Why Is Crypto Crashing? | Weekly Roundup

Unlike other cycles, like, we've never had this amount of adoption. Like, adoption's all-time high, prices are at 2-year lows or approaching 2-year lows. And that's, that's what hurts the most here. Like, in, in a scenario of FTX, you're like, yeah, there's a lot of dumb shit that we did as an industry, you know, certain players that just— it's warranted. But now it's, it's, uh, it's harder to reconcile the adoption with the price action.

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Ladies and gentlemen, welcome to Empire. I was late. Um, it seems like every 10 minutes Bitcoin's going down by $1,000. Rob and I are not market oracles. Maybe Rob a bit more than I am, but we brought in Josh because Josh is here to tell us if Bitcoin's going to hit $60,000 by the end of the conversation or if it's going to rebound at $100K by the end of the month.

That's right. And then, uh, yeah, if it does, I might, I might disappear forever. You might never see me again.

But there's a lot of that happening in this space. But Josh, for anyone that's been under a rock and not— doesn't know who you are, why don't you give us a quick background, then we level set the conversation.

Yeah, absolutely. Glad to be here. I am co-head of markets at FalconX. FalconX is a prime broker trading firm in crypto. We service a lot of hedge funds, institutional counterparties in the space. We do a lot of things from OTC trading of spot and derivatives. We're a swap dealer regulated by the CFTC, so we do a lot of options activity on crypto underliers. And then we also, you know, facilitate direct market access to various exchanges, provide financing, all that kind of stuff.

So you basically, from your standpoint, you're seeing a lot of the flow, a lot of who's selling, who's buying, you know, who's stepping in, who's leaving, all that stuff.

Yeah. Yeah. It's, it's a privileged position to be in, you know, like this sort of centralized dealer seat. I think a lot of counterparties do rely on us for liquidity, for access, for market commentary and, you know, an aggregation of a synthesis really of like what's happening across the whole space. And yeah, like we, we get to kind of help distribute risk, right? That's sort of like the function of any dealer is just like help concentrated positions get distributed to the market in the most efficient way possible without disrupting things. These days there's forces bigger than us, right? There's just a lot of retail rotation away from crypto. There's all this sovereign flow and all that kind of stuff. I'm sure we'll get into it, but Yeah, we try to stay, you know, front and center for our counterparties.

Josh, is, um, how big is FalconX on a relative basis? Do you think you're the biggest dealer, the third biggest dealer? Like, how big do you think you are relative to the space?

Yeah, yeah. I mean, look, like, unfortunately, compared to traditional markets, crypto is like pretty opaque, right? There's no like public reporting on this type of stuff. I think we're generally considered top 3 at this point. We, uh, we do get involved in all the major kind of, um, derivative flows, at least on, on blocks. And, uh, there's, there's channels on Telegram, you can search for them, and you can kind of see like large blocks that are printing on-chain between dealers and, um, and large funds. And so that's, uh, that's probably one good way to track and measure our market share, but we're usually in the mix there.

Awesome. Uh, well, maybe, maybe we should start like, Josh, just give us the state of play. Like, what is happening? I think Bitcoin is down 25% on the year. It's down another 7% today. Silver is down, uh, another 10% today. Gold's down 2%. NASDAQ's down 2%. We were just talking about this, but, uh, Blue Owl, uh, is down, uh, I think 2 or 6% today and is down, uh, significantly over the last couple of weeks. Seems like there's a lot of things that are both crypto-specific and non-crypto-specific that are flashing red, red lights. Uh, and so I'd love to hear, like, from your perspective, what's happening? Well, how much of it is crypto-specific? How much of it is related to, like, October 10th? And then, you know, how much is, you know, maybe more macroeconomic or, you know, other types of, you know, uh, extrinsic factors?

Sure, sure. And, you know, these are the types of, um, kind of bombardments of negative news and catalysts that usually result in bottoms, right? Um, we're seeing just a cascade of really, really bad things. From everything from like really notable people and market participants leaving the space. There's just general kind of negative sentiment around, you know, technologies that have been built in crypto over many, many years. You know, the Ethereum roadmap, for instance, and like even questioning, you know, the fundamental architecture of things like Bitcoin, right? Like with all of the questions with quantum computing and things like that. So on top of that, you have just a series of negative flows away from crypto. You've got retail that's generally packing their bags and leaving for greener pastures like equities and metals and really chasing that really parabolic run that we had last week. At the same time, the sovereigns, right, you look at China just stacking, you know, thousands of tons of, tons of gold basically, right, in reserves. and then on top of that you have Tether, which is really a crypto-native institution, also buying a lot of gold, right? Um, in favor of, of, uh, gold in favor of, uh, Bitcoin, right? So that's, uh, that's really what's driving the dynamics. And it's, um, it's a combination of flows, it's a combination of these, um, fundamental overhangs like the quantum question. Um, and yeah, it's, it's weighing the entire space. I think liquid managers that we trade with are positioned very defensively at the moment. There's really only a handful of names that can be held in these portfolios with any duration at the moment. Um, Hype has been a notable outperformer. I think, uh, you know, just you've discussed on your podcast many times with guests that, um, there's this rotation to revenue, right? The revenue meta, um, tokens that can be sustained through buybacks or other means that, uh, revenue, revenue-generating means. Um, there's only a handful of names in crypto, and everyone's hiding out in those names. That's what we've observed. They're very concentrated, but at the same time, um, they have been actually performing relatively well relative to even the majors. So, um, yeah, that's, that's kind of what we're seeing. Everyone's kind of pointing to like high 50s as a point where they will dip their toes back in and start accumulating long positions. Um, it's probably that, that probably means that we'll bottom ahead of that. But so maybe, maybe, you know, low 60s. This podcast will get there. But yeah.

For some of, for some of those not in your seat of seeing all the flows, what are some of the indicators around like options or implied vol or that you can say, like we just said, okay, that the low, low to mid 50s or something that the market's kind of looking at, like for a retail guy, like what can you look at? To understand that?

Well, yeah, yeah. I mean, crypto options are a reflection of just market demand for protection and the, the fear that's embedded in the market. Right. So we've seen vol levels rise from historically low levels in the last 2 to 3 weeks all the way up, let's call it like 10 points, 10, 15 points in front of the curve. So the front is implying something like mid-60s vol, and the back is still, let's say, in the mid-50s. But that's coming off like a very low level of, you know, let's call it like 40 vol flat across the curve prior to a lot of these recent sell-offs. And the low level of implied vol prior, I think, is just a good indication of lack of retail interest. Low levels of vol, the basis spread between Bitcoin futures and the funding spreads on perps relative to spot price were all at very compressed levels, right? So that all indicates there's just not a lot of people still trading levered instruments in crypto. Um, all of this is obviously on the back of what happened last year in Q4 where just a ton of leverage got blown out, um, on Binance and Hyperliquid and many other levered venues. So, um, it's still— we're still dealing with the fallout of that, I believe.

I mean, I started writing about like my bear— like just being very defensive in October, uh, and then November, and I've just been not— I don't feel like I'm getting paid enough to take this amount of risk on liquid side. Um, but you know, from, from your standpoint, like coming into the year, like, is— was there anything positive that would have compelled you to take on, put on more risk? Um, what would have to change for you to really meaningfully like go out of the, on the risk spectrum.

Yeah.

Because you're seeing a lot of value destruction. Again, not, not, not just in crypto, like, you know, silver is more volatile than a meme stock. You know, SaaS is massively de-rate, like re-rating, like markets just are very jittery right now and want to go down. Negative headlines carry more weight. Like why, why take on more risk when you can sit and treasuries and just, you know, you know, hide there for a while.

Yeah. Well, I mean, not even just treasuries, right? Almost every other asset class has outperformed gold or Bitcoin in the last couple of weeks. Um, I mean, if we just rewind towards the top of the year, like you'll remember some of the key talking points that people had for Bitcoin, right? One, one being, uh, you know, turn of the year, there'll be, um, uh, a alleviation of the redemption outflows of 2025. And there would, you know, be a new influx of capital subscriptions into funds. Now, I think some of the recent headlines that we've seen, like different liquid funds, you know, spinning out or, you know, reconfiguring, I think that kind of like speaks to some of the challenges right now in the space in terms of fundraising and being able to kind of like deploy into these discretionary liquid strategies. So that point is sort of off the table. Another big point at the start of the year was this idea that, you know, the DATS had been a big driver of flows in 2025. There would be a lot of pickup in activity from, well, either, you know, MNAPs improving or some kind of like activity across these DATS, maybe M&A type activity or activism activity. I think that has been slow to play out so far this year, although, you know, you can kind of see that A lot of smart thinkers are thinking about it. You saw the Matt Levine, uh, article this morning hit the tape, um, just talking about the potential for activism in the space. So there is capital looking at it, but it just hasn't materialized in a way that people kind of thought. Um, another area that people, uh, point to is just this stark, stark divergence between Bitcoin and gold, um, and actually Bitcoin and, um, global measures of liquidity, like central bank liquidity, right? Um, that is obviously all benefiting and flowing into gold and not into Bitcoin. And just like we've said in the last couple minutes, like, it's, it's, it's really widened, um, now and not really compressed. Um, it's not, uh, played out the way a lot of fundamental, um, macro guys are thinking with respect to Bitcoin. So, uh, there's—

on that point, there's all these, like, now trying to The conspiracy theories come out when prices don't do what you want them to do, right? Tom Lee of the world says that this is a feature, not a bug. He's lost billions and billions of dollars for his investors. You know, believe me, bro, this thing is going to go up. Moon math, all this kind of garbage comes out. Novo comes out saying, you know, hey, there's like, there's like suppression by the old guard that doesn't want to see Bitcoin, doesn't want to see crypto thrive because, you know, stablecoins are hugely destruct, you know, going to eat into their interest income. And so there's all these kind of weird things that no one can quantify that are suppressing prices. There's also like the more kind of probably cynical view here, which is, dude, crypto continues to be a very like farther out on the risk spectrum. When people feel pain in their portfolio, the marginal buyer is not there. So just assume that there's a shit ton of vol ride it out for 10 years. Anyone that's ridden this shit out for 10 years usually comes out ahead. And don't make it 100% of your book. Like, you know, as much as Rob is, you know, an investor in the space, he personally has stuff outside of crypto and that allows you to be a better investor.

But anyways, I invest only in Dragonfly Funds. So that's it. The only thing I invest in.

Insert clip of I bought ETFs last week. No, I mean, like, you know, I said like all these, what's your take on all this? Like, you know, and give us some—

yeah. And Josh, I'd like to understand one thing from your perspective too, is like, we were talking, like, you're talking about a lot of like very, I think, like, you know, uh, like trading-specific, like, you know, quantitative type measures, right? But like, if I just like zoom out for a sec, right? Like, you know, Evgeny puts out— Evgeny, uh, who's the founder of, of Wintermute, puts out a post yesterday that, you know, he essentially says that, you know, talking about like economic activity on-chain is pointless because it's not really big enough for it to matter to anybody. He's like, he doesn't think stablecoins matter because like, you know, again, it's like really small relative to what's happening in the broader market. I think he's being pretty unfair there, but like, you know, that's more than Visa and Mastercard combined.

Like, you know, that's not nothing.

Yeah, he's, he's being pretty unfair, I think, on the stablecoin side. He talks about how like CME doesn't matter. He thinks Bitcoin has lost, you know, any reason to exist other than number go up. So he comes out with this like extraordinarily bearish post about like this, he's like, he thinks that the market and like the space is in a good position for like, you know, adoption of certain things, but also he's just like extremely bearish on like all things token prices. And, you know, there's been a lot of discussion around that. And there's been a lot of discussion also around like just like microstructure, like did 10.10 and like the blowout of leverage just like completely screwed the microstructure and that's the problem. And so like, how do you think about it from like What is like structurally, fundamentally, that something wrong is happening here? Or it's just, you know, to Santi's point, like it's high risk and, you know, we're— it's a more volatile industry and like where the whole market is kind of, you know, showing signs of weakness, uh, during this, you know, kind of volatile period.

Yeah, look, I mean, this happens every cycle. Like, I think people are doomsayers at the lows always, uh, and Yeah, of course he's right on many points. Like, our industry is still relatively small compared to the broader world, world of traditional finance and payments and all that kind of stuff. But yeah, that's not to say we should be dismissive of it, right? Like, I mean, just Rob, like you and I have followed some of these trends in the last couple of years that have become like huge world-changing phenomena, like everything from prediction markets, which were broadly dismissed by the general public, you know, 5, 6 years ago as being completely irrelevant and like with no volumes and now just, you know, being plastered on every CNBC and CNN screen and grocery stores and grocery stores, everything. Yeah.

A lot of crypto bros are going to be walking into that grocery store. Yeah.

Yeah.

Got liquidated.

I mean, we've all been in space long enough. Like, we remember— like, I remember, you know, talking to, like, Arthur back in the day when he was trying to pitch BitMEX and perpetual swaps. As a tradable instrument in crypto and everyone like would, you know, was extremely skeptical. I was like, well, there's a liquid spot market. Why do we need this thing? And I mean, everything just takes years and years and decades really to play out. And we've, we've, we've all seen it happen many times in crypto. And by the way, like, I do think that all of this stuff will be an overhang in the short term. But as soon as, you know, like price leads narrative, right? We all believe that in crypto and crypto is the most reflective reflexive asset in the world. Like once price starts to turn, like all these things will pick up again and then we'll all be believers again, right? And in the tech.

So yeah, it's, it's funny because I, um, we didn't talk about this at the beginning, but, uh, you joined FalconX through an acquisition of your prior company called Arbelos, uh, which Dragonfly and myself led the investment into. And I sat on the board of your company and I remember you and I had lunch It was January of '23, I think. And, uh, uh, and like a, like a taco stand or something. Uh, and it was like right after FTX happened and we looked at each other and we were like, is this space like cooked? And we were like, no, we believe that the space is still, it has a reason to exist. Like we think that there's a lot of, you know, secular tailwinds here. We think that the technology is going to be used for tokenization and stablecoins. We talked about all this stuff back then. and you're like, I want to start a business that just, you know, is a better institutional transparent dealer than what we saw with FTX and, and otherwise. Um, and, you know, that kind of played out, and now it feels like we're having this like same exact discussion again, like, you know, 4 years later, 3 years later, um, because of how volatile the space is. I, I, I do, to your point, like, for those of us who have been here a long time, it does seem a little bit like déjà vu. Uh, it just happens with like Bitcoin being at a higher price.

Yeah. The thing that I feel like is going to be more painful is that you're seeing adoption, right? I mean, you have $10 trillion of stablecoins settling in January. I mean, that's amazing. On real utility, you're seeing a lot of enterprises, you know, we've talked about it at length here. So unlike other cycles, like we've never had this amount of adoption, like adoption's all-time high, prices are at 2-year lows or approaching 2-year lows. and that's, that's what hurts the most here. Like in a scenario of FTX, you're like, yeah, there's a lot of dumb shit that we did as an industry, you know, certain players that just, it's warranted, but now it's, it's, uh, it's harder to reconcile the adoption with the price action. Um, Josh, I want to ask you, I was thinking about this, uh, yesterday and even today, like, you know, Google posted like record earnings and it's down 6%, entire SaaS, like in a prior life I was a SaaS analyst and like just looking at that just makes me wonder about like How do markets react to new information? Like, like software as a service being totally repriced 'cause of the AI risk, right? You're taking uncertainty. If you thought a business was gonna compound at 10% a year, you feel like you can, you know, that business is durable. AI comes along and no one really still has priced. How much does this change the game for software as a service? And by the way, not Workday's not the same as HubSpot, but the market in this moment where it reads a, the quant reads a headline, SaaS disrupted by AI, runs through it in their model, adjusts the growth, and then says, oh shit, trim risk. And because it has really tight parameters. And I think a lot of it, the market's in index, like it's just passive. So you have these like violent movements in the market. I feel like the market is just becoming more violent. It's more connected, but it's more violent. And it's at this moment, like in SaaS, for instance, the market's still trying to work through like what is the implications of AI? And by the way, that might take a couple of quarters. And I think where the most amount of money is made is when you have a strong view of like, look, Snowflake and ServiceNow are not gonna go away. The market's like treating it like trash. It's not. I'm gonna put in, step in and buy. Translating into crypto, like, What are the catalysts? Like, you know, are there particular catalysts that you've seen, or people that are really smart in understanding when stuff like this happens, they just really step in? Bitcoin whales, like there's an address on Twitter that just tracks Bitcoin whales, right? And they're like, oh, Bitcoin whales, like old-time Bitcoiners are stepping in to buy. What is it in crypto market structure that you say, okay, that's a really smart buyer? Like they, And what are those guys doing right now?

Yeah, I mean, I think the smartest buyers in crypto are the crypto-native players with the deepest balance sheets, right? Like, and a lot of those are players that have been in the space from the very beginning and, you know, maybe did token sales or whatever. They accumulated huge cash balances and they pick very selective points in price action to like start accumulating again, right? I mean, I think one, one name we can all agree is like relatively smart money is like Tether, right? We, you know, we kind of follow like what they do and how they're thinking about crypto markets. I mean, they have a lot of assets to deploy into the space. I think they've— yeah, you know, I think more recently they've sort of thought about maybe diversifying their holdings across to RWA, but Yeah, those are some of the players. Like, I mean, there's others in the space, you know, like the, like the Block Ones, like those types of players who've been in the space forever and kind of seen multiple cycles. Yeah, it's those folks with like billions of capital to deploy and aren't afraid to kind of like take swings on liquid.

When you say, when you say liquid, is it historically— well, to what degree is it now just concentrated in Bitcoin? Uh, because that, you know, I think the marginal buyer for Bitcoin is stronger, and but the marginal buyer for anything else other than Bitcoin is weaker. Yeah, because it's retail, or momentum shifted to AI, and, and like, and like other instruments, maybe DAT or crypto, like crypto equities. Just trying to think about like where the marginal buyer is today where it would have been in prior cycles that would come on-chain is no longer coming on-chain.

Yeah.

Or is that just an over-extrapolation and like the, the buyer eventually comes on-chain?

Yeah, no, no, I mean, I was actually thinking about what your, your thesis around, um, software names, and I, I actually think that the story here is, um, does the availability of substitutes of substitute assets outstrip the growth in capital and liquidity, right? We can all agree there's a lot more money sloshing around because of expansion of balance sheets, central bank balance sheets, and, you know, fiscal and monetary policy across the board. I would say, does that outstrip the availability of substitutes? And when you talk about software names, what that really means is like is AI increasing the ability of companies to replace and substitute vendors with, you know, something they build with Claude, right? Or something like that. Right. For crypto, what it means is like, everyone's— there's like, you know, a million new meme coins that launch a year. Right. And everyone is, you know, there's a million— there's, you know, let's say 20 new major token launches that are sucking capital out from their competitive set every year. And, um, the question is, is that dilution? And then let's not even forget the DApps, right? The DApps, like the hundreds of DApps that launched last year as sort of like substitutes for, um, uh, deploying into the token markets themselves. Um, so now there's this mass dilution of investor attention across so many different things. And then you have a macro phenomenon like gold ripping and silver ripping. You have, you know, very compelling narratives in equities like rare earths and, you know, quantum and AI, you know, what have you, all of these sort of major themes happening that are really going to change the way global power is distributed. And all of that's just sucking attention away from crypto. So there's only going to be a handful of things that can really retain investor mindshare and So to your point, like Bitcoin has to be the one that, that wins in that category, right? It has the longevity and the ubiquity. I mean, anyone in the world can trade it now. It's accessible through every investing platform, through every sort of like mode and medium. Um, and then, yeah, and then the, you know, then the, the, the main questions are like, what is the set beyond that that can really like also have some durability through the next cycle? And it's probably things like hype with with revenue. It's, it's maybe things like ETH and Solana that have had branding, uh, and awareness around them built up over many years of market dollars and all that kind of stuff. So yeah, I think that's— but, but you're right, it's not going to— like, altcoins are fundamentally broken. We all agree on that. And, um, there's nuance there, but, but, but like, like, I, I do agree.

Like, uh, Jenny's observation is something— the reason why I started Immersion— like, we just don't have durable demand for anything other than speculation. And, um, you know, you're— so I want to brute force that by acquiring stuff, uh, and integrating the tech. But like, you know, you could also argue like, hey, how do I go along the stablecoin thesis? Rob, you think about that every day, right? I mean, you're seeing, you're seeing a ton of stablecoin interest and growth. And, uh, you know, on the private market side, like, pretty interesting startups getting funded, like Rain and stuff like that.

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I mean, I think there is, like, to the question you asked earlier, you know, is there dilution happening? I think there's no doubt about that. I mean, Josh has kind of said that, right? But there was this, um, uh, there was this Jason Choi tweet yesterday that was like showing like developer activity in like AI versus crypto. And basically, um, crypto developer activity kind of peaked right around right before FTX, uh, and has basically been kind of like down since. We had a little bit of blips or whatever. And AI developer activity has basically been straight up to the right, and they actually crossed. The more people were, you know, committing code in AI applications, and, um, the at more than crypto starting around that period of time when FTX went under. And like, I look at that from like a venture capital perspective, and like, it's very clear to me now that the marginal person at Stanford does not care. The marginal kid at Stanford does not care about crypto anymore. The marginal kid at Stanford, he cares about AI, right? The marginal developer cares about it. We've had, um, a number of like, you know, high-profile defections out of crypto. I mean, there was, um, I believe just yesterday, uh, uh, Nader, who, who was at, um, I believe he, he was at, uh, where was he at before that? He was head of growth at, at one of the big ETH protocols.

Celestia?

Uh, no, no, no, he was at, um, uh, he was at Eigen, I believe, right before this.

Yeah.

And yeah, yeah. And, you know, he just left Cognition, right? And, you know, this is somebody who has basically put his entire life into crypto for like, you know, like a decade, right? And we're seeing like a lot of that happening. And so there's dilution there and then there's dilution on the the public markets. Because, you know, all of a sudden you look at what's happening with like Trade XYZ on hype, right? And that, you know, the, you know, one day silver did a third of Bitcoin's volume. You know, all of Trade XYZ and the HIP3 markets did a third of all hyperliquid volume in a single day. Like, there's more people even who have capital on-chain trading commodities than— and that's where like retail interest is right now, because the people have been excited about these other reflexive assets. Like, the reality is, is like these retail investors sort of don't care what the asset is. They care about the reflect— reflexivity, right? And they care about leverage. And so like, if the reflexivity, the leverage is, is able to be had in commodities, like, they won't trade the meme coins, right? Like, they will trade what they think they can get, um, where they can get that. And so I think it's both the retail bid— it's happening at the private markets. I think we should talk a little bit about— there's a couple posts around like basically the death of crypto VC. We should talk about that. A little bit. And then there's, um, just, you know, now the institutional interest is, okay, well, buy and hold Bitcoin ETF. But it's, you know, maybe it's Solana, maybe it's ETH, like to Josh's point. But like, you know, you look at— I was— you look at a lot of these other altcoins and like there's— even if they have ETFs, even if they have DApps, there's not really like an institutional bid at the moment because it's not clear what that story is. And I think it's even happening— I want to make one last point, which is like I was on a board meeting this morning with, with one of our portfolio companies, and they were actually asking me around like, should we still launch a token, right? And this is a company that, um, they're, you know, in the stablecoin space, they're actively, um, have revenue, they're, uh, you know, doing hundreds of millions of dollars of monthly volume, but the story was always around being more of a protocol and having decentralizing and having a token. And they're looking at me and they're saying We don't know if that is the right move anymore for us to go like raise new venture capital. Like, should we, you know, like who is the right, you know, capital partner for us in the future? And like, should we even have a token? Is that actually bad for us? Right. Um, and I think there's Intel, I think there's a really clear story or clear reason why people think that. And there, we have to get some sort of regulatory Clarity Act type market structure bill passed that says, hey, a token can have some sort of you know, equity type or like at least going to accrue value type of, of structure for, um, we to get like a mass, like institutional type bid in a bunch of these altcoins. And I think that's the, you know, kind of what's overhanging all of this.

Well, the— I definitely agree on the, on the, you know, clarity on regulatory stuff. Josh, I think you mentioned, um, I think the market's not dumb around like, uh, let's talk about like deep inference. We're talking about, you know, with with, uh, EV3 guys and SAL. There's a whole overhang of tokens that just have codified their tokenomics, and those projects are not going to necessarily catch a bid if you have a new project launching with like a cleaner slate of tokenomics. And so if you kind of, um, look through that, you say, well, gosh, like, you know, you definitely don't want to be exposed to legacy tokens that just have broken tokenomics and need to restructure it on-chain, and maybe it's not going to be as easy and needs to pivot and stuff. There's a couple of things that you mentioned, Rob, that I think would be worth just double-clicking on. The developer interest and deflections, like it's a little bit like LP, like fundraising, right? People want to give you money when you shouldn't be investing and they don't want to give you money when you should be investing. We've talked about like fundraising is always extremely hard. It's only getting harder across asset classes. Josh, maybe from your standpoint, like, are you seeing new signups on the desk? Like new institutions come in and be like, hey, where'd that guy come from? They never traded crypto. They're coming in. Because oftentimes, like, a working theory that we've had here as a group is there's now new smart money coming in on the private markets. You have fintech investors like participate in rounds like Rain. and others that we haven't seen since pre-FTX. Uh, so clearly interest in, in, in getting behind the stablecoin supercycle. Uh, but on the liquid side, just from your standpoint, not the fast money, 'cause DApps I think were just hedge funds, like, you know, arbing away. And even the BitGo book was like very much hedge funds, like just kind of momentum driven. But are there characters that you haven't seen in a while show up? You'd be like, huh, that's interesting. That, that's, that's a very strong signal of people stepping in. Not the Tethers of the world that have always kind of stepped in and are smart money, but like just new players that you haven't seen. Like, have you seen any new player in the last 6 months that is interesting?

Yeah, yeah, we, we have, we have. It's not, it's not a complete wasteland over here. Um, so I would say this, that's not what I would suggest. Uh, I would say the, actually, this is maybe a little surprising, like the category where we're having the most constructive conversations and where we think there's actually a real path to, uh, growth, uh, in, in the business is in the banking sector. So, but this is, you have to understand, right? This is like after 4 or 5 years of conversations with major, you know, GSIBs that are now starting to move in a meaningful way. Towards setting up custody, you know, setting up like trading lines with firms like us. They want to start expanding the product set beyond, you know, just trading cash settled derivatives or CME futures. They really want to do meaningful things like putting it into their private bank portfolios and, you know, distributing it through wirehouses and RIAs and stuff like that. And I think all that took a very long time because obviously we've only had ETF approval for, what, a year, year and a half, right? And that was always on people's minds. It's going to take like, it's a sequential path to getting this stuff into people's portfolios. And now we're on that path. Like we're basically getting to the point where product sets are getting more complex. The choice and variety of things is becoming more interesting. And because the profile of the risk profile of the asset class has changed too, right? It's now no longer this sort of like, I only want upside linear, you know, it's got upside convexity, all that kind of stuff. Now Bitcoin is like, okay, well, it has had some upside convexity. It's also come in quite a bit. It's now range-bound. Maybe I want to get yield on this product. Like BlackRock just announced this sort of yield ETF on Bitcoin where they're going to sell options on IBIT, which is their own linear product. So the variety of things is just— is picking up enormously. Now, if you're talking about just like smart money in crypto, what are they doing? I don't think it's come in yet where they have started to pick the bottom and accumulate Bitcoin again. In fact, I think it's a little bit still a defensive trading posture for most of them. Like, we've actually seen quite a pickup in across the board of liquid funds trying to do spread trades. So that would be things like, you know, long Bitcoin, short alt, an alt basket. That has worked really well, uh, actually in Q4 of last year, obviously worked very well. Um, now it's starting to level off that trade, but it's still something that people are thinking about. They're being caught about asset selection and really picking what they think will be winners and being short other things against them. Now, the— and then the other thing I would say, this is like a natural evolution of 10.10, if you think about it, this migration towards like more regulated players, more exchange setups that are not auto liquidating, right? So like that was the, the crux of what happened was there's just embedded in crypto this sort of weird thing that doesn't exist in any asset class, which is like a major operational risk. Which is that if you have a flash crash, if you have an Oracle update, that's a really bad print, you could get liquidated on your entire position without any recourse and without even the ability to step in and meet a margin call, even if ample funds available somewhere else. Right. Yeah. That risk is being mitigated across the board. And I think that's a migration towards like dealers. So maybe that's kind of why you have a pickup in interest with banks and stuff stuff like that. Um, it's, it's also migration towards more transparent platforms. That could be, that could mean a CME, right? Or it could mean like, or it could also mean like Hyperliquid, right? Which is like arguably more transparent. Yeah.

I think the, there's always been a convenience premium in the space, uh, in, you know, uh, Grayscale, you could argue, you know, there's a whole slew of players that said, I don't want to take the technology custody risk. you know, can't do it, but I'll buy it. And there's a massive premium. And then, you know, got figured out to some extent and with the ETFs, but I think they're still in a state whether because Rob, as you're saying, the regulatory piece or some other thing, like there's players that are just going to continue to benefit from the convenience factor. One of the things that Rob, you said earlier that I think is just worth also double-clicking on is Like there's a pocket of crypto that has been, I mean, crypto has been in a tough spot before, you know, since 10.10. I don't know how much, Josh, you have insights into theories of 10.10 and, you know, there's a lot of interesting posts coming out of that, trying to do a postmortem, but Vitalik had a pretty interesting tweet on L2s that was kind of something that people kind of well understood and people kind of were talking about of this broken value accrual, L2 tokens haven't performed that well. Is there any, have you seen anything interesting percolate over the last 24, 48 hours around L2 tokens or just in general that, you know, is there an irrational player out there that is bidding L2 tokens? Maybe an A16z out there who just, Wants to defend the position.

Did you hear anything about L2s after Vitalik put out this post?

Did I what?

Sorry?

Oh, for Josh.

Yeah. Yeah. Uh, yeah. So there hasn't, I mean, we just haven't seen it translate into major flows in such a short period of time. Um, but yeah, I mean, we're obviously following that very closely. I mean, it's shocking just to see like, uh, What a U-turn in thinking there from the leadership. But, uh, you know, I mean, and it's also, you know, it's like one of these things. It's like price, uh, price leading narrative, right? Um, if you've got this type of, um, price action on, on ETH and on L2 tokens, it's inevitable.

Josh, what is the last time you saw real buyer interest come across your desk? And, you know, one of the major L2s. Never. No, no, he's definitely seen it before.

There's some, there's some. It's, it's not, look, I, it's not just L2. Like, I don't want to single anything out, right? But it's just like, there's not a lot of interest in going beyond, like, let's say the top 5 tokens, really, just across the board.

Let me ask you a specific question on that, right? So there's—

Rob, may I remind you that you have L2 exposure, and for the sake of my bags, your bags, and the state of the industry, no more questions of this nature. No, no, no.

I have, I have exposure to everything, number one. Um, but I, I guess the question for me is a little bit more around like, I, I guess, is there something I can pick out of this? Right. So yeah. So you don't have the, there's no interest in the L2s. Okay. Well, um, I think Vitalik basically said like the L2s should go and become L1s, like in some sense. I mean, he didn't quite say that, but like, I kind of said that. Right. And like, I think there is some story here around like, He, he even talked about the app chains and how he actually like, it kind of likes the app chains, right? And that's like something that I think people for a long time have been, um, uh, very against in a lot of ways. Like, oh, we have to be decentralized and we have to be not, um, opinionated. And I, I've long said, uh, that being opinionated as a chain is actually a very good thing, right? Because you, to now compete, you have to be able to build an actual business on top and, and we've talked about this a bunch, Santi, but like, you know, Solana runs like a business, right? Like their BD team, like their executive team, they run like a business. Ethereum doesn't have that, right? Because it's a very different type of organization.

You mean Tom Lee is not the chief marketing officer?

No, no, MrBeast is the chief marketing officer. So, uh, number one.

Not a bad—

No, but, but then there's also, so there's that story, right? But then there's also like the story of like, okay, well, like Athena did $350 million of revenue last year. Right? And now it's trading at $2 billion FDV. The token hasn't performed well. We— I, you know, we're, we're the largest investors in Athena. I love Guy. I think it's a, it's a great project. Um, and now I look at that and I'm kind of like, well, now it's actually kind of trading at like a SaaS multiple, right? And like, is it that, hey, there's no interest in these things at all? Is there no interest in these things at the multiple? Like, is there an idea that like, okay, well, things with revenue will do well over time, but they need to re-rate? Like, I'm just trying to figure out a little bit if it's just like, hey, like, people are just like closing their eyes off other than, I guess, Hyperliquid because of how much trading volume it's doing to the whole space. And it's just like, okay, well, I look at CoinGecko and there's like, here's the top 10, and like, I pick those things. Or if there's like, people are actually going down and like picking names, uh, that are like, these are actually things that deserve to catch a bid and that we want to be long-term invested in.

Well, they will. I think those investors will come back, the fundamental guys, in token, liquid token space, but this isn't the part to be doing that.

Well, that, that's something interesting you said there. This isn't the part of the cycle to be doing that. There's, there's a lot embedded in that statement, I guess. But the, I think the, again, the markets are not dumb. Um, I would say, you know, I got a lot of, a lot of heat for just coming out with like price to, you know, P/E ratios and price to revenue ratios and comparing that against SaaS stocks. Look, no metric, valuation metrics, like perfect. It helps you diagnose like certain inefficiencies in the market saying, hey, why, why is a free cash flow yield on SaaS like 4 and Amex 7? And you know, how do you make sense of that? And what's the growth? And it's just a useful comparison. I will say like on, there's certain apps like, like the L1 is in my mind just cooked. Like it's just, it's way overvalued. Like, and, and you can't justify the fees and you're just paying like for, for, it's a very lofty multiple, uh, and the value accrual is broken, but the market still doesn't care, right? I mean, like Ripple is an example. You're just probably the smartest of the L1s because it just has never showed revenue. So just keep it like that and just, you know, keep, keep selling the dream. Um, but, um, but one of the interesting things is like, if the market's not dumb, and I don't think it is, like, should we see, if you think about a pair trade, like if you want to go long middleware or long DeFi, short L1s, because like most of the revenue is actually being produced at, uh, like a, like an Athena, some deep in protocols, some, um, DeFi projects, Hyperliquids of the world. Like that's where like the real activity is and they have, you know, stronger connectivity with the user. But like, other than Hyperliquid, it's like been nowhere. DeFi, since I left ParaFi, has just basically been down only relative to ETH, with some notable, like, rare exceptions. Is there, like, is that just a generational setup that in 5 years' time you're going to get paid handsomely? Or is the market just saying, wait a minute here, I get it, but not all revenue is created equal, and this revenue is subject to speculative flows, and speculative flows are just not going to come to F. Jenny's point. It's just like, The momentum is elsewhere. It's in AI and I don't see it shifting anytime soon. So at least the L1s have brand and memetic power and just, you know, people like the convenience factor is easier. You can buy L1s, you can buy Ripple pretty much everywhere. And not everyone can buy GeoNet or Helium or Hive Map or like putting aside just the tokenomic piece.

I, my, my view is, you know, there will be a sharp dichotomy between tokens that have real ties to revenue and that mechanisms to create, you know, positive price action from that. I would say like buybacks or whatever, whatever else you have, or even just staking yield, right? Something that passes value back to holders. I don't think like my— and Rob hates this analogy when I, when I use it, it's just like I do think that this kind of like an NFT moment for altcoins generally, right? Because like most altcoins are really just like some kind of NFT. I mean, it's, it's really like a fractionalized NFT of some idea. It's like an idea is like, okay, we need this high throughput chain, right? We need something or, you know, we need like this privacy-enabled Perp DEX or something, right? It's an idea. All right. I like this idea. I want to own a piece of this idea. But unless it really generates revenue and it funnels that revenue back to the token, it's, it's broken fundamentally. And like, I don't know if NFTs will ever come back. So then why would any of these like fractionalized NFTs, which are called altcoins, come back? That I don't know. That's, that's kind of my—

Josh hates venture capital. That's what I'm hearing right now. He's decided venture capital is a bad business. As— and Josh, and you know, just so we're all clear, Josh, you two might be the two most active angel investors, maybe with like one other person that we know, in crypto history.

Okay, so like, how many investments have you made?

I, I don't, uh, I'll say this, this past few years, not many at all, really.

Was Inversion one of your last?

Yeah, it was one of the last, one of the last.

There you go.

Yeah.

Well, what I tell people, Rob, is like, yeah, I made a certainly a lot of like number of investments. It doesn't mean like number and ROI, two very different things, ladies and gentlemen.

Active can be good, but doesn't mean much if you don't produce, uh, Josh, should we, um, should we talk about like what is actually probably the biggest news in the space? this week, which is, uh, Kyle Samani leaving Multicoin.

Oh yeah.

Um, I don't know. I mean, Santi, you've known Kyle for a long time. I don't know if you have a perspective on it.

Well, yeah, look, um, I tweeted about this yesterday. I saw the announcement. Um, so I first reached out to Kyle, I think it was late 2017, early 2018. Um, I, I'm a competitive type and I saw him getting into a deal and I was like, who that? Who is this guy? Like, why did he get in first? And I was like trying to understand who this was. So I go to his site and I start reading his research and I learned a lot from it. I was like, okay, this guy is like, is clear thinking. Like anyone that can write well, I think is just a signal of first-rate intelligence. And when he is very bold, I remember having the first conversation, I'm like, I don't know if I love or hate this guy, but he's clearly thinking differently and making me think. In ways that I hadn't thought before. And back then there was a lot of like, what seems obvious now of like, you know, there was a lot of gospel in the space, but not a lot of like actual first principle thinking. And Kyle's always done that, right? There's a couple of key lines that Kyle always says is like, you know, reasoning by analogy is like very flawed, you know? And, um, he, so, so I, I, I think I was one of an early LP at least in 2018 and It's interesting because for a while there I was like, I really questioned the thesis because it, you know, it underperformed and underperformed relative to other funds. I was an investor in some other funds too. And you know, at the time I started Parafine, I'm like, you know what? Like I just, I don't, I'm not seeing it. So sort of like contrarian for the sake of being contrarian doesn't mean anything if you can't put numbers on the board. And then, and then boom, you know, he, he had done an investment in Solana and, and I think like ultimately I hedge my investing career by investing in Multicoin. So he's at some point, this guy has a higher probability of catching something that I don't, and he's probably going to see something and has very different views than I do. So it's worth kind of investing and it paid out big. That's probably one of the smartest things I ever did. And so, I mean, he, him and Tushar work very well. I think they have very different ways of thinking. I think Tushar is going to continue to run. Or B, he's not stepping down, he's going to continue at the helm. So I have immense respect for them. And I think they took it— if you're a poor— like now that I'm building Inversion, like having a partner that I've seen them interact with portfolio companies, the constant feedback that I get from founders is like, not to make this a Multicoin show, but it's like these guys stand behind and they will just be unwavering support. And that matters a lot, right? And So I don't know what he's going to do next, but I mean, incredible run. They were early in Solana, double down, stuck to it, not afraid to voice his opinions by any stretch. And it's like, I think it's like one of those rare qualities that you need to have, I think, in investing, which is especially in crypto, which is very vocal and stuff, is like, you know, you don't necessarily care to be liked and you're just in the pursuit of like the game. And like he, I think he embodies that. Um, and you know, uh, but yeah, I, I, I haven't reached out to him. I don't know what he's gonna do next. I think he's gonna stay as the chairman of Forward Industries, which is a salon. Forward Industries. I know he's been curious on other technology spaces, like, you know, he's a cri— he's a techno curious person. He, uh, though he's invested in like biotech, like that Mammoth, like DNA company, health, uh, Last time I caught up with him, he was like training for like a triathlon or something. So anyways, I don't know what he'll do next. I don't know if this is him throwing in the towel saying, look, I've had a great run. Multicoin maybe has grown to a point where he can't produce the same returns. You know, a lot of good investors have like started their own family offices and just transitioned to a different structure. I could see that. I could see him going to AI or sail under the horizon, you know, build a family or something. Great.

He's going to go to AI too, right? We can just talk about everybody at AI, even, even, even Kyle Sawani. So, um, I think there is, um, yeah, go ahead. No, I was going to say like, do you, I don't know if you've spoken with him, but, or maybe not since I haven't spoken to him since he announced, um, you know, we, Kyle and I probably speak You know, uh, I don't know, once a quarter or something. Um, I have a ton of respect for him. I think he's, um, to your point, like very curious. I think the point that you said, which is that like he's always been unafraid to be wrong, right? Or just believed he was right in the face of everyone else thinking he was wrong, which is something that I always respected a lot. I think they were probably the one other investor in the space that we felt Like, we try— we, we're very comfortable being contrarian, uh, and I think he is— he was probably the only investor I would say is more comfortable being contrarian than us, at least in my mind, right? Um, and you know, that Solana investment in Trade is probably the single best venture investment, like, you know, of maybe one of the single best venture investments of all time. Um, and so, yeah, great, great run for him. I, I do think it was interesting, there was this I actually didn't see it, but then I saw tweets about it that there was, you know, a tweet that he had put out that he got deleted that was basically like crypto is just not that interesting to him, uh, anymore, um, or hasn't been that interesting to him, uh, in a, um, in a while, and blockchains are ledgers. But, um, you know, it had me thinking again about just the thing we were talking about earlier, which is that there seems to be a lot of high-profile defects. There seems to be a lot of you know, early true believers who don't seem to be believers anymore. I think, you know, there's another post yesterday that, um, from, um, like a well-known kind of anon about like the death of crypto VC. And it just strikes me that we're in this period where even relative to like post-FTX, more people than ever seem to be losing like their conviction. Um, yeah, but at the time, adoption's working, price is not going up. Yeah, but at a time when, like, you know, I, I, we— there's an investor that I can't name but who is in a deal that we just— we have a Series C that we just led— who literally has not done a deal in crypto since 2021. Iconiq led Rain's deal, right? Like, there are— there is more appreciation for what we do in this technology in Washington, at the regulators, at— in Silicon Valley than there has been in years. And yet, yeah, yeah, maybe ever, right? And yet the— all of these crypto people, and a lot of them have become rich, and so maybe it's just like, you know, they want to do other things, or seem to be losing faith in a way that they hadn't in a long time. And I, um, and it— from— for myself, as someone who's been here a while but hasn't been here as long as either of you guys or, or Kyle was, um, it's, it's very interesting thing to see Uh, especially as I see these people as also competitors, and my competitors seem to be kind of, you know, moving in different directions.

Well, this goes back to— there's two— like, I love sport analogies, Kyle. I'm gonna have to make an analogy if you're listening.

Yeah, I never agreed with him on that.

Like, analogies, by the way, because people understand it through analogies, right? So, but Kobe Bryant, um, said something that it rings true, right? Which is when he joined the NBA, he said he understood that he was gonna win championships because he said, most of my other peers were checking out. They had signed multi-year contracts and they're, they're in cruise control. They didn't care, you know, they hedge, they're, they're set for life, or maybe not 'cause they spent a ton. And he was like, I, I did the opposite. I worked harder. I showed up at the gym twice a day. I'd stay true to discipline. 'cause I love the game and I'm not doing it. In fact, when you remove the obstacle of, I don't need to do this to put food on the table and I could, I fixed that part of my livelihood, I can play the game in its purest form and you never retire. I mean, I've seen so many of my friends in crypto since the early days that thought that all they wanted was just to make their number and then to say, That's it, man.

I did it.

And then they check out for a bit and then they want to come back. And I always tell them, it's almost like when you're in middle school and high school, you feel like you can't wait for summer break. 2 weeks in, you can't wait to go back to school because you miss your friends. And but it's hard to get back in the game and you lose relevance. You lose— sometimes lose your mind around this process. But other people have done it really well, like You know, they just develop an interest in photography, just birdwatching or whatever. Um, there's another post, uh, uh, about Djokovic who he hate— like he came to a point, like tennis I think is like a very psychological sport. And I think at one point his co— he was like, I hate this game. And his coach like reminded him of the early days of him in his childhood of like why he picked up a racket. And every time he plays a game, he now goes back to that childhood memory of like loving a whole a racket and he developed a love for the sport. All this to say is like crypto investing is extremely fucking hard. And anyone says it's easy, it's like, dude, it has so many other layers of complexity. Like liquid venture, just think about that for a minute. It's incredibly complex. And how do you value that and the cost and the security risks? And so I gotta hand it, like someone like Kyle probably is like, listen, like, you know, it's, am I getting paid enough to do this or can I just do it with my own book? I'm still gonna invest in crypto and, you know, but I just wanna do it through my own, capital base and pursue other interests. And I could see that happening, and I respect that. But Josh, as someone that has been around the space for long, you know, you've been successful, like, what keeps you in the game?

Wait, and when was your first— when was your first crypto job? 2016?

Uh, '14.

'14.

2014.

Wow. Back in the day. Yeah. Um, well, yeah, first I, I did want to say a few words on, on Kyle and, um, to Tushar. Like, I think, I mean, they're two investors in crypto I respect enormously. I think a lot of people don't know, but I mean, those two guys, both like my career and a lot of people who have worked in the trading industry in crypto, like a lot of us owe our longevity in the space due to them, you know, both because they are, you know, one of the largest active counterparties in the space, but also because they are extremely generous with their time and, you know, sharing ideas and theses. And they're always like really committed, like Rob said, to the space. I remember in, you know, post-FTX, like in '22, I mean, I think that their venture fund was maybe one of the very few funds in the space that were willing to take bets on Solana entrepreneurs, right? Like with, with Jito and a couple other deals in that time, in that era. And that paid dividends for them enormously. So, yeah, it's— and, you know, if I can— if I think back on all of my conversations with Kyle and Tushar and the team over there, like, the one thing that always struck me is their optimism for the space is always like, how can I structure this trade to be more convex, right? Like, I want to capture more upside. And it was never— it was never about hedging. It was never about downside. Risk. And maybe that's just the nature of like my dialogue with them as an options guy, but it was always, um, it was always how, how can I structure this to get more convexity? And, and then over time, right, it became like, well, the fund is this big, I need it to make an impact on the fund returns. Like, what can I do to, to, to have it be more meaningful? And maybe that's to your point too, Santosh, just like at some point, you know, you get to a certain scale, um, you've been so successful that you kind of have to sit back and think like, is, you know, if I want to make a big impact or hit a big trade, uh, how, how can I do that more effectively and maybe a different seat?

So yeah, I was looking at, uh, the, the, just on that point on, on fund size, I was looking at, uh, I think it was Sequoia India vintages and the first fund was like $68 million. It, their DPI is like, uh, 8x or 9x. Every other vintage out, like the, the AUM and I think it's 5 or 6 different funds after that, like grew an order of magnitude. So it was $600 million or so. And of course, like timing, of course, some of these funds are still harvesting or will begin to harvest, but there's a degradation in returns and a fund like Benchmark has stayed consistent in $300 million. And I don't know if that's the right number for crypto. I don't know what the right number is. But I certainly just, it's, it's the laws of physics. The fund, the larger you are, it naturally comes with a return degradation. And especially in crypto where I think the opportunity set may not be expanding as much as we probably thought over the last 7, 8 years.

Rob might disagree with that, but I do disagree with that because it just, it's more specific, right? The opportunity, the amount, the opportunities are narrower but larger.

Fair enough. Like I would, Yeah, I think you could say maybe some of these funds, their competence is not in that specific vertical. And so therefore, if you were managing $500 million for a generalist fund that invests in L1s only, or historically that, and you miss stablecoins, then, and, or you don't have fintech knowledge, then what's your edge? You're just going to underperform.

I, I appreciate you, um, continuing to, to make this an advertisement for Dragonfly.

Yeah, that's just a layup. And not just because you're our lead investor. Uh, Rob, every opportunity is, is every— everything just comes— there's— Josh, we should play a game in this pod of like, at what point does a conversation come back to Inversion or come back to Dragonfly? And like, I don't understand why people keep listening to the pause, man.

I mean, this whole podcast is an ad at this point.

Yeah, I hear it too.

Um, Josh, so you didn't, you didn't actually answer the final question and maybe we, maybe we need it. We need a little bit of optimism here, which is like, why have you stuck in the space? What keeps you excited getting up every day? Yeah, I know you don't have to go to work.

He's like, well, I had a draft tweet that was going to go out, but Kyle beat me to the punch.

He's like, he's like, I'm literally quitting tomorrow. This is my final thing I'm doing.

The, the, uh, the joke that I always make is like, I'm unfit to do literally anything else. Like, I, I've lost all of my marketable skills being in crypto for this long. Um, but I mean, the real answer is like, uh, I don't know if you guys know, but I actually did spend some time like outside of crypto, uh, post-Circle. I actually went back to work at a bank to do like some systematic equities trading, and I just realized like that market is so slow and ossified and market structure doesn't really change that much year to year. Sure, there's like exciting things that happen and pop up once in a while, but it's like once in a decade, right? Changes. And in crypto, the industry that we're in, it's like the way that we make money as a firm actually today is different than it was 6 months ago and different than— and that was different than 12 months ago. It's, it's always a new thing. It's always a new category. And I like being in seats where I'm always operating at the frontier of what's happening. And that doesn't mean we don't build like a durable business by backfilling, you know, things that are becoming commoditized with automation. But like what I want to do is actually just service, you know, the very frontier of what's happening in crypto. And that's also why I'm optimistic in the face of, you know, banks trying to build crypto practices and stuff like that. I just think that there's value in having like a nimble dealing desk trading firm that you can interact with, people that you trust, uh, that you know can give you access to things that no one else can. So yeah, that's, that's my advertisement for, uh, FalconX.

So love it. Damn, that's the advertisement for the space. Yeah. All right, well, guys, a lot of things to still be excited about.

Talked about earlier, not to, not to squash the optimism, but Look, I always, I've been playing around with Claude and I whipped up this idea that I've had for a while. Claude, Rob's like, Jesus Christ, why are you not spending all your time with him in person? I am, but in the, I did this little experiment that will be my content of the week. And I want, Josh, since you're the guest here, I want you to run through this exercise. It will take 45 seconds, but I think it forces the discussion. Rob, you and I played this game sometimes during this podcast. So I figured it would be something along the Solana Western Union trade that I'm so much up here. So Josh, you're going to answer a series of questions here, okay? And you're going to tell me which one you pick. It's like a Tinder, but like, what would you rather own, Apple or Tesla?

This is what you're spending your time on, is Tinder for equities. I got it.

You know, it's private— privates too, crypto too.

Privates too. Okay.

All right, I like this. Uh, I, I think just Tesla for the sheer, uh, uh, addressable market there.

100% correct. You're consensus. Visa or, or, or JP Morgan?

Uh, uh, JP Morgan.

Okay.

Wait, wait, the majority is coming from where? Like, what, where is this pulling from?

Uh, so, so I trained it. So it's, uh, responses. I think we've gotten like 5,000, 10,000 responses now. So it's, uh, it, it, um, got it.

So this is based on like, this is like Hot or Not basically.

Exactly. Yeah.

Yeah. Okay.

It's called FDV, of course, Fully Diluted Value, or a play on deep fucking hole.

By the way, I, I play this on the desk all the time.

There you go. So, you know, with Rob, if inversion doesn't work out, we'll just monetize this.

Yeah.

Josh, can I come and sit on the Falcon X desk one day?

A lot of people have asked, uh, for like guest passes, just sit on the desk. I, I think we should do it. We should open up.

Also, as a Falcon X shareholder now, I feel like, you know.

Yeah, Rob, okay, you can always sit behind me on a stool and grab me coffee whenever you want.

Uh, back to the game. Don't deflect, Josh. Stripe at $91 billion or Dogecoin at $16 billion? That's Crazy.

Uh, Stripe for sure.

Okay. Stripe. Good. Contrarian. XAI or Chainlink? Ooh.

Hmm.

Very different valuations.

Wait, wait, wait. Can I just say something? We, we just like brush over the fact that 75% of people that you have given this to said they'd rather own Dogecoin than Stripe.

That's skews crypto native, I guess.

That is, that is insanity. Okay.

I know.

So on this one, I mean, I think I would go XAI. Okay. Yeah.

Now especially merged with SpaceX.

Yeah, exactly.

Bitcoin or gold? The ultimate.

Uh, Bitcoin. Yeah.

All right.

This is, this is definitely crypto specific cuz the last one you just did too with, with, uh, XAI and Chainlink. Like it was like very heavy Chainlink as well. Yeah. So you got, you got like too many crypto people here, so.

Yeah.

Yeah.

Al—

Alphabet or Microsoft?

Alphabet. Yeah.

All right. It's down 6% today, I think. Silver or Visa?

Oof. Uh, Visa.

50/50.

Well, NVIDIA or AMD?

Ooh, I'm not qualified to answer. I'm just gonna say NVIDIA.

Okay.

All right. So Santi, I feel like this is like, you know, the type of podcasting we should not be doing. So like, you know, no, I don't.

Well, not, not, none of this financial advice, but, uh, but We'll run through this quick. Is it 10 more? Berkshire or gold? We'll go first.

Berkshire.

Okay. Yeah. Ethereum or gold?

Easy. Uh, ooh. Yeah, Ethereum, of course.

Oh, oh, geez. I thought you were going to say gold. I mis-clicked there. Walmart or Amazon? Got 8 more to go.

Uh, Amazon.

Okay, good. Mastercard or Visa?

This is very easy.

Visa.

Rob, you can chime in here. I feel like you're feeling neglected.

Yeah, Rob, help me out.

You can help out. Help a friend.

I mean, Visa's very clearly like innovating much more quickly than Mastercard is.

Netflix or Canva?

Ooh. I'm going to say Netflix. Okay.

Probably. Yeah, I mean, SaaS is, SaaS is, uh, Avalanche or XRP?

Rob, you're gonna have to recuse yourself from that.

I will.

I mean, this is hard. Uh, I'm gonna say, uh, I'm gonna say XRP.

Yeah, for the memes, man. Mastercard or JP?

Oh, 51% Avalanche. Nice.

Uh, JP.

Okay. Plaid or TikTok? 4 more to go. TikTok.

Okay, back to software here.

Silver or Berkshire?

Berkshire.

Well, you're still like a Berkshire stan now that you know these guys as old as they are.

A piece of America. Do you believe in America or no?

Okay, all right, I do.

Meta or Databricks?

Mm, it's a good one. Probably Meta.

Bitcoin or Berkshire? One is rat poison, the other one's not.

Wow. Uh, Bitcoin.

Okay, last one. Stripe or Silver? Easy.

Stripe.

Okay. You're a growth chaser. Mm.

Yeah.

You 60, is that true?

Yeah, of course. Aren't we all?

You matched 65% of the consensus view. Only 2 out of 20, you're against the crowd. Your risk appetite is low.

Yeah. Listen, I will tell you, I'm in a few group chats with Josh. Having seen how Josh invests and trades, I mean, we're like, listen, we're all in crypto. And so like, we're all obviously chasing some sort of growth. But there's probably nobody who talks about downside risk in any of my crypto group chats more than Josh. And who— and he does a really good job of like, he's like, oh, I'm up 30%, let me get out of this thing. Like, there's nobody else in crypto who like is like, oh yeah, I'm up 30%, let me get out of this thing.

Maybe the ability to be a growth chaser, you have to think about downside. If you truly understand downside, you can really chase growth and just, you know, go at it.

Listen, you're not as successful as Josh without, uh, being able to you know, think about, you know, both, both upside and downside.

I think Santi is a lot more successful than me, but, uh, yeah, no, I would say like this last year has been humbling for me because I think me and like other people who've been in crypto for quite some time, because the convexity is just completely sucked out of this asset class. And so it's like you do have to take profits aggressively. Um, you can't just like sit on in assets and wait for 10x. It's like you'll bleed, you know, because you'll bleed like 90% while you're, while waiting. So you'll— you may— maybe you get your 10x, but then you're back to flat. So it's, it's brutal, this, uh, this market. I have to rewire myself, truly.

All right, should we, uh, should we do content of the week?

Content of the week. I did mine, so Josh, that was your content?

What?

That's my content, man. You know, I'll send it to you so you can play in the spare time and, you know, just share it with your non-crypto friends so we can have that.

I love that. I, I also, I think you can add to that. You could have it like predict your, you know, my personality type and all that kind of stuff from there.

I'm gonna use it for, for hiring. Like, I, I think it was like the tiny guy who created like this like shrink of sorts with like Claude, which I don't know how true that is. Yeah. Um, do you, by the way, do you guys do you, I don't know if you can disclose or not, but like when you hire traders, how much of it is a behavioral interview? Cause like you, you need to like weather your emotions when you're like, you need to have a strong emotional foundation.

Yeah. Uh, it's, it's not like a, we don't have an administrator test or anything, but I spend most of my time trying to gauge people's, uh, response function to different types of stresses.

Fair enough.

Yeah. Okay.

What's the content? Oh.

Uh, one thing I've, um, it's because of all this quantum scare stuff in crypto, I've been rereading some of, um, David Deutsch's, uh, books, um, Fabric of Reality, um, that— I mean, they're very geared towards laypeople, obviously, um, but really, uh, talks about like the metaphysical implications of quantum computing, like multiverse hypothesis and stuff like that, um, and also talks about, you know, like what, what are the applicability, uh, uh, kind of the— well, how can you apply quantum computing to solve hard problems? Um, and, you know, I think we are so focused on Bitcoin, we're like, oh, this is gonna break everything, but it really only can solve like a subset of things, right, that have this sort of like exponential, um, uh, embedded into it. So, and, and, you know, the, the sort of like, uh, signature generation stuff in crypto obviously falls into that category, but a lot of things don't. So Yeah, it's kind of interesting. Um, I, I used to— I studied computer science in school, but I haven't put it to real use in quite some time, so it's interesting.

All right, Josh, you don't know this, uh, because I don't think you've listened to a ton of our podcasts, um, which you're going to change now. But the, uh, I always end up having the, like, you know, um, the fiction or, like, you know, the fun things, you know. And so, but this week It's nonfiction because it's just Olympics, Winter Olympics. Okay. Winter Olympics started yesterday. We got some curling today, some mixed doubles. We've got some ice hockey, you know, just like a curling guy.

Rob, you strike me as a guy that sits down like with a Diet Coke looking at curling all day.

Uh, listen, I will tell you, I love to have like stuff like that.

Listen, that's a market. That's where you know the state of the markets. All you need to know if you didn't listen to anything. It's like Rob is sitting there with Diet Coke watching curling.

Here's what you should know about me. Um, I like to compete. And if you, if, if we're competing at flipping a cup or if we're like throwing a stone on some ice or competing at like trading or competing at investing, I want to win. And so I like the best people in the world doing whatever it is they're doing, trying to be the best in the world at things. So I just like excellence.

So, so sorry. No, no, no, listen, that's why I picked—

I hope, I hope that is the start to this. I hope when Will cuts this, it's, I like excellence. It's just the start, and that's the, that's the front. So that—

look, I get it, man. Curling is one of those. Um, there is a— I'll cheat— um, content— there's a documentary called The Strife that, um, in Kitzbühel in Austria, the downhill skiing the amount of force these guys need to have. And I've seen them train in my gym like there's a couple of Olympians there. It is unreal the amount of power they need to have. It's a great documentary. The Strife is like that famous downhill in Austria. People have died in this, in this corner. It's a very well-done documentary. It talks about obviously the history of the Olympics, the sport. Yeah, it's pretty, pretty, pretty good. It's happening in Italy, Milan, Cortina d'Ampezzo, right?

Yeah, that's right.

Okay, that's good. We'll have to tune into that. I'll put curling in the background while I see the markets bleed. Josh, uh, thanks, man. Thanks for joining. This is a really good, really good discussion. I think it's very timely, so, uh, we should have you on.

Yeah, it's always a pleasure to chat with you gentlemen. Uh, thanks for having me.