State of The Market, Polymarket Insider Trading & a16z Raising $2B | Weekly Roundup

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.

Hello. Hello. We're live, Rob. Bright and early out where you are. You're eating a What I thought was a McDonald's sandwich, you said it was a little bit healthier than that, was a Starbucks.

So do you think I would put McDonald's in this, this temple that I have here? Come on. Starbucks only.

Are you trying to live forever, Rob?

Uh, I mean, we're all going to live forever in the age of like, you know, agentic economies, right? We're going to have just breakthroughs. Like you and I are going to be, you know, 150. We're going to still be doing this podcast. People will still be listening to us.

Well, we could definitely get to 150. I don't know if people are going to still want to listen to our podcast. But yeah, there's some— I mean, I studied— well, I worked at this aging company called Elysium Health. And like, I saw some stuff in the timeline. David Sinclair, who's like this longevity researcher, a lot of the stuff that Bryan Johnson references, he's making some pretty bold claims around like reversing aging and whatnot. So I feel like it's that time we're going to— we have to get into state of the market. But beyond crypto, I think it's that time where like just anything can stick, you know, 'cause like the world's moving so fast. So any, this is a time where you can make the wildest predictions and people will listen probably, but more so than any other time, right?

I saw David Sinclair speak there. I went to this like event back in October in Italy that was just, it was like for a big asset manager and it was just like 60, 80 of like their biggest LPs and then, you You know, they brought me and Palo in to talk about crypto and then there were some other people talking about other stuff. It was mostly a non-crypto event. And David Sinclair was one of the speakers. And like, it was like wild. Like he thinks that, like, you know, if you believe his vision of the future, that's going to be like utopia. It's going to be, we're going to be like the most like just healthiest, like best looking, we're going to live forever, like wild stuff. So, um, I think I came away from that though, that if I'm going to live forever, I really need to make more money. So I had these markets need to go better. So that's what I need. Yeah.

Well, I mean, I, the question is, do you really want to live forever? Um, because I feel like there is some meaning in life if you'd, you know, if there's finality to it, but also healthspan versus lifespan, you know, do you really want to live 150? Like, what is those last 30 years going to look like? Cause you know, what is crazy though is like how well you feel. Yeah.

Yeah.

Plus like the, the, I mean, this is not a podcast about studying longevity, but what, and what that means, but like the strain it has on infrastructure, on health healthcare system. Like, you know that like the last mile spent, like the, the last few years of your life, it's like a disproportionate share in terms of medical spend, uh, and it's crazy, crazy, crazy. It's like, yeah, it's like most of the medical, like vast, vast— it's most of it. Yeah.

Anywho, um, I know you're a healthy guy, right? The first time I was at your apartment, you know, one of the first things you showed me was your ice plunge. So, you know, yes, I, I I know you're working towards that, that future.

So, well, trying to be healthy. Um, let's talk about the markets. What's caught your attention? I mean, we'll give it no more than 5 minutes where we just spend a minute on the markets and then we'll move on because there's some interesting news happening this week.

Well, you know, Bitcoin's back up to $72,000, $73,000 today, so we've got, uh, a little bit of a, a little bit of a rally. I think, um, all the alts rallied a little bit. There's You know, I think some optimism that this Iran conflict will be short and not long. It's unclear. But over the weekend, it was, you know, I think, you know, after the first day, there was the administration was out saying, listen, this will be pretty short. We killed a lot of the leadership. You know, going into the second and third day, I think you started to see some news that maybe that wasn't necessarily going to be true. I think the president himself said this will take at least 4 weeks. on Sunday. And now, you know, I think we're— the market's kind of settling in and seems to be thinking that maybe this won't be a particularly long conflict, which is good. And then more broadly, um, we saw, I think, over a billion dollars of, uh, of ETF inflows in Bitcoin, uh, this week. It, you know, even with all of the volatility in the equity markets earlier this week, the Bitcoin kind of stayed range-bound, which suggests to you they're like, there's not a lot of structural sellers at the moment. And so, um, I don't know, it feels like a very good setup for markets to, you know, do better in the, um, in the medium term. I think I was, I was talking to one of the big derivatives traders and they were saying that the, uh, you know, if you were looking at the, um, the open interest and a lot of the options volume, like, you could tell the market was like bearish, uh, or, or at least they were predicting downside in the near term. But over the long term, uh, for the rest of the year, uh, the market was quite bullish. So, you know, that's all, that's all positive. Uh, you know, you saw, uh, the— I think it was NYSE, uh, invested in OKX this morning, right? They want to provide more, you know, spot crypto and spot crypto, uh, asset pricing, and they want to use OKX as the oracle. So that's like pretty interesting, right? So like clearly, like, you know, a lot of these big market, uh, participants continue to see crypto as like important for, you know, what they want to do in the future. And then, you know, I think on the Iranian conflict stuff, right, you saw Hyperliquid and Polymarket have huge weekends and trading volume over the weekend while the rest of the markets are down, right? And that talks to you again about like why these 24/7, you know, permissionless markets are quite important for price discovery. So I think it's all relatively positive at a time when people are they've been quite negative for a period of weeks, if not months.

Yeah. So I was over the weekend, I think I tweeted about this, but that's where, so I was sitting down with the macro guy, we were talking about Iran and it just happened. It was a topic around the conversation. It was a lunch. They're all speculating, right? They're all looking at their portfolios. They're all thinking about, okay, how do we position ourselves like come Monday? And they're just quiet, just immediately go to Hyperliquid and take a look at— and the market was up like 5%, um, and it's now sitting at like $84. Um, that's when you actually truly now begin to understand.

This is oil you're talking about?

Yeah, Brent oil. Um, they have two markets, right? Um, but nonetheless, I mean, that's where like it makes you wonder, like, it's gonna look very nonsensical in the next like 5 years. And you look back and like, why wasn't finance 24/7, like 365? And you know, people would say, look, you can hedge it on the margin, like it's really not closed. But, um, and the criticisms maybe of Hyperliquid, it's like, hey, there's not that much volume here. So like if you're a large institution, you can't really hedge your book or whatnot. But you start seeing glimpses of like how, um, how this infrastructure that has been built initially for just tokens and digital assets is now really going to be useful for other stuff. And this weekend, unfortunate as it was, it just gave you a glimpse into the future. For me, seeing the reaction of these people is the— I've only really felt that aha moment when I was describing stablecoins back in the day to someone and they really didn't understand DeFi. This was like 2020. DeFi wasn't even really a term, but you had some stablecoins and I went back and I told someone, look, go and use a stablecoin and then come back to me. And they were raving about it. They're like, gosh, wire transfers suck. And look, I think I'm very excited about this. I think like maybe, I know you're close in Hyperliquid and Osteum and some other protocols that are trying to do this. Like what is the, A, what is your react, like how you think about tokenized like commodities and equities? We've talked about them before in the pod, right? Some of these things haven't gotten as much traction as others, but give us your view in terms of where are we in the build-out of this? Like, how are— like, are we ready to truly be 24/7, 365? And or what are the things that you think still need to be built out to, to go in that direction fully?

Yeah, so we're definitely still not ready for it from a large infrastructure standpoint, but You know, I think I've talked about this a little bit in the past, but one of the major issues right now is simply like the accounting systems at the firms, right? So when it comes to perps, perps are a little bit easier, these derivative projects, uh, products, because, you know, these are synthetic exposure to these things, right? Um, and synthetic exposure, you don't necessarily— there's still, you know, accounting concerns, there's still like back office concerns, But the, um, your understanding, like, a derivative contract and being able to do, like, the appropriate accounting for that and collateral management for that is actually significantly easier than if you're doing spot, uh, in these, in these commodities and, and in anything that's, um, you know, in equities, etc. The structural issues for, like, the HIP3 markets, they still exist very clearly. Like, right now they're trying to figure out Well, like, how much risk can we actually bring on? There's— I think the HIP3 markets are capped at a— so you can't move— the price can't move more than 3x during, like, uh, like, on the 8-hour trailing, uh, trailing price action. Um, there's a— and if it has, like, um— and that's if it's kind of like a native market. If it has a, you know, oracle to, like, a centralized exchange, it's something like, um, I think it's like 1 to 1.5x, uh, that can't— it can't move. There's— because of this kind of lagging oracle price, there's a, um, it's not necessarily like directly in line with like real price discovery, and liquidity is, you know, quite low. I think, um, oil, you know, there's a lot of people talking about like, okay, well, like, you want to be able to trade oil on perps over the weekend, but, uh, there's actually, uh, Hyperligo keeps putting open interest caps on it because they're worried about their these kind of like really big movements when, you know, the market reopens. And so I think the, uh, open interest on oil got capped somewhere around $20 million over the weekend. And there's a lot of this— a lot— all of this is really about risk, right? Is like, how much risk can you take on at a time when you have a price that is supposed to be tracking something that is off-chain and is not necessarily a native market, right? And so I, I think the there's clearly a lot of work that continues to be done there. And while I believe Hyperliquid is a big part of that story, it's not a, a place where, you know, call it the large institutions who trade Brent can actually go and hedge their risk. Right. And I think this is going to, this is going to continue to be true as we have this dislocation between the really big deep liquid markets that exist in off-chain and then, and then things like Hyperliquid. Now, I think those are going to get solved because I think more and more assets are going to get tokenized, more and more assets are going to move on these other markets. So whether it's at NYSE or CME or, you know, etc., are going to move towards on-chain rails and are going to move towards 24/7. And then as you have this becoming more normal that, you know, market makers and like broader market participants are interacting with these types of products, uh, 24/7 or 24/5, that makes it easier for also products like HyperLiquid, which are better experiences for a lot of traders, maybe not super sophisticated institutional, but for retail to also be able to take on more risk and be able to allow for more risk over those periods of times. It's easier, I think, in the commodities markets than the FX markets because these are a dirty hedge, easier to move with the sun. Equities markets, I think, are probably the furthest away from having this really deep 24/7 liquidity, but maybe we will continue to get a little bit of 24/5, which we have already with Citadel and others on Robinhood. Uh, not, not quite 24/5, but close, um, who are willing to kind of warehouse some risk overnight.

Yeah. So what we're seeing here is, uh, just to put some stuff into perspective, you have hyper liquid markets, gold. These are commodities. Gold by far has the highest open interest at 163 million, uh, and pretty healthy volume because what you want to look at volume and open interest in that relationship. And then you have silver having way more volume actually than gold. Less open interest. And then oil, to your point, there's two markets. One oil, then Brent oil has, I don't know, you know, $8 million of open interest and $4 million of volume. And then, you know, Brent oil has $9 million of volume and $3 million of open— into $4 million of open interest. Like, that's for, for any real commodities trader like Glencore, or he looks at that and says this is embryonic at best. Like this is a proof of concept. You know, to put, I was just kind of looking at to give folks some perspective, you know, that's, you know, the entire tokenized stock market is about $800 million to $1.6 billion. Like the NYSE does that in a single session, like before lunch.

So yeah, it's, I mean, listen, it's a great embryonic moment, right? Like it's exciting and I don't want to, you know, kind of underplay like what is happening here. Uh, I think it's, it's, you know, incredible to see like so much interest as well. I mean, he's on Bloomberg and a bunch of others talk about it. Uh, but it is very clear that there is a lot of structural issues about how to increase risk parameters, uh, to be able to bring on people over the weekend, right? You— there's, uh, I, I was chatting about this with, with somebody else, but the, uh you know, in, there's all these working sessions that happen at the CFTC. So I sit at, on the CFTC Digital Asset Market Subcommittee, and a lot of the conversation there over the last year had been around, okay, well, like, how do we think about tokenized collateral relative to other types of, you know, wrappers? Because tokenized collateral is essentially just wrappers. And, you know, can we use that in, you know, call it for prime brokers at, you know, maybe clearinghouses. And then, but then if we do that, can we enable, call it, you know, 24/7 trading? Can we have more like, you know, tokenized trading? What's the infrastructure that's needed? And a lot of these big trading shops were saying, listen, we think this is coming, but we, uh, we're not set up yet, or we think we will be set up soon to be able to plug in our current systems to, uh, what is happening here. Those, the market makers are furthest along, and I think they're there now, but they've been working on this for years. A lot of the takers, like, you know, Balyasny, or, you know, not to call them out specifically, but any of these types of guys that look like that, right? Like you go and you ask them, you know, okay, well, you want to do a trade on a weekend? And they'll say, well, like, we can't because like we keyed something in 20 years ago within our trade management system and we don't, nobody knows Cobalt here anymore. And like, we can't figure out how to, like, what type of tech that sits on top of that. So we don't know how to change it, right? And this actually exists at a lot of the hedge funds. Today. And so there's a lot of work that needs to continue to be done, and people are trying to modernize and digitize, especially in the age of AI. But it continues to be a work in progress.

Yeah. I mean, you made a pretty bold prediction on stablecoins. Is there an equivalent prediction here around volume? I think tokenized gold is the most advanced market. And it's like 0.002% of, you know, real like gold futures and whatnot. I think gold's at $3 billion, like COMEX gold futures trade $50 to $100 billion a day, physical gold market does $130 billion. Um, so what's your outlook and what gets most traction first? Is it commodities? Is it stocks? And, and is it mostly retail or Or what, what is it that really gets more adoption? And, and then second to that, like, what informs your investment thesis? Like, is it just hype? Is it ostium type, or is it just more something else?

Yeah, so the, so I think over the weekend Hyperliquid did like $5, $6 billion on each day, uh, over the weekend in total, about 10 to 12% of that was in these like, you know, real-world asset markets. Uh, that was actually— it had been higher percentage, uh, earlier in the, the month when I think silver, it really ran up, uh, and we had kind of that commodity top, uh, that, that existed. The— that $5-6 billion for hyper liquid was, was very high for a weekend. So normally the weekends are, you know, call it like $1-2 billion because, you know, the markets are a lot, a lot more dead. And then, then they go, you know, $5 to $7 billion during, during the weekdays have been up to $10, you know, and maybe more certain days where there's been a lot of interest. Uh, where we've seen, you know, the ability to increase these risk caps to get, uh, you know, market makers and deep enough liquidity today, the easiest place to do that is in commodities right now, uh, and FX, right? So those markets are open much longer, more globally, and you can do, um, more hedging, you know, much, uh, in different markets and kind of move with the sun. Um, over like a— you can have broader coverage. Uh, stocks is the toughest market right now. And so that's why we've seen, to your point on Hyperliquid, the open interest caps being the highest on the commodity side, gold specifically, because that's such a deep, uh, deep market. Um, and FX, I think the— that'll continue to be true. These are still definitely very much like retail prosumer markets. And then maybe like, you know, what in crypto we might call institutional money, but in what outside of crypto we would not call, we would call prosumer money, right? And that's the people who are primarily trading these things right now. But listen, there's a lot of interest from a lot of the institutions. I have heard directly from, you know, big exchanges, you know, they're connecting with Hyperliquid. They want to learn more about the infrastructure. They're thinking about, you know, how this works. And so I believe that we will see whether it is Hyperliquid or, you know, a current project out there, whether it is, call it a, you know, new product that is, no, call it more form fit for, you know, NYSE and NASDAQ. We will see more and more of this type of trading happen on-chain. I think spot is going to be tough in the near term. I think spot equity is the furthest away from getting adopted.

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Yeah, yeah. Speaking about the weekend, obviously another market that saw a lot of activity was Polymarket. You know, again, there was, obviously the insider trading allegations come out again, just to give people some context, like, this isn't like one suspicious trade. It's pretty documented, like, during the Venezuela Maduro capture, like someone bet $32K that turned into $400K, like hours before Trump announced it. On the Iran strikes, I think there was like 6 brand new wallets funded within 24 hours. Of Operation Epic Fury. Uh, that netted them $1.2 million combined. Uh, there's been a couple cases of like people getting, um, going to jail, I think. Or, or I think there was an IDF, like an Israeli Defense Force, um, reserve member that got indicted in Israel for using classified strike plans to bet on Polymarket. Uh, that was back in June 2025 conflict. Um, there was another account called Alpha Raccoon he hit 22 out of 23 predictions correctly. He made like a million bucks in 24 hours. Uh, there's now insider trading on, on, um, Axiom that is going on. Like, well, actually a different story than the different story, but I think like they were like front running, right? Their customers basically, but on the Polymarket stuff, there's, I think, two schools of thought. One that says, look, it's insider trading and it's unfair. You shouldn't be doing it and clamp down on it. There's another more controversial stance that says, look, there is going to be insider trading on these markets and that is a good thing. Like you're getting and converging to the truth faster. Of course, people then have issues with that because it's like you're profiting, someone else is losing because you have an edge. But having a prediction market incentivizes these insiders to divulge this information. And so I guess one, you know, more of a philosophical stance, I'd be curious, like, where do you stand in that divide?

Yeah, I mean, I'll put the Axim stuff aside. The Axim stuff was clearly just crime. Uh, and like, those people should not have, not have been doing what they were doing. They were accessing, uh, user data they should not have been accessing. And they were, um, you know, trading on people's, uh, like wallet information, uh, and front-running, you know, call it the, the customers. So, um, that's obviously an obvious issue. On the prediction market side and what you've seen come out of, out of Kalshi and, and Polymarket, um, you know, it's nuanced, right? Because it really depends on the market. When you think about, you know, these are CFTC regulated. So for the US business for Polymarket and for the Kalshi US business is their CFTC regulated, right? And, uh, and then there's the Polymarket International business, which is more the protocol, and, um, that you can, you can access, uh, you know, permissionlessly. I mean, the same as Hyperliquid, right? Like, the Hyperliquid had had, you know, quote-unquote insider trading allegations for the last year as well. Uh, that hasn't come to the forefront, you know, as, um, aggressively recently because, you know, it— there's been the conversation around the prediction markets. But the same exact conversation was happening, you know, when you saw big trades before announcements coming out of the administration on Hyperliquid in, in early last year. And, um, that is a— there's two really main points around that. So one is like, okay, well, what does this mean for permissionless finance, right? What does it mean for Hyperliquid? What does it mean for, um, any other, uh, and Polymarket, anybody else who has these, you know, call it, you know, permissionless protocols that they can access? Do we believe that there is a need for, you know, permissionless protocols to be able to police insider trading. And if we believe that's true, then how do we do that, right? And this is something that, you know, the CLARITY Act is trying to solve for a little bit around, okay, well, what requirement do these permissionless protocols have in terms of KYC? And I think you and I would agree that if you're going to do— if these are things are just law, or these are just code, right? And code is law, right? In some sense. And code is— and there's— that's a very— spectrum in a very nuanced— how do we think through what requirement these have for KYC and for transaction monitoring and for, um, etc. So that's a very tough conversation, number one, and I think that I'll put that to a side. Then you're— there's the next question you asked me, which is, okay, well, you know, what is insider trading on some of these markets? And insider trading is very clearly defined by the CFTC, uh, and, and the SEC, but these are, these are commodity markets. And, uh, and the, and the CFTC You— it really depends on what requirement do I have to an employer or to a centralized entity to not divulge information. But a lot of commodities markets and a lot of, uh, these really— a lot of these derivative markets actually allow for some form of insider trading outside of, uh, in— with, like, within the CFTC, right? So it is— you're— if you're a somebody who buys and sells land there is actually explicit ways of which you can trade on insider information. That's okay, right? This is true of commodity hedging, this is true of a lot of these different markets, right? And so, um, there's— but this is becoming a lot more, I think, opaque in a world where there is like a market for everything. And so like, what is that spectrum? I think very clearly there's the one side of the spectrum which is, okay, well, uh, I, you know, I'm gonna go trade on whether or not somebody is, uh, whether or not Bad Bunny is going to perform, uh, at the halftime show of the Super Bowl. Very clearly you have, uh, that's inside information that you have to a company, and inside and within that company, that information you're divulging to go and access, uh, and to, to make money, right? Also the same thing with any of the equity-linked markets, any of the earnings-linked markets, etc. These are— this is very obvious. When it comes to anything around like rates or derivatives on commodities, like, it's actually much more less less clear that there is actual insider trading that, um, based on current law, right? Or whether or not there would actually be any insiders, um, who would not be allowed to trade that, right? We see it all the time with rates, uh, right now. And so that's, that's all, that's a very murky side. And then there's the stuff that we have now around like, okay, well, the, the, you know, maybe people from the administration that are trading, uh, these things. I, I actually very clear, like you asked, like was I'd— I'm on moralistically, very clear to me that like that should not happen in the administration. I think that might actually require an act of Congress though. Like, I actually think under like the letter of the law today, uh, they're— they may be allowed to do that. They're not allowed to trade a, um—

well, this— it's interesting, right? Because there was, uh, I think it was Republican Richie Torres introduced the Public Integrity Financial Prediction Markets Act in 2026.

And specifically to get in front of this. Yeah, to prevent.

Yeah, exactly. And I think it was, uh, in the, in the speech, I think Trump called out specifically Nancy Pelosi. Um, and, and, and I think, look, it's, it's one of those things that it's, uh, uh, this would prohibit federal officials, political people, anyone basically in the government to trade on prediction markets tied to government policy. I think it's one of those things that like, in my view, it's at a high level, these markets reveal truth and that's a great thing. They are news and they're a signal. And I think it's fairly clear in how the CFTC treats it, which is like, if you're a government official, you have to KYC. And if you have KYC and you're putting money on the line on something that is confident, like this is national security information. And, and if you're betting whatever the amount, that obviously has implications for national security and divulging information to enemies of the state and potentially compromising a very complex coordinated operation. And obviously that, that is, I can understand very clearly.

So I think it's going to be, I think there's one point that's like very, uh, important to make there though, which is the, uh, I think we can all agree that like that, that you're, you're you're right, right? And we need to get in front of people in the administration trading on these, these protocols. But the, the nuance around how do we do KYC at Hyperliquid or at a, uh, on the PolyMarket protocol itself, right? And what they're required to do has a lot of implications for DeFi, right?

Correct. If you're— if you— well, you always identify to a wallet. I mean, there's, there's always an on-ramp and off-ramp event. I've always felt it is at that particular checkpoint that you identify who controls that wallet. And we have the workflows. I mean, anyone that has interacted with Coinbase, for instance, Coinbase knows. Zach does a wonderful investigative—

But Coinbase isn't going to share your personal information with Hyperliquid.

I understand that, but you always, if you're subpoenaed, you can always trace back who owns that wallet. So I'm saying like, I don't think it's Hyperliquid or Polymarkets at the protocol level. They should be doing this. Now, if they, if they also host an interface, then I guess in that stance, I don't know how I feel like if funds are already now, if funds are already onboard in the financial system, you've KYC'd that person. If they already exist in DeFi, I don't think it's incumbent like a Hyperliquid or Polymarkets to like verify. It's more like, um, one thing I will say, like, I think a lot of the criticisms, like, the CFTC has like 1/8 the staff of the SEC to go after these things, which is a concern, right? Um, I don't think there's been a single enforcement action in the US even though there's been like, you know, these allegations.

Um, so it is, there is work being done.

Like, I, I think people are like, there's work being done, but like, these staffs, these agencies are understaffed. What I'm saying is, I think, and, and And this is something that I think it will serve us well as an industry to self-police. And if there is suspicion of some sort of nefarious activity or illegal activity, flag it. And I think the industry's been pretty good at that. Like when there's like hacks and there's stuff like that, you know, people that are not cooperating get called out publicly. And you know, that I guess is, um, as an industry, I think we've gotten much better at that. But like if, if you're. If you're Polymarket and you register in your systems a spike in an activity like happened over the weekend, and you know the IP address or whatever, then, and you know those funds were sent to an exchange to off-ramp, well, notify the exchange. The exchange keeps a record of that. I think it was Kobe identified this individual within Coinbase that was trading ahead of exchange listings. Obviously insider information and expose them because he looked at on-chain what was happening. And so, you know, but these are, these are different points, right?

Because like the, the person at Coinbase has— they've signed an agreement with Coinbase that they— this is Coinbase information that they're not allowed— they are violating their agreement with Coinbase.

Yeah, I mean, the same with a government official that is in the Pentagon that has information of classified information that's signed, uh, very much—

it's actually a bit of a nuance, right? Like the reason that, that Trump calls out Nancy Pelosi, right, and you see this all the time— is that every single one of these people in Congress right now, that when they sit on these committees and then all of a sudden they hear in this committee that something's going to happen, and then they go and they trade, uh, their equities, they sell, they buy, they whatever. Like, this has been a conversation for years. This is not a Polymarket or Hyperliquid-specific point. This is a, like, how do we expect our elected officials and our government officials to act? And this is why the, the Richie Torres put the put that piece of legislation out there. Right.

What I will say is that these are event contracts, right? And they're very binary. And so that's where I think it's just more, you know, if Nancy Pelosi goes and, you know, full ports, you know, defense and aerospace companies because she learned that, you know, there's war coming, then, you know, I understand that. And I think that should be, you know, that's insider information. She shouldn't be allowed to trade.

Um, I think we do allow it right now.

That's the point, which is allowed right now.

Yeah.

Um, everyone's following the Nancy Tracker, and she's phenomenal. She's a better trader than she is a politician, um, and is outperforming pretty much everyone out there. Um, but yeah, I think with these event things, it is, it is, I think it's going to be nuanced. I don't think it's a clear-cut thing. It's like, it depends on the market. Depends on the individual. But if you're, if you or Rob have a set of drones and, or you're tracking DoorDash activity of like Pizza Huts near the Pentagon and those things spike over the weekend and you go out and basically trade on every market that is tied to the US, you know, invading a country, that's not insider trading. That's just you know, you have an edge. You have an edge. You, the same way that like hedge funds like have drones hovering over Walmart and Target and buy for that data. But if you're a politician or you're someone in the CIA or whatever and have access to classified information and you move the market, in a worst case, that gives your enemy insight into what's happening. Like, that's, that, that I think we can all agree is probably like that. Not probably, that should definitely be clamped down on.

One thing I did, um, I was on— I was in DC a couple of weeks ago. We had that, um, that episode while I was there, and I was talking to one of the, uh, I was talking to one member of Congress who, uh, was saying that they, they, um, yeah, so every time a, a member of Congress does a trade or swap, a derivative, you know, etc., they have to, uh, go and they have to fill out form and says that they did this. So this is a part of the reason that we know that, you know, a lot of these members of politicians are great traders is because they actually go and they fill out these forms every time they do it, right? And, uh, this person, member of Congress, was saying that he hasn't seen a single one of these forms filled out yet for an event contract, right? Which is obviously the point being is that some of these people are trading these as derivatives or swaps. And so like there's, there's also an education thing happening here. I think like if you look, if you talk to Kalshi and Polymarket, they're very much in favor of this, like Richie Torres. The piece of legislation that goes out there, and like, I would love to get it passed. But a lot of people, you know, including that these at the exchanges, at everywhere, have been open to trying to restrict government trading of any sort of security asset, etc. But the incentive is not there for the government, right? Like, that has been the problem, right, is how do we get our politicians to agree to that?

Yeah, I mean, this really goes to the heart of the issue, that is there's a interagency turf war happening. The SEC wants to govern this. The CFTC said it wants to govern it. And it's kind of really in no man's land at the moment. I think it will serve us well to just have some sort of resolution. Where I think it's an interesting direction to kind of round out this chapter of discussion is what happens with equity-linked event contracts.

Right. Yeah. I mean, that's clearly— there's no doubt.

Because the NASDAQ, you know, yeah, the NASDAQ just, you know, submitted, I think it was an application to have equity links contracts. In that case, if you have insider information on an equity and you're— you think— this is my opinion— if you're betting on a derivative of an equity and you have insider information, that should be treated no different than if you bought the underlying. In the same way that you can buy options and other derivative contracts to trade on insider information, I candidly don't care if it's under the CFTC or the SEC's purview. It is just, uh, I think it's in that case is where we talk about being nuanced. Equity-linked contracts should be governed differently than geopolitics.

If you buy a call option versus a binary option, it's still— you're buying an option on—

correct. What I'm saying as it relates to prediction markets though, I think that, that is still not clearly defined, but it will, in my opinion, should be treated no different than other contracts out there.

No, but I don't actually agree with that because, uh, under the CFTC guidance, like, it's very clear, like, what they're— that, you know, see, Chairman Selig has been very clear. Prediction markets go underneath the CFTC's regulatory framework. The CFTC has clear insider trading rules on those types of contracts or those types of markets. Like, it's very clear what constitutes insider trading and what doesn't. So like, that's very clear. There's a nuance on the protocol side about how you catch those people and like how we do KYC, AML, But, um, the whether or not this actually constitutes insider trading in those markets, that's not clear. That's not nuanced at all. Like that is, that is very clear on those markets.

So, so just to clarify, cuz it was not clear for me coming in. If you're trading on equity-linked event contracts on Polymarket or Kalshi and you have insider information, there's no ambiguity even though the CFTC governs that.

Yeah. No ambiguity whatsoever.

No ambiguity. You will go to jail if you get caught.

You should. Yeah. Correct. If you get caught, you should.

Or, but the, the, the question is like, if you get caught. The key though is there hasn't been anyone that, you know, not to say that there haven't been cases going on.

These markets have been like, like they've had real liquidity for like 6 months, right? Yeah. I mean, the—

and these cases take a while to— again, we might be seeing, and I think there are some members that have said you should expect to see more enforcement going forward. This is—

these cases, there will be. Absolutely. There— people expect these things to happen very, very quickly. Enforcement typically does not happen very quickly. It's, it's much easier when you already have the robust framework yet. You know, I was at Goldman when, uh, there was a— I think there was an analyst there at the time who, you know, had given some insider information to a friend, and then that friend had told his dad, and his dad bought some call options about an M&A deal, whatever. That's— that case still took 8 months to build because they had to go trace back that he had talked to his friend and friend Not just that, despite the fact that like there's a very robust framework on, you know, seeing these links and these connections between people who trade these things.

Yeah. Yeah, definitely. Um, one of the common questions when I've described prediction markets to someone is the assassination piece. Um, and it's like, hey, what happens if, you know, people are going to be more likely to do certain things? And you're like, well, not really dissimilar from insurance, right? Like there's, there's always a risk. But like kidnapping insurance and some of these things, like, you know, people might be more induced, if you will, to go out and do certain things. But at the end of the day, you know, these are illegal things. And so people should have an understanding of the repercussions.

Assassination markets don't exist on either Cashier or PolyMarkets.

No, no, I understand that.

Yeah.

Not as, but it's like, if you have like an event contract, is it making it that person that has agency over influencing that event? Be more likely to do that because they have a financial outcome on the back of that. And it's just, I'm bringing it here because it's a common argument that gets brought up time and time again by skeptics of these prediction markets. And I think the simple answer is there's a whole insurance market that it hasn't stopped the insurance industry from having, insuring against certain things. If you're insuring a boat, well, clearly someone might be incentivized to burn it and, and get a reward for it. But ultimately, you know, that, that has not—

you could go long oil and have the same exact incentive, right? Because Brent went up from $60 to $84, right? Yeah, like it's the same exact incentive. So it, it's, it's a little bit, um, it lacks, I think, like real forethought when people are like, oh yeah, well, like now this market exists on Polymarket, so like I'm definitely much more incentivized to do this thing than if I was just long Brent, right? Or if I was just short rates or whatever, you know. Um, it doesn't, it doesn't make a ton of, a ton of sense in, in most cases when people talk about it. Now, in these longer tail markets that have very little liquidity, when you're like, oh, like, you know, will, uh, Jason Kelce propose to Taylor Swift? And then somebody like, that's like, of course, like there's different incentives and stuff like that.

So, so maybe, maybe bring that up. Last point on prediction markets. Um, if you are the best friend of the brother of Kelce and you know he's going to propose, you go out and full port the market and, you know, you're— what do you think of that? Illegal? Not illegal?

That's definitely not illegal. You're definitely allowed to do that, right, under any current iteration of the law. Now, that might feel unfair, right? But like, you're— these— any sort of event contract is a transfer of risk. So it's transfer of risk between you and I if we're on the other side of that. If you think that you have knowledge of whether or not Jason Kelce will propose to Taylor Swift, and you're like, it's definitely not happening, and I know Jason and he's definitely going to do it, and— or Travis Kelce, I keep saying Jason, Travis Kelce. This is how much I follow pop culture. I don't even know which Kelce brother it is doing this, but— and I have this issue, no?

Like, if you're— I guess my mental framework, moralistic framework, is if you have influence over an event In the same way that like there's been sports rigs, like sports betting, there's like a whole mafia, I think in Italy, that was like trading and bribing referees. And I do think that if you have undue, and I think undue influence over the outcome of the event, you shouldn't be trading on said event. Trade on everything else, just don't trade on that because that creates unfair markets. And I think that ultimately hurts the overall platform itself. I get that you're trying to surface the truth, but it creates an unfair market experience that I think in the long run— yeah, I know you're discussing that, hey, look, the world's going to know before that, you know, they're going to get engaged and that's a good thing. I think it hurts the other side of the trade that does not have fair, uh, it just feels very unfair. And in that instance, I think you shouldn't be trading in that particular market. As simple as that.

Listen, I, I, um, more realistically, like, like people definitely have that perspective. There are a lot of markets where inside information is a key piece of how these markets are traded, but people having an edge versus another. The idea is that like, you know, these are actually skill games, right? In the same way, like in poker, you can have more information than the next person and it can be very unfair for that person and you can go and win.

Yeah.

But it's a, it's a random game. It's a, it's a game of probabilities that you can't, you can't infl— like you don't have influence over the deck of cards. You can, you can do certain things. You can count cards. You can, you can have an un— like an edge by like seeing, I mean, we should ask Kasih, but like you, you, you can have an edge on how your, opponent, like the other person at the table, like his mannerisms or like his tics or whatever. But like, for instance, a tech contract, Claude 5 released by March 15th, March 31st, or March 30th, super low volume, less than a million aggregate. If you're working at Anthropic and you have knowledge of this, shouldn't be trading on this thing. Simple as that.

If you're—

but, but you're right about Anthropic, right? So like you're, you're, you're conflating two points, right? So like Anthropic.

Well, the distinction you're saying is you've worked at Anthropic, so you have an NDA, you can't divulge information, so you shouldn't be doing that. I get it, I get it, I get it. What is the difference if like, uh, uh, I'm sure, uh, like, uh, you know, Taylor Swift has tight NDAs with her staff.

I mean, theoretically, if there's like— if she has some sort of like obligation to, you know, Taylor Swift or Taylor Swift Inc. or whatever, like there's something there. But like in a, in a, a Uh, like you asked about sports, uh, previously, right? The Congress went and passed a law in the '60s to combat sports bribery and sports fixing because before that they saw sports as, uh, there was a lot, we saw a lot of fixing happening around betting, right?

Because it destroyed the, the purity of the sport, right?

And so Congress went and passed a law to do that, right? There are a lot of markets today where, like, for instance, like land markets or even like real estate sales, right? Um, there we very explicitly define the things that have to be told to the next per— the next buyer. And, uh, there are a lot of things that negatively affect the price of real estate that you do not have to tell the next person, right? And so when you go and trade a market that is, okay, well, the price of land in XYZ, there are a lot of people with inside information that are explicitly doing something that is legal that they know more than the next person, right? And so the question that you're asking is a moralistic one, but then there's also the question about the legal one, and it feels unfair to people, so they get upset about it, that they might be trading against, you know, somebody who has more information. But the reality is all markets are, are about disparate information, right?

I mean, look, I think you're always interacting with imperfect information, and I get your point. If you're gonna go buy land and you're Rob, you come to me and say, listen, man, I I got a great parcel of land you should buy. I'm like, oh shit, I trust Rob. I'm going to go fly to Ohio and I'm going to buy this great parcel of land and it's at a discount. So wow, it's at 20% discount. Anytime I see a discount, I'm saying surely can't be this good. Too good to be true. So I'm going to go and do due diligence. I'm going to go call an appraiser and he's going to go in there and he's going to tell me, hey, look, I kind of get why Rob's going to get rid of this land. It's not because he wants to buy land in Miami, it's because, you know, there's pests here and there's a landfill not too far from here. It smells like shit. You come out and go see it. And, you know, I get it. There's no perfect information in any market. All I'm saying is if you're betting on a market that Elon Musk tweets X amount by March 3rd and you're Elon Musk and you can influence that market, you shouldn't be doing that.

Let me, let me ask you a question. Do you think that people should have the right to trade whatever market they want to trade? Um, and I'm not talking about information, I'm just saying more broadly. And do you think people should take personal responsibility to if they are trading a market of which they do not have perfect information? Right, because this is the, this is the question that I have for people, you, right, is that, uh, people think they have an edge. And a lot of what we've seen— but by the way, a lot of the, the stuff that people think has been insider trading too have not been. So there was like the Nobel Peace Prize. There was a wallet that got created and traded the right person, winner of the Nobel Peace Prize, like a few hours before it actually got announced. Everyone said, hey, that's insider trading. Turns out what actually was true is that you could actually just scrape the metadata of the website for Nobel.

Yeah, the Nobel Peace Prize, the foundation released it.

Yeah, right. And so there's a lot of stuff like that. But I think there's a— If you want to take the other side of a market relative to whether or not Travis Kelce will, uh, will propose to Taylor Swift, like, it strikes me that, you know, anybody should be able to take any bet they want, and there, there shouldn't be some like moralistic hand-wringing around whether or not somebody else has better information than me about that market, right? Because that is just a, a— that is not a market efficiency point, right? With equities it is. With, with with these other, like, but when it comes to these like long tail stuff.

Let me ask you a question. So you're an investor in Polymarket as, you know, I have exposure through it through ParaFi. Great. Okay. We want it to succeed. We want volume. You make money if Polymarket continues to get way more volume, right? If they assume they start profiting off of it at the moment, it's not. Do you, what is a greater determinant of like the success of the platform and seeing volumes grow 100x? There's a reason why public markets have orders of magnitude more liquidity and volume than private markets, right? Because you have a set of standards and disclosures. They're not perfect by any stretch of the imagination. We all know them. And companies report quarterly and they report very cookie-cutter stuff. And anytime you want to do like more digging, it's, it's, but that, I think a standard guidance around You know, certain things that you have to disclose as a public company is the reason why these markets are way more liquid. All I'm saying is I think, I get it, you and I can strike a trade right now and say the Taylor Swift thing, and you could argue all day long, but all I'm saying is I think if these markets are going to continue to thrive and get orders of magnitude more liquidity, I think if they make a proactive effort, whether the CFTC or the SEC governs them around at least, um, focusing on making these markets a bit more fair. And if— and, you know, I don't think it— I don't think the answer is like take down market— like certain contracts. I think just if they're gonna exist, fine. But I will say maybe, maybe the answer is on the KYC side. Is before— it could be something as simple as before you click a trade, it's like if you have privileged information. If you're Elon and you can influence this market, um, we strongly advise against doing that because it was in breach of our terms of service. And if we figure this out, you will no longer be able to trade on this platform. It's not perfect, but at least it gives a perception of, hey, we're trying to, we're trying to create fairness in these markets. And maybe that's what in the long run leads to the Elon market not having 11 million of volume, but rather 100 million of volume.

Yeah. Well, I think, I think where this gets even more murkier is like the mention markets, right? So there's been a lot of conversation about these mention markets, which is people, you know, Brian Armstrong in the earnings call, like, yeah. So, so the, there, those, it becomes a bit more murky there. Cause it's like, okay, well I can take a bet that like, um, or someone near me can take a bet that I will say XYZ thing during an earnings call or during, you know, a speech or whatever. And, uh, my speechwriter can tell me to say this thing, right? And so there's a question there. I, I think the one thing that I will agree with you on— so I, I, I, you know, maybe saying, okay, well, we'll try to self-police the platform if you have privileged information, maybe that works. I think there's a, a long tail of stuff that is not illegal today that, you know, exists with insider information and is meant to exist with insider information. I don't think that needs to change, maybe, but there is this long tail of of kind of gray area that like we have to figure out how to, um, how to, how to make people feel like it's fair, right? And because to your point, it increases liquidity, it makes people happier. You want people coming back to the platform, you know, I mean, um, I mean, you focus on customer retention and repeat.

Like the other thing is like what you just said, I will push back on because as an industry, we always say, look, this is a new technology. We should craft rules and regulations that meet the technology where it is and not try— like we should like really rethink the how we test or really rethink some of these rules and regulations that were just not meant for this technology. And at the same time, I'm hearing you say, look, these things, they're insider markets in real estate and these other industries, and, and, and, you know, we should just look at that as precedent and, you know, not do anything about it. And all I'm saying here is, no, we definitely should. Absolutely we should.

Because these aren't new markets. There's— this is what poly market is, is a new form factor. It's how to deliver the derivative.

With 24/7 digital markets, it is attracting a lot of liquidity. If I were on their team, I would say just put some sort of terms of service, just put some sort of notice there. It might be subtle, but in the long term, I think it inspires more confidence in these markets. And in the long term, even in the near term, I think it inspires more confidence in people to come to the platform and place bets. And I think that is, it might be as simple as that. I wouldn't wait for the CFTC. I don't wait for the SEC to give you clear guidance. I would just very simply say, if you have influence over this market, you shouldn't be trading on this market because it's in breach of our terms of service. And I think if you're like, take a fucking position. I would be, in fact, I would build a prediction. If someone is building a prediction market right now that wants to take this position, I would love to talk to you because I will fund it.

If, I mean, it depends a lot of nuance. Um, both Kalshi and Polymarket have been very clear that they want to weed out insider trading. They're both working on weeding out insider trading as insider trading is defined by the CFTC. There's a bunch of nuance around, uh, some of these long-tail markets. We've spent a bunch of time talking about markets that have no liquidity. The markets that do have a lot of liquidity are much more clear as a rule, and people are working through that. So I think it, you know, maybe we should just leave it at that, that Santi is a man of the people.

And I'm not a man of the people, I'm just saying like, let's create fair markets because that's what more, inspires more confidence for people to come in and trade. And you want, you want these platforms to have way more volume. So I think it's the right business decision. So, so I just, just as a point of, as of now, I put in the machine Polymarket's terms of service and it said, does the TOS prohibit insider trading? Short answer, no, not explicitly. So just because the regulatory picture is murky doesn't mean that you can't take a more proactive business decision because it is the right thing to do for the for the business is all I'm saying. But, and a conversation. Um, what else? We've been at it for 52 minutes talking about two things.

A lot of Polymarket. Yeah.

A lot of Polymarket. A lot of markets. What else? I mean, there's, you mentioned the OKX round.

Yeah.

You guys are not investors in OKX, right? You're investors in other stuff like Bybit.

No, we're investors in Bybit. Yeah.

All right. What do you think of that? Fair?

Good? I, listen, it's great for the whole industry, right? So, uh, OKX, You know, they've obviously been— they were kind of the OG, right? I think OKX was founded in 2014, maybe it was a little bit before that. Uh, they were kind of the first big, you know, Asian exchange, grew really quickly, you know, lost a little bit of ground, you know, in the last, you know, 6, 7 years to, uh, to Binance and to Bybit. But, um, you know, I know they have been focused for a lot of the last couple of years on trying to enter the US and find ways to do that. And this is obviously a a way to do that. And they can also on the other side offer, uh, you know, NIC-linked, you know, tokenized equities. And so, um, good for the industry, like very exciting to see. Um, you know, Jeff Sprecher and the, the ICE guys, like he's just been incredibly forward-thinking in terms of how he, you know, wants to move his business forward. First with the Polymarket investment and now with, with this investment. I have to give him all the credit in the world for really being willing to put you know, his neck out there on how he thinks through the future of, of markets. And so, um, super bullish for, for everybody involved. Congrats to the OKX guys, uh, and, you know, excited to see, you know, this industry flourish even, um, at a time when people seem bearish on prices.

I know, on the point of bearish prices, like, what's the house view internally at Dragonfly? Like, are you guys deploying faster now that you have this fund? You have some liquid positions, right, in residual funds, right?

So we don't invest in new, like secondary markets. We don't invest in liquid, but obviously like, you know, we do an investment in the seed of Athena. We end up owning a lot of the token in the future. Right. Uh, the, we're not like actively trading any markets or anything like that though.

Has that always been the case? Like you guys are not necessarily, cause you had before like some sort of credit fund, like a more, we had a hedge fund.

Yeah.

Yeah.

In '21 and '22. And then we spun it out in '23 that to Brevin Howard. Yeah.

Yeah.

Yeah.

So you're typically not like, you're managing risk in the book. Like if you have a liquid vesting position and you're way up and you know, your fund's coming out to its life, like you have to do something with that. Right. But you're—

manage risk is the right way to think about it, but we're not trading.

Yeah. Yeah. Yeah. Um, what else?

I mean, there's the, you know, the Paradigm and Andreessen fund news that's out there. Uh, you know, obviously funds. Yeah. Big targets, which is great. So I, um, you know, we, we announced our fund, obviously, whatever that was a couple of weeks ago, uh, which, which was the biggest one in a while. Um, and, uh, and then Paradigm came out, I think pretty quickly after, said they're trying to raise $1.5 billion. And what actually happens is these guys do, they have to do filings around it, especially when they're going to be, one of two things happens, which is how the, the, um, the reporters find out about it. Either one is like they're sending out their deck to some LPs and people are leaking it, or two, once they do first close, they actually have to go and do a filing, and then you can— you have, you know, all these reporters are like scraping Edgar. I think in both these cases, what these are just leaks. So they haven't— neither of these funds have done first close yet, but it's when it's above $150 million you have to disclose it, right? Yeah, there's some— a little bit of nuance there and exemptions, etc., but basically when you're above. And so, you know, for Paradigm, uh, you know, they, they went out to raise 1.5. They had raised $850 a couple of years ago, uh, maybe, maybe a year and a half, 2 years ago. And, uh, you know, so obviously this is below the 2021 amount that they raised because they'd raised 2, 2.5 then, uh, but above the $850 that they had raised in, uh, in '24. And so, you know, we'll see how that goes for them. I think, um, you know, Matt's obviously got an incredible track record and, you know, brand name and They're talking about, um, you know, widening their aperture to do AI and robotics. That's interesting because they had talked about doing that in '24 and the market got really mad at them for it. And now it feels like, you know, table stakes, right? Which is that, okay, well, if they want to do that, you know, if you're going to put, you know, $1.5 billion to work, it might make sense. Uh, you know, they've obviously been very focused on, on Tempo and, you know, I think haven't been quite as active investors in in other projects. So I'm not surprised to see that. Uh, and so I'll be interested to see how they think about, you know, evolving the fund over time. And then Andreessen is just a different story because they actually— Andreessen actually buys a lot of liquids. So it's this, you know, $2 billion fund is below the— I think it was $4 billion that they had raised in '21.

Uh, yeah, it was $4 billion, and then they had some turnover and stuff like that. Now they're raising—

yeah, they've— yeah, they've had some turnover, um, and, you know, so there's now only 5 or 6 investors there. But they do a lot of like, they're just like, they'll put money structurally long into tokens. And so it's like, I guess it's easier to deploy. Um, but I'll, so I'll be interested to see, um, I, I, I sure they, I'm sure Andreessen will be fine because of the, you know, the, the just that, no, but it's a business, but I'm just curious. It helps industry.

I mean, it's, it's, it's a good signal to understand how much appetite there is from traditional allocators to deploy. Uh, there's a, what is the right size for, for, uh, I appreciate the strategy venture liquid and a16z does. Liquid as well. But like there's laws of gravity that as soon as, you know, returns degrade with fund size and also vintages also matter here. Like if you're the early private equity vintages of the '80s, absolutely killed it. Typically first vintages tend to outperform smaller managers, you know, at the right size do quite well. These are all kind of generalizations, but by and large the data's pretty compelling. Like the, the bigger the fund size, the returns degrade. And there's a lot of other confounding, like there's a lot of data that goes into this, but like, you know, macro environment factors in, right? Like if you're a crypto fund, like the last 5 years have been pretty tough. But generally curious, like this data for anyone listening, like looking at the screen is like vintage compression and also talks about scale and what that does to returns. We've talked about benchmark. Being probably a clear outlier here. It's not in this graphic, but they've kept fund size pretty consistent around the $300 million number plus $100 million of GP commit, which is very different than pretty much every other venture fund out there. Like, walk me through the thought process around raising what you guys raised and how do you right-size that for the opportunity setting in crypto? Like, I've heard you say, look, fintech, You know, the lines are kind of converging. We're going to want to have, like, we probably had the opportunity to maybe lead rounds or step up in a bigger way, but we couldn't. So we're going to raise, like, Reigns of the world and Polymarkets of the world. Like, clearly you could have deployed way more capital in there and you bumped into your concentration risk. But like, maybe Paradigm could be a good admission of the opportunity set where they're saying we're going to raise $1.5 billion. It's smaller than their last fund. And we're going to go and invest in these other areas, and that's why we need, you know, but if it were just crypto, maybe it would have been like a fraction of that.

Yeah, it's interesting. So if you look at the last vintage, right, so, you know, we can forward, we can look forward and we can look backward. If you look at the last vintage, there are funds including ours in the, you know, 300 to 650 range that performed you know, top decile, top, you know, uh, and as well as and better than the vast majority of the smaller funds, right? There's maybe one or two of us, I think, that, that did that. Um, and it was clear that, you know, if you had picked right, that there was an ability at that size to still continue to perform really well. And, you know, obviously those funds are still, you know, 4 or 5 years in, and so there's still obviously a lot of a long way to go. And, you know, prices could keep them down or they could go up. So there's a— there's— it's unclear exactly where those, those funds will end up, but It looks like you could have been that size in that vintage and been, uh, and still had great returns. Now, obviously, if you hit the right thing really out of the ballpark, you know, a $50 million fund, you had enough ownership, uh, that is, you know, you were going to be able to crush it. Um, when he got into the bigger sizes, uh, I think a couple of those funds have done okay, but, you know, there was, uh, you know, I think at the billion-dollar-plus It's been much harder for people, but I do think the opportunity set is getting bigger. It's both getting bigger and narrower, right? Which means that there's far less to put money in, uh, or far less like, uh, just verticals and, and far less like things and ideas to put money in today. But there's far more of those things to put more money into, right? So you're seeing the, you know, Raines of the Polymarkets and the Calshays of the world get to scale, right? You're seeing Uh, a lot, you know, Mesh, another one that we just did. They're seeing a lot of, um, businesses get quite a bit bigger because you're seeing, you know, Kraken and OKX, these guys, because you're seeing them gain scale and users, uh, and liquidity and volumes in a way that they haven't, uh, in, in prior cycles, right? And so I think when you look out into the future, people are saying, okay, well, we see that especially with AI, this is what happened in traditional venture. There's you know, more and more business that is go— growing very quickly, that— and there are more and more, um, businesses that will be just started because of AI. So we'll have like more ability to put money to work in these things, and they're growing much more quickly. And so I, I don't know if, you know, the $2 billion is able to be put to work in crypto and be able to, to have good returns. I also— and you know this, and I know this— like certain asset managers have different strategies, right? Which is that you know, if you can return a 1.5 or 1.7x fund reliably, but you can raise a big fund and have, you know, a lot of management fees, you'd much rather do that than have a, you know, swing for a 2.5 or 3x fund and have less money, right? And so it's a, you know, push-pull for everybody.

I want to— two things before we wrap. This is— I mean, Thrive's been doing a lot of chatter on the timeline, of course, because there's great podcasts. I think it was Invest by the Best. I mean, this is just going back to historically like performance here, like the first funds delivering a strong return and a lot of these like, you know, need to harvest and stuff and companies are staying public, like private longer. Like I just heard rumors around like Andreessen raising a round at $60 billion, Thrive's leading it with A16Z that I'm sure will be a great investment for them. But yeah, it was just interesting. Like, how do you guys think about like DPI, when do, when do, like, especially for tokens that vest and are liquid, like you have a 10-year fund, you have an investment that maybe launched a token in 2 years and you're vesting over the subsequent 2 years. Like at what point do you, do you start DPIing, focusing on the next fund versus holding the position and compounding?

Yeah. So, uh, I want to comment one thing on this, this slide that you're showing right now, which like somebody put this box around these, you know, 5, 6x funds and put that's call, which is like the most ridiculous comment. Like, it is so hard to return 6x of fund. Like, that is just—

well, the, the point was, and I'll say like, they don't outperform the NASDAQ during that same time frame. And, and, and it was like, I'll pull up the math, but they—

is that true? 2014 to now, that, that the, that IRR is lower than NASDAQ?

That's, that was her point. I mean, I'll take it at face value, but they said, look, even if, even if you factor in for capital calls over that period, you're not really outperforming the benchmark here, which is just being liquid and being exposed to the NASDAQ, uh, which I ultimately like— that, that is always the benchmark, right?

Yeah. I mean, the other thing that's true, of course, right, is that the, um, this idea that we like compare everything to the S&P or the NASDAQ is like obviously not how sophisticated investors think about things, right? They want diversified exposure to different things, right? Which is that in You know, maybe the NASDAQ, which is basically all NVIDIA for the last couple of years. Okay, well, that performs one way, but Thrive is, you know, very heavily invested in fintech, and they— that might perform differently, right? And it depends on when you harvest, when you get liquidity, all this different stuff. And so, like, people care a lot about total return. They care a lot about diversified risk. Uh, and so, like, whenever you see, like, commentary on Twitter that's like, hey, like, oh, this is the same as the S&P, like, you know, those people aren't actually real investors, right? Because, like, that's not how anybody who sits in those seats actually thinks about capital allocation, right?

I will say, like, in fairness, like, yes, I get your point that, like, you have to build up— like, correlation risk is something that gets lost in some of this commentary because that's why, like, the case for investing in hedge funds, even though they're not outperforming the S&P or the NASDAQ, they serve a purpose in your portfolio. It's like buying insurance, right? Because they may underperform for many years. And then when there's a two standard, a two sigma event, or like a very fat tail event, they really show up and they show up in a very meaningful way in the same way that you pay insurance because, you know, for flood insurance and it might take 10 years, but when that hurricane hits, your house is insured. So that's, I get your point, but I think there is some truth into like you're saying the right thing, which is allocators don't think this way. They need to, They have 20% of their book that needs to get allocated to alternatives. Go find me the best managers. By and large, Thrive is a good manager. Within crypto, you know, there's a very handful, you know, very small set of now funds, you guys included, ParaFi, a16z, Paradigm. There's not that many funds out there, right? So you want to get exposure to the best managers because, by the way, having access to maybe Thrive gives you insight into how you invest in the public markets, right?

No, for sure. There's a lot of reasons to do these investments. And I think I was talking to, um, I was at like a sort of an institutional allocators event last week, and one of the guys on the panel that I was on, it was a kind of a large multifamily office, you know, he was saying that, oh, a lot of people talk about, well, how like, you know, venture funds and staying private for longer, uh, have been sort of like volatility washing. Right? Which is that like the volatility is so happening at these companies, but the marks don't— aren't as volatile on the— at least on the equity side. In crypto tokens it's different. And, uh, that's— a lot of people talk about that as if it's a bad thing. And for us as managers, we actually see that as a good thing. Like we actually want that volatility washing, right? Like we are excited about that because it, it allows us to think about our risk differently and allows us to have different information, right? And so it's, it's the allocators actually think about these things much more differently than what whatever the, the conversation is on Twitter. I, I will say to your original question to me, which is like, oh, how do we think about harvesting DPI? Um, you know, my, my LPs and, and all LPs, they do care about IRR, but at the end of the day, the main incentive for all of us is to return the best money, the best MOIC, right? The best, uh, multiple of what people invested, right? And so the way we think about it is we have two clients. We have LPs, and we have our co-founders, right? And to do right by both of them, we are gonna be long-term investors that are going to have a thesis. We're gonna be put our money behind that thesis. We're gonna support our companies that, um, as they try to build out that thesis. And when that thesis is no longer true, that's when we think about harvesting, right? And that's the way most managers think about it into our long-term venture investors. And that is part of the reason that DPI does take a while for a lot of these guys. Even at a time where a third of exits are secondary markets now, and it's much easier than ever to sell a secondary, uh, position.

Yeah. Is that still true in crypto or you're talking about traditional markets to do secondaries? Cause, cause I, I have heard a lot of DPI comes from secondaries, but I think for crypto funds it's not as true for venture funds, like non-crypto funds.

Yeah. It, it's probably not as true because it's a little bit different cuz like you have, you know, then you have liquid tokens that you can theoretically sell in the open market versus like equity secondaries, but Um, that's a, a, a stat I saw from Corda, I think. So it was like traditional venture investors.

Yeah, certainly like there's, if you have even like some crypto stuff like Polymarket, ton of demand, Kalshi, probably a ton of demand.

Yep.

Some of your tokens, not so much, but, um, all right, well we've been at it for over an hour. I do want to get the content of the week just before we go there, sir. Just, sir, I'm really looking forward to our dinner. Um, we have here Western Union, SOL. Since we placed that bet, SOL is down a barbaric 52%, Western Union cruising by +6%. Um, what do we make of this, Rob? Is it going to correct? Is it over? Like, is SOL and all the L1s overly punished, or what's going to happen here?

Do you think the crypto market's going to come back or not?

Um, I think I do. Look, crypto demand is up and to the right. Stablecoins, certain KPIs are up and to the right. I don't think many tokens are investable. And we've talked about it at length here. So this is, I think, the part of me thinks that a lot of these tokens have been overly corrected. Getting overly punished. Even like certain stuff is starting to get interesting at the application layer. We did a great recording with Tushar from Multicoin and Pranav from VanEck. And we were talking about like the dashboard, like Blockworks around like revenue of these protocols. And, you know, what seems to be a big, the pair trade of the cycle is go long applications that are cranking out revenue. And I would characterize Hyperliquid as that, even though it's technically kind of an L1, but it's, You know, there's a lot of interesting, like AAVE, Kamino, you know, even Pump, if you feel that meme coins are not going to go away, like they're actually pretty interesting. They don't have a lot of liquidity and it may, you know, but it's, you know, ultimately I'm of the view that eventually if you're producing cash flow, if you're producing genuine activity and it's either in buybacks or something like that, that should be reflected in the price at some point. Just be patient enough. Coming up in DAS, Jano's not here. Jano would be proud for me plugging DAS. The guy from Western Union, I think the CEO of Western Union is going to be in DAS. I'm actually pretty excited to go have a conversation, see what they've been up to and what their next earnings, like what that actually shows. And Klarna is in this bucket too. Stripe is private, but in this bucket as well. Yeah, I'm just really excited about what these companies are doing and how it shows up in the P&L, like not the narrative, not the Long Island Iced Tea. Pilot narrative. It's like, are you showing margin improvement with stablecoins? And I think, um, that to me is more investible than a token at the moment.

Yep. Yeah. I, I think, um, you know, a bet's never over till it's over. I, I, I made a bet with, uh, Purnav from VanEck.

Oh, did I?

Um, last, last May on, on something else.

I'm concerned about counterparty risk, Rob. Are you gonna be good for this or no?

You're making bets left and right here.

Well, so I, this was, this is last May. And I was right on this bet, uh, for— we made a year-long bet, 12-month bet, and I was right for 7 months, and now I'm gonna lose, uh, over what's happened this year, right? And so like, it feels like you're gloating a little bit early.

I'm just simply looking at the chart. I'm like, you know, Western Union's not losing me, you know, money. But, uh, was this a year-long bet? I forget. We got to go back.

Yeah, we talked about it for— I think it was a year. Yeah.

November. Okay, it was a dinner, right? You wanted to put $10K or so, but we— I, I said, look, I'm gonna be a friend and don't want you to lose that much money. I want— it was the dinner, right? And Jano, I think, threw his— Jano's in for a bottle of wine or something like that.

Yeah, I think, I think I asked to bet your Patek, uh, which is, uh, which, which, you know, I'm glad we didn't go that far yet. So, but, uh, you know, fair enough. We'll see.

All right, man, well, this is a great discussion. Content of the week.

You know, I've been, uh, I've been a little light on content because I've been, uh, I've been doing a lot of travel this week, but I did watch The Industry season finale. Still the best show on TV right now. Uh, so if you haven't been watching Industry, season finale was great on, uh, on, on Sunday. So, uh, you know, go, go back and watch it.

Yeah, HBO or HBO.

Yeah.

Is it the Billions-like or Dynasty-like, or what's it about?

So Industries, uh, you know, it's, it's evolved a lot over the 4 seasons that they've been on, uh, but it started off basically the, uh, as, you know, kind of following a couple of analysts, uh, and, you know, what happens at an investment bank, uh, in, in London. That's evolved now to like, now somebody has a hedge fund and kind of a family office, and now they're like, uh, there's— this season was all about a, um, a short-only— one of the main characters is kind of running a short-only strategy out of fun and trying to uncover a fraud at a, a, uh, is this Muddy Waters or what's that name of that shop that goes on Seeking Alpha? Yeah, like stuff like that. And it's, um, and the, you know, the, the person or the company that, um, at risk, like, looks a lot like, you know, uh, it looks a lot kind of like the the WorldPay, or was it Worldline? Uh, yeah, it was a Worldline fraud that happened a few years ago. Yeah, um, around what they were doing. Yeah, exactly. So, um, there's some, some parallels to that, you know, kind of an interesting season. Uh, and, uh, uh, so, you know, go, go watch Industry. Uh, definitely the, the, the one show that I've been watching religiously, uh, this, you know, the last few months.

So nice. That's great. I haven't finished it, but Cheeky Pint, the podcast by the, I think one of the Collison brothers from Stripe. I don't know if it just came out or not, but it's an interview with Elon talking about space colonization, energy. Pretty interesting. I mean, Elon is just one of those guys that is really, you know, I think a common theme that we're starting to hear now is like a lot of the software companies are going to come to a realization that hardware realization, like how hard it is to like, um, you know, build compute and energy. Like that Situational Awareness paper is circling around now because that fund, you know, seems to be up dramatically, right? Started like $200 million, now like up $5 billion. Raised some money, but like vast outperformance. Uh, but yeah, no, it's— I'm halfway through it. Seems pretty interesting. I mean, I, I'm nowhere near— like physics was my, my worst subject in school. Not my worst But like, you know, a lot of this stuff is over my head, but it is something that I want to get just, I'm reading up on more like this energy and, um, you know, the, the flywheel that we've seen more energy, more intelligence, like compute intelligence flywheel. Right. And the biggest bottleneck is just energy.

Yeah. I will tell you being in, being in SF this week, uh, the, the, the, the fever pitch of like agents and, you know, what's happening in AI, you definitely feel it more than you feel it in New York, uh, which I think is both good and bad because there's a little bit of like collective delusion that happens when you're— I think you're here as well. So for sure.

How AI forward are you? Do you feel very far behind in your— how you're using it? Or do you feel like you hold your ground and you're like properly utilizing it? And I appreciate some of these tools you just can't use, right? Because of like regulatory.

Yeah. Definitely a little bit behind. Uh, I would say I would— there's also things that like, you know, a lot of things that people talk about doing when you, you know, talk to people around the, around the Bay, like I would just never do. It wouldn't make any sense, right? Like I'm, I'm not giving, uh, a, you know, Open Claw bot like access to my email right now. Like that makes absolutely no sense for me. And as the amount of risk people are taking on, but no, if you're someone that's like a bit of a hacker and you can, try to put guardrails around these things. Like, you know, it's interesting. Um, we— it's something we talk about, we've been talking about a lot internally at the fund too, which is like, okay, well, how do we build out the right tooling to make sure that people are as efficient as possible? I think a lot of VC funds are doing this right now, which is, what is the, um, what is the right intersection of like, okay, let's not put ourselves at a lot of risk, let's not, you know, uh, put our both regulatory and from just like our systems, and especially as a crypto fund too, right? There's You know, there's added layers of risk there, right? And so, but also, how do we make sure that the team is as efficient as possible? I was talking to, um, I had a— I was in Menlo Park yesterday, and I was, uh, I was going on a walk with, um, a really well-known person who runs a very large company in our space and also, um, uh, has been an active investor And this person was saying that, you know, he— they, they spun up, you know, a bunch of, um, agents who, you know, they, you know, gave $50 grand to and then kind of put these guardrails around them and are letting them do like a bunch of market making on like centralized exchanges. And there's like some cool hacking and stuff that happens around there. But, uh, and I think we can see the future, but I do think it's, it's very hard right now if you, uh, to take as much risk in positions like ours as you're hearing a lot of the conversation and, you know, that people are doing.

So yeah, read-write problematic, read less problematic.

Um, but right is where a lot of the, a lot of the—

yeah, that's where a lot of the— but, but I, I've, I've certainly— yeah, topic for a separate conversation. But, uh, I, I do spend most of my time thinking about what is AI resistant, to what degree. And I think for primary research, for just getting up to speed on certain information like that, is like far and away, like even sourcing, right? Just identifying like a specific sector that I like. Give me all the companies within, you know, in the Northeast that are like, you know, factoring businesses, like, and give me all the contact information. I'm not going as far of like emailing them and writing personal, like I want to have some supervision. Where I'm leveling up more is on the skills stuff because having memory and really focusing more on architecture and then the skills versus just going and prompting. I think that's where like Claude is really good at. Like, if you spend a little bit of time upfront, like designing the prompt and having like certain checkpoints, it's, you get way more output. But I mean, so crazy by the time we're recording, like less than 5, like 3, less than 5% of the population has downloaded these things and most of them are using them for like regular ChatGPT. They have, No understanding of like, like co-work and more advanced workflows and yeah, just, just a ver— probably a reflection that technology still, as, as great as it is, right? It still takes like years and years and years to, uh, to permeate into the mainstream.

So, yeah, no, I, I agree. And I think there's a, uh, there's a lot more conversation right now than there is actual like things to, to do in some of these areas that people are very excited about, but the world is moving quicker. Than ever before. And so, you know, I think a lot of that conversation is around the fact that maybe things will just be drastically different in 3 or 6 months. And you kind of see it in the markets, right? The markets are, uh, moving in ways which it makes it clear that people just don't know what, what's going on.

Yes, sir. We're gonna have to bring Josh back on the pod sometime soon. Um, but, uh, anyways, goodest place ever to end it. Uh, thanks for listening, folks, if you made it this far. Rob, have fun out in the West. We'll see you next week.