ROUNDTABLE: Crypto's IPO Era | HYPE vs. SOL vs. PUMP | Jon & Bread

Transcript:

David:
[0:03] Welcome bankless nation back to the round table we're back

David:
[0:06] in session today the man with glutinous glutes zero x.

David:
[0:09] Bread guy good as you hey guys and today at the top of ethereum's most wanted list to john charbonneau and then of course the world's most zen degen andy8052 he is out golfing so it's just us two today bread john good to see you guys uh we ripped it with ryan shun adams uh last week but it's good to have two of the boys back in session this week i want to get this week started off with kind of just an overall vibe check there's like a lot of activity there's a lot of buzz there's a lot of engagement going around in crypto animal spirit yeah animal spirits feel present right now in the crypto industry there's two tweets that are kind of echoing around one from uh intern state of the crypto markets they say ico's are back apps are generating revenue crypto ipo going parabolic bitcoin tapping all-time highs stable coin growth with no end in sight and then bitcoin accumulation vehicles popping off left and right and then another tweet from anthem saying appetite for crypto exposure has never been higher various entities alongside sailor by multi-billions of bitcoin circle is a lot of this same thing circle ipo 25 oversubscribed 5x and open plasma 500 million dollar ico filled in two minutes play market and x integration and then also the united states government actively pursuing regulatory clarity a lot of reasons to be bullish i i feel pretty bullish about the second half of this year i feel like the second half of this year could get frothy that's not my base case but my base case

David:
[1:33] is like at least a slow grind up so i want to kind of get a sentiment check.

David:
[1:38] From you guys about what you think the next like you know second half of this year will look like oh.

Bread:
[1:43] That's tough like you know like we've all seen the structural bullishness that was in place for this to happen It went all the way back to the ETF inflows. The the loosened regulatory frameworks like just hey like there's there's appetite for this thing so like i think we've all loosely like thought directionally this would happen but in a volatile trump market like there's like the path was never going to be a straight line up i still don't think like it's not going to be just like oh just grind up from here it's going to be fine guys no like something is going to happen over the next six months that's going to scare the bejesus out of us but then we have to look back to stuff like this and go like guys we're fine like there is there is some fundamental structural stuff that like is, is bullish for us. And we need to stay aware of that. But yeah, like this has always been kind of what we were hoping for. Just like it will, it will pull up. It's just, it's not going to be, it's not just going to be a slow grind. I'm, I'm confident of that.

David:
[2:35] So I'm hearing a, neither affirm nor deny. It'll go up. I think it'll be up. I'm holding my options.

Bread:
[2:41] They're, my options are, they're expired at the end of the year. I think those are a good move, but yeah, man, I got, I know I'm going to have to white knuckle probably for a few weeks between here and there. Okay.

David:
[2:49] So you're saying by the end of this year, we will be higher than we are today. And in addition to that, there will be one of those big tweets from that one Twitter account that says like $500 billion has been liquidated from the crypto markets in the past like two hours. Of course. Of course.

Bread:
[3:03] Yeah we always get out over our skis because we're feeling this like we're rattling off lists of like guys it's a new paradigm and then like that's when everyone's like they long at the top and then i just did it last week i told you like i entered my first per position i longed at the top and my the ass fell out so like okay like you know what okay i've got to grab this thing for a little bit revisit these kind of lists and say like guys we're fine like some of these things will carry out and i think it's gonna be no

David:
[3:27] Different john what do you think.

Jon:
[3:29] I was listening to a podcast yesterday where they brought up super cycle more times than they made me comfortable, which is more than zero. Yeah, I mean, I broadly agree. If this administration is good for anything, it is good for volatility. There is going to be periods between now and the end of the year where we question everything, probably back down on the downside. I just wouldn't be surprised by that. But at the same time, the just broader setup for the space is really just great right now. Where, I mean, back on the just higher level of, I mean, where is the administration? Where are politics? The environment is just so much more positive where, I mean, we saw in the past week, I mean, like the SEC was having a bunch of the industry leaders come in and talk about the industry. Like they want to openly engage, you know, people were retuning the tweets of Paul Atkins.

Bread:
[4:15] Do you think we're represented well in those instances where they pull people in to actually have conversations? Because like, that's always been the question, right? It's like, you know, in the past we've had those conversations, but it was, you know, SPF. And it's like, ah, that actually did more damage,

David:
[4:27] Right? Right. I think we're representing incredibly well this time around.

Jon:
[4:32] I would say that we were represented very well. My partner at TPA was one of the speakers that they had at this event,

Bread:
[4:37] Michael Jordan. So you're obligated to say.

David:
[4:39] So John says, yes, we are represented quite well in Washington.

Jon:
[4:44] But it really is just an amazing tone shift to see the SEC and other regulators that are very actively reaching out to us because they want to engage, they want to get this right. And we see that in the enforcement actions, the guidance that they're giving, where last year it was they were sending enforcement actions. And the past week we were looking at the SEC tweeting out how DeFi fits in the American spirit and we want to respect self-custody for usual. That's still just a crazy shift for me to see in the past year. And on the legislative front, we're obviously seeing strong progress on the genius bills moving forward for stable coins. We'll see where market structure bill goes after that. Hopefully that gets pushed forward. But very broadly, the macro setup is there. This is being accepted as a real asset class. The framework is being built for us to actually be able to mature the industry. So the The onus is really on us to build the products that take advantage of,

Jon:
[5:29] hey, you can go build mature real products now. Like, please go do that. And I think that we are starting to see signs of that as well in the industry. And then you are seeing the institutional demand for the product as well, as evidenced by, we'll talk about this later, but the Circle IPO, which was the biggest left curve, mid curve between, you know, what was the right take on this IPO versus what was CT saying about it going in. And it's very fitting, too. I feel like I've seen a lot of tweets over the past few months or so, six months plus, where a lot of people that you talk to who speak to more institutional investors and people who are looking at crypto from the outside, large money managers and the like.

Jon:
[6:05] Versus you compare their sentiment to what is CT sentiment has just been the widest gap that you've ever seen. And I think something like the Circle IPO was very representative of that, where everyone on CT for the past few weeks was just mega bearish on this. It was like, the margins are compressing. Coinbase makes all the money on this. Like, how do you justify this valuation? And then they list it, boom, 25x oversubscribed. The thing rips 5x over the next few days. And like, here we are.

Bread:
[6:31] Do you think it's because it's so simple? Like, why was

David:
[6:34] It to pull this apart.

Jon:
[6:35] I think people really want stablecoin exposure. I think it was really that simple.

David:
[6:40] It's a narrative trade. It's a narrative play. I think we would all be in agreement that the fundamentals of the circle business does not at all justify its valuation.

Jon:
[6:50] I agree with that. And then, I mean, there's some degree of fundamentals versus what is the short-term price. If you bought the grayscale Bitcoin ETPs a few years ago, because that was the only thing that you could access and you wanted to express a bet on Bitcoin, was that a bad bet or a good bet? Depending on where you bought it, I mean, it was a bad bet in the sense that, I mean, you're paying twice what is the underlying literally worth, but you had the right macro bet and over a long enough time horizon, if that's the only way that you're allowed to express your bet, maybe that is a rational thing for you to do. As someone who is able to take much more, let's say nuanced and directed bets on, I think there's going to be a lot of stable coin growth. What are the protocols I want to invest in to profit off of that? Whether that's DeFi projects or what other early startups, I think that there are better alternatives. But the reality is for a lot of people, they do not have access to those alternatives. They don't have the sophistication or the desire to invest in those alternatives. They see this is the big regulatory stamp approved. This is the nice white listed white glove, American stable coin provider. And they're a public company. Now I can go buy this thing. Is it expensive based on comparables? Yeah, it is. But I really want exposure to this thing. And so people were going into it. I think it's that simple. is I think there's a scarcity effect that people really want stablecoin exposure. And there's limited opportunities to do that, particularly in a public markets way.

Bread:
[8:09] So I think people just really,

Jon:
[8:11] Really wanted exposure to that.

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David:
[9:55] on Ethereum, base, Arbitrum, Unichain, and more. Use Uniswap's web app and wallet for a more efficient way to use DeFi. Okay. So Circle right now is trading at $106. That's about $25 billion.

David:
[10:07] Just for reference, comped to Coinbase. Coinbase is like $65 billion. And Coinbase has like 30 or 40% of the revenue coming out of Circle, out of USDC. And so there's just a huge mismatch here. Why would Circle be valued at $25 billion when Coinbase is valued at $65? And yes, you could just be like, I don't care what it is i want stable coin exposure circle is the only thing i can do to get stable coin exposure therefore i'm going to slam buy.

David:
[10:35] To me like i can't really differentiate that between somebody being like yeah like i want to i want access to blockchain technology and you know banks running blockchain technology or the future therefore i'm going to buy ripple like the disconnect between fundamentals and actual like reality is just so large here like you're i'm john i'm guessing you're not buying circle brett i'm you're not buying i don't think anyone on crypto twitter can like justify buying circle at a 25 billion dollar valuation and so what one half of me is like well you know we all just mid-curved it because the thing to do was to clearly to buy at least in this moment of time but then i also i'll like project forward you know five years be like well will it justify itself then like like maybe we're not maybe we're not right now we're just early but then also like being early is also being wrong i don't really know how to think.

Bread:
[11:29] About it i think it's mostly commentary on just like the the size of our our ecosystem right like like one like yes we have awareness of all these these comps within the ecosystem that we can look at like tether and say like look tether is is dunking on circle in every measurable like factor and like we have awareness of it we can't get exposure to it but like we have awareness of it so it allows us to like look at it say it's not the best it's not whatever and then just like the relative capital size of players in our ecosystem to the gargantuan trad fi world like the public markets right like this could be this could be the splash on effects of just like a bunch of people in that market that just want to get exposure to it. And as Sean said, this is the only thing they can do. So it's just like, yeah, they can pump this thing to 26 bills. And like, that's not really that big of a deal to them in their market. Cause it's like that, this is what we can do. And this is like, this is the splash on effects of our, our capital size relative to us where it's like, that's a big thing. Like this is like, all of this was a crazy move and yeah, we couldn't move it quite this to quite this degree because our purchase is a small fish, right. Relative to the global markets.

Jon:
[12:32] Yeah. So one of the funny tweets I saw, someone did the math of, I don't remember the exact number, but it was basically if you take the current multiples that Circle's trading at and if you throw that on top of Tether, like, oh yeah, we get an implied valuation of like a trillion dollars or something like that. Right. Is that Rob from Zag and Fly? And so do you actually think it's worth that? No, probably not. And so I do not own any exposure to Circle right now because I can't justify the current prices based on what I think are reasonable expectations.

Bread:
[12:58] But you're not dumb enough to short it?

Jon:
[13:00] Yeah, I'm not shorting anything in crypto. I have no plans to do that at all. Like they are a great business and I wish them success. I mean, that's separate from, you know, what do I think the short term price is going to be? But even as someone who doesn't hold any of it, the sentiment has been super positive around crypto around this and as it should be, because this is a great, really healthy sign for the industry showing, hey, there is a lot of demand for this. This is something that people take seriously this is another step in the maturation process if we have another big listed public company what is this very likely to do for all of those other crypto companies that were considering going public at some point in the medium term maybe they were thinking about going public next year those timelines are probably being pulled up i saw one of the tweets was it was gemini gemini i believe they were pulling forward their timeline to looking to file there's a number of other exchanges another race

David:
[13:50] Is on to go public right now yeah.

Jon:
[13:53] This is a very clear sign that hey the market's open now for this and so that that is super healthy and really really positive for us to see and that has trickled down effects throughout the rest of the funding and startups and all the other products in crypto that are downhill of that it would be interesting

David:
[14:07] To see the price performance of gemini post ipo because gemini is an exchange so it's going to get comped to coinbase not to circle but it's circle that is the firing gun for gemini's like being okay like it's we're good to go and kraken is going to be the same like kraken's probably making similar moves and as a coin holder i was excited for circle to go live because i was hoping that that like positive valuation would blow back onto my coin bags which didn't really happen and so there's an interesting juxtaposition there of like oh yeah gemini kraken chomping at the bit to go public but their comp is is coinbase not circle and so like i don't i don't know if the market's going to give them maybe unless there's like a fresh chart premium for IPO-ing. I don't know. I don't know if that exists in TradFi. What do you guys think about that?

Bread:
[14:56] I broadly agree.

Jon:
[14:57] I think the really, really strong demand right now is for stable coins in particular. And that's the niche that Circle was filling. And so I don't think that these other ones are going to fill that exact same gap. But nonetheless, I still think it is a very healthy sign that you have just showing, hey, there is market demand for institutional grade crypto products right now. This is something that institutional investors want to be investing in now that we have all the clarity. So it's a good sign nonetheless. I agree that it would be even better if they were the third biggest stablecoin issuer to go and IPO right now. That would probably be the thing that you want to do even more. But it's a positive sign nonetheless. And how well they go will be a good indicator though of how broad this demand is and how does that bode for other crypto companies that are potentially considering. Because I assume that it's very possible Gemini or someone like them is next in line. And so we'll see what the demand there versus how isolated was this It's just too crazy stable coin demand, which is possible.

David:
[15:51] Yeah. Yeah. I mean, how many, we are six months into the Trump presidency. So like Coinbase went public 2021, really before the Biden SEC cracked down on crypto. So they just got in right before that gate shut. And then we had just, you know, four dark years. And now, you know, Trump comes in, opens up the gate, people start to go public. And now, now there's like kind of a lineup, right? So MicroStrategy also was able to finagle their way into like becoming a Bitcoin acquisition company because they were already public. But now like Joseph Lubin and SBET and like there's another Ethereum acquisition vehicle company. And now there's like Bitcoin copycats and it's like soul strategies. And now there's also a circle and then Gemini and Kraken and Anchorage and I don't know, Chainalysis, they all want to go plus. So there's a growing number of ways to get crypto exposure. Or potentially soon, maybe by the end of this year or early next year, there will be a pretty rich number of ways to get exposure to crypto in TradFi and without even having to actually to go into the crypto industry, which is kind of interesting. I'm curious as to how that market equilibrates when there's a variety of different ways to get exposure, again, even in addition to the ETFs too. And you don't even have to join the industry. You can all just do it from like robin hood or your brokerage or whatever.

Bread:
[17:07] You had me curious like obviously we all know circle and tether the two biggest or usdc and tether the two biggest coins like okay like what is the third biggest stable is is there another stable coin ipo on the horizon that we could like even like realistically look towards and there's basically nothing like this pack market caps yeah there's mark the market cap for tether and usdc are 150 billion to 60 billion the next biggest which is athena's usde is 6 billion so like the fall off is a 10x below usdc And then like, then it's DAI, Sky, Dollar, BlackRock, Builder, then even like World Liberty Financials, like U.S. dollar or whatever the hell it is.

David:
[17:41] Paxos isn't on there? Like Paxos is like a stablecoin whitelister, so it's not going to have one single- Yeah.

Bread:
[17:45] It's like an infrastructure.

David:
[17:47] Yeah. But like, it's not going to command any sort of like premium that Circle did. Okay. So question for you guys, like $160 billion of stablecoins on Ethereum and ETH BTC is like, you know, I have seen. Tribally indifferent profit maxis be posting about the ETH-BTC ratio. It's been flat for three months for the first time in two years. Stablecoins dominantly on Ethereum. We know this. But then also Bitcoin dominance is just creeping up and up and up and up. I put out this tweet, which for some reason triggered a bunch of people. Max Payne is 75% Bitcoin dominance and no altcoin season. And for the record, we are at 64% Bitcoin dominance. Going from 64% to 75% is a big move. It's like a much larger move than going from like 40% to 50% because as there's less, as there's more Bitcoin dominance, it's harder to become even more dominant. So there's a lot of people like interpreting this tweet differently, but like for some reason, I feel like there's some horseshoe phenomenon where you have like stable coins on one side and Bitcoin on the other. And when stable coin growth is big, it validates, it goes all the way back around and it validates Bitcoin. And then like the Ethereum, the pro Ethereum side of things is like, well, no, Ethereum is the stablecoin blockchain. There's $160 billion of stablecoins on Ethereum. Brad, what do you think?

Bread:
[19:08] I hate that I keep going back to this. Like Ether technology can be great for stablecoins. It doesn't necessarily mean Ether asset goes up. Like that's the problem. That's the problem. Like there's structural stuff in place that like the PSYOP Bitcoin bulls can like, people are just going to buy it because you always think there's going to be a next buyer, right? You always think the next buyer is the nation state or it's the government or

Bread:
[19:28] so whatever, someone on a treasury. Like it gives everyone confidence to buy this thing because you can peg the next buyer on that thing where it's like eth is delivering all these technical properties that are fucking awesome for stable coins right like it's great i want to have my assets there it's creditable neutral is decentralized but like i don't need to have eth the asset in order to like not in size in order to have my stable coins be settled to and transferred in and denominated in on ethereum mainnet it's like without a high velocity there and like bringing execution back to it like i think that is the the unfortunate truth is like i can say yeah stable stable coins are on ethereum that's fucking great like they belong there ethereum's awesome doesn't necessarily mean the asset has to go up yeah

David:
[20:06] Yeah there's a difference between like a stable coin exchange and a stable coin vault and ethereum i think is a very big stable coin vault and i don't i don't know how much like decks civil when decks volumes there are i mean there are definitely an ample supply but enough to generate fees. John, what do you think?

Jon:
[20:22] The perfect test case, it's kind of funny. I mean, we just debated. Ryan Berkman's had actually tweeted out, pulling out the tweet, it was a couple of days ago, of Tether makes billions a year on their ETH business, but their BTC maxi is an alt L1 launchers. Meanwhile, ETH's on track to become a multi-trillion dollar asset without a Tether bid. Let's see if Tether ends up FOMOing ETH when they see BTC as the first, but not the only special stuff. To which I replied, or they're the perfect example of why Ethereum providing value does not equal ETH capturing value. Tether is the quintessential example of they have built a gigantic profitable business, which in large part does use Ethereum with a bunch of Tether there. They use the chain obviously very, very heavily. And you can go check Powell's tweets and what is Tether holding? It's Bitcoin and gold. And so it is that still very barbell of, hey, we can use the chain, but still kind of just be Bitcoin maxis. And so where does that go in the future? If there's increasingly even more stablecoin issuance on Ethereum, is that positive for Ethereum enough? I mean, people debate this one all the time, like how positive it is for your chain if there's a bunch of RWAs on there. My gut is it's still positive.

Jon:
[21:29] It's just that we do have to realize that there is a difference in value accrual between, hey, someone puts $100 billion or whatever, some crazy number of T-bills, dollars, whatever, that's sitting on this chain, but it really is just idle capital that's not moving. Maybe a SEC has it off-chain or whatever. This is just a money market fund that someone has a bunch of money just sitting there, and the off-chain issuer is just clipping all the money versus we have a bunch of money on chain that's high velocity capital and is being traded a lot is actively producing a lot of fees those are obviously qualitatively different and do have quantitative results on you know what is the value capture for the base asset and so ethereum is more in that former camp of a lot of the capital there as it's winning in the size of capital and it's not currently winning in a lot of the velocity of capital metrics things like trading volume and a lot of user metrics and so it's definitely still positive in my mind to be winning the institutional capital and a lot of money going there but it's it's definitely not a one-to-one comparison and so looking at it simplistically i think just doesn't hold up obviously

Bread:
[22:31] I just i just like i hate that like everyone's tying winning or like success to just like raw dollars like the the price going up like that's what's like that's the the fight everyone's having right it's like it's doing great like it's service like it's doing all of these things it's servicing its purpose like it has this crypto ethos like it's doing all of that but everyone views it as a failure because price isn't going up and like unless my bags are going up like this thing sucks right like and like that's that's not the case maybe maybe there's an acceptance where you're just like and like i've talked about like the compression lower of like all these infrastructure plays like you know what maybe all these things will serve their purpose and like facilitate app growth and like all of them will kind of just like sit where they are they don't all have to go up infinitely for this to be a successful thing and like if that's a like the future of this world like maybe that's just how it's going to play out.

David:
[23:21] I think there's like two common trains of thought which will put you in two different conclusions depending on which one you are. There's one that is like, okay, In one to two years, there's going to be 10x of as much real world assets tokenized on Ethereum as there are today. And then like the ETH bull will say, and just by proxy of that, ETH will be bullish. Just by association, just like at some point, BlackRock is going to have so much assets under management on Ethereum that they're just going to want ETH by proxy of that. And people in their orbit will also just want ETH by proxy of that. You know, how much demand does that create? Uncertain. Maybe not a whole lot, but like still like 10xing real world assets on Ethereum is going to, you know, have a huge halo effect around the Ethereum brand and Ether, the asset. And that's bullish. And like, I think that's somewhat true. I agree with that. I think that's mostly true. And then there's like the John Charbonneau's, which is like, show me the mechanism for how it captures value. And if it's not there, then I'm buying Bitcoin. And I kind of understand that too. Like there are ones like a little bit of a narrative play. It's a little bit looser. It's a little bit more about belief about the network and the growth of the network. And then the other one's a little bit, no, like, no, show me, show me the burn. Show me the value accrual. I want to see the burn. And it's like, I also, I see that one. I see that one as well.

Jon:
[24:40] Yeah it's a very

Bread:
[24:41] It's just both are gonna happen

David:
[24:44] Yeah, both are going to happen. What do you think about this tweet from Deez? Deez, I consider a good faith, profit maxi, tribally indifferent trader who's in it for the vibes. He's tweeting out the ETH BTC ratio and he just goes underwater beach ball. John, when you see this tweet, what do you see?

Jon:
[25:03] The chart looks good to me as someone who doesn't understand charts at all. I remember the last time someone asked me on a panel, like, what do you do for technical analysis or whatever?

David:
[25:12] Yeah, you don't do technical analysis.

Jon:
[25:14] Drawing a line on a chart in my life and i do not intend to draw a line on a chart not what i do

Bread:
[25:19] Yeah like yeah so like i hate that i can draw lines on charts and it makes me feel smart like i can i could do it like

David:
[25:27] Hey that actually did i do feel smart when i draw a line.

Bread:
[25:29] It actually did bounce whenever i drew this thing am i good i think part of it is like a self-fulfilling prophecy i don't ascribe any of that stuff here like just because the lines there doesn't mean shit right it's all it's all like backwards looking to where like oh it invalidated of a line therefore my entire thesis changed i no longer think it's a beach ball underwater i think this thing's going to this greater center of earth right so it's like it's always going to do that so he's trying to be a little predictive here but yeah i i also still disagree that like you need structural shit like you will have the splash on stuff that you're talking about and but you like it's all about conviction that you can instill in people like that's all it is you need to instill conviction in people like john right who like he needs to see material things and you need to instill like conviction in people who are just like all vibes based and like yeah man it feels good like everyone's having a great time on the chain like i'm gonna buy it because all my homies are buying it like so you need to service all of these things it's just the the johns of the world and like i'm starting to get into this camp it was just like i'm i need to see i need to see more of of like structural stuff in place of value accrual and like it's just it's just not there the one thing i am getting starting to get a little bit pilled on and i even wrote about it i think today in the response to the debate thing is like we're talking about these nation states what like if they if everyone's going to come on chain right we have all these the hard way is that like everyone's starting to put more and more money on chain.

Bread:
[26:44] Ethereum is like the place that most people would trust their their large amount of assets to be okay cool like if you take that a little bit further and say like well smart contracts on ethereum still aren't like totally trustless and like in an adversarial environment like i don't want some i don't want tether or circle to be able to like unilaterally freeze my shit so it's like if i if i have to accumulate eth and i want to like i want to put assets on chain or if i have to accumulate assets on chain money on chain i'm going to accumulate eth because it's the only thing that like is truly like credibly neutral permissionless pristine as justin would like to say it's like it's the thing that no one has control over and i i do appreciate that outside of like maybe changing some inflation numbers periodically but that's few and far between that like that gives the scariest to some people but generally bullish

David:
[27:27] Not bearish yeah those changes yeah i pointed out.

Bread:
[27:29] I would agree yeah i would agree like minimal inflation relative to the entire market so like so then like the next question is okay what is what do we think the global appetite for something like that is going to be on the long run right if we think everyone's going to bring their assets on chain we're talking 10 trillion tens of trillions of dollars potentially okay like if you want to do that in an adversarial environment are they going to accumulate ease to sit there and hold on to it because that is the one asset across all of these chains that is like the best place to just like store your value right or to like not not have to worry about third-party risk or counterparty risk maybe but is that enough to pump the price to to valhalla i don't know yeah

David:
[28:04] Yeah i do think in the future when like central banks are our counterparties to each other that will be done on ethereum like yeah without.

Bread:
[28:15] Without a negotiation right like if north korea wants to do do a deal with like you guys like look man like that they spin up a smart contract it's publicly viewable it's like i don't want i don't want anyone to be able to intercept this shit they're gonna probably do it on ethereum like that's that that is the place where that entity has to do that thing for like some high stakes shit it's gonna take like it's probably gonna take place on ethereum ain't i can do it on base right base is going to rug me and he's going to steal all my shit it's not going to happen on on bitcoin i can't even fucking do the thing it's not programmable okay it's not gonna be solana because of whatever reason right so like now the question is like how much value is that right i don't know that's that's the

David:
[28:50] Question let's talk about hype really quick group got the hype chart we hit a 42 dollars with hype which is i believe an all-time high i was talking to a crypto twitter legend who i will remain unnamed but they said there are they're bearish soul because of how well hype is doing what do you think about that line bearish solana because how how good hyperliquid is doing john what do you think so.

Jon:
[29:16] I mean just disclosure i've said this a bunch of times before but we we own both we we own both hype and soul I think it's fair to say that Sol is definitely starting to see at least the early stage difficulties that ETH has had over the past few years, which is, I mean, the largest part of it is it's really hard to move an asset that's a hundred billion dollars plus. It takes a lot of, you really got to show me something to convince me, hey, there's a lot of upside left on this thing. And so, I mean, very simply looking at Sol and Hype, I mean, what are the metrics that you can look at? obviously one of them is just like fees generated in some form they're both like pretty comparable right now so sol's been running a bit ahead their rev relative to like hype fees really

David:
[29:58] Solana is generating as much fees as.

Jon:
[30:01] Hyperliquid is yeah they're in roughly the same ballpark i think the ballpark has usually been that sol is generating rev of like closer to actually a billion dollars annualized wow possibly a little bit more and hyperliquid

David:
[30:12] Would be running circles around them.

Jon:
[30:14] Oh, no, no, no, no. Yeah, no. Hyperliquid is still behind Sol on like actual fees to the chain. And then Hyperliquid is in the ballpark. It's usually been in the $600 to $700 million annualized. Obviously, these numbers fluctuate up. At times, Sol has been much higher, especially. But that's ballpark, I believe, where they are right now is Hyperliquid somewhere in the ballpark of like $600 to $700 million annualized. And then Solana is like closer to a billion dollars of REV.

Bread:
[30:36] Solana Rev was 1.4 bill last year.

Jon:
[30:39] Yeah, like that sounds right. Yeah, so it's in the same ballpark, but Sol is like definitely higher. And the other part that's notable on that, and this gets into the apps versus platforms point, is you look at what people are paying to Hyperliquid. It's not the Hyper-EVM that's generating still at this point, even though people are talking about it.

Bread:
[30:58] Effectively a de minimis amount of fees, certainly relative to HyperCore. The vast majority of this is at the app level. That is what people are paying for. Versus on Sol, obviously these are platform level fees.

Jon:
[31:08] This is REV. And on Solana, where's most of the money going? It's going to platforms like Pump. It's going to Axiom. It's going at the app layer. So there's certainly a lot more economic activity that's happening on Sol. It's just this Sol versus hype is very emblematic of the current big meta question of platforms versus applications. On top of them, what is actually going to be the revenue generator going forward? What is sticky? What really owns the user? So it's very much a bet on that kind of split. And I mean, even in Solana, I mean, this is why we've also been investing increasingly at the application layer, not just at the protocol layer as well, because that is where I think a lot of the stickiness is and a lot of users are going to gravitate there. So part of it is that of just, you know, do you build a first party application versus a totally general purpose platform? And then the other part is just sheer size. You know, Sol has hit 100 plus billion. And so people very naturally start looking for, okay, what's the next trade? What's the next Solana? People always want to hit, you know, what was the next Ethereum after Ethereum, you know, went at $80 that was Sol at eight. And people are saying, okay, what's the next? I'm like, you got to hit the next one. And so people kind of like are naturally always looking for that. Hype is in a relatively good position for people just like psychologically want that kind of trade. And these are two of just the big applications and platforms in crypto that just currently are successful and people are using a lot. So it's a positive amount.

David:
[32:29] Hyper Liquid right now is at $40 billion versus so long as $95 billion. So obviously still a gap, but not that large of a gap. And so I think the universal question that I'll ask as a representative of the hype sidelined tribe, is it too late to buy hype at $41, at $35 billion? Because like, that doesn't make me feel good. I feel like I'm just top blasting everyone's $10 purchase that they bought during the tariff scare.

Bread:
[33:01] It depends on what you think the the general growth is going to like the yes john is doing great at comparing like what is going on with hyperliquid fee generation versus the rev of solana but like rev was created as like a proxy to try to figure out demand for for the actual block space on solana and then like to try to like determine okay there's what's the value accrual here right there's clearly a bunch of activity going on in the chain how much of that is going back to to the native assets solana like do you apply multiple to that like you know all of this stuff whereas like 100 of this shit that's being generated on hype is like i think it's 97 of the actual fees are going to hype buyback and that's instilling a lot of conviction and then like you think about a

David:
[33:42] Dollar generated by hype revenue is worth like i don't know five ten x more than a dollar were generated by solana revenue because it just goes straight back to hype.

Bread:
[33:49] Buybacks yeah because some of that goes to like what we're gonna have the pump ico soon like so like some of that's going to the pump token eventually i'm assuming some component like some of it goes to jito some of it goes to like the the photon you know trading bot so like it gets dispersed amongst a bunch of things whereas because hype has created the the tier one application right the native app like basically all those fees go directly to just buying hype the token right so and then now it's kind of becoming a cult thing where like a lot of the actual applications being spun up on the the the hyper course or the hyper EVM side are kind of doing a similar thing. It's kind of like an honorary burn. I don't know how long that'll last because everyone's just going to profit max, but you know, it's kind of a thing. So, you know, I was top blasting the whole last like three weeks. So I bought from like 26 up to like 36 over the last few weeks. So I anticipated going a little bit higher. If you think it's going to continue to grow its moat, they're talking about like now a bunch of other, a bunch of other DeFi or not DeFi, but blockchain native applications are buying tickers and trying to do their launch on hype specifically as opposed to doing it through centralized exchanges. They're talking about, you know, doing unit to bring on much more assets. They're talking about HIP3 is the big thing that everyone's discussing lately because it allows more and more units, or not units, more and more assets to be brought on chain to be traded. So like, if you think it'll continue to grow just by it being the virtue of it being a good product and people wanting exposure to hype, then like, yeah, you can expect more revenues, we should expect more bullishness, we should expect price to go up a little bit more. That's my thesis.

Jon:
[35:17] I generally don't have a very strong opinion, usually, on value distribution mechanisms. I think in most cases, it doesn't make a tremendous difference whether you're taking in fees slash REV from users and using it to buy back and burn the token versus distribute it directly to stakers. I think there's a meaningful difference if you're redeploying it for growth, if you're taking those funds aside and using it to grow the protocol. But if you're returning it to shareholders in some form, whether it's a buyback or staking, I don't think there's actually a tremendous difference. It's just a company doing dividends versus buybacks. It's not a huge difference to me. I think the bigger difference when you're evaluating platforms versus application level fees, and this is something we've tweeted back and forth on bread, is I think the more important point to me is depending on what type of activity you're using to generate these fees slash REV, you may take a different view on how sticky those are and how much headroom they have to grow. And so you would apply potentially different multiples on them. A simple classic example would be if you looked at Ethereum fees back from a few years ago, where it was generating. I mean, the annualized run rate was, I think, crazy. It was like $20 billion a year. But where was all of that coming from? It was just a shit ton of congestion fees. It was super, super high base fees.

Jon:
[36:31] People were just like yeeting $500 to get a Uniswap trade done. Like, obviously, that is not sustainable activity that you could project forward in any reasonable way whatsoever. That's like obviously going to go away at some point. versus I would say there's a higher degree of sustainability to a general purpose platform where users are paying right now a fair amount of priority fees in MEV. And this is where Solana Value Pro primarily is right now compared to ETH. The base fees are de minimis effectively and there's a meaningful amount of priority fees in MEV. So I would say that's generally a stickier source of revenue compared to high base fees. I would say it's a little bit more durable going forward. But at the same time, apps are trying to eat into that margin too. and if there is too high a margin on priority fees and MEV, well then they'll leave and go make their own chain if they're not able to internalize it on your chain. So even that's not perfect. And then I think generally the stickiest thing is going to be if you just have a killer application that people love to use and there is a big market for that to grow into, you will put a different valuation multiple on something that has revenue that you might assess to be a lot stickier, a lot more durable, and a lot more headroom to grow. So that does make a difference in what type of platform you're looking at. What is the quality of this revenue that you're actually getting and how can I forecast that forward? So that does end up looking pretty different on a platform versus an application level.

David:
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David:
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Bread:
[39:52] Around DeFi perps.

David:
[39:53] So Dex perps, it's already at 78% market share in the Dex landscapes going from 78 to 88% is like pretty hard. And then also you're only growing that much more. Like, so like to growth is tapped out on Dex perps. So like, where does Hyperliquid even go from here? Like, how does it get any bigger than this when it's already at like 80% of market share? And like, congrats, you've won when like your number two competitor is other, like it's just the other category like you you just won you just won dexes but like you're also you're also done like there's there's no more market share for you to go to that's the bearish case for hyperliquid the bullish case is looking at hyperliquid versus binance purpose volumes where weekly hyperliquid volume i think has peaked out at 11 versus binance is 88 hopefully this uh dune dashboard is correct but if you just look at hyperliquid versus binance being like well it's only got 11% of Binance's market share. That's a whole lot of fees left on the table. It could just, if it goes 50, 50% versus Binance, it's going to 3X its fees. And all of a sudden that $40 billion, so Solana's $95 billion does look pretty like justifiable. But I think it's really a function of just like how well can Hyperliquid get Binance traders to migrate over to Hyperliquid? And why haven't they already? Like why haven't they by now? I don't really, I'm not a perp trader, so I don't really know. I don't know if you guys, either of you have any like information here.

Bread:
[41:15] Yeah so the difference or the edge that that we had at mega that like is encroaching specifically on what hyperliquid is maybe losing to some of these centralized exchanges is that the centralized exchanges are just like they're more performant right they don't have blockchain backends they don't have to deal with latency they don't deal with block times so they're very very performant and the the most that is a downstream of like needing consensus right takes time to actually like agree on something which then makes it good than true. They do some stuff to get around that. But for us, if you have, or this is L2's broadly, if you have a chain that has a centralized or a predictable block builder, then you can co-locate next to this thing. Then you can start to encroach on some of these performance numbers that centralized exchanges actually can tout. This is a comparison against GTE, which is one of our applications building on MegaEath. They're working specifically with market makers so that they can co-locate next to our sequencer so that you know the latency round trip for them to actually execute this stuff on chain if it's cheap enough is you know in single digit milliseconds right and because you can afford that stuff or because you can you can get some predictable outcomes from from the construction so like if volume is the metric that just says like these are the things we want to capture and we want to bring that stuff on chain this this is a vertical that we're actually trying to push for because hyperliquid may not ever be able to accroach on that because yeah they have they have a distributed validator set as an l1 right if you're doing that then necessarily can have a little bit of delay for achieving consensus.

Bread:
[42:40] Will they ever be able to eat into GTE because of that fallback? We are not GTE, but for Binance, because of that latency fallback, who knows, but that's the vertical that they're pushing for. So what you're

David:
[42:52] Saying is this gap between the 75% market share that Hyperliquid has on the DEX side of things versus the 9% market share that it has versus Binance, that gap is the latency of the Eiffel market.

Bread:
[43:05] Yeah, it's just saying this is volumes, right? Volumes are going to be mostly dictated by these very large players that are doing high-frequency trading, trading tens to hundreds of millions of dollars pretty consistently. And they do that stuff because there's some properties that they can count on, whether it's not too expensive for them to execute the order, they can get rid of toxic flow, they have latency expectations for interacting with the thing that is actually taking the order. And it's like, will they ever leave the confines of a centralized exchange that can say, look, bro, you can get your order on-chain for free, or not on-chain, but you can get your order in the order book on-chain, or fuck, I keep saying that, on the order book and single digit milliseconds for free like will they ever leave that environment to go to a public ecosystem like hyperliquid that it costs money to put your order on you have to deal with toxic flow for ordering like like will they ever opt into that maybe not because the performance is not going to actually really be able to keep up on the latency side with with a centralized counterpart but like maybe the middle ground becomes a construction like an l2 where you these market makers can co-locate next to a sequencer which is the block builder doesn't have consensus so you don't have to worry about

Bread:
[44:05] the delayed block time it's much more predictable environment?

Jon:
[44:08] Well, I'm going to agree with half and then disagree with half. I agree the half that matters is the centralized exchange side. I don't agree that latency is actually the determining factor here or the reason why users or market makers are primarily on these exchanges. I think the very direct risk to hyperliquid is primarily that, for example, you can imagine perps getting legalized within the US and having a regulatory framework around that in the short medium term, like there's clearly regulatory and institutional interest in that happening. And then the question is, okay, Robinhood and Coinbase have perps now. What do you use? Do you use Hyperliquid or do you use Coinbase? I, as a US citizen, do not use Hyperliquid, but if I were to hypothetically use a perps platform in the United States, in New York, I would probably have to use one that does not KYC and take my documents in the way that finance does. So you could imagine some of those users may be using Hyperliquid now, but they might go use Coinbase or Robinhood should that option present itself to them. I don't think that's a latency consideration to them. I think that's just the fact that they own the user and they're a good product and I trust them with my funds. And empirically, I mean, most users are getting their face ripped off when they trade on Coinbase and Robinhood. They're not paying these cheap fees for best execution.

Bread:
[45:20] And market makers are increasingly, to my understanding, I mean,

Jon:
[45:23] The big market makers really are on hyperliquid and it is quite profitable flow. And it's not entirely clear to me that reducing latency further based on where they are is actually going to meaningfully improve execution, particularly within the fast batches where they do have prioritized and free cancels, which does help the market makers a lot. So my understanding is like that they are trading there now, most of the meaningful ones, and they are doing well and users obviously love it. But the bigger issue to me is the regulatory clarity that comes around perps. And then you assume that all the major players who are currently being held back right now, do they come in and squish the market? Does Coinbase come in? Does Robinhood come in? And do they win the market now that that is the best available option to most users? Does Hyperliquid still have a product market fit after that?

Bread:
[46:05] Do we have a regulatory event with Hyper in the future, do you think? Obviously, you just called out the KYC not being a requirement for coming and operating on chain.

Jon:
[46:14] Yeah, I mean, this is a risk to them existing right now is that there is very unclear regulatory clarity for, I mean, pretty much all decentralized DeFi protocols. But I mean, especially someone like Hyperliquid, that obviously is not KYC and is a somewhat decentralized network. But this is all the stuff that gets into like the market structure built to have a lot of the legislation and that regulators are thinking of is what is a sufficiently decentralized or sufficiently mature network? What exactly is your definition of that that allows you to operate differently than a centralized counterparty? And that's all TBD still. So yeah, it's certainly a risk for them.

Bread:
[46:49] It strikes me as like a Tether versus Circle debate with how their approach to the market where like everyone has funded Hyperliquo specifically of like, oh, unregulated exchange, you're doing all this stuff and there's no KYC, you're going to get funded, which is like, that's what's been pushed back against Tether for the longest time. It's like, oh my God, they don't have any like audits. You can't tell who's doing what. Like there's just a lot of opaqueness to the actual system itself. But it like, because it just like asked for forgiveness as opposed to permission, it got an incredible amount of network effects and like, like, like it's all throughout the ecosystem now. I wonder if it might be similar with Hyperliquid where like they like, yeah, it's probably not like the best way to go about this thing if you're doing it by the book, but like they've undoubtedly like 75% market share, right? Like it's crazy. Like if they continue to go down that path, does it get to a point where it's just like, all right, we'll ask for forgiveness, pay some dollars, and then we're on our way. I don't know

David:
[47:37] If that's the right comparison. I think the better comparison,

David:
[47:40] because Tether hasn't done anything illegal. There's nothing wrong about Tether's business. You can call it shady and opaque, but I don't know if there's any pointing of fingers of anything actually illegal being done there. I think the much better comparison for Hyperliquid is BitMEX, which did get in trouble for violating the Bank Secrecy Act and not KYCing their users and being just laissez-faire about users on their exchange. And they were an absolutely centralized exchange. And again, all the laws that pointed towards BitMEX being illegal, I don't necessarily respect myself. I think those are bad laws that should go away, but those would be the same laws that would be pointed to hyperliquid. And so I'm not sure that the tether versus hyperliquid comparison is apt.

Bread:
[48:28] Yeah. I think it's more just like having a dollar backing every dollar on chain kind of situation where like everyone always questions of like, if you're going to be doing this thing, this is how you should be doing it. If they claim that there's someone that has a dollar for every dollar, but they had not done any proof of reserves up to this point, like that was always the FUD that I had always seen. It's just like, look, they just, like the bot would go off on Twitter where you see like oh Tether just printed a hundred gajillion dollars and it's just like did you just get a hundred gajillion like do you actually have that money

David:
[48:54] Or what's going on one trillion dollars printed at the Tether treasury yeah so like.

Bread:
[48:59] You would see that stuff and like is that like illegal like I don't know what their claims are like what all the regulations are but like it's the same tactic in my opinion it's just something that's kind of like okay like we're starting to get into a territory that's whatever but it's undoubtedly been good for their network effects

David:
[49:14] Let's get into the last topic of the week pump fun planning a one billion dollar token sale coming in a four billion dollar valuation so this is a combination of an airdrop that i think has been more or less confirmed along with a billion dollars of sales from private investors and then also sales on exchanges to like retail investors i think at an ico i'm actually a little bit fuzzy on the mechanism but this is the news that went around the the shot heard around the ecosystem I think that the reactions to this have been mixed. This is obviously very pricey. So the individuals who are able to get in into this pump sale are coming in at a $4 billion valuation. So that's already priced in pretty well. Gross is already pretty priced in. But otherwise, like the exciting thing is a pump token is confirmed. And then a pump airdrop is like all but confirmed. And so it's a pretty big moment for this ecosystem. And then there are different takes, of course, as you would imagine. Some people are pointing at this being bullish. Some people are pointing at this being like, well, this is the end. This is the top and then also other people are saying like why do they need one billion dollars for and that which is all which are a whole other thing i think the one one thing of note is.

David:
[50:21] Pump is going for a like sitting shoulder to shoulder with some very big web to gargantuans like twitch and it's going to try and be like a creator streaming platform that just has a token lot as aside with it as well as like presented front and center but it's interesting to see pump the the long term the end game for pump trying to sit shoulder to shoulder with a streaming platform which is interesting because they're really leaning into like the creator economy side of things. John, what's your take when you saw this?

Jon:
[50:50] The immediate reaction for myself, which was mostly a counter-reaction to what people were on Twitter, I saw a lot of the stories at first were quite, a lot of the reactions at first were quite funny, saying this is extractive of, oh, they've been extracting for the past year or two, and now this is their final effect.

David:
[51:03] Yeah, what do they need $1 billion for after they made $700 million in cumulative revenue? Like, that was a big reaction, yeah.

Jon:
[51:08] It was just quite funny to me. Crypto is the most, you know, we're supposed to be free markets people in the world, and then they will call it extraction on ironically when you have the most successful consumer app in crypto, which users pay willingly to use, pay them money. And then they also sell a share in this profitable protocol openly at a price that anyone can participate in or not participate in. And that's extractive. So I don't think it's extractive. I understand that obviously a lot of people don't like meme coins. I mean, my view on this has been very consistent for a very long time of,

Jon:
[51:41] I think people just really over intellectualize the hell out of meme coins. I don't think they're that complicated. They're fun. They're mostly a new form of gambling, just like be direct about that. That's cool.

Jon:
[51:50] Casinos are a real market in the real world. I mean, this is effectively the, I mean, do internet native on-chain casino as it stands right now. I mean, obviously also, hopefully this progresses into more real productive assets and stuff like that over time, but meme coins right now, and that has product market fit, love it or hate it. Like this is a protocol that has had serious product market fit over the last year, has generated a ton of money and like actually makes sense. And so just, I mean, like it's emblematic of that trend that we were talking about before again of, you know, what are the interesting areas in crypto of, you know, this progression from FAT protocol thesis to FAT application thesis. Obviously Solana and Pump are right in the middle of that, of that has been the hot chain and this has been the hot application for the past year or so. And where it's similar to Hyperliquid where it's running a comparable revenue

Bread:
[52:41] Run right to hyperliquid over the past year,

Jon:
[52:43] Like quite consistently again of, I think they generated something like $700 million over the past year, which is ballpark about like half of what Sol has been doing. So, I mean, obviously anyone can do their own, like look at the asset themselves, like everyone free to make their own interpretation, but it's not hard to see why people are like looking at Pump and interested in it as one of the very few incredibly successful applications that we have seen in crypto that has a lot of product market fit right now. And yeah, Yeah, to that point of going on and competing against a lot of Web2 incumbents, you can imagine that's where a lot of capital needs would come from. It is not cheap to go take on Twitch and Binance at the same time. You can go look at what are the top streamer contracts. You can go look them up online. They're gigantic. And they're very much aggressively going after this blend of this inevitable collision course between social and finance that is very directly coming. And they are very much right in the center of that. trying to build out the social and streaming platform, really owning the user and then financializing all of that and having the trading infrastructure around that. That's a very big vision. It's a very expensive vision to build out, which they've done a very good job at over the past year. So it's understandable what they could use the funds for.

Bread:
[53:54] You guys have $100 to allocate at Pump at $4 billion or Hype at $40 billion. How do you allocate that $100?

David:
[54:02] Oh, all into Pump. 10x cheaper, all into Pump, for sure. I don't think I think hype can do a 2x or.

Bread:
[54:10] 3x Kobe was calling for 150 today

David:
[54:13] Kobe was what? Called.

Bread:
[54:15] For 150 hype I think 120 to 150 makes sense but I don't know when or how it gets there

David:
[54:20] Kobe's very long hype that is a 4x that's a 4x and so I think Kobe's size like 4xing is pretty good but like pump if I've only got $100 I'm throwing it on the smallest market cap thing possible and $4 billion, that seems fine and a fresh new chart, you know.

Jon:
[54:40] John, what would you do? No opinion, no investment advice. Everyone do if they use their own money. I think both are great, successful applications. Like I understand the investment case that people are making for both of them. I mean, the very simple thing that you could do is go look at what are the big money makers in crypto over the past year or two. It's these two protocols, head and shoulders above everyone else at the application level. It's Sol and then maybe it's like Tron. And then you take basically a big leap down at that point. And then you have like Etheria and Sky and a number of these other protocols that are great. But I mean,

David:
[55:14] Even a lot of Solana's revenue came downstream of pump is because if you.

Jon:
[55:18] Look at the correlation, if you look back, I've seen people, people post charts about this. If you just look at the correlation of pump fee revenue over time and sole REV over time, they're very, very highly correlated, which is unsurprising. And so I think that's the interesting comparison, too, that a lot of people will make is in many ways, obviously, Solana is, at least at this stage, highly reliant upon a lot of speculative trading, a lot of meme coin activity. And in many ways, this is the clearer value expression of, you know, hey, I think that meme coin activity is a real thing. I think that this is a, you know, a actual sustainable application that people like to use. what is the right level to express that view? And PumpFun and Solana are obviously the two different layers of that, the application versus the platform layer. I think that's a very interesting comparison that you're going to see a lot of people making. Obviously, you've seen a lot of people speculating also over the past few days, you know, hey, is this why Sol is underperforming lately? If you know, are people taking that view? Very literally, where are people going to get capital from to put this in? You know, you could imagine a portion of that is going to be people who are

Jon:
[56:21] selling Sol. It's a lot of the same audience. And it's this very FAT protocol thesis to FAT application thesis trend that we're starting to play out here where people are getting very interested in the applications that generate a lot of money again.

David:
[56:33] John, Brad, it's been another week. Really appreciate you guys coming on and giving your thoughts. I always learn a lot.

Jon:
[56:38] Thanks, dude.

David:
[56:39] Bankless Nation, you guys know the deal. Crypto is risky. You can lose what you put in, but nonetheless, we are Head West. This is Frontier. It's not for everyone, but we are glad you are with us on the Bankless journey. Thanks a lot.

Music:
[56:50] Music