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Comfy Sunday Spaces v22 10/10, CZ vs Star and Metals
Recorded: Feb. 2, 2026 Duration: 1:30:52Space Recording
Short Summary
In a recent discussion, crypto enthusiasts explored significant trends and shifts in the market, particularly focusing on the reevaluation of Layer 1 blockchains, the underperformance of major cryptocurrencies compared to equities, and the growing interest in decentralized finance, especially in commodities trading. Additionally, hiring announcements signal ongoing expansion within the industry.
Full Transcription
all right guys we're letting everyone join here and we'll start in about a minute
you guys know the drill we'll go through a few different topics and uh i'm gonna be with my
co-host kyle we may do a quick q a at the end
but this will probably be a bit of a shorter one so um yeah excited to jump into it guys
give me about one minute here and then we'll get started All right, guys. all right guys we're uh we're ready to jump in here can everybody hear me
kyle mic check mic check no mic check sounds good okay sounds good kyle happy sunday
happy sunday how are you feeling? How's the market?
Yeah, it's not great.
It's been better.
It's been better.
It's been better.
It does feel like, though, we're sort of getting to a kind of level where you're seeing a change, right?
I mean, you're seeing a change online. You're seeing a change in the way people are discussing crypto. I saw a lot of people on the timeline kind of re-evaluating or sort of
capitulating on their thesis. And I think that's like a good segue for today where we sort of
re-underwrite some of the things that we think are good in the space, some of the things that
we think maybe the space has gotten wrong over the years.
Yeah, so I think kind of the overarching theme of this space is, at least from my end,
Kyle's going to cover some other topics, but from my end is definitely to re-underwrite a bit of the L1 thesis.
I put out a tweet this week where I kind of said, hey, I really think owning L1s is a very tough investment at this point,
as a lot of the reasons why, you know, maybe you were told to own L1s or some of the reasons why L1s seem to be an attractive thesis are sort of turning out to be maybe not totally correct,
or maybe touch a different surface area than was originally intended. So I put out a tweet
where I basically said, hey, I really don't think Solana and Ethereum are all that investable.
And this made a lot of people, I think, rightfully upset. These are, you know, some of the largest,
strongest holder bases outside of Bitcoin people, which sort of the entire principle of Bitcoin is
to kind of do nothing and remain relatively unchanged. And, you know, these people were, I think, rightfully upset,
where they said, hey, what do you mean this is uninvestable or this is maybe a precarious asset
to own? And I sort of, I mean, I asked the question and I genuinely use Twitter as a way to sort of like validate some ideas that I have.
And I genuinely asked the question, like, what would happen if someone like Google or Amazon decided that building an L1 was existential to their business, right? This happened over the 2010s where all of these different businesses realized that cloud businesses were existential threats and core infrastructure and a core product offering that they needed to offer enterprises.
And they all basically spun up cloud solutions.
AWS, Google, and then obviously Microsoft Azure.
Meta, not so much, but Meta was sort of focused on other things.
Tesla, not so much, but they have their own infrastructure that they've built.
So you could sort of argue that they do have their own cloud infrastructure.
It just may be primarily used for themselves.
Now, L1s have not yet been decided that they are needed or core cornerstones of a large mega cap tech company.
But that doesn't mean that eventually they might not be.
And so my question really stems from, why would a large asset manager like BlackRock
or State Street or any of these other large multi-trillion dollar asset managers
choose to use ETH. And what I mean by that is what advantages does a credibly neutral
chain where they probably don't have much ownership of, or certainly at least not 51%,
what advantages does it offer their business? I think back to a time where in
2022, I was at dinner with a bunch of VCs, and it was not yet at the point where we were kind of
heading down the downward slope. I think Bitcoin was still in the high 40s. And, you know, this guy
who was a GP at a very large fund was sort of bragging about this investment that he had made in a LLC
on the blockchain ownership company. And, you know, people were congratulating him. And I guess
it had just marked up in a recent round. And, you know, we were kind of discussing the thesis.
And I just had one simple question where I was like, hey, you know, what happens in the event of a hack?
What happens in the event that, you know, your ownership, your certificate, your tokens of
ownership of this business are on the blockchain? And then there's a security incident, which happens
frequently, most notably Bybit, which is a very sophisticated entity, was hacked for $1.5 billion.
Notably, Bybit, which is a very sophisticated entity, was hacked for $1.5 billion.
The chain functioned as normal.
The funds were eventually laundered and off-ramped.
And, you know, things kind of just went on their way,
minus a $1.5 billion deficit in Bybit's balance sheet, which they seem to have fixed.
Bybit is a, you know, massively profitable centralized exchange, as most people know. But my question really was,
okay, what if I steal, what if I wrench attack you and I own the stock certificate for your
business or the token certificate, the ownership for your business? Do I then own your business
legally? Was that ill-gotten gains? It's very confusing and very difficult to imagine that the things that these large asset
managers sort of optimize for and the things that they find important, which is ability to generate
fees, processes or software that makes their operations more efficient, allowing them to
save money internally by reducing headcount or just pushing expediency. And then third, trust and stability.
None of these things really seem like advantages
that a fairly neutral L1 gives to a large asset manager.
So again, Kyle, I'd love if you could play
maybe devil's advocate for the other side.
But to kind of recap this thesis,
I just wanted to ask kind
of two questions. Like, why do we take it for granted? As much as, you know, BlackRock is maybe
talking up ETH and, you know, I'm sure they have positions there or they have some sort of grand
thesis as to why it's been beneficial or why it would be beneficial for their business. I just
kind of have this question of like, why do we take it for granted that these people are going to come in and deploy on these L1s and, you know, ideally custody funds there or, you know, push clients to custody funds on these L1s?
Like, I just don't see the competitive advantages or additional ability to monetize in this setup where they onboard to the L1s.
And then additionally, my question regarding like Google and Amazon
was sort of like, if you are a large asset manager,
who are you comfortable doing business with?
And who has baked in equity value that significantly exceeds the market cap
of something like ETH or something like Sol, right, that you'd be willing
to sort of have something built for you or you utilize their infrastructure that probably gives
you a bit more control over your assets. For example, if there's a hack on an L1, it's not
clear that the chain would be rolled back. Those funds may be lost forever, that would be a significant hurt to the stability and brand
recognition and perceived safety of keeping your assets in something like a BlackRock ETF or
something like that. Whereas if you used some sort of hybrid permissioned L1 that was built,
facilitated, maintained, and continuously improved upon by something like Google or Amazon,
facilitated, maintained, and continuously improved upon by something like Google or Amazon,
would that not be beneficial? Again, I just want to be clear that I don't think this is great.
This is not the ideal that I had when I got into crypto at all. I'm not excited by this possibility.
But above everything, I am a trader and a profit-motivated person. And I'm just asking the question, why are people so against,
or why are people, I think,
so skeptical that if Google or Amazon wanted to dominate the space that they
couldn't?
So, so I think there's a few points there.
The first is that if there was a bit of a head fake for many years when it came to Ethereum,
because what it was indexing for was the preference set of people who were in crypto in 2016,
2017, 2018.
And that crowd had a very different set of preferences than I think the generations that
would come after, where they saw being this incredibly neutral, independent chain.
Nobody owns it.
Nobody can roll it back unless the DAO hack happens
and then everybody can roll it back.
But it's basically kind of neutral territory.
And I think they really saw this as a differentiating feature.
And so the idea was that if you leverage this as your
substrate to build upon, that created value. People would pay for that. People would look at
two otherwise similar product offerings and say, I prefer this one. And so in that way,
it's kind of baked into the product that this is a good thing to have. Now, I think what you saw is probably around 2021,
somewhere in that era, people stopped preferring that. However,
we had a second reason to continue to push the narrative,
which is that we felt like we were treading dangerous water,
that it was too dangerous to build decentralized technologies
on anything less than Ethereum, right? This was kind of like the cover your ass, like you don't
go to jail because it's on Ethereum. You can build, people can use it. You don't have to like KYC it.
It felt like the minimum necessary steps you needed, but it was nobody's preference in terms
of like engineering trade-offs right it was it was simply
like the evil that you had to put up with to make things work and then i think we've sort of torn
that wall down too in the last like year and a half and that's why i think everybody looks around
and says what what does ethereum have for me what do a lot of these kinds of chains offer me now
right you see people who are excited. Robinhood is excited
about a chain and I'm excited for what they're going to do with it. Tempo is working on a chain.
You see like DRW building out Canton, which candidly I'm associated with. But what it feels
like now is when people have a reason to go to a chain, they want their chain. And if you think
about it, I think what Hyperliquid
has done with builder codes is a really good example where traditionally you've had exchanges
that are completely cut off and there's no way to like interop with them. Like if I'm a developer,
there's no way for me to like tap into that. It sits behind a wall, that code is locked.
There's no way for me to participate other than just being a customer
and what chains do when you're a business like robin hood or your business like tempo
and stripe or any of these things is that you provide basically a very standardized foundation
and you say look i own it this is mine don't get it twisted like if there's a problem here i'll
roll it back if there's a problem here like i'll roll it back. If there's a problem here, like I'll fix it. I'm not, I'm not giving away the control to anybody, but what I'm
doing is I'm giving you like a very open standardized way that you, an entity who sits
outside of me can start interacting with it. You can build code that plays with my code.
And because it's like a standard open format, we all sort of know how these things play together.
And because it's like a standard open format, we all sort of know how these things play together.
And because there's like an explorer, some kind of way to sort of see the live action,
and you can kind of like, you know, open things up and look inside,
that allows for a lot of creature comforts, like being able to monitor your in-flight transactions.
And it sort of feels like the minimum you need to spin up like a really good dev experience.
Right.
It's like if Visa right now basically just had like an explorer for all their transactions and then gave you an API to interact directly with it, it would feel a lot like the same thing.
So I think that that's kind of got our signals crossed in the first couple of years of Ethereum, where it just so happened that the first people to show up and get excited about that technology is not representative of the whole population.
And, you know, the necessary trade-offs we use to build in like a more hostile regulatory regime were also, you know, not things that were ever meant for the long term.
So I completely agree with you. I think that a lot of these L1s find themselves in a confusing
place right now among what we see is the obvious trend of companies who want to use blockchain,
who see the upside in this like open dev experience, who would rather just own it
because the risk of a hack,
the risk of like having a critical part of your business that you don't really control
is it's tough for them.
I have a figure that I don't have on hand, but would be great for someone to figure out.
What is the aggregate market cap of DeFi protocols?
So something like Aave or SNX or Compound or Uniswap, for example,
I think would be kind of probably the most relevant one, Aave and Uniswap. And what is
the notional amount of capital that's been lost to hacks? I think it would actually be a surprising
amount of market cap, candidly, right? And that just is poor risk reward from someone who's thinking about
why should I utilize this technology, right?
You wouldn't get on board a plane
that had like a 10% chance of exploding.
It's just too high, right?
Imagine like, imagine Google reports earnings
and they're like, hey, we lost like three weeks of ad revenue.
Like somebody stole it.
Yeah, someone stole it.
No, no, no, no, totally.
So yeah, I think the big problem with me for ETH,
and candidly, like, we've been on both sides of the trade.
We've been people that were, I think, rightfully ETH bulls,
where especially in 2020 and 2021,
most people onboarded through ETH.
ETH was sort of winning the net new onboarding game,
where before, you know, in 2017, 18, 19, people come to us and say, hey, Flood, I want to get into
crypto. What should I do? I say, okay, well, download Coinbase and buy some Bitcoin. And
then they're like, now what? And I'm like, oh, well, you just kind of wait. They're like, okay.
Then in 2020, 2021, you say, hey, pull up this thing called MetaMask.
I'll send you a little bit of ETH and then go and make a swap and go and buy a funny monkey
picture or something. And that was really important because I was recommending people
to onboard and buy Bitcoin solely less and less. Then in the future, in 2023-24, the clear net new onboarding was Solana.
And I think it was a valid thesis. And one of the sharpest traders I know basically said,
I'm looking at Solana like a super high multiple, super high growth tech stock. And that was around
$30, $40 sold. And that was a completely valid thesis. But the question is, what happens
when those metrics slow down? And that is what we're seeing on Sol. And that is what we've seen
on ETH. You know, GUE is consistently sub one. And then on Sol, you know, on-chain trading volumes
have consistently gone lower. And the pitch pivoted from, hey, there's meme coins and this is great
and this is a bull market forever,
obviously impossible,
to then, oh, we're going to see equities trading on Seoul.
And I think we will.
And we will see some portion of equities trading
shift on chain.
The question is,
what will be the rate of growth of that business? And is that even
going to be something that Solana eventually wins? This sort of segues us into, I think,
what a lot of people want us to talk about again, which is HIP3, metals volume, and sort of this
like chat GPT-esque explosion moment where I think metals were listed, what,
less than 14 days ago? And volumes have exploded in the, you know, single digit billions over the
last few days. Kyle, talk to me about this sort of rate of adoption and whether this was something
that surprised you, didn't surprise you, or generally what's your kind of take on this?
Yeah, so before I do that, just to go back to the previous point,
when you think about L1 token values,
you have to think about Jordi Alexander
and this idea that he put forward about community money.
And there's something very real there,
which is when people trade on any of these chains,
so Ethereum, Solana, any of these,
there is this kind of innate preference
to use the native asset of the chain as money.
So a lot of NFTs on Ethereum are priced in ETH.
NFTs on Solana tend to be priced in Sol.
Even if you look at meme coin, like AMMs, like the pools, they all trade against Seoul. So you need this asset in
order to participate in those markets. And then the asset gets bid when those markets are fun to
trade and you know you kind of need your gambling collateral because those are the house tokens
trade. And you kind of need your gambling collateral because those are the house tokens.
and stable coins exist like they're there but for whatever reason they're always like 10 to 20 percent
at most of the total activity like there's there's nothing that says you can't just have like one soul
in your account and then always trade like you know the usdc pair and never really like swap to
solana but for one reason or another people don't have a preference for that.
They like to hold the native token.
So I think a lot of what ends up bidding or dumping these tokens
tends to be the acute need for playing these on-chain games
and its use is like house money.
That being said, if you look at what's going on with Hyperliquid,
we do, we have like, we have a new game right the game is to trade metals to trade stocks to trade all these things I think it's
you know catching fire about as hot as any game we've had in crypto the notional volumes are
enormous importantly these are all being traded against like stable coins though the denominator
the margining asset is all stables
so you're seeing a lot of value accrual to hyper liquid and i think you're seeing uh a meta that
people are very enthusiastic about but you're not seeing like any house money getting bid like it
works without a house money because stables are pretty damn good um full disclosure we respect
we have a position in hype as as everybody knows, but we have to
say, you know, please do make your own investment decisions. This is purely research.
But, you know, I will say like the most comforting thing about HIP3, or I guess the most interesting
thing for me is over the last year, crypto has significantly underperformed equities. And this is the first time that you can get some sort of equity-ish beta or exposure
in a crypto asset.
There's nothing really like it on the market.
And that commands a premium, right?
Something being unique and finding product market fit,
especially being first, or maybe not first, but having the best implementation does typically lead it to trade at a premium.
Additionally, when you have multiple diversified revenue sources, those businesses are typically looked at as more safe or more stable.
And they also command higher multiples from the market.
This is kind of like sort of the thesis
of like private equity roll-ups where it's like,
hey, we don't just do one thing, we do three.
Instead of trading at four or five times multiple,
we now trade at eight or nine, right?
Despite acquiring the businesses
for three to four times multiple.
Anyway, sorry, Kyle Kyle couldn't do it.
Yeah. And I think that's the fantastic thing about the perpetual future
instrument is that you can trade anything, right? Anything that you've got a
reliable, robust Oracle price for, you can trade it. And so I think you're,
you're seeing the natural evolution of this, which is that there's a lot of
great assets in this world.
There's a lot of really cool stuff worth investing in that I think people can get excited about.
And you're seeing it pop up on Hyperliquid. And you're seeing people that I think maybe
weren't interested in using perps to gain exposure to crypto and asset class. They're
already very indexed to sort of coming in and saying, look, this is differentiated. I don't really get this anywhere else.
I think that having crypto offerings alongside equities offerings and commodities and all
kinds of things is just, it's very exciting.
You've seen Robinhood go in the other direction where they had equities first and then they
and then they realize that they have to add crypto.
realized that they have to add crypto.
It makes a ton of sense.
It makes a ton of sense.
And I think Hyperliquid is doing a great job
of really giving us our first mainstream taste
of what it's like to trade commodities
and equities on a perpetual futures instrument.
So I think things are going really well.
I think the markets have been pretty well behaved.
I think volumes are great.
I think diversity of customers is great.
Shout out to everybody out there who's keeping these markets well arbitraged. I think it's a lot
of two-man, three-man teams out there right now kind of pulling their own capital together that
are holding these markets up. I don't think we have the really big players in there quite yet
who are making them efficient. But look, they're doing a great job and i think uh i
think everybody has a lot to look forward to i think this space is going to be very exciting
and that's where a lot of the edge comes from for those very nimble sort of trading firms
and trading pods of like talented people is you kind of saw that with solana or I guess let me rephrase this if you're a smaller trading team you have the ability
to move a bit quicker than some of these large trading firms and you have the ability but you
don't have the ability to make multiple bets just because of a human capital perspective
and I think you you if you want to really generate significant profits, you have to be right about where the puck is going
and where the growth is going
because there's no chance that you're going to beat jump
at front of book liquidity on BTC per.
It's just not going to happen.
So you have to sort of find these niche markets.
Like if you were early to token sniping,
like someone we just hired at Fullstack,
or you were early to Sextex Arb,
or you were doing a number of different things like that,
you could generate substantial returns
with a fairly low employee count.
But yeah, HIP3 is definitely one of the most exciting,
if not the most exciting thing happening in crypto right now.
It really feels like Hyperliquid
is kind of finally pulling ahead of the pack.
You even see that in the token returns over the past week since we last did our spaces.
Kyle, tell me a little bit about the portfolio update.
Have we had any major changes or anything or what's kind of your outlook?
Yeah, I mean, I think no major changes.
I think that the appreciation and the hype token so far is kind of what you expect to see.
I mean, it's fairly all weather now.
So in a regime where crypto's just got nothing fun to do, I think Hyperliquid would be by and far the best place in crypto to be to have your money.
Because it's going to allow you to take positions on a lot of assets that I think are just more interesting and a world in which crypto sort of comes back and catches a lot of interesting
narratives and there's a lot of cool markets to trade I think hyperliquid's got a place for you
too so I think it's one of these places right now where there isn't anybody who doesn't get
something out of hyperliquid other than maybe somebody who wants access to like spot equity tokens
or something like that or like NFTs or I don't know, yield products.
But I think that most people in crypto who are interested in doing like daily speculation
have basically all of their needs met on hyperliquid right now.
So I think it's exciting.
I think that's exactly correct. Additionally, liquidity has come a long way since even, you know, this time last year,
Jeff obviously put out a tweet very conveniently timed after a lot of the large
sellers were done talking about side by side comparisons with Binance.
Now, again, you know, our portfolio is very simple.
We try and hold a very low concentration of assets,
sort of like an Ackman-esque Pershing Square thesis where we really try and hold probably three to five assets
at any given time and understand those assets very deeply.
One of the assets we own is actually BNB.
This position has been reduced over the past few months for various reasons.
Kyle, I know you wanted to talk about, and I think a lot of people are excited to hear
about some of the drama and maybe your take.
Yeah.
Publicly, the two great titans of the sex game, Star and CZ, have been really going at each other.
Yeah, it's like mom and dad are fighting.
It's very uncomfortable, right?
Talk to me about that.
And what have they been discussing or alleging?
And again, nothing we say here we know definitively.
We're not equity owners in either business.
We know just as much as you guys.
Well, maybe a little bit more, but just as much as you
guys. And, you know, again, this is all from public tweets. So please, please don't sue us.
I mean, like, we've lived through like dozens and dozens and dozens of market nukes. Like every
big liquidation candle since like 2017, I think we've both been here for it. So we've seen, we've seen a lot of these, um, and you know, some of them are bigger than others. Some of them break the markets in different ways. 1010 was pretty special, um, for, for a number of reasons. And we weren't snoozing when 1010 happened. Like we had, we had pretty big positions on, right? So we had a, I won't, I won't name too many specifics, but we had a pretty big
short position on Binance when 10, 10 happened. And, you know, we saw opportune prices and,
you know, when I go to actually trade, there's nothing on the book. Like there's nothing. I'm,
I'm literally watching the price ping pong between the bid and the ask that were something like 30% away from each other.
Right? Like there's nothing there. Like literally I would see like a hundred dollar order that would
smack the top of the wall and then like another hundred dollar order that would hit the bottom.
And it would just literally ping pong between the two. And so I'm like, all right, you know,
we've got an opportunity here. This seems like the wrong price for this asset. And I start putting up orders for like $5 million just to see what would happen. Hell,
a guy can dream, right? And instantly, snap lifted. No slowly filling, no like, hey, it's
kind of like nibbling at it and there's a bunch a bunch of people. No, no arbitrage flow.
It's just gone.
Like it just vaporized, like instantly filled.
So you put up another one, bam, instantly filled.
And the market just ate like four or five or six of these.
And it was on an asset that's not like Bitcoin or ETH.
Like it, it doesn't do that normally.
So there was, there was a lot of indigestion things were violent and it
wasn't just like hey the chart looked weird like i experienced my orders getting filled in ways that
were frankly terrifying but that being said given my understanding of the situation given all the
you know telemetry that i look at and and lived through it, I don't think that the DPEG of Athena
or any of these other stable coins had like a significant role to play. I think that they
exacerbated the situation. I think having your collateral that's normally a dollar marked to like
70 cents for some fraction of the population is not great. Like certainly somebody out there got their ass kicked because, you know, their portfolio
collateral was marked down 40% or something.
But that's not like, you know, Binance has like 40 million accounts.
Like that's not most of them.
So I don't think it actually played that big of a role.
So I'll pose a question here. I think it's not that it played maybe a significant role, but was it an enhancement or did it add to additional weird wonky things?
So my, yeah, I'll pose a question here.
Because savvy, sophisticated, very active traders that maybe have a higher propensity to be levered, were holding a significant amount of USD.
I agree with you.
I don't think Star is entirely correct
that USD was the sole cause of the crash
and kind of trying to, I think,
incorrectly place the blame on Athena,
which has its advantages and disadvantages.
But I really think that when I think about it,
hey, like if you're
an active trader in crypto and you're searching for yield and you're going through things like
maybe USD was a significant amount of your portfolio and you wouldn't have otherwise been
liquidated except for the fact that USD sort of flash crashed down to 60 cents. And so,
yeah, look, it's not even like a USD thing. Like, what if Tether depegged?
What if USDC depegged? No, exactly.
USDC depegged?
What if any of these...
Or you held a liquid staking token and it depegged.
Or there was a flash crash on a spot asset,
which happened, like even a mega cap,
where it put a print of, you know, $500 on ETH
for just a second because there was a deep market sell
that made ETH spike down.
And then that was your Oracle print and you get clipped.
Entirely possible.
It's not just USDE dependent or it's just a factor of liquidity dynamics
when these things are just exploding.
My guess is like a few things here,
which is I suspect that the way in which there was nothing there,
like literally there was fuck all sitting on the books
like i mean a lot of coins like touch the zero like the the lower bound of what they're allowed
to trade at they hit so this isn't like hey like you know something got reduced or some people
backed off this is like there's nothing there And that to me happens when a trading system just halts.
It just stops, right?
Everybody knows the story of Knight Capital,
which is that they had like an algorithm run wild
and it just turbo nuked like $500 million in a few minutes
because it was just doing dumb stuff.
And so I think everybody who builds a reasonable trading strategy
has these
invariants, which are if this happened, like basically in your code, you say, here is something
that should never happen. If it happens, just stop, just turn it off and figure out what the
fuck's going on because this thing shouldn't happen. And I think that the market was fragile
because we had not seen ADLs in earnest in like years.
It had been so many years since we really had ADLs.
And then it's just so uncommon that you have your denominator asset, your stable coins,
not worth a dollar.
And I think the pinch of like a big swift move, people being forced out of positions.
So saying, hey, my position isn't what I thought it was.
And I didn't initiate a trade. Like none of my orders got lifted. And yet the API is telling me
I own a different amount of this position than I thought. And then my stable coin not being a dollar
anymore, I think just triggers a lot of invariance. Like a lot of algos just stopped. They just pulled
all their orders, hit cancel all and said, let the human restart
me and figure out what's going on. And so you had this weird like twilight zone of like five minutes
where everybody's algorithms took turns just shutting off and resetting. And I think that's
really what happened. I don't think that Binance had any like malicious intent. I think that,
you know, as they posted in their their report
i think that their apis probably suffered uh i think that anybody's apis would have suffered
given the amount of load and congestion we had at that moment but you know could they have done more
yeah they could have done more they could have had more stable apis i'm sure a lot of people
were afraid to quote because they just didn't even know like what their own book was
because the APIs weren't telling them. But you know, I don't think that there was anything
malicious here. And I don't think that the deep hegging of stable coins was even like 10% of the
issue. I tend to agree. I will just say, I think if you see a competitor growing, especially a competitor where
it's pretty aggressive retail takers, on-chain market buyers, it could be seen as advantageous
to say, what if we slow the growth of the market and we try and reset open interest and try and, I don't know, potentially create market volatility in one direction that stress tests other exchanges as well.
I don't mean any particular exchange in particular.
There are lots of crypto exchanges with extremely large balance sheets and crypto trades pretty thin over the weekend.
and crypto trades pretty thin over the weekend.
Again, this happened after Friday closed.
Again, this happened after Friday closed.
So, you know, it's not like we had ETF flows
to kind of come in and provide some stability
or anything like that.
So again, really quick for those people that are new,
Kyle, do you want to explain the relationship
between Star and CZ?
Like, is there any familiarity there?
Or, you know, for people who just joined, it's an important...
CZ used to work for Star back in the day.
And then he split off to do Binance.
So it's, you know, it's kind of like the, you know,
the underling becoming like the new master.
And so there's a bit of a rivalry there.
I don't know at a personal level kind of where things stand.
But, you know, the way they speak to each other on Twitter suggests that they keep an arm's length distance these days and there's still a bit of a rivalry.
Correct. And, you know, we've had the privilege of meeting both people and, you know, we respect what they've done.
But yeah, it's important context to know that CZ worked at OKEx.
Before it was OKEx, it was called OKCoin.
The market dynamic back in the day,
there were basically two big exchanges prior to Binance. It was OKCoin, which had a very interesting setup with quarterly futures and sort of tried perps and eventually made it work,
but it took some time. Futures used to be one of the dominant products. And then there was BitMEX.
It draws interesting parallels between actually what happened in the COVID crash and 1010,
not just the price movement and liquidity, but we actually kind of saw a loss of trust
in BitMEX when it actually went down during the COVID crash and other exchanges remained
up or performed better.
Everyone suffered performance issues during the COVID crash.
But we saw a migration from BitMEX to Binance because Binance performed exceptionally well during the COVID crash.
This was due to a number of reasons, mostly the collateral base where BitMEX was Bitcoin
collateral. Binance was moving towards a cash future perps. But again, we may see something
similar to that where market makers may say, hey, or traders may say, wow, I think the performance
of centralized exchanges generally, I don't want to single anyone out, was pretty poor. Plus, they're opaque. I have no idea if there's a balance sheet hole.
I'm not saying there is one. But again, you just have no idea. They're a black box. You have no
idea what the methodology was for the rebates that were issued to people who suffered losses.
Why did those losses happen?
What was the total gross notional loss
and how much was rebated as a percentage of those losses?
We have no idea.
The beauty of DEXs and on-chain finance
is we don't have to guess.
You know if there's a hole,
if HLP loses $30 million, right, or something,
or someone's exchange, you know,
has some sort of weird outage, and then there's a deviation in mark price, we know exactly what
was lost and how big the hole is. And we can sort of price that risk pretty acutely. But on a sex,
it's an entirely black box. Yeah. And I mean, look, you you know fortunately for us on that day we did not get
auto deleveraged which was surprising actually which is surprising right and and if we did
you know i kind of would have wondered like why why us like you know given that we were well
capitalized and not very highly levered yeah yeah exactly and it's like, you kind of, I think a lot of people are just left wondering,
like when the dust settled, why did the treatment they get, get applied to them? And, and, you know,
how did everybody else fare? Like, I think there's just like a sense of fairness of like,
explain to me why I got what I got. And I think that in the name of transparency,
I'm actually a little bit confused
as to why Binance hasn't done more.
So they released a report.
And in the report, they basically say,
look, we had latency on a particular API
that caused an issue with moving collateral around
within the exchange.
And then we had latency on another API that caused an issue with moving collateral around within the exchange.
And then we had latency on another API that was related to getting your portfolio balance
or something like that.
And it lasted for a certain number of minutes
and they put the time window and they said,
and then we rebated users a bunch of money
if we felt like this affected them.
And that's it.
That was the end of the story.
The whole report fits on like one page. It's like a memo. And it does leave me a bit
confused that everybody talks about it. Every mainstream media, Cathie Wood, Tom Lee, everybody
who goes out there and says anything says 1010 created a lot of damage.
It affected a lot of trust and it leaves a permanent scar.
And I think the problem that a lot of folks have right now is how do you know it's not going to happen again?
We don't know the details.
If Binance really dug in and said, here is exactly what happened.
Anonymize all the accounts, anonymize all the
names. But just like you have in traditional financial markets where they literally go in
and pull the tape and they say, and then this guy placed this order and that guy placed that order.
And then this guy did this. Literally all this shit. And just say, look, here is actually what
happened. And here's how we can as a community be pretty sure this is never going to happen again.
I think it would do a lot to heal a lot of the, you know, distrust, trauma, risk, whatever you want to call it, that I think is built after that.
And seeing as how they're like the big industry titan, they have a lot of like monetary incentive to make the industry kind of heal.
It's crazy to me that they haven't spent the time and the effort to do that.
Unless, you know, there's maybe something to the story we don't know.
Yeah, I mean, and I think in general, from a market's perspective,
it's always bad vibes to see two of the largest Bitcoin holders
in the entire world fighting.
I think that doesn't give people
or inspire confidence when,
you know, sort of two titans of industry
are kind of sniping at each other
very publicly and very aggressively as well.
It's sort of alleging
pretty substantial negatives
about each other's businesses.
And so anyways,
okay, Kyle, I know you had some other topics that you wanted to talk
about.
Yeah.
Let's get into that.
Sure.
I think, look, I think we've been in crime season for a while.
Crime season really kicked off like in earnest with Trump coin.
And we've kind of went through a bit of a crime regime.
And I don't know anybody who thought crime season was like genuinely bullish, but there were opportunities for sure.
Uh, but I think that crime season now is actually decidedly bearish.
I think everybody feels that way.
There was a great chart that was put out this week, which was like
the aggregate outcome of new Binance listings in 2025. And it's this chart that peaks like one
week after listing and then sharply turns down only where a year after listing, like your typical
your typical coin is down like 85% or something. They all look like this. So you get like one week, a little pop,
and then they just begin the death slide forever.
And there's two things that sort of come out of this.
One is if you listen to CZ's town hall this week,
he says, look, man, I don't make you press the buy button.
You're a big boy or a big girl.
You can look out for yourself.
If you buy and lose money, that's your fault.
Don't at me.
And it's fair.
They're not forcing anybody to buy stuff.
But at the same time, look,
you got like 300 million users on your exchange.
You list a token.
You blast out the email to everybody.
Hey, new token launched.
Everybody who's got the mobile app gets buzzed in their pocket.
Notification, new token launched. Everybody who's got the mobile app gets buzzed in their pocket. Notification, new token just launched. You know that out of those 300 million people,
some fraction of them are going to buy this thing. That's why you're enthusiastic to list it.
That's why you get the fees. That's why you can charge 5% or 10% or whatever of the token
distribution as a listing fee. Everybody knows that these users get used as ATMs
and it's just kind of a huge disservice.
I think that we as a community,
now that all tokens are finally down enough,
are getting pretty exhausted with it.
But there's some kind of moral responsibility.
I remember back in the day, like a lot of the industry titans, this is like 2017, Kraken,
Coinbase, these guys, they felt almost like a sense of duty to filter the kinds of tokens
they listed.
Because even though these days, every single listing says, hey, you can trade it, but this
is not an endorsement.
It kind of is.
And it kind of was.
And so these guys were super reluctant to list obvious trash.
And a very funny thing happened,
which is that sometimes you get six months in the market
where the trash just rips,
where everybody just bids the new trash.
And suddenly the one guy out there who is listing trash,
everybody goes to his exchange.
And so you thought you were protecting your users and being good.
And instead you just like lost customers.
And I think this meta hurts a lot of people, right?
It hurts when like shit coins pop off, like when memes and pump fun stuff is ripping and
goat is going up and mudang is going up and peanuts going up and all these coins are going up.
going up and Mudang is going up and peanuts going up and all these coins are going up.
You kind of sit there and say, look, like either, either I, you know, kill my users in a year
or they're just going to go leave and do it on somebody else's exchange.
And so it puts everybody in a tough spot.
But I think we can all agree that what's going on or what has happened just kind of sucks.
Do you have any, you have any specific altcoin thoughts on that, Flood?
Yeah, I think about an idea that,
so just candidly, I steal Kyle's tweets all the time,
but Kyle had this sort of idea at the office and he was like,
I think the listing sort of criteria
and marketing and this sort of thing like should become a lot more rigorous.
And what that would make is competition, healthy competition, pushing people towards transparency,
pushing people towards being open about vesting schedules, people having to really articulate
why their token has value,
potentially even pushing more foundations and net profitable businesses with tokens to do buybacks.
As we've seen with PumpFun and with Hyperliquid,
where the returns, those have been some of the better performing tokens
on the market, buybacks do matter.
And this would lead to a better concentration of wealth, better, more curated access for retail traders to ideally buy higher quality assets.
When you trade equities in the United States, there's a rigorous listing process that far exceeds anything we have in crypto before those products, which are securities,
are given to retail and retail has the ability to buy, right?
And this makes the returns quite higher.
We've seen crypto in aggregate
significantly underperform equity indices.
And then even our flagship products like Bitcoin and ETH and Sol
have actually significantly underperformed the indices as well
over the past two and a half years.
And so we've sort of been hit by two different effects.
One is the saturation of the market.
The retail bid and retail attention and enthusiasm
has been spread really, really thin.
And so this makes it difficult for, you know, businesses to really,
or tokens to have, I think, spectacular returns
like they did in 2017, 18, 19.
The market has gotten far more extractive
where there are all these weird ways like Celestia
for locked tokens to become available float
and hedging products through OTC desks for foundations
to be able to lock in certain prices and be able to sell their token without potentially
noticeable market impact.
And this has really led to token prices significantly underperforming.
And so it would be interesting to see a large exchange try and set themselves apart by potentially saying like
hey like we have standards crazy concept right we have standards we have even potentially like
an indice now the difference between indices and and a big spread in returns is indices have this
passive flow bid from people's retirement accounts and 401ks so returns are always going to be
flow bid from people's retirement accounts and 401ks.
So returns are always going to be different.
You know, Bitcoin and crypto generally doesn't experience this.
But it would be interesting to see like, hey, this is the index of, you know, 10 tokens,
or this is the top 50 or the top 20 or whatever you decide.
I think it would be tough to do 100 high quality products and index the returns of that sort
of blend of assets
versus, you know, the broader market generally.
Um, like, yeah, I, I had this presentation that I gave when I was doing my postdoc in
a January of 2022.
So we had lived through the 2021 cycle, but it hadn't yet popped.
Like it was gonna pop soon, but it hadn't popped yet.
And I had this presentation
that I called, Should My Mom Trade Crypto? And the whole idea was that it was kind of
like a turning point in the industry where you saw enough crap getting pushed that you
knew you couldn't just put your mom and set her up with a Coinbase account and give her
some money and just say, yeah, be a self-directed investor.
Because there are so many things that shrewd market participants can look at one of these assets and be like, look, the only reason people are buying it is because they have this game that
they play where in the short term, it might go up. But we all know that in the long term,
it's going to zero. Everybody in the room knows that except for maybe like the few people who are like
naive and they just, you know, they're like, I don't know.
People are excited about this.
Seems good.
Right.
But they don't, they don't understand like the bigger game that they're playing.
And I think if you had an exchange that kind of took that away from you and said, like,
I'm not gonna, I'm not gonna expose you to these kinds of games where you, you realistically
can't just buy it and walk
away for you.
I think it would be a great service to a lot of people.
And it's a shame that I think the incentives of the industry have, have caused that to
be a, you know, not something that anybody can offer right now.
And we may actually be sort of bit by this, you know, very profit short termism, where the net new
onboarding for people, because I think we've onboarded a substantial amount of zoomers,
and maybe like terminally online, more sophisticated types of people. But there's the
entire global populace that will spend limited amounts of time, you know, researching
assets or trading or doing anything, they just kind of want to, you know, stick a few
percent of their portfolio into crypto.
And hopefully there's material wealth appreciation there.
We may see ourselves pushing family members, people who are going to spend less time into
sort of these safeguarded walled garden exchanges sort of similar to
Robinhood to some extent.
Or I think actually, if I had to think about assets that have the best walled garden or
the best selection of assets right now, it would probably be Robinhood.
But yeah, it's Robinhood.
Robinhood is the one who's like done it right.
Like our own industry titans have kind of fucked it up.
Correct.
Robinhood is like the only place I could tell people to go.
Correct.
But I think the level of professionality and seriousness for,
and rigor for what assets actually get included in the platform
is actually going to, again, give some competitive advantages
potentially to IVKR and Schwab,
where they're not going to list funny money dog token, right?
They're going-
You know what would be hilarious?
Flood is, what if you kind of rated each exchange by the average return of all the
tokens at least totally.
And you, it just like you go and you say like, oh, what is like Coinbase is rating this
year? And you say, oh, Coinbase is like a negative 47% exchange, but Binance is negative
52%.
Exactly.
Like, and you just say, look, you know, if you, look, what makes a good exchange?
Like, yeah, okay, I got like competitive fees, tight spreads, maybe my UI is sick.
But what about like that number, like the average return of the sampling menu that you
give your customers?
Like that would be a sick metric.
And again, having your customers make money is a good thing as an exchange.
It may not necessarily, it'll grow your AUM, obviously.
Exchanges are also, unfortunately, optimizing for turnover.
But I'm actually really excited to see IBKR and Schwab's crypto offering.
There's been rumors that Schwab is going to list BTC and ETH zero-fee spot.
So for native assets, IVKR,
I actually tested this over the past week.
You can actually deposit with stable coins.
It's going to be really interesting to see
what happens with these platforms.
I'm not excited about these platforms winning
and eating our industry.
I actually think I would like to see some upstarts,
ideally, and some wealth compounding go into something
where it's not owned by boomers and has been for like 40 years.
You know, I just don't own enough IVKR Schwab equity
to really root for them.
But yeah, I think it's great.
And I think also one of the things that we kind of forget at times is,
you know, the rake is really high in crypto.
To trade equities as a retail trader, it's free through payment for order flow.
We'll eventually see that in crypto.
It seems logical.
It seems like a no-brainer. with maybe different business philosophies and potentially optimizing for long-term compounding
or servicing a different subset of users
may actually end up having potentially better results.
As there are returns from crypto,
there have been as a whole over the last decade.
It's just been a tough few years of performance in crypto generally.
Binance, I want to actually go back for one thing.
Kyle, so tell people about the BitMEX research project
that you did.
And I think it's one important thing
in terms of the internal desks at these exchanges.
Tell us a little bit about that
and what occurred on BitMEX.
So the BitMEX research project I did back in most of the work I believe was done in like
2019, 2018, 2019.
This is actually how we met.
Yeah, it's actually how we met.
It's a funny story.
But BitMEX took only Bitcoin.
So it's Bitcoin in, Bitcoin out.
It was just completely Bitcoin driven exchange.
And so when you registered in an account there, they would give you a vanity
address and they would tell you, okay, deposit Bitcoin in here. We'll take one block confirmation
and then we'll credit you and you can trade. And then when you go to withdraw, what they'll do is
they will take it from your account first. And if you've made money, then they will go ahead and
take the rest of your withdrawal
and process it from somebody else's account who's been unprofitable. And if you've lost money,
then somebody else will be withdrawing from your account. And so it was this cool way where you
could see what like net unique users were, who was being profitable, who was unprofitable. You
could do clustering like outside of bitmex and see that
one account was actually depositing to like many other addresses so like one guy might own 10 bit
mex accounts and you know we were able to uncover who like spoofy was and a bunch of these cool
characters um and and so i think what you're referring to, Flood, is the story of what Binance did in COVID times, right?
So there is a user who would routinely deposit money to BitMEX.
And they would, you know, it would typically be like 300, 500 Bitcoin, something like that.
And then it looked like as soon as they would deposit the money, you would see a BitMEX order pop up where they'd crank this thing on like 10 turns of leverage.
They'd rip like a 5,000 Bitcoin long or 5,000 Bitcoin short.
They'd hold it for like two, three days and then they'd unwind it again violently and then withdraw.
And it was just like this one user who would come and do this maybe every like 20, 30 days.
And this created a lot of barts on the chart. It was just like this one user who would come and do this maybe every like 20, 30 days.
And this created a lot of barts on the chart.
It was like a barting pattern because literally it's just one guy ripping like a 5,000 Bitcoin long,
taking it off and then withdrawing. Always withdrew all the funds immediately once the trade was over.
Never held any money there.
So then just before COVID really kicks in, we're talking like maybe two weeks before it goes super mainstream.
They deposit 20,000 Bitcoins and they go short.
They go short big.
They go short probably about 80,000 Bitcoin total, I guess, about 4x levered.
And the market falls apart.
And their withdrawal from that account yielded a profit of 68,000 Bitcoins.
So they showed up, they shorted the whole thing, and then they withdrew 68,000 Bitcoins of profit at the end.
And the reason that you can be confident that it's Binance and not like some user on Binance, some guy who trades out of Binance,
is that when they withdraw the money, they don't send it to a customer
deposit account on Binance. They send it to the fucking hot wallet. This money was getting sent
to the Binance hot wallet. And so for those of you who understand exchanges, you can't deposit
to the hot wallet. The exchange has no way of crediting your account. When you deposit to an
exchange, they create a special account so that when it receives money they know whose account to associate it with if you send it to the hot wallet it could be anybody and so when they
send 68 000 bitcoins to the finance hot wallet you you know it's them like it can only be them
so they they uh you know they didn't really have their futures products spun up at the time
and so they were using bitmex to probably hedge a number of things.
Or maybe they were directional.
I don't know.
But yeah, very interesting.
Very interesting.
Most profitable trader on BitMEX by far.
By far was Binance.
Or again, we have no 100% confirmation.
But this is all on chain and you can go back and verify it for yourself.
Kyle, you should eventually put out a thread sort of detailing this. I don't think you ever have. But luckily, anybody can go
back and validate or reference or see for themselves. That's one of the beauty of blockchain,
right? I mean, it's actually so fantastic that you don't have to take our word for it. I always
find it so funny when I'm on a date and, you know, crypto comes up or something. I try not to bring
it up, but they're like, isn't it for money laundering?
And I'm just like, oh my God, no, it's not.
It's actually the worst thing you could use for money laundering
because it's recorded forever.
Anyways, okay, Kyle, is there anything else you want to cover here?
Yeah, guys, be careful who you date, right?
I think Justin Sun's son's down
i i don't really know what's going on over there also one of the greatest traders in crypto's
history justin's son as much as he's silly and goofy and spends 20 million dollars on bananas
um his on-chain trading desk was by far the most profitable, I think, other than Alameda's.
Crazy profitable.
Crazy profitable.
And he's absolutely crushed it in terms of market timing,
especially flipping between ETH and BTC positions.
Okay.
He's got very, very sharp acquisitions.
I think a lot of people saw he bought Poloniex
and then kind of shut it down and scratched their heads.
But it's actually such an insane trade because a lot of these exchanges that used to operate
in a no KYC era and then flipped KYC gated all of the accounts that never KYC'd.
So there's like this little like pocket of crypto sitting there just like kind of untouched
and they vampire it they
charge you like a like a custody fee and he worked out the math on kobe and poloniacs and realized
that like the exchange is willing to sell for like less than the value of the crypto that's
obtainable off the balance sheet like these are like 200 iq plays and he has the capital and the gusto to like do it.
Like he's forever a legend.
As long as you were willing to take
the litigation risk. I know
BitMEX had a bunch of dead accounts and they just
ended up charging them AUM fees
for not doing KYC which is probably
a more kosher way of doing it.
And then additionally
like you know all of these exchanges
with the rounding where you can't sell under a minimum lot size and you end up having,
we've all experienced this, there's like 83 cents.
Well, when you have hundreds of millions of dollars of accounts,
that's a non-zero amount of capital just sitting on the exchange.
That'll eventually be theirs when they shut down.
Okay, I do want to say one thing about metals, just for context.
I got a few DMs as people hoping we'd talk about HIP3 a little bit more. We obviously talked about Hyperliquid a lot. We have a position. But we do try and stay as intellectually rigorous as possible as that's the only way you can, I think, consistently outperform the market.
So I have some figures from Friday where obviously metals traded the highest derivative volume ever.
By the way, market makers must be making an absolute killing, especially people trading options.
One reason why perps are much better than options, simplicity, aggregated liquidity, much better product for retail to trade where they're not getting ripped apart by spreads and implied volatility spikes.
But CME traded a reported $130 billion, a little bit more
of derivative volume. Hyperliquid, specifically Unit or Trade XYZ's HIP3 silver market traded
about $3 billion. This is actually, which is crazy to think about, in under 10 days, single digit percentage of global metal derivative volume on a decentralized exchange.
It really is a zero to one.
But there is one caveat, and it's as hyperliquid grows larger, it's something that we won't be able to ignore.
Trading crypto derivatives is one thing, where right now under
the current regime, they're not securities. Commodities are not securities either, but
commodities are regulated, right? And this is one thing to always be aware of is, you know, you have
to continue to re-underwrite your thesis. Just to clarify, I am pro-freedom of transacting. I'm very much a libertarian. But when you're re-underwriting an trading, especially when it's a significant amount
of the global market's volume,
a good or a bad thing?
I think it's a good thing.
I'm obviously biased.
But I genuinely do believe
in one of the reasons why I got into crypto
was I believe the freedom to transact
is an inalienable right.
I think even sanctions, although I have to obey them as an American citizen, are pretty bad
because actually they disproportionately hurt the general populace in those areas
that didn't choose to be born there. Obviously, there are other reasons why we sanction nations
and that may be valid or invalid for other people's reasons.
I don't want to get into it, but there are going to be questions. You are probably going to see
hyperliquid in the news and there's going to be hopefully thoughtful, but definitely I think
inflammatory discussion around, is it good for finance for a significant portion of volume to occur on a, they are going to say this, an unregulated exchange.
If you believe in crypto,
and if you're passionate about the same ideals
that Kyle and I have and people on our team have,
it's important that you educate people
as to why this is not necessarily a good or a bad thing.
It just is, right?
Tech and modern finance is going to continue pushing in very interesting ways.
It's an inevitability that decentralized applications will sort of reach parity with centralized applications.
But, you know, we have a substantial amount of education that needs to be done on why hyperliquid is important and ideally, arguably, a net positive.
But it does call into question,
you know, hey, like, is this good?
And I don't know the answer.
It's obviously important.
There's demand for something.
We're fulfilling a market need.
But it is more of a philosophical question of like,
hey, you know, what does this mean
for the future of finance unironically?
Yeah.
And I think it's like a very defensible case I think that commodities are one of these things where you know there isn't there
isn't like an acute level of insider knowledge on commodities right it's just kind of like it's a
rock which kind of sits there maybe you you you know about a particular like mining stock or something,
but that's a security.
The rock itself, the gold or the silver or the copper
is not something that you would typically think of somebody
as having an inside information on.
Additionally, I think the classification of derivatives
or even non-derivatives,
you know, it's like if you go out
and you just buy a bunch of spot gold,
that's not, that's just, you know,
that's not a regulated transaction.
That's just a trend.
You know, you go to New York,
you go to the Diamond District
and buy a couple of gold coins.
That's, you know,
I don't see how these things are fundamentally different.
I think that things will be fun.
But I think that it'll be important and it'll get a lot of discussion.
I think you're seeing Hyperliquid pop up on a lot of radars.
I saw Kathy Wood talking about it.
I saw, I think, a lot more people who are in the TradFi world
sort of appreciating and respecting the role that hyperliquid now plays in the
greater financial landscape.
It's one of the only things performing well in this market.
So if you're going to pay attention to crypto, you're going to sort by, hey, what's actually
going up or what's actually gaining users or net new deposits.
Okay.
Kyle, how are we feeling on time?
You want to do a Q&A or shall we cut it here?
Yeah, let's do like two, two or three.
We'll do two or three questions.
We're out of topics.
Please keep them respectful as always.
You guys are always great.
We'll start with Beef.
All right. He's connecting there we go beef the floor is yours what's going on guys uh long time listener flood you know you're a legend dude so happy that you
guys invited me to come up but i did hear a a couple things Kyle said, and I guess I just wanted to make sure you guys didn't miss it.
As far as spot equities on Hyperliquid,
Felix actually partnered with Ondo Finance to start doing that.
And then there was also, like, mentioning NFTs.
Like, if we go back to the Genesis AirDrop, you know,
Hyper's our thing, and they're currently, like,
500 hype apiece on Hyper EVM.
So there's also, also like other cult communities like tiny hyper cats and hypios so like the nft
like game on hyper liquid is alive and well oh yeah i mean you know we uh we own hypers obviously
we got airdrop some hypers we bought a few more on the open market.
I own like a bunch of tiny wines and a couple of these.
So, you know, we play around in it.
I think that, yeah, it's like, it's one of these things,
like if you know, you know.
And I think the spot equity through Ando is something that I'm very excited about.
In fact, I think it slots into a bigger thesis,
which is that you can build like a pretty all weather portfolio on chain now,
which is sick. Like, you know, derivatives have their spot,
but in terms of like sort of longer term investing,
I think a lot of these spot equity tokens from Ondo are great too. Um,
and so I'm, I'm excited about the, the whole offering,
but I think increasingly hyper liquid is becoming that place where you can kind
of just put capital in and stay there and you don't feel like you really need to go you know
too much further these days all right thank you for your question yeah thanks a lot all right
shout out all the communities on hyperlifid, we have limit down Matt coming up,
and then we have J Prime.
And then we'll get through Shin,
who typically asks good questions,
and Archer, and we'll be done.
All right, you got the floor, J. All right, it's taking too long.
Matt, you got the floor.
Regular listener.
Yes, we can hear you.
What?
GM, you're a little bit quiet, by the way.
Yeah, you're kind of low.
Yeah, we can hear you.
You're a bit quiet, though.
Oh, all right.
We're having some technical difficulties.
Yeah, we'll circle back.
We'll circle back.
All right, Shinderak, floor is yours.
Hey, I just have one question.
Also, thanks for letting me talk again.
At what point do you think hyperliquid becomes so
big globally for the financial markets to the point where the U.S. steps in and tries to
quote-unquote regulate it? Or is that even possible? It's definitely possible. I don't know if there's a
particular size or percentage of notional volume. I think any percentage of notional volume and the incentive of government
is always going to be to own part of it or regulate it or bring it under compliance.
So it's just, I would say the size it's at now is definitely a possibility. But I think
Hyperliquid, and again, we don't speak for the team, but they would probably take the
position that they're decentralized in the same way that Bitcoin and Solana and Ethereum are.
And so, you know, it'll be an interesting philosophical discussion around that.
But yeah, I don't want to comment too much on regulation.
I just sort of wanted to give people something to think about.
Appreciate it.
Yep.
All right, we'll try Matt again.
We're getting better at these, though.
These are quick.
Oh, yeah.
We should just do an all Q&A one eventually.
All right.
All right, go ahead, Matt.
I think you're muted right now.
I also gave real nice speaking privileges.
Hey, can people hear me now?
Yeah, we can hear you.
Oh, cool.
Yep, we can hear you.
Thanks for, yeah, thanks for being on.
Good to see you guys.
Yeah, I mean, so we've been doing like a ton of like research and diligence and stuff on the, you know, equities perps in particular, but like really all
the RWA perps. I think we as in ondo. Yeah. Yeah. I guess I'm speaking as on no Matt now.
I have a badge. But yeah, like, you know, I think what we've seen with metals in particular is that there is just so much latent demand, right, for exposure to RWAs.
And I think it's a convergence of, like, crypto not performing, not seeing, like, a lot of interesting, you know, differentiated alpha opportunities across, like, crypto assets.
opportunities across like crypto assets. And then also just like the cryptofication of TradFi,
where like you're starting to see these like crazy alt-like moves across metals, which like to me,
like, you know, gold and silver have always been these like assets that really could never compel
me to like participate in them, right? And now we've seen this like insane volatility, like super high
reflexivity, right? And it really has become clear that like, you know, I think the thesis is like
very much validated on RWA perps. And I think Kyle's point about how the market structure right
now is almost there, right? Like it has been getting better. The liquidity is
getting better. The spreads are getting tighter, particularly where you do see like volumes.
But it's still like not quite there yet. And I think a big part of it is market makers like
varying levels of like hesitation to participate. So you have a lot of people that are like, you know, hey, we like are super active
across crypto asset perps, like between centralized changes, hyperliquid, whatever.
And like, we're happy to make markets and provide that kind of arbitrage that serves as like the glue
that keeps all the prices in line across all the different venues. But we can't get a TradFi account, so we don't know how to head, right?
You have other people that are like, hey, we're super active in TradFi.
Maybe we make markets even on equities exchanges themselves.
And they're like, but what the fuck is a perp, right?
Or they're like, what do you mean it's, you know, permissionless, right?
And I actually think that, you know, over time, obviously, like, everyone's going to mature
and, like, a lot of the bigger players will get involved,
which I think does result in, like, better quality products for retail,
just, like, you know, spot stock trading on Robinhood, right?
But I also think that, like, token think that tokenized spot is a huge missing ingredient
where it sounds kind of dumb because I'm like, me personally, why would I ever buy tokenized spot
S&P 500 ETF, right? Unless I'm really trying not to offer him cash for some reason.
But as a piece of market infrastructure,
it actually is really important for these perps markets, right?
Because the level of capital efficiency you can get
and the sheer number of potential participants that are like,
yeah, I would be happy to make markets on perps,
but I have to find a way to like actually be able to trade the spot on chain.
Giving them like super liquid
markets where they can do that is going to make all of the purpose markets way better right um and
so oh yeah totally yeah i mean if you had a if you had a billion dollars of like spot gold or
any any of these like other things on chain and the arbitrage was not to the Tradify market.
It was to that, which then is in turn arbitrage to the Tradify market by the issuer, like
Ondo or somebody.
I think that the legacy players say, hey, look, it's just a token.
Like, you know, we can fix this.
Yeah, exactly.
And I actually think that like it even goes beyond that to like non-hyperliquid venues,
right?
Like I think finance listing like Tesla perps the other day is just like another piece of validation.
And we're so early on RWA perps that I really think this is somewhere where anytime a competitor gets in, it's like a really good thing, right?
Because it's going to make the market more liquid.
It's also just like a good sign of validation. makes your cost of capital lower makes your token worth more so
i i'm pretty hyped about all this um and uh yeah there'll be more to come i can't leak any alpha
right now no i i think it's awesome i think that what you guys are doing is really important for
the space i think that in time the altcoin guys are going to come to hate you
because I think what the introduction of a lot of these RWAs does
and just higher quality assets on chain in general
is it reduces the temptation of like the long tail ticker game
where you just buy random trash
because we've got better stuff to gamble on now.
Man, I miss the random trash. I got into crypto because I didn't want to trade equities
anymore. What am I doing?
All right. Cool. Thanks for your question. All right. We'll get through Nice and the
other guy who's Archer who's been so patiently waiting and then we'll click off here.
All right. Nice. Thanks for waiting. Floor is yours.
Oh, thanks so much. Yeah. I just wanted to kind of understand, um, your thinking guys on moving
hyper liquid, moving out of a entirely crypto native kind of environment and capturing, I don't
know, like day traders at their desks, people like we've just spoken about spot equities and stuff.
Like what's that route look like given that Hyperliquid do no marketing,
a highly crypto native at the moment.
What's that journey look like to you guys?
Okay, so two things.
The thesis and the reason why it's compelling and interesting is what I stated earlier
with the diversification of revenue streams.
That's always going to strengthen the business. It'll make it more robust.
It will be less cyclical, ideally, and it'll have more at-bats for exponential growth,
like it's seen with HIP3. In terms of marketing, the beauty of Hyperliquid is it is a chain,
and builder codes give you the ability built in natively without
needing brokerage agreements or any of the other things that you need if you integrate it at a
centralized exchange to build on top of it and provide value. If you think that you can build a
better Hyperliquid or you think that you can have a sleeker experience or a better on and off ramp
or take their even potentially remove features and make it simpler, that could be another idea.
even potentially remove features and make it simpler. That could be another idea.
You have the ability without needing any permission to build on top of it and be able to keep a
substantial amount of the fees and be able to set the monetization rates yourself from one basis
point to 10. This is the first time really in history this has been possible other than building
on ETH or building on Solana. Most notably, Solana made a substantial amount of revenue,
but the apps on top of Solana made considerably more.
When you add the net revenue or the top-line revenue of PumpFun and Axiom and Trojan
and all of the different trading bots that went on top of it,
it significantly exceeded all of the revenue generated by Solanits in
entirety. So I think that's the bull case for Hyperliquid. I would say the bear case about that
is that then it looks more and more like a real business. And so there may be actually a top end
evaluation where we're able to sort of definitively say because there'll be comps like Schwab and
Robinhood and interactive brokers,
it's still significantly undervalued compared to those businesses, despite having similar top line
and much higher net profit, especially by a per employee basis, it's not even close.
But there may be a point where we say, hey, this thing is actually sort of expensive,
or it's very difficult to say, wow, you know, ETH is expensive here because it's not like anybody is building a DCF and valuing ETH for their cash flow or their burn.
People are just saying, this may be the place where all finance settles, and that is worth trillions of dollars, right?
It's very difficult to say that for hyperliquid, although there is a chance where you say, well, the TAM is infinite.
If all capital and all transactions occur on hyperliquid and this is the de facto place for
settlement, then maybe there is no top end for valuation. But I think that's possible. But I
think it'll definitely look like, hey, this is trading at 40 times and maybe not growing as fast.
What does the IRR look like?
And maybe it is a little bit richer.
So it's sort of a benefit of being a real business,
but also you're able to actually make apples to apples comparisons.
But yeah, I think the goal of Hyperliquid is to say,
you deposit your capital in one place and you can do anything,
whether that's through Hyperliquid itself
or it's through someone building on top of it.
You want to be able to trade any product in any way, ideally using the best sort of and
most performant platform for doing so. And that's sort of the thesis at the long term.
That's amazing. Because I think if you take the franchise model, if you go to one Domino's pizza
restaurant, it's the same as all the others,
but I feel like what you're saying
is that it's a franchise model,
and maybe that's a dirty word,
but every iteration
and the way that those models are rolled out
can be so utterly different
that they're somewhere for everyone to play.
To go back to that analogy,
it's like, yeah, maybe it's a franchise,
but they all use the same kitchen.
They all hit the same order book.
You can build a new front end.
You can build different ways of interacting with it and mobile experiences and plug it into stuff.
But the cool part is you don't bootstrap the actual hard part, which is the liquidity, the clearing, the engine, any that kind of stuff.
Maintenance.
Yeah, the maintenance.
So it's like having like five different dining
rooms that all connect to the same kitchen where like your food comes out of the same place it'd
be like having that same it'd be like having your food procurement automated and your ingredient
sourcing to some extent and you just kind of have to set the interior and and the the value or the
branding of it to some extent yeah yeah thanks so, guys. Have a good one.
All right, let's power through everyone else.
That was a good one.
All right, I know Archer's been waiting.
Let's see if he's still here.
All right, Archer, floor is yours. Yeah, hello.
Yep.
Hello.
All right.
Keep going here.
All right.
Tim Brower.
All right, we'll go with you,
and then this will be the last
one unfortunately all right Tim for is yours final question last but not least
hello everyone good evening it's a morning here in Netherlands I have
questions for you if you're rich and infinite money what you're going to do
how you're going to help the world what are you going to do? How are you going to help the world? How are you going to help your brother and sister?
How are you going to help Hungary and Yemen?
Okay, how are we going to help the world?
I think for me, philosophically, it's very simple.
I want to make the world more open.
I want access to data and ability to transact
and sort of the ability to do whatever you want
with your capital, completely free and accessible
and on the same playing field for everyone else.
So, all right, we'll have one more.
That was, we can't end on that one.
All right, Yaelo, last but not least.
Hey, hello. First, thank you for these Sunday spaces. They are so great.
My question is, again, about Hyperliquid. I think I can't ask without being biased because this token changed my life
but first we have
HIP2 which
came with
teams like
Unit, Building, Spot, Hype
now HIP3
a lot of more teams being able to
create these HIP3 markets,
etc. But I think
that we are at
some point going to have
HIP4, HIP5, HIP6.
What do you think
should be next for
Hyperliquid to go to
the next level? I think
it's a very open question,
but I'm really curious what you think.
Thank you again for the spaces.
Yeah, thank you.
Thank you for being here.
You know, we wouldn't do this
if we didn't get great feedback from everyone,
so it means a lot.
I'll say this.
I think it's actually less about
what Hyperliquid can do right now.
They're going to continue pushing
and they're going to do multi-asset
and they're going to experiment
with other feature sets
that they can add.
But actually, I think a lot of the growth,
if we're going to see additional added growth,
is going to come from companies building alongside
or on top of Hyperliquid.
HIB3 is notably not Hyperliquid itself.
It's independent teams, or mostly independent teams,
that are spinning up their own markets
and attempting to compete for market share and facilitate demand for products that users
want to use. And that's where the growth has come from, from Hyperliquid recently. In fact,
the crypto derivative markets have been like growing steadily, but not at a crazy rate of
compounding. The market's been pretty dead. But I think if Hyperliquid is going to continue growing
and improving, it's going to be people leveraging the tools that Hyperliquid gives you, reducing a lot of the complexity, specifically the hardcore engineering, so you can build additional products on top of it.
And that's where a lot of the growth will come from.
I agree.
I think we're also in a state now where the feature space has expanded a lot.
And I think there'll be a period of really polishing and refining the features that we have now.
So for example, there was some discussion this weekend on Twitter about how the silver oracles work.
So the silver contracts have an oracle that snaps to the previous closing price.
And the idea is that it's kind of like a leash.
The price isn't allowed to go too far apart from where it closed on Friday, just for fear that
something wacky would happen. It would go up a lot or down a lot, kind of untethered from the
real market without any ability to arbitrage it and create all kinds of problems. But as Hyperliquid becomes increasingly
a place of price discovery,
it makes sense to have an Oracle
that allows the price to walk around a bit.
If it's true that like two or three or 4%
of the global silver volume is gonna trade on this thing,
maybe the market really does have some opinion
about what the price should be
and it's different from where it closed Friday.
Right? So I think that there's going to be a period of refinement.
Um, I think that even right now, if like TradFi took a first principles
look at the perpetual future, they would find certain parts of its
construction, a little confusing.
Like we have a lot of legacy stuff that we've inherited which is why does the
clamped funding rate default to like 13 a year right right that's kind of like an arbitrary
number that we invented you know several years ago and it's not obvious it made a lot of sense then
so i think that there's there's a lot of small things that can be refined before we say like
we've completely solved all of these things with perps and equity perps and stuff like that.
And so I think that a lot of the, and you're already seeing this too, right?
What is the team working on?
They're working on making the existing things smoother.
They're making isolated margin nicer to work with.
They're making like collateralizing some of these things a little nicer.
So I think you're going to see a period of polish before you see like really big ambitious like new features come out.
Yeah, totally agree.
Yeah, that makes sense a lot. Thank you. Thank you for the answer.
Yep. Thanks guys. All right. I'll leave it here. We obviously have our ending credits.
I'll leave it here. We obviously have our ending credits.
Two things. We're hiring for fullstack.trade,
which is a trading front end with very interesting engineering and QRQT work.
If you want to improve the trading experience in crypto and reduce fragmentation,
please let us know, especially if you're crazy about Rust and you're in New York
or you know someone who is.
And then just as exciting, but newer,
so maybe feels a little more exciting.
We're always looking to fill roles,
both front-end, back-end, and blockchain engineering at Fullstack.
It's a lot of people who are in and around our family office
working on high-frequency trading.
So if you want to work with a team like that, please let us know.
But more interesting and more recent,
we are hiring our first ever intern.
I guess that's not true.
Kyle, before you joined,
I actually had two MIT interns
who were friends with Nick who came on.
But I don't really count those.
They built like an on-chain monitoring tool.
It's been a while.
But this will be the first ever real in-person,
full-time or potentially hybrid intern.
It's an 11-week program. It's on the site,
ramiel.capital. And basically, please consider applying or considering recommending someone
as it's a pretty unique opportunity. We're not sure we'll do it again. The market is a bit,
well, I guess I wanted to say slow. It's been quite volatile recently, but this is a time period where we feel like
we have some free time
where we're willing to train and talk with someone.
So if you have, you know,
a skillset that matches the description,
please apply and please let us know.
We'll be doing CV reviews.
Just for context, we had, I think, like 140 applicants.
So we'll be getting to those
as soon as the market calms down.
But yeah yeah thank you
to everyone who applied i'm sure some of those people are in these spaces um and yeah thanks
for everyone for tuning in kyle anything any closing thoughts no i think that's pretty much
it i think we we covered some pretty interesting topics today and uh have a great night everyone
and good luck in the markets next week it's gonna be to be an exciting one. Bye, guys. Have a great night. See you.
