tech, which—

yeah, listen, I love my, I love my Eight Sleep, right?

I will give them— they have a good product.

Great product. Great product.

They have a good product. Um, or, you know, Ramp, also a good product. Um, you know, Blockworks is a happy Ramp customer. But this, you know, this is a credit card and expense management platform raising at a $22 billion valuation 45 days after reaching $16 billion. And so there's a lot of, I'd say, frothy things in the market. And it's really fun for everyone. Everyone wants to go out and be the top signaler. But I just want to get your guys' take. Like, maybe, Ro, you had some interesting commentary the other day about where we're at in the cycle. Maybe if you want to share your thoughts on just like Yeah, where we're at.

Yeah, I know, for sure. Um, and also I would just caveat, like, it's impossible— like, truly calling a perennial top makes no sense, right? Because, you know, you hold this stuff for the long term, uh, you really can't lose from a denominator perspective, right? Like, calling a top is more of a cyclical thing. And, you know, crypto kind of goes up a lot more than people expect, and then it tends to go down a lot more than people expect. Typically, when it does, there are— in the latter case, you know, for the down case, there are catalysts that could cause that. Right. And just kind of keeping your ears peeled for what those could be, I think, is sort of important. And to see kind of how flows can shift from one to another. And yeah, look, I tweeted that thing because I've been looking a lot at these dApps, and I think there's a lot to like about them. And I think you guys talked about them on the Empire podcast in terms of all the good things it provides. And just to name a few of those things are the marketing and the education that comes with it. People can learn more about these underlying assets, treasuries, whatnot. And I also view them in an analogy to maybe Pendle or the early days of even Ondo's protocol, where they had fixed versus variable yield, where it's like this capital arbitrage, where if I go to people and I say, hey, give me a bunch of money to go buy Bitcoin spot. The type of people you can attract for that product are just people that are down to give money to you to go buy spot Bitcoin. If you construct something a little different where it is like, I will pay you this yield, there is this knockout level, there is this kicker level, after this, I keep the price upside, you keep this much price upside, and you can mark this on your books as yield, which mutual funds, pension funds, all these guys love to do, they need to do, it becomes this different thing where you are making all these different capital sources give access to buying the underlying spot. And I think that there is something to be said there. And that is impressive. But I think on the bad side, like, yeah, a lot of these things are— at some point, I think, you start with a good thing, and it always gets a little bit out of hand. I don't know where we are in terms of it getting out of hand, but there were some signs here where people are talking about DATHs as a better way to get exposure to the underlying, just owning it in the public market than the underlying itself, which I think is a very strong statement to make and has a completely different risk and volatility profile. The flows that are keeping these assets above their MNAVs are a little more fickle than people think, because they're not the type of people you're attracting are not here for 3, 4, 5x. They're here for percentages, tens of percent.

Ro, go a little deeper on that, because I think that's something that people don't fully understand, is that the buyer is a very different buyer set here. And you called this out well. You said one of the main reasons is the DAT trades are all momentum. I've traded closely with the same wealthy TradFi apes piling into these DATs on public markets and want to know for sure is they're nimble. They'll mercilessly cheat at any whiff of weakness, which is what nicely described. Go a little deeper on that.

Yeah, and actually, you know, the funny thing here, too, is I didn't really have space to mention it or whatnot. But, well, look, the guys that are buying the actual public equities and aping into those, that's that cohort there. But there's also this other group that's really important here, which is people I think, grossly underestimate how much access hedge funds, like really good momentum trading, like liquid trad fi funds have to access on underlying assets. So a lot of these guys actually just piled into, say, like ETH as this narrative was picking up, and they're the ones that actually drove spot in a good amount of way. And those guys, you know, they buy $2,000, $2,500, $3,000. When you get to $4,800, $4,700. It's like, that's an objectively good return for these types of people. And they were here for that momentum that these DApps are going to come in with their telegraphed advertised flow that they're going to aggressively buy. And like, when you say that you're going to aggressively buy an asset, like, there are very astute participants in the market that can get ahead of that in a pretty profitable way. And You know, there's guys that have done it a little slower, a little faster. Some, you know, maybe even like, uh, I think I saw a tweet where, you know, you're gonna advertise, you're gonna buy as much as you possibly can in a single, you know, kind of quick minute or quick hour, uh, and then obviously that was actually the, the local, the local current local top of Bitcoin. So yeah, I think, you know, a lot of these DApp flows that are expected are actually being, um run in spot by people that can trade spot with size. And they're not here to make like a 10x. They're here to make the move that the dApps are going to provide from a liquidity perspective. Yeah.

Santi, what do you think about just where market cycle, toppiness, frothiness?

Well, look, you look at the chart, and you try to extrapolate all kinds of things. And I'm not a chartist. I'm also not a near-term kind of— like, I've never met anyone that systematically is able to time markets. But I pay attention to Howard Marks. He put out a great letter out there, talks about the calculus of value. He published that last week. And look, Howard Marks is— he always kind of mentions a couple of things, right? The S&P 500's forward-looking P/E ratio is sitting around 23 times. That is above the historical average. And historically, returns have lower returns have followed when the S&P trades above that historical average. There's also things that people already know. The concentration of the S&P is pretty high. I said it in a couple of podcasts a year and a half ago, which was forget about Jay Powell, just focus on NVIDIA earnings or Meta earnings. And you and I having a private discussion, Jano, which is like, how do you feel about this market? And I've been personally rotating into Bitcoin. I just feel that I feel really comfortable there. I think we're likely in the second half of the cycle. Um, and again, I just sort of work backwards. I never want— I never assume I'm going to be able to capture 90+ of the returns. By that I mean like the major— like if Bitcoin is going to deliver a— I don't know, has already gone up quite a bit, right? Since the low was like $25K, $30K, right? So it's gone up quite a bit. It's 4x. Does it go to $200K? Possible. Historically, in most cycles, there's been a pretty fast run-up towards the end of the cycle where Bitcoin or Ethereum, some of the majors, run up a lot. But that is very short-lived. So I never assume that I'm going to be able to understand it in there. You're going to be euphoric. You're going to be caught up in the trade. And so I'm very comfortable capturing 50%, 60%, maybe 70% of the return. Going into it, so I do think we're in the second half of the cycle. So I've repositioned my portfolio. One, I'm less active. B, I'm mostly in illiquid stuff. And I feel really comfortable holding Bitcoin through the cycle. And so I think the things that I'm paying attention to to inform that view is stuff like Howard Marks. He's been a bit of a canary in the coal mine, to be fair. He's been bearish for the last God knows, since like 2008, he's been bearish most of the time. Like, go do ChatGPT, like, dump all the memos of Howard Marks and be like, uh, what percentage of his memos skew negative or like bearish? And it's like, I would say like 70% of them are bearish. Um, he's a sound of like reason and caution. You gotta understand, the guy sells a credit product. But, you know, I do want to, learning from prior cycles, I feel comfortable holding Bitcoin. Um, I don't feel the need to like, um, punch out of it, like holding it for the next 10 years. Justin Bram, actually, if you can pull up his Twitter, I think he had some really good takes that we should just like use as an anchor for our discussion because he took some profit last week and he was kind of going in through his calculus as to why. And I sort of ascribe to his view. He's much more of a trader than I am, but I do think he had some pretty interesting takes. There you go.

So, okay, so what Justin said is a lot of people ask me why I took profit at the top. One, I expect BTC to go down 60 to 70% next year and want to buy. Two, sometimes enough is enough. And three, yes, dollars inflate away, but one week in crypto is a decade of inflation. Um, before getting into some of that stuff, how do you guys grapple with this idea that, uh, the end of the, the end of the cycle oftentimes is the most parabolic? Yeah, so like, Ro, you mentioned this, right? If we have another, like, it's often the most parabolic. And actually, I think that's the thing that Chao misses here. Which is—

yeah, go through those, you know.

So maybe, Ro, talk to me about this idea that the, the, the end of the cycle is the most parabolic sometimes, um, and, and how does that impact what you do with your money?

Well, you know, I think it's like we're not at an inflection point here where you— where it makes sense to be like, let's say, 100% unallocated. But I also think you can't be 100% fully allocated, right? Because if this parabolic situation is truly true, you know, multiples on, you know, less than 50, less than 70%, or less than 80%, or 50%, whatever you want of your portfolio is still fine. Um, so yeah, I do think like, look, like you could argue between now and Labor Day pretty much anything that happens in the market doesn't really matter, um, right? It's like summer seasonality, uh, probably the least lowest volume, uh, 2 weeks. And then historically, you know, crypto in years like this Tends to do really well in October, and then into November and December. And if there's going to be a parabolic move, that's kind of where it is. So this is kind of like chop, maybe a liquidation or two to the downside, maybe not, but basically chop, then up. I think that's kind of like where my base case sits. And I think, like, you know, to Justin's point, like, it's 70-80% is a big number now. But I think there might be a little bit more of a floor in Bitcoin because of the ETFs and the traditional flows, like where what previously was normal for an 80% drawdown is more like, I don't know, like a 50% or something in a situation like where we are today, where that's not terrible if you can weather that through cycles. So, yeah, I don't think that we cyclically topped here. But I think there are things to be looking out for that could put it close. And then also, I think a lot of people, they look at stocks—

What are those things? If you're looking at— so the thesis so far, it sounds like, is we haven't topped. Cycle's not over. It's getting I'm a little frothy. We haven't topped, but I am starting to be hyperaware of some things. What are the things that you're starting to be hyperaware of?

Well, datmnavs is a big one. For me, everyone— when effectively closed-end products are trading at a premium to their nav, it's like, great, everyone's making money, and you issue shares. It's all this good stuff. I've had a lot of time spent with closed-end products that end up trading at a discount to their nav, and then it gets super messy. And then it's like, if you ever sell the underlying, then you're reversing seeing the whole pitch of like we're accumulating more units per share and it kind of ruins the picture. You have to think of other creative ways to get financing, which Saylor recently tweeted or announced or whatever it was that his plan there is to find credit lines. That's fine right now. Like, you know, he can get credit lines and I think, you know, Strategy is in a little bit of a league of its own where it may be perennially always has access to credit lines. But I've also seen how quickly the credit market can dry up for demand to lend to crypto strategy companies if people are not interested in crypto, right? So I think the DAT MNAs are like really the thing to watch for, and they're not too bad, you know, just yet. And, um, you know, that's kind of like the crypto idiosyncratic part of the market. You know, of course crypto trades in line with stocks, and I, I don't know, I think the S&P 500 is always like, even if it's horrible, the S&P 500 might go down 20, 30% at most. It's pretty dampened on the downside. So it's like, to Howard Marks' stuff about calling like PE multiple tops and things like that, I think that's a much harder game, and it's kind of a game that you don't really want to play. So you kind of have to just look for like what could cause crypto to underperform, uh, stocks and other markets. And I, I do think the MNAV thing is, is a really big thing to watch out for. Yeah, and there's other little things like, you know, people saying cycles are over forever, Kanye launching a meme coin. Like, you know, things are, things are moving.

I would say, uh, well, you have a really interesting chart here, um, and you, Jano, shared with me something we've been talking about extensively here, which is the performance and the volatility of some of these dApps if you had bought them straight out of the gate and how like vastly underperform you, you, you like the Tom Lee vehicle, I believe is the one that's like was trading at like 5 times nav and then just kind of crushed. And, you know, I think, you know, one, you definitely want to steer clear of DATs and paying a premium for stuff, um, and especially this time of the cycle, I think, because like that, that's pretty much unequivocally every DAT person that is putting these together or investing them tells you one thing, which is this is a trade, not investment. So if you kind of like And, and so if it's a trade, then it's very much dependent on timing. And if we agree that we're in the second half of the cycle, you don't want to be playing the game of musical chairs with your entire stack. So if you're going to do it, maybe do it with like less than 5% of your portfolio. Um, but yeah, like SBET is just vastly underperformed. Uh, so, so for everyone that's not looking at the video, for context, you know, um, you know, what is this, you know, SBET?

I can read this. I mean, so there's this guy Victor, by the way, who's great and has a great, uh, Telegram channel and stuff like that. He said, I remember when SBET launched, I was debating with a friend whether whether buying SBET was a better deal than ETH. I was pretty confident that buying SBET there was potentially dangerous because MNAV was 6. If you bought ETH on that day, you'd be up 80%. And if you bought SBET on that day, you'd be down between 40% to 60%. And he kind of goes through— like, I'm not going to read this all, but like, the very unpredictable and irrational things. These are basically just like levered— they're levered products, right? They're slightly levered products, not entirely. They're very volatile products on the underlying. And he concludes and says they can go very quickly from overvalued to undervalued. And this is what, like, anyone who wasn't around in 2020 and 2021 into '22— like, Ro, I know you were very close to some of these closed-end products. If you don't— if you haven't seen some of these closed-end products before, it can go from very quickly overvalued to undervalued to overvalued to undervalued. And like Santi, you've been saying on Empire, Right. It'd be a real shame if you got the thesis right, but the structure wrong.

So, um, yeah, yeah, yeah, exactly. I mean, honestly, to that point too, like, this works both ways on the, on the down, on the upside case too, in, in the sense of like, similar to how like GBTC was a better expression of Bitcoin from the absolute bottoms in 2022 when you could effectively get Bitcoin at sub $10K when spot was still at like $15, $16K, uh, I imagine you'd actually be able to do the same with some of these treasury company stocks pending that, you know, they could they can actually survive. So there are opportunities in them. I don't think they would— they're just— they're going to fall off the face of the earth completely. Um, but they, they will go through this reckoning cycle. They, they almost have to. Like, if they never— you can never perennially sustain, uh, you know, above MNAB and keep issuing, uh, at infinity without some cyclical, uh, movement.

Right, right.

I think, uh, NFT prices is probably something that would definitely also track. I think, uh, NFTs are one of those, like, they benefit from the wealth effect. Like CryptoPunks have had a pretty, you know, pretty decent— I think it's 52. Yeah, 55. The top last cycle was 125. The reason I know this is because I bought a floor punk for 125, uh, and ETH was at 4,000. So you can thank me for that.

You paid 600? Oh no, you paid— wait, you— for 125?

125 for one of my bandana punks, and that was, uh, yeah, nice.

How do you feel about paying 500k for a bandana punk?

Uh, you know, I, I have it. I, I feel— look, on this point, ladies and gentlemen, coping, coping. I don't consider what I—

I'm—

I consider myself a pretty big collector. They don't compete in my investing. They don't compete in my net worth. It's just something that I— it's like, it's an expense, right? So I'm not there to ever sell it, and I've actually never sold other than one, two NFTs— a Bored Ape that was gifted to me and another thing like a Nifty Island thing. But I have it. As soon as I walk into my house— yeah, you've seen it. As soon as I walk in, it's there on rotation, but it's there. And it reminds me that we can all be stupid, right? We can all— you're not infallible to getting caught up and buying stuff. I like CryptoPunks. I buy stuff that I love. I would feel way worse if I'd bought it with an investment perspective. And Yana, you remember that time where we were talking about doing a levered bet? Oh yeah, during NFTs as like a levered exposure, uh, and that's like a— it could work again. It works in the super last couple of months, parabolic, right?

Well, what would we do?

We're gonna let, uh, so you're like saying, yeah, it was like exposure to SOL, be like borrow against your SOL, buy Tensorians, which are gonna probably rip as soon as they launch, uh, the, the, their, their token, and you would have gone like crush. You not only would have been probably liquidated on your SOL stack, but Tensorium price just totally collapsed. Look at that.

Oh God.

And this is the thing that I'm trying to impress on people, which is why I'm going to Bitcoin. One, I think the setup for Bitcoin is sort of pristine and it is broken away from the— like, there's a whole now narrative forming, which is we're kind of over the 4-year cycle for Bitcoin. I don't know, Bitcoin goes down 65, 50, 65%. I'd certainly have more conviction that alts, including like ETH and below, definitely goes down 60%. Bitcoin, I think, is breaking away in a kind of its league of its own. And that's just a function of the industry maturing, candidly, which is you would have expect— you, you would expect that the correlation within crypto, that intercorrelation, kind of breaks as we form more thesis around like, you know, one is a commodity, the other stuff is something else. I don't, I don't think we're going to see this cycle, but I feel more comfortable I'm more and more paying attention to what is the size of the door on the way out. And for anyone that's been around the space, you know that that door really shuts down really quickly, especially for NFTs. Like, there's basically no liquidity. Even stuff like Terra and Luna— good luck trying to get out of that trade if you had size. Like, and so, you know, you just don't have that problem with Bitcoin.

Yeah, yeah, Bitcoin you can really get out.

Yeah, or more like bar against it, or just like the vol of it is, uh, it's a very personal like decision, but I just generally think that— I don't know, I never want to put out predictions, but like, are we going to see Bitcoin back at $50K? That's what like Justin's kind of suggesting. I don't know, it's really possible. Like, look, anything's possible.

I'm—

things can always be—

for year-end, that's actually very extremely unlikely. Hopefully I don't eat my words.

You think it's extremely unlikely that we do?

Okay, before year-end for sure is unlikely, I would say.

You said $150K?

No, $50K.

Oh, $50K. Oh, $50K to the downside. I see. I see.

Yeah, yeah. There's just too much demand, especially even at like $75K, $80K.

All right.

Yeah, we got to take it. We got to take a quick break. When we come back, we are going to talk about lending because the counter to all of this is that lending is still— at least CeFi lending is still at a low. On-chain lending is high, but CeFi lending is low. We'll be back in like 2 minutes.

Yeah.

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So before we talk about lending, by the way, just one thought I had on the cyclical thing. This is something that I've started to think about and use recently. So if you think about the cycle in terms of innings, right, like as Santi was saying, you're probably past inning— oh, Jason's later. Yeah, 4.5 or 5 or whatever. One way to think about it is you could take whatever inning you think you're currently in, divide that by some number. It could be 9, which is the total number of innings, or something higher if you want to be a little conservative. Or a little more aggressive. And basically, that's the percentage of your portfolio that should be in whatever you want to call your quote unquote safe asset. And I'm not here to tell you what that should be for each different person. That, you know, in many people's cases, that could be Bitcoin, right? Because of the risk reward being skewed over years, it could be the S&P 500, it could be stablecoins. But, you know, if you think you're 40% through the cycle or 50% through the cycle, then maybe having 40% to 50% in safer risk actually is kind of the way to go.

That's a decent— that's a decent framework. So what cycle, what ending do do you think we're in, bro?

I think we're past 5. Um, so yeah, like, I don't know, some— somewhere over there. Yeah.

So let's call it 7. Let's call it— let's call it inning 6 or 7. So that means, um, so 6 divided by 9 is 66, 7 divided by 9 is 77, roughly. So it's 66 to 77% of your portfolio should be in your safe asset. So is your—

right, that's if you want to be pretty safe. You could increase the denominator to some number if you want to go— like, if let's say you consider yourself— if you consider 50% cash like the safest, or 50% Bitcoin the safest you could possibly be, you know, make your denominator, um, you know, like 12 or something, you know, like whatever.

I, I don't, I don't hate that. So what, what is your safe asset personally? Is it Bitcoin or stables?

It's like a mix, I would say, of Bitcoin, um, in index funds and stables that are earning, and cash that's earning yield, even municipal bonds, whatever, like just things that are relatively safe. Obviously, there's a different ranking in those things. But yeah, it's like, it's like a grab bag of it. But really, for years, honestly, the portfolio, like kind of the thing that you divide your total net asset value by and see how many units of that you owned was, was very important to me. And for years, I was doing Bitcoin, then I was doing ETH, I was doing Solana. Now I track it in all the different things. So you can kind of see like where you are in terms of how many units of those things you have. But yeah, I think something like an index fund. Also, it's like, as you get later in your investing career and older, that number tends to go up too.

Santi, how do you— go ahead.

Well, I was just going to say, look, holding cash is really hard. You go back to Stan Druckenmiller and some of the greatest investors of all time, Seth Klarman from Baupost, um, they have held— like Berkshire Hathaway, they've held 40 up to 60% of their book for extended— I'm talking multi-year periods—

cash.

And, and then it makes you wonder, what is your cash allocation? And again, when you go back to that discussion, uh, yeah, like they're sitting on $347 billion of cash that is historically way above its historical average. I have a kind of couple of stats here. That is roughly one-third of their entire assets. And so, yeah, it's roughly one-third of their entire assets. That is— that figure has more than doubled since 2023. And so I think it's just a— it makes you wonder, like, I always ask myself, like, what percentage of my books in cash. And so, okay, you overlay that with, okay, maybe we're going to get a rate— rates cut likely by the end of the year, right? Because you're now— the market's kind of forecasting a pretty high probability, like 60 plus, of a 25 bps rate cut. Um, obviously this week is going to be really important. The jobs data last week was important. Like, look, we're not here to talk about macro. I go listen to forward guidance. But, you know, that's sort of the other thing that I'm factoring in, which is I don't think we're like in inning 8 Because if you have rate cuts, there's likely going to be a pump. Uh, if there's like a peace deal, there's a couple of things that obviously like the markets are kind of schizophrenic because we're a tweet away from the market dumping 5 to 10%. Uh, so, so don't use leverage, ladies and gentlemen. Um, but I do think that like when I think of working backwards from I'm going to capture maybe 50 to 60% of the return for something that I think is pretty compelling I think that I'm comfortable just going more and more to cash.

Yeah.

Like 10% of my book.

Maybe a question for both of you, like what percent of your book is in cash? Yeah, I think I caught the end of that. I think it was the percentage. I would say it's above 20%, less than 40%. But I think a big question to ask, maybe Santi, for you is like when you think about cash in the portfolio, like what is that? Actually? And is it like cash and AAVE earning like 4.5%, something like Athena or something a little bit higher, or like, you know, basis trading on a DEX that's actually probably in the mid-teens right now? Like, how do you think about what the— what is the cash earning as a yield, right?

Yeah, great. Off-chain for me. I just don't want to take smart contract risk or whatnot. And I'm someone that was very much degen doing DeFi, and— but I just feel comfortable. The best advice I got, which is what Justin said there, is if you can change your life, change your life. Put money away, far away from the industry that you spend day in and day out, and allocate it to treasuries and/or fixed income stuff, like super high-grade fixed income where you lock in a 6%, 7% rate. Um, the other thing that I'm mindful of is as you go in the later parts of the cycle, I think the risk curve is not like a progression. So if you think about, OK, I want to earn 5% on my stables, you can buy T-bills and clock that. You know that that rate's going to go down, so you're going to have the reinvestment risk. You can then go fixed income and maybe go buy Disney or Exxon or some super high-grade stuff. If you want to go high yield, I think in the latter parts of the cycle, the risk curve just changes. The shape of the curve just does that, where the incremental 1 percentage— like 100 basis points for you to get— you're trading way— for the incremental 100 basis points, you're giving up or you need way more risk units. So that's how I think of it, which is in the earlier part of the cycle, in a recovery, So the market crashes, um, for you to go from like 10 to 12%, you're not— you're not trading in that many like risk units, say 20. In the later parts of the cycle, for you to go from 10 to 12% return, you may have to trade in 3 times more risk units. Does that make sense?

Sort of. What's a risk unit?

Arbitrary number. It's, it's just, it's all— everyone has it, everyone has a different risk unit, but that's how I think of it. Like Like, okay, yeah, for me to go, I, I do two things. The law of 72, which is divide 72 by the percentage that you're getting. So if it's 5%, right, which you get right now on treasuries, it will take 14 years for you to double your money. So like, you know, 72 divided by 5, 14.4. You have reinvestment risk. So say you want to say, you know what, anything gives you 10%, you can probably get a high-yield bond, like a, an investment-grade bond for like 7, 8%.

Maybe a bit less.

But like, that's, you know, you're doubling your money in 9 years. And then you say, shit, no, that's too much. You know, I, I want to go from 8 to— I want to earn 12% of my safe bucket. Well, you're doubling your money in 6 years. What I'm saying is, if you think about the curve, from 5 to 6, not that many risk units. From 6 to 8, more and more risk units. From 8 to 10, a lot more. Anything above 10 way— like, it's like a non-linear, it's like a parabola, right? And that, that change of that shape of the curve, it actually steepens.

Yeah.

And you're, you're, you're taking way too much risk in the later parts of the cycle from go for the incremental 100 basis points.

So what are you make— uh, so Roe was saying kind of what he's doing. Santi, what, what are you doing? Are you flip— yeah, go ahead.

I'm rotating a lot of my crypto exposure to Bitcoin, uh, and, and I feel good just doing that. And then I just have stuff in my ex-crypto part of the book, which is more and more, uh, positioned as like, it's super long-term focus, but holding greater amounts of cash, not reinvesting it. So I have like a bunch of stuff that is maturing, structured products and whatnot. And so I'm just kind of holding cash and putting it on treasuries and being patient. Like, you know, if I get paid 3 to 5% to be patient, it's not nothing. And so I, I'm, I kind of do— I'm comfortable holding greater amounts of cash for the next 2, 3 years if it gets ugly. Like, I would love to buy Bitcoin again at $60K.

Yeah, yeah, for sure. You know, the interesting thing too about the late state, the later stages of the cycle, because they have this kind of parabolic move and this strong desire for people to get— typically you do see funding rates and forward rates and curves kind of blow out a bit. So it makes like kind of the cash allocation to me, it's like almost a little more enticing, right? Because like, let's say hypothetically, right, hypothetically, Bitcoin's $180K, right? Like whatever tomorrow. But the 6-month out forward, you can lock in like somewhere in the mid-20% or high-teen percent basis rate. Like, do you think the risk for like, you know, playing for another 20% in Bitcoin annualized from that point at like $180K, $200K versus like getting that locked-in forward rate, just capturing a quarterly future or like some sort of perp with Pendle, or like now Pendle does this borrows, which is like kind of like a fixed-rate perp thing, you know, does it make sense? And I think oftentimes like later in the cycle you see that like, yeah, like, you know, putting some of this into stuff like that actually is kind of logical.

So yeah, rates on cash and at least on-chain, you're saying because people will pay so much to get long, right?

You—

at this stage of the cycle, you should just feed them that money.

But we're not there yet. We're not there. Like, the basis is like, all right, and it's like there's a lot more participants slamming it in. So it's like, I don't think you're going to see like the 45% annualized basis that you had in April of 2021 into like June futures. But, you know, when that happened, Bitcoin did go from like $68,000 to $25,000.

So let me, let me counter all of this. And the counter, the counter to all of this is probably this chart. I think, which is the CeFi lending market. And Ro, you were obviously at the center of this at Genesis in the last cycle. So, I'd really welcome your thoughts here. So, Galaxy has this great report on just— here it is— on the CeFi lending market. And you can see, like, I mean, for anyone, like the last cycle, if you wanted one word or one sentence on like what drove the last cycle, it was a leverage-driven cycle. And this cycle has not been that. Maybe you could say it's a dApp-driven cycle, whatever it is, but it's not a leverage-driven cycle. And you can see that in the numbers here. The numbers really haven't come back. The numbers are actually what they were a little above 2020, but nothing like what it was in 2021. So by this standard, you would say maybe we're in inning 3 or inning 4. And what Nick Carter said was, when people ask me if the top is in, I show them this chart. Watch the credit cycle. Cycle, top, not in. And Dan Taviero said the same thing. He said Bitcoin and ETH bull market still has a lot further to run. No chance lending doesn't go multiples over where it was in '21. Americanization of crypto's driver. Lending only still in its infancy. Bitcoin and ETH legitimate collateral. Old world salivates at the opportunity. And boom, again, similar chart. So what, what say you, Ro?

Yeah, I mean, look, look, the lending charts actually, you know, they look pretty healthy. In the sense that they're not like completely overblown. And it is true that one of, you know, one of the things you need— you, you, you don't need it, but you hate to see it. But like, yeah, like if, if credit overexpands, like that causes— and you look at other markets too, like let's say houses, right? People are like, oh, real estate's so expensive, it's like bubble, top, whatever. But then you look, there's no leverage in the system. Like, oh wait, lending originations are super low, mortgages are not being taken out, rates are too high. There's not anything that would cause an implosion there, similar to this lending chart in, in crypto, there's not like insane unsecured loans and leverage being taken with, you know, whatever counterparties that aren't deserving of it and whatnot. So I think in that sense, it's pretty healthy. I mean, the other thing that I would caution, though, when looking at a chart like this, actually, one more thing I'll say is like there is still a huge hole here, right? Like the hole that SVB, Signature, Silvergate, Genesis, BlockFi, Celsius, all these kinds of guys left. Has not been filled from both the crypto lending endogenous perspective, but also even to like startup LP shares.

What do you mean it hasn't been filled? The demand side or the supply side?

The supply side. Like, I think the demand is still there. People still want to borrow against LP stakes and like funds.

But what do you mean the supply side? I mean, people have tried to offer the supply side. Like, what? Why? Why isn't it there?

I think— I mean, it's a good—

the lenders, the lenders are not there.

Yeah, I don't think people are lending size like unsecured anymore. OTC, they're much more careful about it. They want to like Maple. It's like very like if you go to their page, it's like, it's like designed where everything is like, hey, let's be as transparent and forward as possible. So I think in that sense it's pretty healthy. But I will say like the one thing going back to the chart is that I do think there could be a little bit of anchoring bias in this chart because of the situation that you had in '21 was quite wild. And like, you know, multiples of 21, like Tapiero says, like, like with price appreciation, for sure you could get there. Like multiples, let's say in terms of units, I mean, I think it would, it would take a long time to rebuild, right? So that chart, it's growing, but it's not like where it was, was like this kind of like anchored crazy number, right? So you got to kind of keep that in mind.

Santi, what do you think of like Nick Carter and Dan's takes on this that were maybe early days because the lending— it's all about the lending market and the leverage?

Um, I don't, I don't buy it, to be honest. Like, yeah, um, it's one data point and I don't, I don't, I don't think it was— we're early. By early they mean like third, second, third inning. I would love to have them on here and discuss this, but I mean, you gotta also believe they're institutional investors going out there and selling their own product. So I'm not selling any product other than warranting caution for people. So it just— I think if you were to survey some of the, like, the general market and whatnot, um, I, I wouldn't place as much stock on just pure lending as a data point to suggest that we're early when other indicators are probably telling you that we're not early. And for that reason, I would just— the weighting that I would give to this particular data point is lower. Yeah. Than with the abundance of other data points.

Not—

and by the way, not just in crypto, but also macro. And it's also traditional markets and private rounds. And I think one of the biggest risks that, you know, maybe you should talk about, which is, you know, secondary markets are also pretty interesting to observe, the discounts and the demand. And also, you know, how rounds get constructed. And we're in that environment where, like, people are chasing— the AI hype train is very real. And I think that just will come to some sort of, uh, disappointment sooner rather than later. And I think that trickles into crypto being a super risk-on asset class, right? Because when you think about the allocator game, if their portfolio gets hurt in traditional markets or in other buckets of their venture portfolio, then they're definitely not going to go out and invest in a crypto fund. And so It's a liquidity game. So where is this liquidity going to come from? And candidly, what do you think has a greater weighting, DApps and MNAV or lending markets?

Yeah, yeah, it's a good question. Sorry, Jason, before you answer, real quick, just to add one thing that I think you alluded to this really strongly, and I've actually recently done this myself with one of my indicators, is that indicators can grow stale, right? Like lending was way more important in '21 than maybe it is now. And like another example of why like an indicator I've recently started to weigh super less is Coinbase's App Store ranking, because before that was like a really important thing because retail was driving the market. Now it's like none of these financial crypto apps are like really at the top anymore. But it's like, does that matter that much anymore when all the flows are coming from ETFs and DApps? Like, arguably no. So like, I've really unweighted that indicator in my kind of process. So I think that's like something to think about with the credit market, right?

I mean, maybe another thing to look at is, uh, like maybe some of the lending has moved on-chain. Is that what— I don't know if— I don't know.

Yeah, yeah, I mean, that's fair. But you know, the on-chain lending is like, it's, it's like, it's money markets, right? It's like over-secured.

Like, where—

yeah, it's all over-collateralized.

Yeah, it's all over-collateralized. So if Bitcoin drops a bunch, there's a bunch of liquidations on Aave and Maker. Like, okay, great. Like it's not going to cause like some systemic loss of like funds.

Yes. Yeah. Hmm.

What did, uh, out of curiosity, what did the lending markets, um, look like? And maybe this is part of the chart that I'm not fully appreciating, but like before the market crash, and what was the— what would be interesting to look at is the premium on the Bitwise products. Um, and the Grayscale products. I mean, sorry, the Grayscale products.

Yeah. Yeah. Yeah. I mean, this is off the cuff, but I think before, um, GBTC went negative, it was like sustaining for years. It was sustaining 100% plus premium constantly because it was like the only product and that was a little bit systemic like in terms of access. But I think it went to like maybe like 30% premium, then parity, then it was hovering at -10, -5 for a while. And then, um, yeah, this is probably not the premium chart, or maybe it is, I don't know.

I think they made it private.

Got it. It went to -50 at some point. Um, so yeah, that's kind of where it was. Yeah, but I don't— yeah, yeah.

Oh, um, Ro, let's build on what Santi was saying before. Let's talk about, uh, fundraising. Um, what do you— what are you seeing in the private markets right now?

Yeah, I mean, I think it's a lot of like A rounds, B rounds, things like that. Like some of the stuff, like, I, I, I know less about the, the ramp and kind of, you know, um, what was the other one? Eight Sleep that, that you brought up earlier. But like some elements of that in crypto too, right? Like big rounds, big valuations, later stage stuff. I think like, you know, seed and pre-seed, I've always said it's like very insulated from this because like, you know, you're investing in something at a low valuation with good founders early in a bet. Like, that'll always be like a bet that's there. And like, very much like, you could argue now it makes more sense. And I think Santi, maybe you're doing this because you probably are even more active on the angel side than any institutional fund. It's like, Definitely. So yeah, focus your, you know, focus your thing on, uh, on pre-seed, seed, right? Like, you know, like go a little earlier, right? Like maybe it makes sense— less sense to do like these big pre-TGE rounds, right?

Yeah. Look, one of my good friends Omar pinged me like a day or two ago and said, do you think you can still do 1,000x in crypto? And I said, absolutely. Like, like you can do 1,000x in pretty much any market if you understand that markets are deeply psychological phenomena. Right? And I tweeted about this, but it's like, okay, sure, it's definitely gotten harder in crypto because, like, look, the, the state of affairs was if you invested in 2000, like, if you were early in crypto, this asset class went from like sub, like, $10 billion to $4 trillion. Like, it was easier to do 1,000x's. Um, it will continue to get harder as this industry matures. It's just sort of a law of large numbers. But you can do a 1,000x in technology. You can do a 1,000x by starting a company or by investing in something that is totally overlooked. And again, Howard Marks talks about this a lot, which is market pendulums swing to extremes, and fundamentals just don't really deviate that much. So I appreciate that. I guess if you do want to do 1,000xs, you want to be— again, as Peter Thiel describes— you want to be sufficiently early that it is overlooked, but not too early, because being too early is kind of indistinguishable from being wrong.

Hmm.

So it's, it's, that's, that is the skill of venture. One of the things I will say is at this part of the cycle, if you're investing in something, uh, if, if seed round valuations have gone up from $5 million to $20 million, it's really hard. It's just fundamentally harder. You might do 100x, but not 1,000x. And the difference between 100x and 1,000x is that 1,000x retires you, and 100x probably doesn't. Or 1,000x definitely returns your fund. 100x, maybe not, because the round is small. But it's still great. Don't get me wrong. If you get 100x in your life, you're sitting pretty. But all this to say is, for me, it's like, it doesn't— I'm not jumping out of my seat to invest when I see seed rounds 4 times of what I saw them in the bear market. And I'm not compelled to do the AI rounds at like, you know, $200 or $500 million, as no matter how big of an industry or how big of a TAM, it's just really hard. I'd rather like invest in the S&P, which is still going to benefit from AI, and you're still— your downside protection is just much more there, right? But I'm curious, I mean, you guys are still very active on the private side, and I think that's more of your mandate, right?

Yeah, yeah. I would say we've been probably a little bit more careful and a little less, um, uh, you know, kind of like doing every— doing a lot of deals. You know, I think it's the pace has definitely slowed down. Some is like seasonality, but I think a lot of it is, uh, cyclicality, right, in the cycle. Um, and like a lot of these rounds too, that like these bigger rounds that get done now, like especially if it's a product that's gonna take a little bit of time to launch and like it's probably, you know, next year, a year, you know, late into that kind of thing. It's like oftentimes you do see that these things raise again at either flat or, or, or in a position where investors are in a little bit more strength. Whereas now it's like kind of like you have a good idea, it's like it's done, right?

Totally. That's a good point. Jano, I mean, I don't know if you guys have this in your dashboard, but one of the cool things to do would be take a look at all the last round valuations for company protocols that have launched the token and what percentage of those tokens are trading below the last round.

I think that's a good question.

That's a, that's a good barometer that I'd want to monitor, which is like, you want to be investing when greater than 50% of all new token launches are trading below their last round. That probably tells you, yeah, it's a, it's a decent time to go. Token picking, for sure. And right now, I don't think we're there. Although, to be fair, some of the newer launches have just not performed well. Hyperliquid's been— I guess I wouldn't consider that. It didn't have a round, right? Athena has done fairly well. But it's few and far between, I would say. There's a lot of protocols out there. Again, you can do 1,000x in a raging bull. You can do 1,000x in a raging bear. There's always going to be assets and pockets of the market that are totally overlooked. GameFi, or gaming. It hasn't performed well at all. And I'll tell you, one of my best investments was Aave. And yeah, it was in a bear market. But you were just sitting there and saying, it has a team of like 20 great engineers, survived the bear market, kept shipping. The token has not moved. There's another company called Compound that just raised a round from a16z and has all the it, you know, at a 5x evaluation, you can make a compelling argument that that's like mispriced. Hmm. You had to have a little bit of it of luck, and, you know, but anyone could have bought that token. It was listed on Binance and it had done an ICO, and it was just sitting at like sub-$10 million market cap. The value of the team, goddamn it, is worth like $50 or $100 because someone was willing to pay for an inferior product. No disrespect Lechner, but it was just, it was not as developed and one was live. And so anyways, it's just, um, there you could argue like DeFi, has DeFi caught a bid, uh, like, you know, you, the narrative might be evolving, you know, you got fundamentals, you got cash flow, you have, you know, potentially dads that are going to put money on chain. Yeah, but look, this is quite interesting, the chart you have here. What would you attribute that to, by the way?

This?

Yeah.

Leshner leaving and Stani staying. You, and then again, this is something that you gotta, you gotta be, you can't, you can't get startup and not be founder-led.

I mean, you, you're, you're a great founder, right? So you understand this and you've tweeted about this, which I think is someone should put together an index, right? Founder. Didn't you create this by the way?

I said that I would like to just invest in founder-led companies.

Why don't you create an AI bot that just buys just companies that are founder-led or have a resurgence of a founder, like Apple. When Steve Jobs returned to Apple, boom, the agent would have invested in that. When Cain returns to SNX, boom, invest in SNX. Or companies that just have strong founders and closely held control, percent held by insiders and the amount of stock that the founder holds and has not sold. Look at 13Fs and bunch of other stuff. There you go.

Exactly. Um, yeah, all right folks, sorry about that.

I, I'm the only one here, so receiving packages is a thing. One thing I wanted to add, and I, I maybe hopefully you didn't touch on it, but like, yeah, the sector I think matters a lot when you, when you talk about stuff like this. Like, for example, like, like AI and crypto, like, intersection deals right now, I think the bar is like a lot higher for that because you are seeing maybe a little bit of like— I'm super bullish AI long term for sure, but it's like, you know, Meta announcing you know, these kind of layoffs and like just like the timeline for how close we are to truly like really AGI-level stuff, like with the AI 2027 thesis. I think a little bit of reality is setting in where it might take just a little longer than people think. Well, what previously maybe was like a 2 to 3 year thing could be like more of a 6 to 9 year kind of thing. And that can temper expectations quite a bit in terms of like how to price these like kind of— yeah, that specific sector, right?

Yeah. All right. We got to take one more ad break. We'll be back in 2 minutes.

Do not say no. That's how you know we're in a bear market.

No, bull market, baby. We got, we got a lot, we got a lot of ads.

Pump the ad, pump the ad, let's go. Yeah.

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Well, guys, I was quickly browsing through some of the comments that people want us to talk about. I think it dovetails naturally into some of the discussion we're having, which is, are there sectors right now that are totally overlooked? And we're talking about DeFi, obviously GameFi. DePIN is something that you could argue has been great traction in the real world, stuff like Helium and Hive Mapper and GeoNet, but the token prices have actually not reflected that at all, you could argue. So, so maybe we go around the table and like we can talk about like a couple sectors that you think are overlooked or particular companies. Like, obviously none of this financial advice, but like, uh, just kind of curious, Ro, if you have a, a, you know, a couple strong views there.

Yeah, I mean, I can start—

overlooked or totally overhyped, by the way.

Like, yeah, yeah, overhyped is a different question. Maybe I'll start with overlooked. The first one, you're gonna hate me because it's so simple, um, and I think maybe Cosmo was talking about it too, but like, yeah, you know, it's like with ETH making this move and like if, you know, the last stage is parabolic and, oh, which is the next product that doesn't have an ETF? Like, it's obviously one clear answer there. It's Slotta. It's still like really popular and it's a good chain. Uh, so I don't know, I don't hate— like, I don't hate— I don't even know what's at 180.

Yeah, the SOL/ETH ratio has also come down quite a bit.

All these ratios come down. A lot of ETH ratios have come down. Um, so that's, uh— oh wow, yeah, Hyperliquid actually is now 40 today, which is kind of— that's a pro— anyways, um, Yeah, so like something like that I think is like, as far as like not going too crazy down the curve and whatnot. But, you know, going back to like where this, uh, kind of where we're sitting with like this admin and, and how people can actually now value, uh, flows to, uh, or value, um, yeah, like bring flows into tokens and like make these like kind of like really drive revenue back to them. Like, you know, a bunch of individual names— I don't want to get too low cap— are doing this. I think things like that where it's like, hey, look, like, here's something that is making money or can make money, and the valuation relative to the amount of money it's making is pretty reasonable. And I think there's a few of those things out there.

What do you think outperforms SOL or HYPE?

That's a really good question. I mean, I think from— I think you got to— you did.

Yeah, that's going to make a clip right there. Jared, I know you're listening. The title of the episode would be like, where are we in the market cycle? And Jared, that will be Ro, like, doctor, fill me.

I would have to pull up a SOL hype chart. Honestly, it's one of the charts that I actually— I, I get it sent to me a bunch of times. I should, but it's one of the ones that's not like on my TradingView right here. But look, like, from a market cap perspective and just like amount of owned and like room to, room to own it, you got to go with maybe hype there. I mean, hype is a pretty interesting product because the airdrop has happened, right? And it's maintained loyalty. And the spot order book is getting more and more liquid. Like, Unit is kind of like crushing it. It's really impressive stuff. And like, they built like this kind of like coalition around that, around that, you know, that product. Now, at the same time, like, you know, historically, people have gone through rotations with their favorite effective trading platform, right? It was like GMX in November 2021 outperformed literally everything. Into November 2022. Then it's like a couple other ones, and then it underperformed severely. And then it's like dYdX had its moment, hype has its moment. So there's a little more rotation there, whereas Solana I think is a little bit more— I mean, like, after like ETH. Yeah, yeah.

To your point, like, uh, you always— two things there. One, what rebounds the hardest is pretty indicative of what— like, what catches a bid hardest. And I think hype is that asset that always leads the rally. Um, and And again, it's a $40 billion fully diluted market cap protocol. SOL is 3 times the size. So from a funds perspective, like, how many flows does it actually take for this thing to actually, like, you know, double it? You know, hype from that standpoint, much less, right?

Yeah, exactly. It takes a lot less money to move it.

Exactly. Yeah, like, and that's just a simple math that I've just had to pay more attention to over the years, right? The other thing is, uh, I would I would caution because John from DBA was looking at like HYPE's like 30-day revenue and annualizing that. Ladies and gentlemen, please don't ever do that. I have a ton of respect for John. We're going back and forth on the timeline. It's just, it never serves you well to kind of analyze that. Now, I do appreciate for all the HYPE bulls that are going to come after me, maxis, the earnings for HYPE have been fairly actually consistent over the last like 6, like a sustained period of time. So you look at the average and say, OK, what is going to be the earnings of this protocol? over the, you know, in a true bear market. Um, but I do think both, both assets, um, other than Bitcoin, I actually think SOL and HYPE are pretty interesting on a relative basis. So like, ETH has been all the rage these days, um, and I'm not dismissive of ETH. I think ETH is important to, you know, perform well. Like, rising tide lifts all boats. But I do think that these two assets have, again, check a lot of the boxes. Majors, have a lot of liquidity, they're still at a fraction of Ethereum, and in their own right they have interesting ecosystems.

And, you know, from a fundamental standpoint, you could, you could look at their earnings profile and say, yeah, these are good.

Yeah. Um, I've got a different one. Or, uh, are you guys big investors in, in Athena?

No, no, I mean, a huge, a huge miss probably. I, I I know, uh, no guy, great guy, like super smart team. They're crushing it. Uh, yeah, that, that thing's been doing pretty well, right?

Because I, I'll just, I'll just say like the thing that we haven't really, we haven't really discussed any of the news this week, but like if I was thinking about the news stories to put together for, for this week's roundup, like, and here, here are the 3 pieces of news I put together. Bullish raises one of— so okay, so Bullish did this IPO. A billion dollars of the IPO proceeds came in stablecoins. The other one was MetaMask just announced their stablecoin, like mUSD.

Oh wow, did that just get announced? I didn't— wow, that's crazy.

Yeah, that got announced. And then Wyoming just became the first state to launch a stablecoin. There's like stablecoin, stablecoin, stablecoin. However, Circle, if you look at the Circle stock, like it's just getting crushed, obviously. Right. So look at, look at the chart of— look at the chart of Circle. So Circle's kind of coming back to reality, but I still think people want to express a long stablecoin trade. So, and look, we do these— like, we've got financial disclosures. Like, it's one of the— I own 8 coins right now. It's one of the 8 things I own is Athena. Um, just because I like— I just think people want to long the stablecoin. Uh, long stablecoins, they don't really know how to do it. and it was Circle, but then Circle got overvalued.

Yeah, by the way, I think this is interesting. Like, the left curve might be, um, Athena's gonna trade like Circle. Uh, the right curve might be— if the bull case, I think, for Athena is that if people understand that as rates come down, Circle actually takes a really big hit, Athena benefits from that. If you believe the market rips, right? Athena's sort of— I think that's like the uber— I've talked to like Guy about it, which is like Clearly people want to go long stablecoins. It's all in the limelight, it's all being discussed. But I— there could be a version of this world where the stablecoin thesis, people sour on it if people lose a lot of money on Circle. If rate is— and you could envision like if rates go down, for every— I think Omar from Dragonfly had a good like analysis around this— for like every 25 bps, um, rate cut the impact to Circle's earnings is pretty dramatic. And so like extend that to, uh, you know, 2 to 3 quarters from now, we're in a different rate environment. What are Circle earnings like? Maybe they vastly underperform unless you believe that like the market cap of USDC goes through the roof, which again, you don't really kind of like have reasons to believe that because there's everyone under the moon is kind of launching their own stable. Um, and you know, Tether hired Bo Hinds. I mean, there's just like a couple of reasons why I think like USDC's market share actually is the one that degrades the most. Um, and if Circle underperforms vastly, people may not want to long stablecoins.

Yeah. Now the counter to this is that everything that we're talking about with leverage, it could— Athena could be— could get whacked there. And like, like one thing I saw is So Athena had previously said that Athena should limit its initial allocation of stablecoin backing to AAVE to at most 10%. And that was the on-chain vote, basically. And now it's at 25%. There's currently $2.7 billion in AAVE of USDC and USDT allocations. I actually think it's the— I think Athena right now is the largest lender of both USDC and USDT. To AAVE, and it seems, it seems like they're kind of cranking up the risk parameters at Athena. So, and again, a lot of respect for Guy and Athena, and I obviously own the coin and stuff like that, but that, that would be like, that'd maybe be the counter to this trade.

Yeah, I'm curious why that proposal, like, is it like a diversity thing? Because like, as far as like a, you know, battle-hardened Lindy smart contract goes, I mean, AAVE, would you want to go to AAVE and then do the do like the second money or the third or the like, Morpho is still great, whatever. But after that, like, you know, kind of falls off. So I don't know like what the purpose of that was. Like, I don't know, Athena having this much NAV doesn't really ring alarm bells to me personally.

Yeah, yeah.

But back to, you know, back to Santi's— I actually think what you brought up on the whole, you know, basis point versus like the basis is quite fascinating as far as like the revenue divergence goes. It made me think of point, how low would rates have to go for Circle to actually consider basis trading? Like 1% is probably still good, maybe like 50 bps, 25 bps. If they go negative, hypothetically, like Germany, then I get— you gotta— or something. I don't know.

Yeah.

Yeah. I mean, again, stuff that I don't necessarily feel compelled to own. Again, in the public markets, Would you rather own a DAT, Circle, Coinbase, Robinhood, or something else? But like, I feel like crypto exposure kind of boils down to that. Maybe bullish, but in that, in that bucket, Yano, what are you buying? What are you selling?

What's your— what's your— give me the bucket again.

Um, Coinbase, Circle, Robinhood. I'll kind of keep it at that.

I mean, you, you know, you know, I'm buying. I mean, it's probably—

or like Kraken, Kraken primary or secondary, $50 million.

For me, it's— for me, it's Robinhood coin. For me, it's Robinhood, Coinbase, and I mean, and, and nothing else, I'd say. Like, I don't think you need to buy another— oh, and then, and I wouldn't— I don't own any Circle. Yeah, um, I wouldn't buy another crypto exchange because I would just buy Coinbase. And then I think Robinhood is a better buy right now because I do think the crypto market feels a little frothy, and like crypto or Coinbase stock stock could get whacked like Bitcoin. Robinhood will also get whacked, but maybe not as much, not as correlated.

Like, like, Robinhood has different other business models, right? And so it's a, it's a, it's a bet on crypto, but they have a bigger funnel to acquire more customers and serve them like traditional stocks or whatever. Uh, what about a Kraken primary, i.e., secondary, $15 billion?

$50?

Oh man, $15.

Oh, $15. Oh, sorry, because that's what they're raising.

That's what they're raising. That's what they're raising now.

Like, would you buy and would be one to hold it, or would you go and just hold— prefer to hold liquid coin?

Or is this for Yano or for me? I can answer both.

Both.

Um, well, to, to answer your first question, just to repeat it, like, a big huge disclaimer here: I own a lot of HOOD. I think HOOD is the clear number one of the, of that basket because, yeah, the pace at which they've been saying what they're gonna do and then actually executing on it over the last last 4 to 6 earnings calls has been insane. They're like, we're going to do this, and then they're doing it.

We're going to do this.

We're going to do it. The user base, the growth. It's a good product. The UX is super slick. Everything about it, like transferring stocks and IRA product, card, all of it.

Oh, fellow, fellow Hood pumper. We need—

Yeah, it's just an incredible company. And I think they're just a lot cleaner and tighter than something like Coinbase, which is like their messaging. You know, there's two instances of it. There's Prime, there's normal. And then it's like, like, you know, they're really jamming, you know, Base down, you know, come to Base, come to Base. They renamed the Coinbase wallet Base. I'm like, where the heck is this on my phone? Like, can you— the apps are getting renamed. And it's like Aerodrome, right, has now got integrated into Coinbase. And that was actually— it didn't really— that was like the top of its price at the time, right? It didn't have that second leg up from there. I think Kraken, given how bullish has gone and like, you know, Figma and Circle and all this kind of stuff, I don't think the juice is out of that just yet. I mean, if you look, you can get free IPO shares and whatnot, and they have a lockup, right, for 6 months? They have a lockup if you do 90 days or 180 days. I, I don't want to quote it. Maybe it's 180, but that's if you buy secondaries. Now, if you can get the allocation into the IPO, you don't have a lockup. But then of course, if you sell it, you know, your brokerage might be like, you're banned from doing IPOs for 60 days or something, um, especially if you do it the same day. So I don't know, I think from, from that perspective, it's pretty But Kraken's solid, you know, long term. I think that they have a good product. Yeah. So probably works if you get 15. It's a good entry for sure. NFA. NFA. Also, I don't own any Kraken, so.

I got to take us in. I got to jump in a sec for 1:30. So I'm going to take us into content recommendations. But before I do that, I'm going to round this out with a chart I just saw, which is Bitcoin seasonality. So this is Ryan Rasmussen, who's the head of research at Bitwise. This is Bitcoin seasonality average monthly performance, which is just a good reminder that even though we're talking about top, top, top, I actually personally— I know you guys have been talking a lot because I've been asking the questions, but I don't think we're at a top. I think the market's pretty frothy, but I don't think we're inning 9 of 9 innings. I think it's maybe inning 7 or something like that. And I think what's happening right now is we've just got— like, I think the market would have been extremely slow this August. August and into September if the ETH DApps hadn't happened. If Tom Lee didn't exist, it would have been an extremely slow August. And you can see this in this chart, like August and September are just always slow. I think we'll have a great October and a great November. I think the market's frothy, but I don't think the cycle has topped yet. So, that's my closing thought. Santi, Ro, we always do content of the week. Any content recommendations? Santi, you want to go first?

Well, I gave one earlier today. People should go read Howard Marks' investor letters. Not just the one that he publishes. He has a collection of letters that are free. You can also buy his book. I think it's The Most Important Thing. It's really good content. So I would just encourage people to go read that.

Yeah. Do you guys— it's always crypto content?

Can I give one that's not crypto?

For no crypto content. The only crypto content people should be listening to is this one.

Yeah, yeah, I'll give, um, I'll give the crypto one and then maybe like a fun non-crypto one because I've been enjoying it. But, um, I don't know, I've been looking at now with like kind of piggybacking off the Hood discussion, like I've been thinking a little bit more about like tokenized, um, stocks and equities. And, and as a disclaimer too, I'm not an investor in Xstocks, but Solana on their official website put out like a blog about tokenizing equities on Solana. About XDOX specifically. Now, I don't know if XDOX is necessarily the one to like win this game or whatnot, but I do think this is an area that will probably grow, like tokenized kind of equities. And this is like a good intro, like case study, and it has some, I think, links you could sort of, um, piggyback off of and go read more about it. So I thought that was interesting. It's a sector I'm kind of looking out for, um, still a lot of questions in it. But then separately, I've been reading, uh, I just finished the third book of The Red Rising trilogy, and I'm starting the fourth one now. Incredible, incredible science fiction. If you like science fiction, go read that.

Super good.

I was like mind-blown because I've been reading a bunch of— I try to read one fiction, one nonfiction at all times to kind of mix it up. And of all the nonfiction books I've read this year, it blew it out of the water.

So, uh, yeah, or of all the fiction books, I, I have a, I have a fiction recommendation which is a book called Replay, which is, um, I'm only, I'm only 4 chapters in. It might be my book of the year so far. It's this, it's about this, uh 45-year-old guy who dies of a heart attack in 1988, and he wakes up in 1963 in his 18-year-old body. And he's actually a student at Emory, which is where I went. And he actually is in the— so it's like, if you went to Emory, you'll like it a lot. But if you like sci-fi and like, it's a very kind of makes you reflect on life and stuff like that. He basically relives his life with his all of his memories intact. But then he— I will actually, I won't, that's, I won't give away spoilers, but, um, uh, he, yeah, he can't prevent his death, so he kind of just is just living out his life and with all of his memories intact. So it makes him realize like all the time that he should have spent with his parents and his, his college girlfriend and, you know, his relationships and friends and all that kind of stuff. So it's a good, it's a good, uh, sci-fi fiction but also kind of reflective.

Perspective book.

I'm just going to say, well, have you read, uh, the latest— or I think Neal Stephenson's books, but I think he came out or is coming out with a new one called, uh, Polostan. Polostan.

I haven't. I don't know, you know, if you have.

No, Polostan, no, I don't know. Yeah, yeah.

I think, I mean, obviously Snow Crash. People like— if you like—

oh, he's a Snow Crash guy.

Is he a Snow Crash guy? Yeah, he's super famous. Like, people love him. Uh, but yeah, Snow Crash is kind of his most, um, known one.

But yeah, that's where the meme "you will eat the bugs" came from, I think.

Exactly. Cool. Ro, thanks for joining us. Santi, good to see you. Thanks everybody for listening. Uh, I hope you guys enjoyed the live stream. And we will on Monday— I think the episode on Monday is with, um, just recorded an episode with Kraken CEO. So it's all about, um, uh, so we've had Dave Ripley, who's the co-CEO And this is with Kraken's other CEO. And it was a really good episode. It was Arjun Sethi, who he also founded Tribe Capital, but is really, really good look into what's going to come for Kraken, their IPO, acquisitions, all that kind of good stuff.

Yeah.

I'm also excited for the episode we're recording tomorrow, which I don't know if we can announce or not, but yeah, Hester Pierce.

Hester Pierce. Yeah. We've got both Hester Pierce and then the, the other, the lead of the crypto task force at the SEC. So we are going, uh, very deep into what is coming from the SEC. Awesome.

That's right.

Yeah.

Thanks so much everyone for listening. Have a great weekend.

All right folks, thanks guys.

Take it easy.