Can Rate Cuts Save Crypto’s Bull Market?

Rate cuts are massively bullish. Jackson Hole was massively bullish. So here we are on the verge of a cutting cycle. That's when I told myself, despite the froth and the top signals that I'm seeing, I don't think it's the time to get cute and try to pair positions. I think I probably want to just sit and ride the volatility, deal with it for a while, and sell at higher prices.

We're live. Welcome back to another 1000x. I want to start off with an apology. I want to apologize to the Chainlink Marines who flooded my DMs with absolute hatred after we discussed Chainlink. Let me just pause: we got a lot of hatred. I don't think we were that bad toward Chainlink. We actually said that they have a lot of revenues off-chain, and we just didn't know how to track them.

But I think people seized on the first part, where we said, “Oh yeah, their on-chain revenues aren't great,” and then Jonah chimes in and goes, “But their off-chain revenues are great.” They just heard, “On-chain revenues suck.” I got flooded with at least 10 DMs on Twitter about how wrong we are about Chainlink, which is really good to see. It means the cult is still strong.

1. Proving the Haters Wrong

It is down a significant amount right now from the highs that it hit over the weekend. It's down almost 7%. The market's down a lot, and the question is: Is this where we're going? Are we heading into down-only for a little bit? Jonah?

I don't think so. I haven't been seeing the ball very clearly for the stuff that I've been actively trading in the last week. I've done a pretty piss-poor job of trading. Just as a recap for people who haven't been bombing me with hate on Twitter and in my direct messages, I bought some ETH at $3,600 and pitched it back out at $4,350. Then, after Jackson Hole, I rebought my ETH at $4,800, and now it's sitting at $4,500.

Down on me again. So overall, I'm pretty proud of the way I traded the first leg of the rally. I had that tingly feeling and got long before the first big rip, but I spooked myself out of the position too soon.

We don't know. We don't know if it's too soon. And one thing that I'll say—I'm very proud to say we proved all the haters wrong who told us that we were washed-up and lame, because at $3,800 per ETH, when we got on the podcast and said, “Hey guys, it's actually a pretty good time to buy,” everyone gave us shit, and then it went up 30% to 32% from there.

Yeah. We told everybody to get into what was likely AERO at $0.28, and it—I mean, there's a wick for up 40%, but realistically, that also went up 30%. LINK did well. Aerodrome crushed it. Aerodrome was fucking phenomenal. If you listened to us on that one, you're up like 2x.

What we kept saying over and over is that you have to be taking profits. We said that on the last podcast, the podcast before it, and the podcast before that. There are going to be violent moves here. And now that we're near what we call the end of the cycle, things absolutely can get stupid.

But you should be taking profits up 20%, up 50%, up 100%. You need to be pitching out. I don't think by any means we're over. I think people are panicking a little bit. I was a little bit caught off guard by how quickly we rejected after making an all-time high on ETH, and that's when I got a little bit nervous.

2. Did We Top?

So we had that little pullback. We were like, “Hey, it's not fucking over.” The shakeout—that was such a clear shakeout. Get back in the water. The water's warm. And then from there, ETH rocketed up another 15% to 20%. Then, on Sunday, we had that move up to $5,000 and a pretty nasty rejection.

If you ever see a down candle—if you see a 5% one-hour down candle after hitting an all-time high—that tells you there's a lot of fucking supply up there. There are a lot of people willing to offload. So I think now we need to find the stabilization point.

I wouldn't be buying $4,500. I'd probably be buying at $4,100. But this is kind of no man's land to me right now, at the current price of $4,525, just in the middle of nowhere. And so is Bitcoin. Bitcoin is also kind of in the middle of nowhere.

The momentum has slowed down, and now we need to find some level of value. I think that's probably between—I mean, this is a huge range—between $102,000 and $108,000. I'm probably rebuying there because I don't necessarily think we're in the mood—we're not in the zone for a massive pullback right now.

I don't think we're going down 25% to 30% right now. I just don't think that makes sense given the state of the market and how quickly everyone is to turn bearish.

The top's going to come when we get a sell-off and everyone has been trying to buy the dip.

Yeah. It's not going to come when we sell off 10% and people are saying that it's over.

Yeah. I don't understand why people are saying that it's over. I don't think it's over. I don't think it's over at all. I think the big feature of the market that freaked everybody out over the weekend was some whale blasting out a bunch of Bitcoin.

We'll get to macro in a second, don't worry, but I think the way I look at these sorts of trades—these big trades—is that the whole market will freak out about them, whether it's in TradFi or in crypto. “Oh my God, this whale just sold a bunch of—sloppily sold a bunch of—coin. The market went down a lot. Oh my God, it's over.”

I think those 2 conclusions—those 2 events, a whale selling and it being over—are just totally unrelated. It's a one-off. When I think about flows that impact the market, I think about programs like miner selling getting halved, or, in commodities, producer selling distorting the forward curve.

One-offs don't really matter because unless you can predict them ahead of time, or unless you can front-run them or pre-position for them, there's no trade before the one-off flow hits the market. Then, after the one-off flow hits the market, it's over. Whatever themes were there, whatever narratives, whatever fundamentals are still driving the market, just from a slightly different price point.

To me, a big whale going and selling a block of Bitcoin—or maybe it was buying ETH/BTC; we're not exactly sure how the trade went down—but it went down sloppily on a weekend with a lot of slippage. I think way too much attention and value gets placed on these types of things by participants who don't really understand how markets work.

I think it's utterly irrelevant what this whale did. He or she is gone now, and the market can resume doing what it was doing before, which is ascending. Why is it ascending? Macro, right?

3. Macro & Rate Cuts Bullish for Crypto?

So anybody who was victory-lapping ETH at $5,000 a token, saying, “I told you so,” should literally stuff it, because the only reason it melted upward was a shockingly dovish speech by Fed Chair Jerome Powell at Jackson Hole.

To me, there's a macro theme going on here, which is that interest rates are getting cut. The labor market isn't as white-hot as it was before. Inflation has come down. It seems like inflation will probably continue to taper off further.

Jerome Powell has been very behind the curve for most of his tenure. I think of him as kind of a lagging indicator: things have been cooling off for so long now, inflation-wise, that if he's finally catching on, I think he's 3 or 4 cuts behind the curve. That's just my opinion.

Let's say I'm right. Let's say the Fed cuts interest rates by an entire percentage point between now and 6 months from now. There is no amount of crypto-native capital that can front-run the inflows into Bitcoin that will result from that rate cut.

There are just trillions sitting in T-bills waiting to get deployed into Bitcoin, SPY, and everything else that's risky. And everybody in the American economy and the global economy becomes so much richer for every basis point that the Fed cuts off that overnight funding rate.

To me, rate cuts are massively bullish. Jackson Hole was massively bullish. It's a policy stance shift akin to the one that we saw in 2022, when they started the big hike cycle that nuked crypto and provided a huge headwind for the entire macroeconomic risk-asset picture.

So here we are on the verge of a cutting cycle. That's when I told myself, despite the froth and the top signals that I'm seeing, I don't think it's the time to get cute and try to pair positions. I think I probably want to just sit and ride the volatility, deal with it for a while, and sell at higher prices.

Yeah, I 100% agree. The only thing that I would add to that statement is that crypto, and specifically ETH right now, is just a juiced version of the markets. Yes, it rallied. It rallied because of Jackson Hole and because of macro, but it rallied 15%. It went up a ton relative to the rest of the markets.

I mean, you don't normally have crypto go up literally 10 times the amount that Nasdaq goes up in a day.

That's got to be the biggest green candle in years for ETH, right?

Yeah. I think it was the second-biggest amount added to market cap ever in 1 day, other than the ETH ETF. Yeah, that was nuts. That was a ridiculous, ridiculous move. It's because it's a lot easier for these DATs to raise money and plow it into the markets when rates are getting cut and people are going down the risk curve and shoving capital into things that wouldn't make sense with higher rates, right?

Every 50 bips, 25 bips lower we go, the better it looks for Bitcoin, because Bitcoin doesn't produce, right? It doesn't have any dividends. It doesn't pay anything to hold it. So, it obviously gets more attractive the lower other things pay you, right?

The way that I'm thinking about this is that macro still looks very supportive. What tends to happen, what I've noticed with these moves, is that you pull forward a little bit too much excitement. On the specific day of the announcement of some sort of shift—not necessarily; this isn't necessarily a big shift in policy—it's kind of just, you know, okay, yeah, we are probably going to cut rates moving forward.

But on the day, you probably get too much optimism pulled forward. You get an exuberance effect where everybody goes, “Fuck, I can't miss this. Let me get in,” and then it overshoots a little bit, and then you get some sort of pare-back. What you've done is you've just reset the starting line for the climb higher, because equities climb higher. That's what they do. If the economy is strong and the data looks good, you're going to see equities go up and to the right. That's just how this game works.

What events like this do is reset where they are going up from. That's how I view the tariffs. The tariffs sent the market down, and then we just resumed our uptrend. These events, they just reset. So, it's about finding the equilibrium point. Okay, we go up 1.5% on Nasdaq, and then maybe we pare back 20 bips, and then we just resume the uptrend into good macro.

4. Ads (Kraken OTC, Katana)

That's what's happening right now. We're getting, I think, just a little reset, and then we go right back up.

The market will fill that wick, you're saying? Basically?

Yes, the market will fill that wick. Well, it doesn't even necessarily have to fill the wick to the downside. It almost always retraces the gap—well, no, always, definitionally, because we're at all-time highs. It always retraces it to the downside because, again, equities go up and to the right because equities make money, and there's a value to making money, so they go up and to the right as long as the data doesn't look bad in the economy.

Anytime you go up, what I'm saying is that you probably pull forward too much of that performance. Because rates are getting cut, you're pulling that performance forward in time. What I'm saying is, we did that too much. Maybe we did that too much, and that's why we're seeing a little bit of weakness today, with the S&P down a quarter of a percent and Nasdaq slightly down, barely down, basically flat.

Right now, but I think we pulled forward too much of the performance.

We sit for a little bit around these levels and then we resume the uptrend. That's my take.

Yeah, I think that's a good take. It's kind of the way that people in the market I talk to see it. Even my friends in LA, who aren't traditional white-shoe people—they're more like regional loan sharks. I know a bunch of those out here, lending money to businesses against A/R just to bridge-loan them some cash to survive through hard times.

They're all like, “Oh my God, it's on. It's happening. It's real. Rates are going to get cut, our business is going to pick up.”

And then today, the excitement is gone, and they're like, “Well, wait—when do they get cut? Since October, November? When's it happening again?”

You know, this is one of the reasons why I never really wanted to be an interest-rate trader when I had the choice early in my career. I traded corporate bonds, so there's an interest-rate component to it, and you hedge with Treasury bonds and talk to the swaps desk all the time.

But the people in that world—they're the nerdiest MIT physics people who have just decided that they want to make a bunch of money, and they go 50,000 levels deeper into this stuff with all their machine learning and analysis. I always feel like such a tourist when I try to talk about interest-rate policy. It baffles me.

The only way that I feel I can have a good edge on this as a non-interest-rate specialist is to zoom as far out as I can and try to think of it like a commodity cycle and just say, “Okay, are interest rates trending up, down, or sideways?”

I do think that the Jackson Hole meeting, just from my naive perspective, was a seminal moment because it signifies the beginning of what I think will be a prolonged period of downward pressure on interest rates, and that's great. But now, in terms of how to trade the minutiae of it or the volatility, I'm already chopping myself up. I suck at this.

So, again, I think the only way to do it is just hold on for dear life to your risk assets and not let any of this interest-rate stuff scare you. To me, there's also a big deflationary shock coming. I fully expect—I think the end of the Ukraine war is underpriced. I really do.

I think that when that happens, energy prices are going to crash. It's a huge component of inflation, and the Fed will have no choice but to cut fast. I think that will be a big boon to the global economy and to risk assets. So, that's on the table. That's a super-bullish catalyst that I think isn't really talked about enough.

Beyond that, I just think that Donald Trump is going to juice the macroeconomy into the midterms. I don't think he wants a middling, shitty, problematic economic picture for himself. I think tariffs are going better than expected. I think he wants lower interest rates. I think he wants to pump the gas and deregulate.

I just think it's going to be a rip-roaring Q4, Q1, Q2-ish time frame. He has a lot of power. He can control that. So, that's what I think we're going to get, because that's what he wants for his legacy.

Beyond that, there's really not a lot of macro—like, we haven't talked about macro in a while—but to me, the macro climate feels so constructive for crypto that I wanted to touch on it. It speaks to your end-of-cycle volatility comment, right?

Nothing like a little bit of exogenous macro stuff fanning the flames of crypto to make everybody get super greedy, make prices go high, and make OGs sell. It's really starting to look like an end-of-cycle situation. People are getting excited, FOMOing in, new participant bases are joining, and OGs with billions of dollars are just blasting out of their coins in disgust. Things are about to get fun.

5. Does the Fed & Macro Even Matter?

But this does not speak to my original idea that this was going to be just a 20-year upward grind, the way that the tech market was post-dot-com crash. This may actually be another 4- to 5-year cycle. I don't know. What do you think on that? Do you think it's a 20-year thing, or do you think we're going to have a raging bear market after this is over?

So, just to take a step back for 1 second, I don't think that it matters what the Fed does. I genuinely am now in the camp of none of it fucking matters except for the week-to-week moves. The only thing that matters is a true phase shift in their approach to managing the economy based on the data that they see.

They can, I think, obviously impact the week-to-week and maybe the month-to-month. But on the 3-month-to-3-month time frame, the economy will do what the economy does unless the Fed does something truly drastic. Whether they decide to cut this month, next month, or in 3 months, as long as they're saying, “Yes, we're going to manage to a 2% rate—we're going to manage to 2% inflation—and we are going to bring the rates down,” there was kind of no possibility that the Fed was going to keep rates where they are for 2 years.

Nobody was saying that rates were going to stay where they are for 2 years. The debate was whether they were going to cut now, in 3 months, or in 6 months. That's kind of the debate, and that's not really a massive shift in approach; it's just a timing question. Whenever you have a timing question, it doesn't really impact the course of the market, in my opinion, other than in the short term.

What impacts the course of the market is the Fed saying, “Hey, I think that inflation is transitory, therefore I won't manage toward it,” and then, in November 2021, saying, “Ah, fuck, actually, no, inflation's not transitory, and we're going to have to reverse a policy of 40 years and start hiking rates like crazy.” That's going to impact the markets. If the Fed comes out and says, “Fuck, we're going to cut rates very quickly right now because it looks like the economy is weakening and we need to get ahead of it,” that is going to affect the markets.

I think the market would actually get nervous at that, and the rate cuts wouldn't matter. Basically, unless they're taking a big step in one direction or the other, I just don't think it matters that much, which is why I find Fed-whisperer talk pretty funny. I just don't necessarily think it matters for the average person. My advice to you, the listener that tries to pay attention to macro, is that you can use macro for 3 things.

You can use macro for trading the day or the week. If you want to try to make a bet on what's going to happen at Jackson Hole and you think it's mispriced, you can even make a 2-to-5-day bet on that. You can have a multi-year thesis on where you think the world is going and bet your money on that. Or you can bet on massive inflection points in the macroeconomic order of things, in which case you get some edge.

Other than that, I'm not going to ever say that I can use macro to figure out whether we're going to go to 150 or 75 first. You see what I'm saying? I just don't think it matters that much. I used to have a joke at my old firm with my partner because he was a big macro guy. He'd been in TradFi for an extended period of time—16 years—and by all accounts was a very good macro trader.

6. Ads (Kraken OTC, Katana)

He would use his opinions to try to trade the cryptocurrency markets, and more often than not, it was actually unhelpful. You might get it right on equities, but when crypto has idiosyncratic flows, crypto has idiosyncratic flows. If the economy is not falling apart, but people divest a little bit out of Nasdaq and it goes down 2% or 3%, but DATs are still able to raise money, crypto's going up, right? There are idiosyncratic flows you have to pay attention to.

7. Are DATs Just Exit Liquidity?

So, let's talk about one of those idiosyncratic flows. Let's talk about the Galaxy, Jump, and Multicoin Solana DAT. Everybody's jumping up and down with excitement about that one. Galaxy, Jump, and Multicoin are trying to raise $1 billion to create a Solana treasury firm. They'll probably get it. Maybe it's too small, but why?

Solana's been outperforming on that narrative until today, of course. I guess I don't know what to think about DATs at this point. Are we going to see the end of the capital that was already raised hitting the market and lifting it higher, or do you think that the DAT thing still has some legs and new capital will get raised by coalitions like this at current levels?

I'm actually, right now, getting tagged in a bunch of stuff as we speak about Solana DATs because of the stuff that I said on Threadguy.

We got to talk about that too. Threadguy. Love that guy.

I think a decent amount of people got upset with me over that. But I just literally don't give a fuck. I don't work for anybody. I'm too rich to care. I don't need to scam people out of money to make money for myself.

Obviously, these locked-Solana deals are, in my personal opinion, really dumb because you are being used as an exit for locked Solana. People can't get out of their locked Solana for another 1, 2, or 3 years, and they're literally using you to exit on. It's not—I just think it's kind of scammy.

There is some attempt to fix this, so not everybody that's involved in Solana DATs is scammy. There are some people that are extremely scammy and extractive. There are other people that are trying to make it work. They're trying to figure out, “How can I make everybody win?”

One of the ways that people are trying to do this is by saying, “Well, you have to match one-to-one with cash. Whatever you put in locked Solana, yes, you get liquidity, but you also have to match that with cash to buy new Solana.” So you're basically doubling your Solana exposure for early liquidity, but you are buying—you actually are buying Solana. This DAT will have cash to deploy at some point in the future, right?

A lot of these Solana DATs are just, “Give us your locked tokens and we'll announce a $500 million raise, and then we'll go dump this fuck on retail.”

Yeah, that's obviously not okay.

That is scammy. I actually got one of my favorite projects in crypto to reach out to me—not going to say which one—about the idea of spinning up a DAT for that project's token. I said, “No, I don't believe in DATs. It doesn't make sense.” And they were like, “No, no, hear me out.”

They kind of spun an idea where it's like, okay, this DAT—from a regulatory perspective, crypto projects can't do a bunch of things that they want to do. They were like, “Wouldn't it be great if we could have sort of a TradFi legal structure with a bunch of locked tokens, tokens that don't need to be sold under any circumstance? Private equity would call it permanent capital, but just something with a longer-term view within a TradFi corporate structure.”

That DAT could do things that are profit-accretive, like market-making, and basically be an opco that can do things that a crypto project can't do. Other financial products could be tied to the underlying crypto project—basically, an ancillary, or a sister, business with different regulatory constraints and a supply of tokens to do things.

Rather than hiring Jump to be a market-maker for some usurious fee, or rather than contracting out different types of things that would have gone on-chain but this project can't do off-chain, just have the DAT do it. Basically, create financial businesses around the underlying crypto project using the token legally and kind of at arm's length, but connected to the underlying project.

That makes sense. If those activities are profitable, why not?

I don't want to reveal too much detail because I don't want to dox anybody or the project. But to me, it just seems like the DATs—like you said, I was trying to think of it as one-size-fits-all, where they're all just scams and stupid, except maybe MicroStrategy. But even MicroStrategy has become kind of scammy and stupid.

I still love MicroStrategy.

I love him. I love him.

I just fucking love Saylor, man. He's so good at his job.

Look, some scams graduate. Some scams become self-fulfilling—what the hell is it? Self-fulfilling prophecies.

Like, look at Scientology, right? That scam just hit escape velocity. I’m not saying that MicroStrategy won’t become the next Scientology. Bitcoin certainly has become the next Scientology.

Sometimes you create something that’s stupid and kind of a multilevel marketing scheme, and it just works—rarely. And, yes, MicroStrategy is already there. But my point was that one size may not fit all. I agree with you. I think some of these DATs are actually probably creative. Not the one that’s like, “Hey, we can let our insiders dump locked SOL on retail.” That one’s stupid. But, yeah, I like the idea of TradFi’s sister businesses to these crypto projects that can actually produce revenue using the token in interesting and creative ways. That could work.

It also locks up more tokens.

As people have been saying for a while, I think they’re just the new foundations. These things will become the new token foundations.

Now, the question is obviously how long can this possibly last, and really, what are they doing? It’s just another form of regulatory arbitrage. That’s what it is at the end of the day. Just repeating what you’re saying, it’s regulatory arbitrage to be able to do things that you couldn’t necessarily do otherwise, especially in an ETF format. What else can’t you do?

But I think, definitionally, if these things last for a long time, what’s going to end up happening is that they’re going to have to chase themselves down the risk curve. People will continue to iterate on the products and make them riskier and riskier to deliver higher returns, and then at some point, obviously, that doesn’t necessarily work out well. But at least for now, I’m not nervous about the market right now because I do think there’s still appetite for this stuff.

I do think that Solana is going to be okay. If the market refuses to listen to what I’ve been trying to warn them about and Solana pumped to 250, that is going to be the short of the fucking century.

It’s just going to be such a good short. I mean, Solana has disappointed me in many ways. I thought that they would do a better job capturing something. I guess they’ve stuck squarely to—I think they’ve unfortunately pigeonholed themselves as the memecoin chain.

8. Solana Branding Problem

I was hoping they would be able to break out and use the activity they had from memecoins to bring in applications that people are really excited about. While there are a ton of really good people building on Solana, they’ve sort of lost that PR war right now to Base, and that says nothing about Solana’s fundamentals. It says a lot more about the ethos and the campaign that I think both have been running.

Base has somehow managed to feel more legitimate in terms of, “Hey, we’re a real chain. We’re not just a memecoin chain,” while also having memecoins on there. It’s just kind of interesting, right? So, yeah, what is their branding?

Yeah. What is Solana’s branding strategy at this point? Because Base—all those guys are in Washington. Brian Armstrong is on every podcast talking about—

You know, proliferating crypto in sort of buttoned-up ways. Solana had a much easier battle. Now they’re fighting an uphill battle against that, but before, it was much easier because no matter how professional ETH was, it was just slow and clunky and terrible to use. Base is just as fast as Solana for all intents and purposes.

Solana doesn’t have the luxury of combating an L1 that’s basically from a bygone era at this point. Something like Base is a formidable competitor this time. So, yeah, what is their branding?

That’s a good question. Maybe we need to bring somebody on again to talk about this.

Yeah.

Maybe we need Anatoly back to give us the vision for Solana moving forward. What are you trying to accomplish right now? What is your vision? What is your strategy? Because I’m a little bit lost on that, and that’s unfortunate.

Like, other than memecoins and esoteric random shit that people bring up, if somebody brings up Hivemapper, I’ll shoot myself in the face.

DePIN. I was so right on DePIN. I will give myself a—

Dude, I was very wrong about DePIN. I was very, very wrong about DePIN, unfortunately.

I’ve been wrong a lot, but not on that one. That one I nailed.

Yesterday, I took the Metro—the subway, I guess. I got flogged by a New Yorker for saying “Metro.” I grew up in DC; we call it the DC Metro. It’s a New York subway. I get it. Whatever.

9. DePIN & Helium Disappointment

Moving on from my inability to speak the New York English language properly, I was on the subway yesterday and I saw an ad for Helium. It immediately sent a chill down my spine. I felt this stabbing sensation in my heart, keeled over, and threw up in front of everybody. They had to cart me out and take me to the hospital. My last words were, “I believed in you, Helium. I believed in you,” before they sedated me.

I talked to the psychiatrist and explained everything to them. I was a big Helium believer. I thought Helium would take over the world. Helium, in fact, did not take over the world in any meaningful way. They sent their token price to zero while still managing to expand their network, so that was a fun experience. Jonah, have you ever been sent to the hospital by a failed investment?

I’m trying to think. No, thank God.

So let me tell you exactly why I’m so salty about Helium. I’ve spent so many dinners and lunches and nights and weekends explaining to non-crypto friends—this is back in 2021—why Helium is the perfect example and how DePIN is the perfect example of how crypto can bootstrap a network. It just hasn’t worked out. Hivemapper, too.

Let me explain to you why it came to me in a dream while I was in psychosis about Helium in the hospital. What I realized is that Helium was just printing its token forever and ever and ever and ever to reward people who thought one day the Helium token might go up.

Silly me listened to the Helium team many times, and they were constantly saying, “We’re going to find new ways to create a token sink for Helium. We’re going to find ways to deliver value back to the Helium token itself.” The answer that I guess they came to in the end, because they actually never implemented anything, was, “Ah, shit. No, we’re not going to do that.”

We’re not actually going to do that.

They didn’t make a big announcement, did they?

No.

That’s really what happened. They never made the token useful for anything, despite saying that they would, which gave me hope that the token might go up at some point. They never actually made it useful for anything other than being used as a reward for the miners.

I am still of the mindset that there will be a DePIN or something that figures this out at some point in the future, where they give out equity that they also buy back to bootstrap a network.

Yeah.

Now, Hyperliquid is a great example of this. They had a massive airdrop. They gave out huge amounts of free equity to people. A ton of people traded on their platform, and then a ton of people got rich because they delivered the token to these guys. But the token was just equity. The token was like—they were using their revenues to buy back the token, so they kind of pulled it off correctly.

Now, that is obviously an exchange, but the same concept in theory can obviously work for Helium. Helium just needs to not print a ridiculous amount of HNT relative to the amount that they’re buying back. It’s kind of a chicken-and-egg problem. But you see where I’m going?

Yeah. Bootstrapping a network is a common thing. The classic intellectual example that my research analyst used to provide to me when I worked at Cumberland was, “Think of decentralized network bootstrapping. Instead of looking at Helium or Hivemapper, with all of the errors and flaws, just imagine decentralized Uber—Duber, he called it.”

He was like, “Why wouldn’t we just—that type of network is perfect for crypto?” You give the drivers some tokens, and you give the equity holders tokens instead of equity. All revenues from the platform go into token buybacks. It should work so perfectly.

He was making the exact same argument that you were making. Now it all just clicked for me as you were providing the Hyperliquid example of how it works. The reason why Hyperliquid works is because it started generating money quickly. Uber, I think, was losing billions for 15 years before it turned around.

So you need an injection in order to create Duber. The reason why it wouldn’t work with crypto is that you’re forgetting the most important stakeholder in this entire situation, which is the coalition of VCs who pump in tens of billions of dollars to basically scale the network and cut out all competition until it’s so global and integrated into society that you can slowly turn up the heat on the frog sitting in the pot.

The frog being the customer, the heat being the prices the customer has to pay, until now they’re paying 50 bucks to go 16 blocks in New York City. That can’t happen if you try to bootstrap it.

Basically, what Helium is doing is they don't have the VCs. They don't have the tens of billions of dollars of funding to advertise and do customer acquisition, all that crap. So they're making money, but they're just not making enough money, right, to buy all of the stakeholders out of their tokens. Even if they hadn't fucked up tokenomics, which they did, it still wouldn't work.

The only reason why Hyperliquid would work was because an exchange just scales so fast. For these real-world networks, basically, lived experience in Silicon Valley with marketplace technology reveals that you have to just lose a bunch of money for a long time to establish a market, establish a new market, and dominate it such that you can eventually charge what you need to maintain the service. The same thing happened with Amazon, too. It wasn't really till AWS came along. Actually, no—when is Amazon's retail business even profitable? These huge networks are just expensive as fuck. To me, I don't know if crypto—I don't know. DePIN may work one day.

Yeah. No, actually, the retail business is profitable. That's crazy. The operating margin is 6.4% in North America.

Yeah, that's wild.

That's actually pretty fucking good, to be honest.

Yeah, that is. That's amazing on the size that they do.

International retail is 2.6%. And one thing that I've always—completely off topic—but one thing that I've always appreciated about Amazon is that they make deliveries to places that are so clearly unprofitable.

Yeah, they'll just make deliveries to the literal middle of nowhere, backward towns in Appalachia that obviously are not profitable to deliver to, but they do it because Jeff Bezos, for all the shit that he gets, isn't—

He's not a horrible human, even if he has horrible taste in women.

10. Bezos & the Mega-Billionaires

Yeah. Now, I respect that guy. The guy just wants a little fun, something a little sexy, you know? He's just a nerd trying to live out his teenage years in his 50s or 60s or whatever.

Yeah, I guess a little bit of class would be nice, but look, man, I'm not going to judge a gigabillionaire that's clearly been more successful in life than me. He's certainly earned it. If anybody's earned it, he's certainly earned it.

Of all the big tech billionaires, he's done the most good for the world. Has Zuckerberg done any real good for this planet? No, not really.

He bought WhatsApp. WhatsApp? No, I'm joking. Yeah, I agree.

But he's making the sunglasses that record video of you all day. Yeah, I agree. It's all kind of insidious and—

Weird. It's like Elon Musk and Jeff Bezos have probably been the biggest value adds. Yeah, I'd say Elon, with the whole “Let's decarbonize transport”—that's pretty big.

Even Google—Larry Page and Sergey Brin. Google is big because it won, but they didn't invent the search engine. They just refined the search engine. And I think if Google had never existed, today we would have had a comparable search engine at some point. Don't you think?

I don't know. Maybe. I do think—I'll give those guys their flowers. I love Google Maps. I love being able to search for stuff. Life was kind of—actually, you know what? Before Google—and we do this on Shabbat as Jews, without using electronics—it's nice to just have arguments and not immediately go to Google to find the answer. It harkens to an era when people would just debate shit and somebody would be wrong, but neither person in the debate would know who.

Without getting distracted by your phone after 3 seconds. Google Maps is awesome. I did not enjoy getting lost. I will give those guys their flowers for mapping the entire Earth. That is dope.

That's true. Google Maps is huge. That's the best product they've ever made by far. They changed the world with that one in a great way. Now, have any crypto founders ever made anything as wonderful as Google Maps? What are we doing? What are we doing here, guys? What the hell are we doing?

Yeah, not doing so great in the context of the Magnificent 7, I agree. Crypto founders made Axie Infinity, which one-shotted an entire generation of game developers trying to build on crypto. Now all those people are getting vomited back out into the normal world.

Yeah. Is that Blue vomiting in the background? That's a great—we should get that sound effect.

Can you hear him? I didn't realize that you guys could hear him here.

Yeah, I can hear him.

There we go. Because I was talking about Axie Infinity. I go, “Axie Infinity,” and then Blue goes, “Yeah, he really hates Axie. He's not a big Axie fan.”

Yeah.

What a cute dog. Speaking of cute dogs, I probably do have to take this guy for a walk soon.

11. SBET Buyback Program

I saw that ESB—likely SBET—authorized a $1.5 billion stock buyback program to combat their discount—their discount of their market cap to NAV. Imagine that's not going to work, right? We can't expect all of these DATs to start buying back their own stock. They've been contracted to buy coin, not to buy their own stock. The Ponzi-ish level of these things is just mind-blowing. I don't know. That's my closing thought. I don't know if you even need to respond to that. I was just sort of like, well, SBET's down, actually. SBET's holding up pretty good.

It looks good.