Crypto's $150 Trillion Opportunity
CeterisJasonYanKevinJoseGuy Young
Jason remains long risk assets through the midterms, but has cut leverage and shifted toward spot. He sees stocks steadily rising despite geopolitical scares and expects a gradual advance after a “wall of anxiety,” while weak on-chain speculation unwinds. His preferred leaders are Hype, Pump, Zcash, and several promising network or DePIN tokens, including Grass, Ethena, Venice, and GEODNET.
Guy Young sees tokenization’s largest opportunity as access and distribution, not technological novelty. Tokenized equities largely use “regulatory arbitrage” to expand access to people without US brokerage accounts, much as stablecoins exported dollars. The stronger product may be 24/7 derivatives, where global users get liquidity and leverage without owning the underlying share.
The $150 trillion thesis is that real-world-asset derivatives can dwarf an industry built atop only $2.5–3 trillion of crypto assets. Guy expects these non-crypto perpetual contracts to overtake crypto derivatives in open interest within 24 months; he says they may already be near 50% on Hyperliquid. “You’re going to create some very large businesses in the process.”
Equity perpetuals may have a more consistently positive funding-rate skew and keep capital inside crypto between cycles. Unlike crypto, which periodically falls 80%, equities have risen steadily for almost 20 years, supporting more persistent long demand. Users can rebalance into stocks, fixed income, or yield rather than withdraw entirely, reducing the friction that keeps capital from returning.
A liquid on-chain dollar can rationally yield less than SOFR because its option value is unusually high. Guy would accept below-risk-free returns for one-block access to USDT or USDC during crypto’s recurring “three-sigma” events, when dislocations can offer 5–10% in a day. DeFi also serves offshore capital that cannot complete KYC for regulated US products.
DEXs possess a structural cost advantage, but Ethena still considers centralized venues safer for delta-neutral hedging. CEXs can recognize hedged accounts, place them later in ADL queues, and support markets with dollar-denominated insurance funds; many DEXs instead used excess profits for token buybacks. “Our main job is not to lose people’s money.”
The panel’s low-stress strategy is increasingly to own category leaders, though challengers can outperform when expectations diverge. Pump’s revenue barely changed while successive launchpads cooled, suggesting their innovations could become future features for Pump. Yet the moat-versus-growth trade-off remains: leaders deserve longevity premiums, while smaller players can capture enough TAM to rerate sharply.
Guy’s hardest founder lesson was choosing whom to involve in capitalizing a project. Ethena responded to its low-float/high-FDV stigma by buying out weaker venture investors, clarifying token–equity alignment, and directing intellectual property and future sale proceeds toward the token. Guy says a first year without investor selling can help a project grow into its valuation, but after the first 12-month unlock it may be better to establish real price discovery; a host argued against prolonged drip unlocks.
1. The rally still favors durable leaders over on-chain churn
Jason’s posture is straightforward: remain long until the midterm elections because an administration that has made it its calling card to sue markets or dictate what markets should think is unlikely to stop doing so before voting. He removed substantial leverage over the weekend, kept spot exposure, and sees “no reason to sell right now.”
The panel distinguishes market health from speculative breadth. Bitcoin and equities are grinding higher, while Bonk, Stonks, and parts of the Robinhood ecosystem illustrate the familiar transition from PvE profits to “all the PvP extractors” arriving once activity fades.
Jason’s shortlist is Hype, Pump, and Zcash, with Grass, Ethena, Venice, and GEODNET among the network or DePIN names showing promise. Strong leaders acting as “a good sponge for external money” matter more than reviving traders who hold four-figure positions for 90 seconds.
2. Pump’s endurance has become the argument
Jason initially thought Pump had missed successive waves as FOMO gained mobile traction and Stonks introduced new mechanics. Yet Pump’s revenue barely changed, competitors cooled, and the token again looked likely to soon reclaim its high: “At this stage, Pump just needs to be respected.”
His strategic framing is that one launchpad rival is dangerous, while ten are effectively a feature pipeline. Competitors test liquidity additions, reflections, hooks, and custom rules; Pump can observe what works and incorporate it, much as Instagram absorbed Snapchat’s Stories.
The business remains difficult to value because outsiders cannot understand how rapid-fire meme trading persists when most participants lose. Even so, the panel cites roughly $1 million per day during the bear market and about $2.5 million per day over one recent weekend.
3. Tokenization delivered the thesis before it rewarded the tokens
Guy admits the recovery surprised him. He had expected a discrete catalyst, sold some long-term Bitcoin after worrying that MicroStrategy’s leveraged trading had “spoiled” the asset, and watched altcoins rise three to five times while Bitcoin gained roughly 40%.
His deeper observation is that crypto’s promised adoption already arrived: stablecoins became widely adopted, tokenization advanced, and fintechs connected to DeFi backends. The despair came because “you got everything you asked for,” yet the coins investors owned did not appreciate with the underlying thesis.
Guy separates tokenized equities from tokenized fixed-income or savings products. Equities are exciting chiefly because permissionless rails expand access beyond US brokerage accounts; technologically, he sees little novelty and describes much of the opportunity as valuable “regulatory arbitrage.”
4. Real-asset perpetuals open the $150 trillion market
Yan’s product-market-fit argument is that perpetuals offer existing crypto users more utility than merely wrapping Nvidia shares. Twenty-four-hour markets, leverage, broader liquidity, and potentially lower funding costs create a compelling international product.
Guy says these markets barely existed 12 months earlier, with under $100 million of open interest in any of the names discussed; now traditional finance watches them for pricing. His 24-month call is categorical: these contracts will surpass crypto derivatives in open interest.
The arithmetic drives the conviction. Crypto built multiple billion-dollar derivatives businesses on a $2.5–3 trillion underlying asset base; extending the same machinery to roughly $150 trillion of other assets could create “some very large businesses.” Guy says the relevant contracts may already have reached somewhere around 50% on Hyperliquid.
5. Better assets can keep capital on-chain after the cycle turns
Guy expects equity funding to have a more consistently positive skew than crypto funding. Crypto falls about 80% every three to four years, eventually making paid long exposure unattractive; equities have trended upward for almost 20 years, making long exposure and positive carry more durable.
This changes user behavior at cycle end. Instead of withdrawing because every available asset shares crypto beta, users can rotate into equities, fixed income, or savings products, remain operationally on-chain, and redeploy without overcoming the psychological and practical friction of depositing again.
The previous cycle showed that friction clearly: around 2023, DeFi lending yielded roughly 150 basis points below the risk-free rate because capital could not reach Treasury bills. Stablecoin supply fell only about 5% at the end of this cycle, versus roughly 40% at the end of the last one, as more on-chain options became available for holding money and earning a return.
6. Instant liquidity deserves a premium that rate comparisons miss
Guy argues that Ethena helped converge fragmented crypto rates toward a common dollar benchmark. Two years earlier, CeFi funding could reach 30–50% while DeFi borrowing cost around 10%, leaving spreads of roughly 1,000 basis points between borrowing on Aave and deploying on Binance.
Comparing Aave’s 350-basis-point lending rate directly with SOFR misses the embedded option. USDT or USDC can leave a DeFi application within one block and immediately fund a distressed trade; Treasury bills may take one or two days to exit.
That speed matters because crypto can produce a “three-sigma event” every three or four months, when available cash might earn 5–10% in a day. Some capital in Asia also cannot access regulated US instruments through KYC, making a near-SOFR DeFi rate its best practical alternative.
7. DEX economics are stronger, but CEX risk controls still matter
Guy’s long-term evidence for DEXs is their share of CEX volume, which has risen almost linearly for two or three years. Once interfaces become usable, avoiding full KYC operations, custody, and centralized security costs creates what he calls an “unfair business advantage.”
Ethena nevertheless executes centrally because safety dominates ideology. CEXs can classify an account as delta-neutral and move it behind directional traders in the ADL queue; on-chain venues generally treat accounts alike, and Hyperliquid’s documented ADL occurred during an event when Ethena’s BTC and ETH venues did not have ADL.
Centralized exchanges also hold billions of dollars—not platform tokens—as collateral or insurance funds for contracts. DEX token buybacks can support price and attention, but redirecting excess profits leaves a thinner cash buffer when markets break.
8. Category leadership is valuable, but distribution can redraw the moat
Robinhood’s Bitstamp partnership could weaken the idea that Lighter enjoyed an exclusive or priority distribution relationship. One panelist described the integration question as more “when” than “whether,” while noting that it could still hurt Lighter’s thesis.
The panel repeatedly sees crypto settle into pairs: Tether and Circle, Aave and Morpho, Hyperliquid and Lyra, Uniswap and Aerodrome. Below number two lies “a graveyard,” although immature categories such as options may support three or four winners before liquidity and market-making consolidate.
One panelist says he likes and uses Lyra and still holds it, but expects Hyperliquid to trade better than Lyra through year-end because of the distribution, investor, and unlock factors discussed. The panel does not establish that the Robinhood arrangement is clearly exclusive to Lighter.
A panelist resists a universal “buy the leader” rule. Valuation reflects growth plus longevity: incumbents usually own the moat, but smaller players can have more upside if a distinct product captures even a modest share of a large TAM.
9. Options, unlocks, and stablecoins expose crypto’s remaining frictions
Guy sees perpetuals as the simpler instrument for leveraged direction. He contrasts them with options, which enable hedging and custom payouts but require users to price volatility and Greeks when many simply want “long with leverage X.” He cites a roughly 95/5 split while contrasting Deribit with perpetuals and other venues, without specifying the direction of that split in the transcript.
He credits Deribit with finally supplying a credible order book after years of virtual-AMM workarounds. Founder John Jansen spent five or six years “chewing glass” before achieving apparent overnight success; TradFi options also benefit from institutional hedging that makes the market genuinely two-sided.
On token structure, Guy admits Ethena became shorthand for “low float and high FDV.” The team bought out weaker venture holders near the summer lows, clarified revenue return, aligned the token and equity, moved intellectual property away from the shareholder structure, and assigned future sale proceeds to the token rather than equity.
On unlock design, Guy says a year without selling pressure can give a project time to grow into its valuation, but after the first unlock at 12 months it is probably better to establish real pricing. A host argued that a single earlier unlock is preferable to prolonged drip releases.
Stablecoins close the episode with a useful contradiction: their secular adoption is real, but marginal supply remains speculative. Supply contracted roughly 40% during the intense bear market, then expanded by $1–2 billion per week when Trump and ETF optimism revived crypto—not because people in Argentina suddenly changed their need for dollars, but because investors again wanted capital inside rising crypto markets.
Full transcript
So when you take that $3 trillion and turn it into $150 trillion with the asset base behind it, I think you're going to create some very large companies in the process. Having access to much higher-quality assets or asset classes is really exciting. It's much higher utility and a much better product-market fit for the existing user base. Once you move these things to the blockchain, you can do more interesting things with them, right? The potential for this, although people are optimistic, is greater than we currently imagine.
Welcome back to the Delphi Hivemind podcast. Unfortunately, unlike last time, this edition returns to our usual virtual format. But we got really good feedback about the live release, and we definitely plan to do it more often. So thank you to everyone who joined. If you haven't seen that episode yet, be sure to watch it before listening to this one. We have another special episode today, and I won't reveal the cards just yet, you know why, but we'll be joined by a close friend of Delphi in a few minutes. But I'd like to start with what's been happening the last few weeks:
Last time we recorded, the market was feeling really good. We may not have been at the peak of the hype, but the market was definitely gaining serious momentum. I would say that things have cooled down a bit in the last few weeks since we last recorded. I would like to start with our feelings about the market right now: Are we losing momentum, or is it just a pause before we continue to grow through the end of the year? Jason, I might be putting you in an awkward position by starting with your general thoughts on the market, but let's start there.
Of course. No, I think everything looks pretty good, to be honest. I think stocks are just steadily rising. Paying too much attention to events like Iran, or pretty much anything at this point, has been a mistake, right? The markets have just kept going up slowly, and that's usually how it goes. Everyone gets scared for a while, the market kind of brushes it off, and then 3, 4, or 5 months later, we're back at all-time highs. That's where stocks are right now: just moving on.
And Bitcoin looks great, right? Have you consistently seen good flows into ETFs since the Treasury did the reversal a couple of weeks ago? At this point, it was probably a month and a half ago.
My main thesis about the long position in risky assets was that I would hold it until the midterm elections. I just don't see how an administration that has made it its calling card to sue the markets or dictate to the markets what they should think for the past few years wouldn't do the same thing before the election. That's pretty much what we saw. I'm still in a long position, but I dropped a significant portion of my leverage last weekend and am just holding spot positions. I don't see any reason to sell right now. I'm just holding long positions in the underlying assets.
As for the hype, it's not there for me. I know many of you also hold things like Zcash. Pump.fun—I’m so glad I sold that shit on the lows. This thing completely took off after that. I think the cycle turns out to be that you can just hold the core good coins and do nothing else.
In many ways, it looks like 2024. I think the on-chain situation looks pretty bad, up to the point you mentioned. I think Bonk and Robinhood are pretty fried right now. I think Stonks in that ecosystem is also pretty fried for a while. This brings us back to everything we were talking about: How stable is a memecoin with a 3% trading fee that's pegged to a stock or something big?
At some point, this game ends when trading activity decreases, which is what we're actually observing. You see a lot of rugs and things like that popping up on Robinhood and Stonks. This is how all these on-chain games usually end and unfold. They start out as PvE, everyone makes a ton of money, and then they're like, “Oh, wait. Now all the PvP extractors are coming.”
You see this over and over again, for example, in the Pump.fun ecosystem. I see it now; it's exactly what I expected, so I never really got involved because I didn't want to play this. What's interesting about this on-chain thing is that everything was supposedly going up and then down, right? Like PONKE, which made a mad dash without any pullbacks, soared to almost $1 billion, and now is falling every day. It was similar with AI and with Stonks.
There was a period when literally everything in the Stonks ecosystem was going up. You could buy any cat on the platform and make 10x in a day. There were giveaways everywhere. But look at Hype, Zcash, and Pump—for me, those are the main 3 now. I somehow brought Pump back into the top 3. At this stage, Pump just needs to be respected.
About 2 weeks ago, I was thinking, “Okay, Pump missed the Robinhood chip.” Then FOMO came along and became a hot mobile app, and Stonks came out on Solana. You were like, “Wow, Pump missed Raydium. FOMO is a new app. Stonks is now doing things on Solana.” But then I looked at the metrics, and their revenue really didn't change much over that period. Now you see all these things have cooled down, and Pump again looks like it will soon reclaim its all-time high.
If there's 1 competitor—a launchpad for Pump—that's a problem. But if there are 10 of them, then those are just future features for Pump, right? All of these launchpads do things a little differently. For example, LaunchLab does something where they add liquidity to coins. Stonks did something with reflections. There are these new ones called Hooker [?] on Robinhood and Hooked [?] on Solana that have hooks.
It's like, “We can implement all these cool custom rules.” All these launchpads are trying to win at the expense of some new features. It seems like Pump is just a behemoth, and this is a strategy that's not new to crypto. Many companies, like Meta, have already done this. When Instagram stole a bunch of features from Snapchat—remember when Instagram added Stories?—everyone was like, “They just stuffed Snapchat into Instagram. This will never work.” Obviously, it's possible to do that.
I think Pump looks pretty strong. Hype, Pump, and Zcash look really good to me. Bitcoin looks good, and there are still a few good network coins. You see a lot of promising network coins lately, like Grass and Ethena. There's also Venice, which looks pretty good. There are many strong projects in the DePIN field right now. Tempest wrote about this the other day.
A lot of people are talking about GEODNET these days. That's interesting. GEODNET and Grass seem to be in the same DePIN category. I don't know if Grass is exactly DePIN, but it was in that category.
This is definitely DePIN. It's a physical realm, even though it's software, because it uses bandwidth, which has a physical aspect. I don't know—there's no hardware there. You do see that some DePIN tokens are really proving their value.
Pump was so painful for me. I didn't sell at the very bottom, but I sold for about $0.02.
Yes. Yes, dude. I just want to kill myself. My original plan was to buy this and exit before the tokens were unlocked. As the unlocks approached, I just sold.
You got the reverse price dynamics on it.
That's right. It was very painful, but I bought it again. This is so annoying. I've kept it all these years. It has more revenue than Hyperliquid now, I think. They seem to have been doing about $2.5 million a day this weekend.
It's just a sleeper.
They held steady throughout the entire bear market. All that time, I was thinking, “How is this even possible? The crypto market is literally dead, and these guys are printing $1 million a day on memecoins. Who is paying for this, anyway? Do you understand?”
Someone, dude. Apparently, someone is paying for it. We need to find some real trench fighters for this show somehow.
The market definitely looks good. That's exactly how you want things to go after a long rally: You create a kind of wall of anxiety, doubt, hesitation, accumulation, and a reason for people to open short positions again, followed by gradual growth.
I'm okay with the fact that trench fighters are being destroyed. Ultimately, I don't think bringing back trench soldiers is what attracts capital. You don't expect big players to come in with big money knowing that the game they're playing is holding 4- or 5-figure positions for 90 seconds. Nobody will actually do that.
When market leaders lead by being a good sponge for external money—which is actually what is needed to continue the movement of this market—I believe that's a huge plus. You have people who support it, or at least the ability to have a thesis with some certainty, as opposed to these purely trading opportunities that I think end up on a roller coaster with euphoria.
So, yes, there are clear market leaders, and they continue to look good. Bitcoin looks good.
How close is Saylor to getting his STRC re-peg?
That's a pretty serious thing, right? He's also become an insignificant factor. It seems he bought about 300 BTC last week. It looks like he's trying to finish this re-peg, maybe before their earnings report, which is in about a month.
I don't know what the open interest is in STRC, but this will be a big hurdle for them.
Yes, it's nice to see that it's no longer driving the market the way it used to and is becoming less of a factor.
1. Introducing Ethena Founder Guy Young
I think it's time, as we mentioned at the beginning, to invite our guest this week.
As I said, Guy Young is a close friend of Delphi and the founder of Ethena. Guy, welcome to the show. Nice to see you, man. Thank you for inviting me. So, let’s start with this. Let’s include you in this roundtable: what is your current vision of this market?
I’m probably not the person to ask for market advice, because I feel like every time I share my thoughts with you, you’re pretty spot-on, to be honest.
In our personal conversations, you were quite apt. You were bearish closer to the peak last year, and you’ve become quite pessimistic. I think you underestimate yourself.
I think I was personally quite surprised by the market recovery. Two or 3 months ago, I thought there always needed to be some kind of catalyst, like the ETF catalyst at the beginning of the last cycle. I couldn’t really pinpoint what it was this time, other than the fact that cryptocurrency had fallen so much relative to every other risk asset in the world that it just seemed to start reverting to the mean.
I think I even got shaken out of some of my long-term Bitcoin holdings midyear, just looking at what was happening with Strategy. I thought Bitcoin was a spoiled asset because of how leveraged it was. The thesis shifted quite a bit over time: MicroStrategy was initially a smart tool to give people access to Bitcoin with a little bit of smart leverage, and then it turned into him trading it intraday in volumes of $50 billion. I just thought, “Do I want to hold an asset that this guy is trading on leverage at that scale?” So I was really shaken up.
I think Jose is exaggerating my position at the beginning of all this. I don’t spend much time on the markets right now. I did it a little bit more last cycle, but now I feel like I’m already in a long enough position with my main job. If it goes up, great, but I don’t spend a lot of time thinking about it.
I would say that I don’t really have a clear vision of where we’re going next. I was quite surprised by how strong this move was, and especially by how much altcoins rose relative to Bitcoin. A bunch of them have gone up 3 or 5 times, sometimes even more, while Bitcoin is only up around 40% in the last few months. So I wouldn’t be surprised if we cool off a little bit for a while.
2. Tokenization & Crypto’s $150 Trillion Opportunity
I think that’s a valid view. One of the things we’ve been talking about a lot, and betting on, that has surprised some of us is how big this wave of tokenization, RWAs, and on-chain shares has really become, especially in the last couple of months.
I know that in a lot of ways this intersects with what you’re doing, and you have some announcements that we’ll get to and weave into this conversation. But as a founder in this field, it’s hard to escape the price, right? Even when you’re fully immersed in development, I’m curious how you personally perceive this whole wave of tokenization.
Will it be possible to move away from crypto, and from the fact that some of these products are very cyclical relative to the crypto market, and diversify into much larger potential revenue streams and new markets thanks to this wave of tokenization? I’m really interested to hear what you see from where you are right now.
I think it’s incredible. What’s really happening is that all the things we were talking about 2, 3, or 4 years ago—the dreamy scenarios of what crypto could do and what this technology was capable of—are actually coming to fruition.
That was one of the biggest sources of despair for people during the last bear cycle, when it seemed like the sentiment might be even worse than after the FTX crash. The main reason was that, in a sense, you got everything you asked for, but the prices of the assets you owned did not reflect the fact that your thesis had turned out to be correct.
The adoption of stablecoins, the growth of tokenization, and fintechs connecting to DeFi backends—everything we had been talking about for the last 4 years actually happened. But the coins you owned did not increase in value, despite all of this coming true. There was a real disconnect between reality, where truly amazing things were happening, and prices, which were almost completely disconnected from that.
I think we’re experiencing the biggest upswing right now because real businesses are creating real products and are being recognized for it more than ever before. To answer your question more specifically about tokenization, it’s not a core part of our business. We’re not a token issuer, but of course we work with a lot of them. I think Aave is the second-largest holder of real-world assets in the crypto sphere overall.
I really think there’s a division in this market when we talk about tokenized stocks and tokenized fixed-income instruments or savings products. Tokenized stocks, to me, are quite exciting. The analogy is to think about what stablecoins have done: they simply created a digital version of the dollar and effectively exported it to everyone who wasn’t in the United States. That’s where they found product-market fit, by giving people outside the United States access to the dollar and the US financial system.
As for tokenized shares, I don’t think there’s anything particularly interesting going on from a technological perspective. It’s primarily regulatory arbitrage, which is interesting because it expands access to these assets for people who don’t have a US brokerage account.
There’s an Odd Lots podcast with one of the owners of a major exchange where he was asked a very simple question: “Explain to me why this technology actually enables something new, and why this isn’t just a way to ignore securities laws to sell stocks to people who don’t currently have access to them?” He didn’t have a direct answer to that question at all, even though it’s the first thing you’d expect to hear from him.
I really think a lot of this is less of a technology story. It’s more about the fact that cryptocurrency provides broader, permissionless access to these assets, which is still valuable. You can build a very large business on this regulatory arbitrage. My skepticism is only due to the fact that I don’t see anything particularly interesting there from a technological point of view.
I would probably agree. You ruined the mood. You’re still skeptical? The market is growing, sir.
No, but I really think that’s a good point. We, as we call ourselves, crypto-optimists, are very immersed in this. It’s very much a part of our daily lives. I think one of the things that is less about the technology and more about distribution is expanding the surface area of high-quality assets. What can now be traded through these on-chain rails obviously opens up a lot of possibilities.
I personally am not very keen on the tokenization of Nvidia shares. Maybe it’s interesting when you’re in the United States and the process is relatively simple, but having access to a much higher-quality group of assets is really exciting. These rails aren’t necessarily just dependent on a handful of what we consider high-quality assets in crypto today, crypto-native assets, or a bunch of tokens that, let’s be honest, have pretty questionable mechanisms for accumulating value, while we’re almost trying to force them to have value.
It simply provides much more volume for quality assets that can be traded and used in innovative ways. I think this aspect is fascinating. I’d like to hear everyone else’s thoughts.
If we never tokenize Nvidia, it doesn’t really matter.
I was going to say that I think the perpetuals sector is more interesting for many of these assets. It offers much higher utility and better product-market fit for the existing user base. The more volume there is, the easier it is to create liquidity, especially when it’s possible to lower financing rates.
That would be a great transition to what you guys are doing.
If you can make the financing rates relatively low, then it becomes a very attractive product for an international audience, as opposed to whether my HIMS pairs with BONK.
Once you get these things on-chain, you can do cooler things with them. A pair of HIMS with BONK may not be the innovation we wanted, but it might be the innovation we deserve. I think there will be interesting things.
It’s similar to the situation with stablecoins. You could say that these regulatory-arbitrage dynamics apply to many crypto assets. I’m curious whether you want to delve into the topic of perpetual contracts on real assets or discuss what you’re betting on right now. Guy, what are you really excited about right now?
I definitely agree with Yan’s point. The situation with derivatives on these assets is incredibly interesting, and we’ve actually created something that isn’t that new. We’re simply bringing these markets to a 24/7 format, which didn’t even exist 12 months ago. That’s pretty impressive when you think about it.
We had less than $100 million in open interest in any of these names a year ago. Now traditional finance is looking at these markets and actually using them for pricing.
So, I think it was incredible. I believe the growth potential, as long as people remain optimistic, is greater than we currently imagine. The general concept we're thinking about is that we've created multiple billion-dollar-plus businesses simply by creating derivatives on a $2.5–3 trillion asset class where the underlying asset is crypto. When you take that $3 trillion and turn it into $150 trillion with a corresponding asset base, I think you're going to create some very large businesses in the process.
So, my general view, which I wrote about the week TradeXYZ launched the first perpetual contract on Hyperliquid, is that in 24 months, these contracts will overtake crypto derivatives in terms of open-interest volume. It seems they have already reached somewhere around 50%. You probably know the situation on Hyperliquid better than I did a couple of months ago, but I think this figure will completely surpass crypto derivatives in the next 24 months.
The most exciting thing for us about this is that a couple of weeks ago, we started expanding what we were doing. The core idea goes far beyond the crypto base, and the same thesis I was just describing—moving the asset base that allowed us to reach $15 billion at the peak last year, from $2 trillion in cryptocurrency to $150 trillion in other assets—is obviously a very exciting expansion over time and in the process.
I think another important point, besides diving into the fine details, is to think about the nature of the funding rates for these assets. If you look at things, you see a much more positive skew in how consistently positive equity funding rates are compared with cryptocurrency. Intuitively, this can be explained as follows: every 3–4 years, cryptocurrency falls by 80%, so it is quite logical that you do not want to pay a positive interest rate for a long position in crypto at the end of that 3–4-year cycle. Stocks, on the other hand, have been steadily rising for almost 20 years, and there has never been a time when it didn't make sense to hold long positions in stocks and pay for them.
So, I think it's just the nature of the underlying assets contained in these products, and the form of these products is better suited to what we actually offer our users. In previous cycles, you had every reason to withdraw your money as soon as you thought the cycle was over. Now, with the increased utility and leverage of assets, you can simply rebalance your funds, go about your daily business, and keep the money in the system, which I think makes it much easier to reinvest when things are going well again.
That might be because of a psychological barrier or simply because of the obstacle associated with needing to deposit funds again. I don't think people realize how much capital just stays locked up and doesn't come back into the system as a result. Even at the end of the last cycle, if you remember, this was when the first Treasury bills were coming online, around 2023. DeFi lending rates were a full 150 basis points below the risk-free rate, and it was literally locked-up capital that couldn't even get into Treasury bills.
Well, it shows how crazy the discrepancy was between the rates in traditional finance and what was happening on-chain. Now, of course, this isn't even an issue; it's completely secondary, given the access to these products on-chain, which can actually be seen in the indicators of stablecoin supply. At the end of this cycle, stablecoins barely fell in total volume. I think the total supply of stablecoins is down about 5%, compared with a 40% decline at the end of the last cycle, when capital flowed out of the system in pursuit of risk-free rates in traditional finance.
3. DeFi Yields, Exchanges & the Perps Race
So, I think this is a very good indicator that stablecoins haven't really left the system at the end of the cycle, because there are many more options on-chain where you can hold money and earn a return.
I wonder what you think about interest rates in the cryptosphere. There is a common complaint that you are not paid an adequate income for the risks you take. But I think it's very difficult because different income products are exposed to so many different risks, so it's hard to evaluate them in the same standardized way as in traditional finance, where it's mostly about credit risk, duration, and other parameters.
You went through a lot of difficulties, and we've mentioned this many times. You handled everything perfectly, both in terms of transparency and prompt response, and in the fact that you didn't actually suffer any financial losses. The situations were mostly the result of market misunderstandings, which you immediately clarified. So, I think you're in a very unique position in terms of the Lindy effect, and the numerous integrations you have are further confirmation of that.
I'm curious how you see the evolution of returns in this area. Does it consolidate around a few players, or will people continue to direct funds into these more esoteric options with increased returns?
Yes, I think that since the day it came to market, interest rates have actually converged across all possible cryptocurrency sources to one rate, which is the USD rate, which I now consider, at least in DeFi, to be a kind of benchmark. If you remember, when we first came out, there was a huge gap between funding rates in CeFi, which could reach 30%, 40%, or 50%, and lending rates in DeFi, which were around 10%. You could just borrow dollars on Aave, put them on Binance, and get a 1,000-basis-point spread. That seems crazy now, but just 2 years ago, it was a practical reality.
So, I think one of the factors that Ethena created was the convergence of all interest rates in the cryptosphere to one value, as you provide capital to different parts of the system through USDe. One of the misunderstandings, or the point I disagree with in the simplistic analysis, is when people look at Aave lending rates or other DeFi rates and compare them to SoFi, saying, “It doesn’t make sense to lend to Aave at 350 basis points when SoFi gives the same amount.”
I think people don't understand that the option value of holding a dollar in cryptocurrency increases significantly when it is instantly liquid. Your ability to withdraw USDT or USDC from a DeFi application within a single block and use those dollars immediately is extremely valuable, much more valuable than sitting in Treasury bills, which can take a day or 2 to get out of.
If you think about trading organizations that need liquidity in CeFi, or even the fact that every 3–4 months there is some kind of 3-sigma event in the cryptosphere, you want to have cash to take advantage of market imbalances and make 5–10% per day. I think people underestimate the importance of instant liquidity in the cryptosphere and how much it is actually valued. I would even accept rates below SOFR if I could access liquidity on demand so that I could use those dollars in the system at any time.
So, that's one point people underestimate when considering how valuable a liquid dollar can sometimes be in crypto. Another point is that a lot of the capital in DeFi is kind of “locked-up” money in Asia that can't actually go through KYC and access regulated products in the US. Therefore, lending within DeFi applications is probably the best they can get. If they are approaching SOFR, this is probably the only option available.
So, regarding some of the questions about why rates are reaching the levels they are now, I think there are some not-so-obvious aspects that don't immediately catch your eye when you simply compare them to risk-free rates.
I don't want to embarrass you, but I know that you've been launching perpetual stock futures with the support of Binance. We’ve discussed perpetual contracts a lot on this show, and we've had different views, both more serious and simpler. What's your overall opinion on these more crypto-native platforms for perpetual futures compared with centralized exchanges? Distribution can also be part of this, and how you think about it. More broadly, are you optimistic that crypto-native versions will be able to beat traditional players over time?
Yes, definitely. I think you can just look at the very basic chart that, to me, may be the only important chart for answering this question: the percentage of DEX volume compared with CEX volume, which has been going up in almost a straight line for the last 2–3 years. I think it will continue because DEXs have a kind of unfair business advantage. If you can create something with a relatively user-friendly interface—and I think they have already achieved that—you don't have to maintain a full-fledged KYC department, and you also don't have the custodial costs of a centralized exchange, with all the security costs that come with it.
On a structural level, DEXs are in a much stronger position because of how they can do business and how efficiently they can do it compared with a centralized exchange. You can see it in the numbers, given how their dominance grows over time.
The reason we haven't done this on-chain from Ethena's perspective is that, while I'm optimistic about these platforms and believe this trend will continue, our main job is not to lose people's money. That's what I care about the most. It is objectively safer to do what we're doing in CeFi now than in DeFi, which may not be exactly what you expected to hear.
There are several different reasons for this. One of them is that on decentralized exchanges, there is really no understanding of whether your account is delta-neutral or long. If you do it in CeFi and the exchange marks it as a delta-neutral account, you move to the back of the ADL queue if something goes wrong.
Whereas in DeFi, you are all practically considered one and the same account. Another reason is the aggressiveness of ADL mechanisms. In CeFi, BTC and ETH contracts on the platforms where we are present have actually not had ADL since 2018, and this even applies to events at the end of last year.
Even with what happened at the end of the year, there was no ADL on the platforms we used, whereas there was ADL on Hyperliquid. This is not a criticism of Hyperliquid; it is just written in their documentation. This is how they set up their ADL, and you can choose whether to participate in it or not. It is just not set up in a way that would be beneficial for what we are trying to do.
I think the last point is about insurance funds, which people forget. Centralized exchanges have literally billions of dollars—not tokens—as collateral for contracts. So if something goes wrong, they have a pool of dollars they can turn to to make sure we stay whole.
Many DEXs made the decision to channel excess profits into token buybacks, which was obviously a great move to get people interested in the business and support the token price. But it also means you have less of a margin of safety compared to those who choose to hold funds in dollars as a safety net for the product.
Yes, I think these are excellent remarks. I also find this question about distribution and integration interesting. One of the major news stories seems to have happened since our last recording, right? We have not discussed this yet, but, for example, Robinhood’s collaboration with Bitstamp.
Unlike Lighter, where one could argue that part of the price increase was built into this integration because it is a huge distribution partner, I am curious what you guys think. Can you chime in? Do we see this as a significant change in the thesis for Lighter, or is it just a matter of time? Is it a question of “when” and not “if” regarding their integration?
It seems more like a “when” than a “whether,” but I think it still potentially hurts the thesis a little bit, because it was thought to be something of an absolute—if not exclusive, then priority—partnership.
Yes, it seemed like the right move. I feel like if this was a sign, they should have been trading much higher than they were. Trading was pretty sluggish before this news.
Well, that is because people knew.
Yes, they knew. Someone was saying it would be above $5. I thought, “Dude, this guy is dropping a bunch of tokens, man.” I hope he is wrong about some of the memes.
In short, my new favorite account is definitely Tulip King. This makes me laugh so much. I do not agree with everything he says, but I really like the way he thinks. I like his energy, and he had a good recent post about how he thinks about crypto cycles. I actually thought that was pretty apt.
His idea is that you should simply own the best in each category, because they are not only the best, but they also deserve a higher premium than the rest. Own HYPE instead of LIT. Own PUMP instead of all the other launchpads. Own Bitcoin and Zcash instead of the others. It is a little strange, but I think his opinion on this is spot on.
Guys, do you believe in this theory? Should people just own the best? I, for example, own HYPE. I do not own LIT. Obviously, if you look at LIT, it seems like it has a lot more growth potential than HYPE.
I think it depends on how immersed you are in the market. For a very long period, LIT just blew past HYPE. You have these long periods of one leading, where the 2 metrics get too far apart, or there are catalysts, or there is a divergence in expectations.
Everyone thought LIT was it, but in reality there was so much invested and such a small volume in free circulation that it really took very little to move it off the bottom.
Do you agree with his thesis that, in terms of the profit multiple, it is worth giving a higher multiple to leaders than to others?
I guess it depends to some extent on competitive advantage, right? The profit multiple is growth and the combination of growth and longevity. You could argue that smaller players have more growth potential, so maybe it depends on how strong the moat is for the leaders.
The leaders usually have a moat, but the growth is likely on the side of the smaller players. It really depends on their ability to bite off a piece of the total market, or TAM, and how marketable their offering is. A smaller player might also have a unique approach that will allow it to capture a certain niche, where even a small market share can lead to significant fundamental results for the asset.
I think it really depends on the situation. You have periods of success that follow each other, and so if you try to apply a buy-and-forget strategy to the entire cycle, maybe it works, but I do not know. I think it all depends on the team, right?
That is right. I would say I generally agree with that sentiment. Last cycle was pretty similar. I do not tweet often, but the only tweet that was successful was about the last cycle.
I basically just wrote, “Why is everyone so resistant to this meme thesis? The market has made it clear that it likes memes, so just buy some good memes, right? Take a few obviously good memes, accept the market as it is, and either respect the pump in those assets or not. It is your choice.”
I think it is pretty obvious this time that, as Yan pointed out, if you want a minimum of stress and just want to relax, you could pretty easily use that strategy and be very happy with the outcome.
With projects like Lyra, I am trying to reevaluate all of that, because I was relatively optimistic. I was also thinking about this whole Vlad thing and Robinhood. I would not say—I do not think that it is clearly an exclusive deal with Lighter, right?
Everyone is starting to realize that Lyra’s success, at least in part, is dependent on external parties, not necessarily on Lyra itself. Everyone is looking at this distribution through Robinhood as a kind of push that will help Lighter get to the next stage of its journey. When you rely on that, or when the market recognizes that, it takes away some of your control over your own destiny.
What would it look like if, say, in 6 months, Robinhood had both Lyra and Hyperliquid integration? I am just trying to reevaluate that. Of course, Lighter has a lot of investors who have made a lot of money, and the token unlock starts in a few months. That obviously affects how I want to position myself with perps.
I do not know. I think I like Lyra. I use Lyra. I still have some Lyra, but I am trying to figure it out. I think Hyperliquid is trading better than Lyra for the rest of the year because of all these factors.
It is also quite interesting. It seems like you can afford to be long, but only in the number 2 spot, essentially. If you go below number 2, it is like a graveyard.
I think there are so many examples. I do not know why, but there is always a duopoly in almost every segment of the crypto market, except for maybe centralized exchanges. You have Tether and Circle, Aave and Morpho, Hyperliquid and Lyra. It always seems like a pair: Uniswap and Aerodrome. But when you go beyond that, there is nothing that even comes close. I do not know why, but it always comes in pairs.
Yes, I agree. I think it also depends on where each of these sectors or verticals is in the maturation cycle. We talked last time—I asked about options, remember? Options are one of the last frontiers, or primitives, that a lot of people are betting on here.
Because it is so early and the TAM is so big, maybe it makes sense to have 3 or even 4 leaders, depending on your opinion, because it is too early to call a winner. It seems to me that with Hyperliquid, you are already further along the path to opening larger positions or having more confidence that this duopoly will perform well compared to early-stage projects.
Also, if you rewind a year ago, there were a lot of perpetual DEXs. Aster came out, there was Pacifica, and there was Paradex, which has recently shifted a bit toward options. There were a bunch of these perpetual DEXs, and most of them did not pan out.
Last year was the summer of perpetual DEXs. This year is the summer of launchpads.
The summer of launchpads.
I think the thing was that with perpetual DEXs, before RWA came along, you were all competing with each other. It was a real race to the bottom. There are only a certain number of assets that take up all the volume, and you offer a generic product.
With RWA, you can really differentiate yourself with technology and access to assets. Expanding your footprint on the RWA front makes the opportunities almost endless. Obviously, at some point the market will get saturated, but I do not think we are there. Even the numbers mentioned earlier about the size of the markets relative to each other show that there is room to grow.
I think that is what makes options even more interesting, because you can make multiple bets. One of the problems is that you have so many different order books that you have to provide liquidity for. It is very difficult to be hypercompetitive, and there are just so many assets to deal with.
I think the same reasons that Lighter and Hyperliquid can coexist and still gain market share are much more pronounced with options because of the complexity of market making, the addition of liquidity, and the variety of assets that do not have it.
Did you see this morning that Hyperliquid was added to the Bloomberg Terminal? It is one of those things that no other perpetual futures crypto exchange is likely to get.
Why? Bloomberg will just take it and add Hyperliquid. Yeah, there’s a screen there. It’s WSL <GO> HYPE. Can you open this, Kevin?
Yeah, give me a second. I need to log in.
Oh, really? You have a real terminal?
Yeah. It’s just slowing down my computer.
Oh my god. You could just stop subscribing to Bloomberg Terminal for a month and buy a nice computer. What a rip-off, this thing. It costs a fortune to—
Hey, hey, hey, hey, hey. Don’t do that here. I really think there will be another revaluation, and for some of these asset tokens that we’re talking about, the revaluation will come, but it’s going to be unevenly distributed, right? I think it’s a question of whether the diversification that we’ve been expecting throughout this year—and that’s happened—will continue, and I definitely think it has.
4. Pump & the Memecoin Economy
And it does, but there’s another side of the coin. When you watch Bloomberg TV, for example, they still show the 5 crypto assets that are constantly on the screen: Bitcoin, ETH, SOL, XRP, and Bitcoin Cash. So there’s still a gap between those, to me.
But in terms of launchpads, the argument is similar to the one you just made, right? If this is the summer of launchpads, to say that Pump.fun has a Lindy effect is probably too early, or it’s a bit of a stretch. But it’s impressive how they’ve survived despite the emergence of all this competition.
Yeah, I don’t know. Last year, they had so many competitors: Bonk.fun, Sugar, and a few others that I forgot. But they were all doing the same thing that Pump.fun was doing.
Dude, Sugar? What is it? What are you even talking about? What is Sugar?
There was this Sugar a few months ago.
What, you own 10% of this project and you’re trying to find liquidity to exit?
I never owned it. I only had Pump.fun, and I had this guy from Raydium come to me in the comments every day and yell at me. But I only had Pump.fun. Last year, they were all the same as Pump.fun. There are some small differences, but I talked about this at the beginning: there’s innovation in launchpads now, where people are doing more interesting things.
Yeah, Pump.fun can just wait and see what features to add, and it’s pretty easy for them. They still have a lot of money. So I think that, especially on EVM networks where Pump.fun hasn’t really gotten that far yet, someone has a chance to dominate, but it’s tough.
You see Raydium and Solana—Pump.fun is beating them all. They have their own AMM. Raydium is actively promoting Bonk.fun. Meteora is working with hooks. So you see that kind of competition within the ecosystem.
Yeah. I don’t know, and I also disagree with those who are raising the issue of trust in Pump.fun because they don’t do airdrops. I just don’t think it matters. I really don’t think they ever need to do airdrops, or that it’s even worth doing. I know people are not going to like it, but I don’t think they need to rebuild the trust of people who didn’t get the airdrop because, frankly, they don’t affect the price of the token.
Will they ever do something? Maybe. Maybe we’ll see, but it would be better to spend those resources on incentivizing something new if they really want to do this.
They still have a pretty low multiple, right, compared to a lot of other things. A lot of people still don’t want to admit that memecoins have product-market fit. Trading in the trenches has that fit, that’s for sure. I think most people have a hard time understanding how this extremely short-term trading can be sustained when most people are losing money.
That’s obvious, and I think it’s the problem of understanding how that can exist that makes the multiples so low. Even with all the other launchpads, they’re trading even cheaper. Some of them have less than 2–3x earnings. That’s just a hard case to support or to discount long-term.
It’s so crazy that they’re still making $1 million or $2 million a day. I just need to meet these people.
Who’s betting on them?
I’m telling you, you need to invite real trench traders. We need to invite real trench traders.
Well, pre-IPO coins, right? Who’s betting on them?
Yeah, there are people who are just playing the bonding curve.
Who’s buying it? The whole point of them—
I saw a tweet the other day where this guy was bragging about how much money he made, telling everyone to subscribe, and his average exit was at a cap of $8.9K. Isn’t that the bulk of their income?
That’s what they make. Your average exit is at a cap of $9K. You’re just literally—
I’m a fundamental investor.
No, but isn’t that where the bulk of their income is? Because that’s where the highest fees are.
Yeah. So, Pump or Stonk, it’s actually useful to understand how they all make money. Stonk makes money on all these transfer fees, right? And Stonk actually makes more money when you have coins with very large caps and large trading activity. Whereas for Pump coins, getting to a very high market cap doesn’t help them that much. What helps Pump is the massive rollout and all these launches. It’s different from other models, right? But they can still do it somehow.
Why is that? Don’t they have trading fees on DEXs?
There are, but on the bonding curve, they’re much higher.
Yeah, much higher. It’s crazy. So are there just 2 or 3 big developers out there who release a bunch of memes on Pump.fun before bonding, and then everyone just—what happens? They’re at the top of this “shitty” tree, and there are a bunch of these dudes who are just stupidly bonding. I know 1 guy who does that, and that’s kind of how it works. It’s just like, “Oh my god, I have to fit into that.”
Where are they trading, on Photon still, or where are these people degening? Is there something better?
I think if you buy on the bonding curve, you’re probably on the front end.
Well, Photon and Axiom last year—I don’t know if people still use them for that.
No, Axiom fell a lot because of FOMO. FOMO kind of completely sucked a lot of Axiom users out.
FOMO is a good app to use.
Yeah, it’s like that. You probably won’t make money using it, but it’s a nice app.
I agree. There are all these people just posting funny comments on the chart, calling for a pump and all that, to get a dump, but still opening positions. I don’t know. I thought the app was—
But it’s funny. Yeah, I made an account on FOMO, and it held up pretty well for a week or 2. Luckily, I took a profit, but it’s hard.
You see someone big buy, and you’re like, “Oh my god, I have to follow them.” And then you buy—
Oh, I have to go after them.
It’s like—yeah. Oh man. So it’s literally like going to a casino, right? It’s just actually—
That’s what it is. That’s all it is.
It’s worse. It’s worse, but it’s better. Your odds are lower, but you have a chance of a bigger payout than at the casino.
That’s it. You can just bet on a number instead of red or black, and you get a pretty good payout.
Yeah. But I don’t even know, man. I think there’s definitely a certain skill to this trench trading. If you’re really into it, it’s a lot more profitable to figure it out.
The metaphor is, if you were counting cards in blackjack and you knew there were a lot of 10s in the deck, you could increase your bets. So if you’re in a bull market where the pile of junk tokens is growing, then you play. When it cools down and there are only small cards left in the deck, you take the chips off the table little by little.
Yeah, I think that’s totally fair. And you need to sell. You should pull out of those positions.
But how can that be sustainable? I don’t find it interesting at all. I don’t know how that can be sustainable. You’re just losing money.
Well, because you need some kind of fundamental value, right? You need the possibility that the coin will take off and get external demand, whether as a store of value, through some narrative, through cash flow, or whatever. You can’t play this game forever. Sooner or later, people are going to go bankrupt, and it’s going to lose its meaning.
The ebb and flow. I think it’s like a puddle an inch deep but miles wide, where people are burying themselves in with amounts ranging from $10 to $100 and just getting in and out of positions that last less than a minute. They’re school kids and all that.
Yeah, honestly. 1 dude at school makes some money, and everyone starts going crazy over it. It’s kind of a social element: when you see someone win, everyone thinks, “That could have been me.” And then they keep playing. That’s what resilience is all about.
I’ve talked to some family members, younger nephews, and younger friends. It’s so prevalent. Kids are just chasing shitcoins right in class. I guess it’s like how kids used to go outside to secretly smoke cigarettes behind the stands or something. Everyone’s just trading shitcoins from their phones right in class.
I don’t know. Well, it’s the way it is.
What’s worse for your long-term health: smoking cigarettes or trading cryptocurrencies?
Cryptocurrencies, for sure. But we’ve got a lot of red flags here. Right, Kevin, click on these charts. I’m sure they look pretty much the same today. They’re just disgusting charts, right? Come on, let’s move on to the next one. Just click there.
They look exactly the same, right? But that one got a Trump flavor. By the way, after he renamed it, the thing just burned out. That’s why it went down.
Yeah. It’s not artificial intelligence anymore. Even though it’s backed by a couple of NVIDIAs, it’s just—
Oh my god. But yeah, let’s see how Robinhood is doing.
Robinhood has more interesting things that are showing good results, like Orbeos[?]. Orbeos[?] is cool. There are a few other projects.
So yeah, I'm not sure what to do with all of these launchpads. What is this? Support at 10 cents, Kevin? Is that what your chart looks like?
Yeah, it's not even close to support. That's what the chart shows. Or maybe it's 3 cents if you go lower? Throw some Fibonacci levels on it. That's—yeah, that's 15.
Honestly, this chart is the reason I'm pretty pessimistic about Robinhood Chain right now, at least in the short to medium term. Maybe it'll come back, but it's the wealth effect, right? There was no wealth effect on Robinhood. BONK was actually the wealth effect, and no one is taking profits because all their favorite social traders are sitting on $10 million of unrealized profits in their FOMO wallets.
They're clearly not selling on the side or anything. So if this rolls back, I think a lot of the activity and the so-called “wealth effect” that was on Robinhood is just going to evaporate, and everyone's going to be really upset for a while.
Honestly, man, Solana is just the best. I can see people just giving up on the feed.
Yeah. They're like, “You should have gone into altcoins,” or moved to Zcash or something.
Yeah, me too. I think a lot of people see that. I think that's the right conclusion, right? I think people should just—most people, they're not the 1–2% who are going to make money trading altcoins and change their lives. They're not in the top 5% of perpetual traders. They should just listen to the market and bet on the things that the market has been saying for years are going to go up.
The last 2 years of HYPE just gradually went up. The last year of Zcash actually gradually went up, and the last 6 months even more. There are things that you just have to be a little patient with. I guess people don't want to hold. HYPE only exists for 24 months, right? Even less. In traditional finance, a 24-month holding period is often the baseline, right? And you get 40× or 50× from TGE on HYPE after 18 or 19 months.
5. On-Chain Options
It's like just having a little bit of patience and believing in something.
What happened?
So what do you really think about options, dude? I wonder if you've used them. We're pretty bullish on them as a category.
Yeah, I think it's always been clear to me that perpetuals are a better tool for just speculating with leverage than options. And I think we could see that in the volume in crypto. It was like 95 to 5, Deribit versus perpetuals and everything else.
But they have their place, in the sense that you can do things with options that you just can't do with perpetuals in terms of risk management and creating different payout structures. So I really think they have a place. I just think the overwhelming majority of crypto users want to get long on the underlying asset, and I think a perpetual contract is just a better way to do that.
Options have their place and can reach some scale. I think the problem is that we never really had a good options platform until Deribit came along and started to scale this year with a proper order book and so on. Everything we saw in the last cycle was a bunch of strange virtual AMMs—essentially a kind of duct tape that tried to hide the lack of a full order book.
In my opinion, they did an incredible job. I also want to mention John Jansen, the founder of Deribit, with whom we collaborated over a year ago. I saw the difficulties he went through, “chewing glass” for 5–6 years with various attempts. It was incredible to watch their success. It's one of those true stories about a strong team and an honest founder who worked for years to eventually get this “instant success” after 5 years. So it was really nice to see their progress this year.
Why do you think things are so different in traditional finance? After all, options occupy such a large share in TradFi. Is it just a matter of usage? Because it's not even just at the institutional level, right? Even on Robinhood, regular traders love these options. It seems like it should be—I don't know. It seems like there must be a way to make this work in crypto.
Derive simply tore this market apart. I've been trying to use it for days. It's still quite complicated for someone who isn't familiar with options. But I was told that if you try to buy options on Derive, you have to use an RFQ.
Yeah, I still don't understand why it's so much more popular in traditional finance. You know, I just don't think retail users on Robinhood had any choice but to trade them—perpetual futures, or perps, weren't there. They were unavailable.
And I think if they were around and you just wanted to get leverage on the underlying asset, a perp is a much more intuitive way to do that, given your comment, Ceteris, about the ease of understanding what you're getting into. At the simplest level, when you buy an option, you are not necessarily expressing a view only on the price of the underlying asset. You are actually pricing volatility, like the Greeks.
In fact, everything is much more complicated there, and this is not at all what an ordinary user signs up for when they simply say, “I want to take a long with leverage X.” I guess there was just no real option to use other tools, and this was the only one available. And this is a very successful combination: on the one hand, retail investors who want to use them for leveraged speculation, and on the other, significant institutional hedging, which is not available on such a scale in the cryptosphere.
So in traditional finance, it's a much more two-sided market, in my opinion.
Yes.
6. Token Unlocks & Lessons From Building Ethena
And maybe today or yesterday was the last ENA token unlock, right?
No need. Don't remind them, dude.
They'll get their coins. I think they know. Judging by the speed at which these coins are moving, I'm sure they know. How do you feel, man, finally free from this burden that's been haunting you? And are there any lessons to be learned from this experience other than “don't sell so many coins before launch”?
Some of it depends on you, and some of it doesn't, because of course you need to raise funds if you haven't made any money before starting the business. But I think it was a very harsh lesson for me about who you involve in capitalizing a project.
I made a bunch of mistakes like that at the very beginning, which took a lot of time to fix. The good thing is that it's not an insurmountable problem. It's just a painful thing that needs to be resolved over time. A lot of the capital in crypto is essentially hedge funds masquerading as venture capital firms, and I think you have to be more careful at the beginning about who you're going to work with over the long term, over many years.
I know a lot of people who are starting a business or raising money for the first time, and it's just not something you necessarily think about at the very beginning when you're excited about launching a product. It's essentially what you're most focused on. Fundraising seems like something joyful at first, not a problem you'll have to deal with later.
So I'm kind of glad that we're getting closer to the end of all this. A lot of parts of this were poorly managed on my part, but we tried to correct course with some of the things we did this year. We were just trying to admit our guilt and recognize some of these mistakes.
Some of the things that we were trying to address this year were, in a way, the perception that Ethena was a symbol of low float and high FDV, and venture fraud. Those were the same catchphrases that I saw most often in the feed. We tried to address a few of them directly, which meant buying out the shares of the weakest venture capitalists, pretty close to the lows of this summer.
Being much clearer about how we return revenue and value to the token is something we should have done properly long ago. We also aligned the token and the equity, because when we came out, it was a little bit of a different era in terms of the disconnect between the token and the organization that was creating the token and all that.
I think we've gone further than most, actually moving the intellectual property away from the shareholder structure. Any future sales proceeds now belong to the token, not the shares. We've seen a few cases where a token project gets bought out and the team walks away with $20 million, just zeroing out the token on the other side.
All of these protections have now been removed from the equity and transferred to the token. We tried to address a few of the points that we heard from the market in terms of what people didn't like. It's nice to be able to just focus on building the product, because I've spent a lot of time over the last few years trying to somehow manage all of that, which has been a pretty ineffective distraction.
Do you think it would be better if all investors actually got the unlock on day 1?
Well, yes, maybe. I think there's a certain advantage to having, say, a year's worth of time where you don't have to worry about selling at all—to grow into your valuation or build and try to do something that can justify the initial valuation.
In a way, this first year, when you don't have to worry about anything, is exactly the time when you can devote the most time to actually living up to people's expectations of you. But I think in that first unlock after 12 months, it's probably better to just find real pricing for investors.
By the way, I don't think it's the right thing to do for the team. You obviously just need the team to stay focused and motivated to keep building this for 5–10 years.
But this whole thing with investors—if they want to sell, you're always fighting gravity, right? So if you're trying to postpone these things and put off the inevitable, you're just fighting gravity. The faster you can get them out and get new supporters, the better it actually is for you, I think.
It seems to me that a lot of projects with such a long vesting period are going to unlock everyone at once very early, within the next year or two. I don't know if I'm right about this, but Monad is a good example. As a disclaimer, I'm an angel investor, but wouldn't it be better if everyone—it's an L1, so you just unlock investors right away after a year instead of having this gradual release? I think gradual is the worst part.
You'd be better off just having a big event and then letting whatever happens happen. The drip release is also just a psychological moment. I'm not selling Monad here, dude. I think Monad still has a real chance to become one of the main EVM chains.
I'm not a big fan of L2 networks. I just think that—I don't know, man—I believe Solana is a much better and more holistic blockchain ecosystem than all these L2s. I'm just curious: who else is interested in blockchains anyway? What about L1 networks?
To the developers, I think. That's it; it ended about 3 years ago. I don't know. Are we still worried about blockchains?
Well, the people who build on them are worried. Regarding the unlock, I think if you raise funds knowing that the unlock will be on the first day, you can probably get higher valuations. The worst option is to attract investors with a lock because people demand a discount, and then unlock later. But if you say that everything is open from day one, then the tendency is to spend.
Although some of them dropped 90% from their valuation during the process, it's kind of a matter of skill. If you just do it and forget it.
Yes, I think there are many projects. Sorry, continue.
No, sorry. I didn't mean to interrupt you. I just wanted to say that it's also a bit of an unspoken thing: people probably don't want to talk about it.
It also depends on what stage of maturity you think your product or product-market fit is at. For us to do it in the summer was kind of a “fuck you” to everyone else in the market, saying, “If you want to get out, get out. We're just going to keep building, and we're confident in ourselves. We don't care if you guys are all dumping it now.” That was the message I was sending them.
But if you're not confident in your own product, then when you're trying to find product-market fit, it's more useful to have a high FDV. It's not talked about much, but a high FDV attracts more talent to the company, allows you to make better commercial deals with partners, and so on. You just get bigger, even if that number is somewhat artificial in the meantime. The reality is that it really helps you get closer to product-market fit.
There is a nuance here: if you're sure that you don't need these tricks with a high valuation that no one considers real, then fine—open everything to everyone. But sometimes it really helps to stop pretending and grow into something real when you have that kind of base.
Yes. I'm just wondering what kind of founders would want to go through that. This is my main bearish argument about tokens: after all, you can do equity rounds, right? To some extent, this is the best high-FDV, low-float scam scheme, especially in a bull market.
In a bullish private market, you're valued by only 2 or 3 investors, and that becomes a benchmark for all your employees and everyone else. There's usually enough liquidity to conduct a secondary sale if you're currently popular. So what's the benefit of going through this public-token hell, where idiots in the feed write all sorts of crap to you?
I think it depends on whether you need the token for incentives—that's the first thing. You can't do that with stocks. It also depends on how easy it is to buy your business and how attractive your business is for a takeover.
I think doing it through stocks would be a real nightmare, man. I don't think that's going to happen. And then, yeah, your real long-term path to exit: can they buy you out? Will the company go public, or will it be an independent business that's better monetized through a token?
So, what do you think, Guy? You kind of went through it. You're probably often approached by founders for advice on this.
Yes, I definitely don't regret doing this or choosing this path in general. I would just say that sometimes the nature of what you build doesn't get rewarded if you implement it in token form.
If it's an almost cash-flow-type business—the ones that trade at a 2x revenue multiple or something like that—and they generate cash, then you could lose financially by trying to funnel that cash flow into a token to satisfy the token holders, instead of just monetizing the dividends from the business you've created.
So I think there are certain types of businesses that people look at and just say, “I'm not going to give it virtually any multiple.” If you're just going to funnel all the profits to satisfy token holders into something they don't value at a high multiple, then that's probably the case where it doesn't make sense at all.
But I agree that this whole calculation has changed dramatically in the last 3 or 4 years, right? People were jumping into tokens because there was a certain hype around them. Last year, we tried to convert tokens into stocks and sell them as such in the opposite direction, when the stock markets were more “frothy,” so you almost saw how everything turned upside down, right?
7. What’s Next for Stablecoins?
The crypto market lost its excitement, while the stock markets gained it all last year. But I definitely don't regret this overall decision to choose this path.
Yes, 100%. I think the last question we wanted to ask you is this: we all expected that by the end of the year, the supply of stablecoins would be significantly higher than it is today. It seems to have stabilized a bit. I think some of our predictions were at the level of $500 million, maybe even $1 billion, or $1 trillion by the end of the year.
Do you have any thoughts on why this is the case, why we're seeing this stagnation, and what could trigger the growth of stablecoin supply again?
Yeah, I think this is one example of a nonspeculative use case that has found proper acceptance and product-market relevance outside of crypto. But that short phrase I just said also misses some nuances, namely that this is still driven by speculation. Most of the sharp growth you see in stablecoins is still speculative.
If you compare the Bitcoin price chart with the growth of stablecoins, they're quite highly correlated. For example, when Bitcoin crashed in 2022, people in Argentina didn't wake up thinking they no longer needed the technology and the supply shrank. This is because the crypto market collapsed; there was no base, and there was nothing interesting to make a profit or income from.
So supply decreased by 40% during the most intense periods of the bear market, right? When Trump came to power, they announced the creation of ETFs and so on. Stablecoins literally took off, adding $1 billion or $2 billion a week. This is because everyone was just chasing profits in crypto while this was happening.
Therefore, I believe that the trend is up and to the right, and it has become less dependent on crypto speculation. But the main driver of demand—or the most noticeable changes in stablecoins—remains the desire to say, “I want to put dollars into crypto if it goes up, and get out if it goes down.”
Yes. No, I think that's a very apt observation. We'll see how it all plays out, right? We'll invite you back in a few months, compare the data, and see if these predictions came true.
I think we can end this here. Thank you very much, guys. I'm very grateful that you've joined us. As I said, you've been close friends with Delphi for a long time, and we've wanted to invite you to the show for some time. Thank you for stopping by and sharing your thoughts.
Thank you, guys. I appreciate it.