Crypto’s Speculation Problem, Regulation Without CLARITY & The Gambling Economy

Nothing said on Empire is a recommendation to buy or sell any investments or products.

What’s up, folks?

Are we live? We’re back. We’re back. We’re out of the kitchen, back in the office.

We’re live. Santi is out of the kitchen, back in the office. What’s up, folks?

We’re cooking. We’re cooking, ladies and gentlemen. That’s the bottom line here.

We’re cooking. No longer cooking. You’re in the kitchen, and now you’re like, “I’m back to podding in the office.”

We had a board meeting this week. We are always cooking, no matter what room we’re in. We’re always cooking.

What happens on these inversion? Let me into the board meeting.

Yeah, I don’t know what happens on your board meetings.

I don’t think he has them.

No, he definitely has them now.

What happens on your board meetings? No, we have board meetings. We have a good crew. We’ve got a good crew. We have 50T folks, Tapiero in the crowd. We’ve got ParaFi. We’ve got Ben.

Oh, you got Ben?

Ben joins.

Yeah, yeah, yeah. Good debates. Actually, very good board meetings.

How are we doing? Rob, where are you? Where in the world are you?

I’m in New York.

Nice. This is home.

I’m trying to stay home a little bit this month and next month. Next week, I’ll be in Jackson Hole for SALT, but I’m trying not to move too much.

Nice, nice. I will be there.

August is a sticky month to be traveling because I prefer not to move. Are we going to record in person in September in New York? Yes or no?

Sure.

Are you coming?

I am.

All right.

When are you here?

The first week of September, I think.

All right.

We should all get the band together.

On the 8th, 9th, or 10th, I’ll be in D.C. because of Staple Con, but otherwise—

Oh, that’s right. Okay, let’s—

September 8th, 9th, or 12th?

Yeah. The 8th, 9th—oh, I’m signed up to speak at that, and I’m not available then. That’s a botch. That’s a botch.

Okay.

Before the 8th.

All right, you should apologize to Nick.

That is a botch. I thought that was October 8th, 9th, and 10th. Okay, all right. I’ll give you that. Thank you.

Let me get this straight, Rob. We’re playing—

So we’re playing on the pod. We’re getting our calendars ready on this pod right now.

This is a horrendous podcast. Let’s get into the news.

This is when you know there’s nothing to talk about, so we’re—

1. Has Crypto Found A Bottom?

No, no, there’s a lot to talk about. Santi got called out on Twitter by Lorenzo at Arc, so we should talk about off-chain versus on-chain value accrual. But maybe we can start with: Has the market found a bottom? There are a lot of signs that point to the market finding a bottom.

You guys are just perpetually optimistic, aren’t you?

What market and what bottom?

I believe we have found a bottom.

He means memory chips.

I’m looking at memory ripping 15% today, so we bounced hard off the bottom in semis. The S&P is at an all-time high, the Nasdaq’s ripping, semiconductors are back on the menu. The guac is back on the menu, ladies and gentlemen. Chipotle is getting a hit.

Let me show you guys 2 data points here. Blockworks actually has a lot of data, and I feel like we should create our own fear-and-greed index. The first is the number of sales calls we’ve had. We’ve had more sales calls on the calendar this week than any week in the past 6 months. Inbound leads, which have historically been a leading indicator of how the market is feeling—because if customers are optimistic, they come inbound and want to buy things, and if they’re feeling pessimistic, there are fewer inbound leads—have increased 6 weeks in a row.

What are these people trying to buy? What are they most excited about?

The number-one source of inbound leads right now would be traditional financial institutions—basically fintechs and financial institutions—and traditional brokerages that are now starting to do things with crypto. For example, fintechs that are trying to roll out crypto to their users need our APIs and our data. We also have this monitoring platform that we acquired from Messari, so they’re very interested in that.

Brokerages are the same thing. I think brokerages see how much Binance, OKX, Bybit, Coinbase, and Kraken are making, and every single one of them is pushing in. Even Vanguard is pushing in.

What data are they most interested in? What are the things they’re saying, “This is what I need to know to do my business”?

It’s unique to Blockworks, the 2 things that we can really offer them. There’s an internal thing and an external thing. Internally, anyone who lists crypto assets needs to monitor those assets. There’s usually a listings team or a compliance team, so we have this monitoring platform that we acquired from Messari.

On the front end, let’s say you’re Charles Schwab and you want to show your users that you now list Aave. You want to show the signals for Aave, the fundamentals for Aave, and the social sentiment. You want to have an AI chat box embedded on the Aave page so the user can say, “How is Aave different from Morpho?” That would be a front-end feature that we offer, too.

So the things they’re asking about are mostly listing and offering assets to their clients. They also have either client capital or personal capital in crypto on their own platform, and they want to be able to monitor things like the price.

That’s right. There’s also a third bucket of people who have basically been told by their CEO that they need to do something in crypto. They’re spinning up a crypto division and have absolutely no idea how to track the data.

An example would be a fintech consumer app, maybe a buy-now-pay-later company or someone who offers buying and selling of stocks or lending and borrowing of stocks. They’ve been forced by their CEO to roll out crypto, but they have no ability to track anything. They don’t know how many users they have or what those users are doing. All of their traditional data breaks down, so they need to figure out what’s happening.

Cool.

Yeah, so we haven’t bottomed yet.

Do you think it’s because of these conversations that we’ve hit the bottom and prices are going to go up?

No, no. I’m trying to egg Santi on here, but I do think it became very clear that you were right, Rob: We’re not passing CLARITY. At least not right now. We’re not passing CLARITY.

I think there’s still a 20% chance on Polymarket, and Saylor is selling a lot of coins, but the market didn’t really puke. The market’s down, what, like 2% in a week? Either that was already baked into the market—which is very likely, because everyone knew Saylor was going to have to sell—or the odds that CLARITY was passing were only 20%. But look, I think it became—

What’s the catalyst? The market always needs a catalyst. CLARITY’s not passing. Saylor’s selling. I hear you—it feels like we bottomed. But the reality is that Galaxy and every Bitcoin miner are pivoting to AI infrastructure. Where’s the bid going to come from?

Retail Koreans are longing SanDisk, Micron, and SK Hynix. Where’s the demand going to come from to get us into the promised land?

I mean, do you remember in 2023, when you were very vocal about longing Solana? That was peak bottom—peak, peak, peak bottom. What was the catalyst then?

You were talking about it, too, when it was hitting $8.

We were. What was the catalyst then?

That’s a good question. I think my appreciation over the years has become more focused on flows. That’s probably top of mind for me now as I think about making decisions about where the market is going to go.

There’s that chart showing the correlation between money supply, M2, and pretty much any asset of choice. I don’t think I was that sophisticated back then, to be honest, other than thinking it felt totally oversold. But in 2023, what were other assets in crypto doing?

Right now, it feels like there’s a lot of intra-asset correlation within crypto. Everything’s kind of sideways.

I’ll give you the catalyst on this. Sorry to interrupt, but the catalyst is CLARITY—even without CLARITY. We should talk about this in the next segment. Rob, I want your take on some of the stuff going on in D.C., because I know you’re spending a lot of time there.

The SEC and CFTC have been sitting on these rules and regulations that they want to roll out, but they don’t want to overstep the Senate, the House, and the White House.

And so they've been sitting behind CLARITY. Because that's what you're supposed to do, right? You kind of sit behind CLARITY. But now that it looks like CLARITY isn't going to happen, what I believe is going to happen now is that the SEC—and I think this is pretty public; I would say this is the common take—is that the SEC and CFTC are going to drive forward these rules and regulations that aren't actually new to them.

Atkins did a keynote at DAS in March. Project Crypto rolled out sometime in 2025. These are not new; they've just been sitting on them for a while because of CLARITY. I think they will now drive those forward, and they're going to be very, very, very good for crypto innovation. Crypto innovation will spur crypto prices going up. They're not doing these to move prices; they're doing these to spur innovation in the industry. I think that is probably the big catalyst here, in the same way that the GENIUS Act was a massive catalyst for stablecoin adoption. I think this will be the same for a lot of other—

Let's get something straight. Stablecoin adoption is one thing, but your coin pumping is a different thing. My point is that this bull market is different and more difficult for people to digest because we're getting adoption and inbound leads from enterprises. That doesn't mean you're going to get the flows coming on-chain to translate that into Solana pumping, Jito pumping—pick your token of choice.

Market-wise, unfortunately, we need to overcome this scar tissue of retail that has been burned time and time again with token emissions and low float, high FDV. That's the thing. Retail has now understood, for years, that there's just no interest in longing stuff that has a vesting schedule attached to it that is very well telegraphed. That's an issue. Tom Wan at Dune Analytics produced a great analysis, which we talked about here on the pod, so I'll just leave it there. There are these natural walls of worry that you need to climb for retail, and probably institutions, to come on and buy your token.

I think it's been quite bullish if you're a stablecoin issuer or if you're a stablecoin project. Adoption's been great. Companies like Coinbase launching their chain has probably been a big eye-opener for other boards, saying, "Huh, these guys are printing money over there. We should probably think about doing something similar."

I feel like there are certain pockets of the crypto economy that have done extremely well in spite of tokens going down 60% to 90%. And that's a good thing. We talked about this over the last 5 years. We'll know crypto's maturing when we break the correlation. Before, everything was tied to Bitcoin. When Bitcoin sneezed, everything else caught a massive flu. Now, the good thing is crypto's become this bigger thing, so you can have success in one pocket of the crypto economy.

2. Is Erebor Worth $8 Billion?

But I think tokens are just—I don't want to say it—but tokens are kind of dead at this point. Doesn't mean they're not alive. Yeah, Rob, what do you think about all this?

Tokens are definitely not dead. That's a crazy thing to say.

I'm catching the headline.

Yeah, he's catching the headline. So he felt bad that I was sort of the lead-in too many times and that he needed to be the headline a few more times.

No, but listen, I think on the SEC side, to your point, we're probably going to get an innovation exemption relatively soon, right? I think alongside that, we're probably going to get a startup and fundraising exemption for you to raise some amount and how much you can raise over some period. We're probably going to get some safe-harbor rules for people who are trying to do the right thing onshore. There's going to be a lot of rulemaking that's put out. So I 100% agree with Yano that it's very clear that's where the SEC and the CFTC want to go.

They're very, very focused on trying to bring innovation back onshore and trying to bring and foster the crypto ecosystem here in the U.S., because they see it as strategically important for the country. Now, I think some of the work that will probably be done—or would have been done—under legislation like the CLARITY Act around maybe taking more risk in terms of trying to innovate around token design, some of that may be harder to happen now that there's not actually legislation.

I think that would have been particularly interesting: some of the things that people might have done around trying to figure out certain disclosure schedules and what that means, and if they disclose certain things, can they go and do direct value accrual to the token or back to the people who hold the token. That becomes a little bit murkier because of the fact that there is concern for what happens under a future regulatory regime.

And I do think for some of the people who need to do very long-term planning—the largest banks, the largest asset managers, the largest companies in the world—not having legislation will make them less likely to invest in the space, regardless of having good rulemaking. So it's not all lost, but it is certainly net worse if we don't get the CLARITY Act.

3. Fomo Vs Pump Fun

But I do applaud what Chair Atkins and Chair Selig want to do. Regardless, tokens are a good mechanism for how to operate networks and how to incentivize people, and they will find a way. But that doesn't, of course, mean, Santi, that whatever random token you name is going to go up. I totally agree with that.

4. Everything Is Becoming Financialized

Yeah. All right, let's get into some of the news of the week. Maybe the first thing is—I think one of the hot topics on Twitter this week was Fomo versus Pump.fun. A lot of people were sharing the Fomo charts. If you're not following on YouTube right now, you can see Fomo just hit a new weekly revenue all-time high: $1.88 million in net revenue and 50,000 daily active traders. Frank Chaparro tweeted out, "Animal spirits are reawakening."

I think there's a lot of conversation about Pump.fun as well. It overtook Hyperliquid on some big metrics. Revenue is going up, users are going up, buybacks may be starting to work, maybe starting to impact the price. Curious, Rob and Santi, if you guys have any takes on Fomo versus Pump.fun. There's an Austin Barak tweet: "Interesting to see people comparing Pump.fun and Fomo to Polymarket and Kalshi," which, Rob, I know you have been intimately involved in. So, curious if you guys have any takes on this.

Yeah, I don't really understand the comparison. They're not the same thing whatsoever, but I get why it's easy for people to try to find analogies or, as Kyle Samani would say, analogies.

Listen, they serve different purposes right now. I understand they're trying to compete with the new Pump app, and there is a lot of trading. But they're, in some ways, synergistic because the more things that get launched and then Fomo lists them really quickly, people trade them, and it's on-chain with the relay, and it goes through—

So, from August 1st to 7th, this is Blockworks data: Fomo routed $139 million into Pump.fun's pre-graduation bonding curve.

Yes, I didn't know those numbers. That's a great number. But the point is that they're somewhat synergistic. It does feel a little bit like Pump is trying to launch this app and figure out a way to be a part of not just the launchpad and token-creation piece, but also the social-trading piece as well. I get why they're going after them. But I think today it's a lot of the same users doing different actions.

Now, the question will be interesting: Fomo launches a launchpad. I don't know what will happen there. My guess is they probably will at some point, although we'll see how that evolves. I think they will both be successful.

I think there's a general question here, though. You talked about earlier that all of these institutions are trying to reach out to you and do work with you, but literally the only thing happening on-chain right now is memes and perps. Those are the only two things happening. And so I do wonder: typically in the past, meme cycles have been very short-lived. People get really excited, there would be a lot of trading, it would go up over maybe a 2- to 3-month span, then they would crash immediately, everybody would lose money, and then they would kind of valley out. If we're having a meme cycle again, I think that actually spells worse things for the rest of crypto and the rest of the tokens in the near term.

5. How Founders Survive The Reckoning

Yeah, I'm invested in Pump, so I'm biased. We've discussed meme coins here at length. Every time a meme pumps, there's a discussion about whether meme coins are value-destructive to broader crypto, or whether that's really all we're going to do. You look at breakout apps, and it's all just this type of activity.

Does that compute? Forget about what we think. Does that change the calculus—how regulators perceive the industry, the ability to pass further legislation, and the ability to gather interest from LPs and other institutional investors to come into the space?

Are we being too harsh on ourselves? I feel like the industry criticizes meme coins internally a lot, but we don’t necessarily look at Wall Street, what happens there, and the speculation that happens there in the same light. Meme coins are artifacts that have no cash flow and nothing else other than memetic value. I’m curious how you guys think about that. Is it demoralizing? Do you not care? Does it inform what else you invest in?

I don’t think the regulators care. I don’t think they’re paying attention. I do think it hurts capital flows generally. The LPs aren’t really on Twitter, but they do ask the question if you give them data around, “Okay, this is the thing. There’s all this volume on Solana.” The sophisticated ones will ask you, “Okay, what’s happening?” They’ll do the diligence on it, right? It becomes very clear pretty quickly what’s happening.

People are wise to it now because we’ve done this enough times that they can ask the right questions. I think it also hurts capital flows because of a lot of these net-new investment companies that are coming in. Fomo is an interesting story, right? They have all of these great traditional investors. They have Benchmark and Index, and before that, I think, Union Square. Before that, they did an angel round. Full disclosure, I was in that angel round—a small check personally—and I like those guys, but Dragonfly’s not an investor.

At the end of the day, they’re building something for the future that’s really broad and about social trading and social finance. But today, it is basically driven by memes and perps and that type of speculative trading activity. There’s a lot of conversation around RWAs, and that’s happening on Fomo as well, so I give them credit for that. But I do think that we have to figure out a way for this not to be the only thing that holds so much of the attention online, or for this plus stablecoin payments to be the only things that allow the alts to go up and the rest of the ecosystem to grow.

We’re seeing early signs. There was some stuff around this that’s a little bit misleading because there’s been some stuff on the timeline around, “Oh, Uniswap—look how much of the volume is RWA now,” or “Hyperliquid.” That’s great, but part of that is because the volume on everything else is getting crushed, right? It’s not just that the numerator is getting bigger; the denominator is getting smaller.

There was a bunch of data around how DeFi, as a percentage of total trading volume, is growing incredibly quickly. But again, what does that tell you? It can tell you a bunch of different things. If you look underneath the data, what it is is that trading on centralized exchanges—which typically have more normie users and more users that are not necessarily really crypto-native and not using Phantom and MetaMask—is coming way down. The interest from the really on-chain people is either staying the same or going up. If you look at Hyperliquid’s volume, they’re basically the same. If you look underneath the data, it’s not actually great in my mind, even though they’re trying to figure out ways to talk about it that are really positive.

Yeah. Going back to Fomo, Rob, I have a question from the venture perspective, and Santiago, I’m curious about this, too. Every company goes through a reckoning at some point. I would say Pump—and for many companies, there are many reckonings—has clearly gone through its first reckoning. You could probably call it the past year for Pump, right? They were a company that could do no wrong, one of the hottest companies in crypto.

The past year has definitely been a reckoning. I don’t know what it’s been like internally at Pump, but I can imagine a lot of turnover, moving things internally, figuring out processes and knobs, and figuring out what the new products for the next 5 years are going to be. Fomo has not gone through that reckoning. I don’t personally care about breakout virality from these companies. I care about how you get through the reckoning.

At some point, Fomo will have a reckoning. I don’t know what it is or why it happens, but at some point it will have a reckoning, and it’ll be interesting to see how they handle that. We had the founders on the other day. They seem fantastic, and I think they’ll handle it quite well. But I will say every company at some point goes through a reckoning.

Rob, from the venture perspective, when you’re looking at a company, do you take that into account at all? Do you try to invest post-reckoning or pre-reckoning? Do you look at how the founders are handling it? Or does it not factor in at all?

No, I mean, there are always going to be bumps in the road, right? Hopefully, they just don’t make anything reckless. There are some founders where you feel like these guys are willing to fly close to the sun. They need more support. But with other teams, I always look for whether they’re going to drive through a wall to make it a success.

Crypto is a really tough market to build in, as you guys know. Before you have a token, then once you have a token, it’s just really tough. I look for people who are tenacious and persistent. It never gets easier, right? The stakes are higher. There are regulators, there are traders, and their token goes down. It’s tough. Pretty much every builder I’ve backed or just talked to says the same thing: it never gets easier, ever.

It’s the nature of the beast.

I was listening during my workout this morning to Eric Vishria, who is one of the GPs at Benchmark and who did the Cerebras deal on the hardware side. He had a thing that I guess they say at Benchmark, which I really liked: if an investment doesn’t work at the early stages, it won’t work because of all the reasons that you and your partners said it wouldn’t work at investment committee. You will have been right. And if it does work, you’ll also probably have been right, and it wouldn’t have mattered.

I actually quite liked that because, to your point, Yano, with the really good founders—and we try to invest only in good founders, in their earlier stages rather than growth stages—there will be challenges. Nobody is straight up and to the right all the time. Both Kalshi and Polymarket have long stories of really, really tough times for years before their seemingly sudden rise to stardom over the last 1.5 to 2 years.

The Fomo guys are growing incredibly quickly right now. It’s accelerating, and they’re doing an incredible job. I’m sure they’ll have struggles in the future, and hopefully they’ll get past them. I think they’re really good guys. But that’s been true of every company. I’ve never known a company that was straight up and to the right from day 1 and never had any problems.

He also told a story about how, in 2019 or 2020, he was sitting in one of the boardrooms at one of the board meetings for Cerebras. The chips were literally melting, and they were saying, “We’ve put $50 million in this business, and we think it’s going bankrupt right now because the chips are melting. We can’t do anything with them.” He talked about how worried he was: “Oh, we’re going to lose all this money,” or whatever. And then look, right? We never know how it’s going to work out.

At the end of the day, no matter what, when you’re investing, you’re investing in the person and the people and seeing if they can figure it out.

6. Is Crypto Worth The Venture Bet?

Yeah. I mean, guys, I want to say the elephant in the room for me now is, to your point, I listened to that and I said, “What are we building towards here?” At some point, yes, the future of media—when I underwrote Polymarket in the seed round, I do believe that. But at some point, you’ve got to figure out where the puck is going. Is this all going to matter?

That’s my point. At some point, I’m personally frustrated that, yes, stablecoins are good. They’re really good instruments, and I think it might just be that we need a little more time.

But at some point, most of the activity today has just been 24/7, 365-day speculation—the capital markets. I'm trying to grapple with 2 conflicting ideas in my brain. One is that you have to build this, and it's proving that it's working for enterprises. The other is the same as with porn, the internet, and all that jazz: when's it going to happen?

Maybe my timeline is just a little too clouded by the pump and FOMO, and it's not a dig on that type of stuff. I feel like maybe it is opening up investment opportunities for a lot of people outside the US. I get that, but is this where I want to be spending my venture dollars?

Because it feels pretty damn great to be an investor in a company like SpaceX or Cerebras, and you just see—it's like biotech investing, right? You can quite literally cure cancer. I don't know. I do think about that more and more these days: where do I want to spend all the venture dollars that I'm going to deploy this year? Less and less crypto, to be honest.

Well, but you're spending them automating accounting firms—

Correct. Correct.

Right. No, I mean, and it does.

But, again, in this—

Right.

It's on the spectrum. It's closer to where I want to be investing, for sure. I don't know—

I get that. Of course, that's not biotech.

No, no, I grapple with that, but I also grapple with the icky side of it. I'm not a bio—I’m not a biomedical engineer. I know I'm going to get burned because the best guys just have a very unique edge. You can't just work your way into being the best biotech investor. Atlas and quite literally a handful of firms have differentiated themselves in venture.

We talked about this in the board meeting. In venture, I don't have an advantage there. So I balance that out by investing in funds that do biotech. I'm not going to do it personally. Personally, I need to balance what I'm good at. I've invested a lot in crypto. Would I do it again? I think now where I want to spend future dollars is very different from what I've historically deployed. And that's just me.

Wait, are you making the argument because the returns are greater elsewhere, or because you have a moral component tied into it?

And I don't want to sound like a purist here, because I feel like there's a lot of that in crypto. Again, coming from someone who invested in a lot of DeFi, I would want to see more types of activity coming—more case studies of just—

Maybe we just need to talk more about that, right? This is a writing point: we as an industry need to highlight case studies that are not just a leveraged trader who got rinsed in a meme coin, because there's a lot of other good stuff happening. But when you look at the data, the vast majority of activity continues to be just that, and it's a—

Yeah.

It is the nature of the beast, is all I'm saying. I just don't like—

On the moral point—I know that's not your point—I think it is increasingly tough, as companies grow, to actually make the point that there is no good company or bad company anymore.

Is Facebook a good company or bad company? It democratizes global communication and connects billions of people, but it has been linked—it is definitely a cause of the youth mental-health crisis. Google organizes all the world's information, but it maintains a really intense monopoly over your entire digital life. Amazon completely revolutionized how you get things to your home, but there are pretty grueling warehouse working conditions.

All of these can be true. I think crypto is getting a lot of the bad right now because it's in such a deep bear market. I think the conversation about crypto will flip in 2 years, when things are going much better. And, by the way, I think AI will—in 2 years, you want to hear the bad? Watch when the midterms come around and the entire country is talking about how bad—

I will tell you, that's a great idea.

You know what was an interesting hire that I think is a signal of where things are going? The chief legal officer of Coinbase, Paul, left to go to Cognition. They're raising at $40 billion, and there's actually a fantastic podcast with their founder on David Senra.

Paul is one of the best tech lawyers in the world and is fantastic in D.C. If you want to see where the puck is going, I think Cognition is gearing up for a big fight in DC as some of the sentiment turns on AI.

Someone I was just talking to who is incredibly well connected in DC said this to me yesterday. We were talking a little bit about the election, and he was like, the top 3 things that the general public cares about and that are going to determine the elections are affordability, jobs, and data centers and AI.

Those are the things that everybody cares about, and right now the general sentiment on data centers and AI is negative— incredibly negative. And then, so—sorry, go ahead.

I'll just leave it at the Prometheus myth. I get it. It's always been the case. I'm just saying I'm probably later than I should be in starting to push the puck more toward these case studies around enterprise. Stablecoins deliver a lot of really good value. We as an industry need to push more and more of that, because we will get drowned in more of the negative stuff, and it will not serve us well.

Yeah.

I'll kind of finish my point on this, which is that the comparison to AI is somewhat relevant, because part of AI's problem is that they have just been so awful at talking about what they do and about their business.

It's like one of the leaders wants people to hate him in the general public. “I'm going to replace all of your jobs, and you're all going to live in abundance, but you're not going to have anything to do. You don't know how that abundance is going to happen. Also, everyone who's making money is already rich and lives in San Francisco.”

It's been incredible how poorly the PR of that industry has been, which is also true of us in a lot of ways. We don't help ourselves when the topic of conversation is entirely around the pump and all of the meme-coin stuff, and when we're all focused on these other things.

That said, it's consolidated a little bit. Now people are talking about, “Okay, I want to talk about stablecoins. I want to talk about algorithmic organizations. I want to talk about all of these things.” But a lot of people find the new stuff that's working to be boring, right?

I talk about that when I'm in DC. Other people talk about it when they're in DC. We talk a lot about innovation happening in capital markets and things like that, but we have to continue to drive those points home. We also have to make sure that we provide opportunities for people to engage with the space in ways other than meme coins.

What are the most optimistic things we should be talking about this week?

Are you an investor in Erebor? They're raising at an $8 billion valuation, right? Tell me if raising $1.5 billion at an $8 billion valuation is a good or a bad investment right now. By the way, I would guess the reason a bank needs that much money is to cover the deposit ratio, not because they need to go hire people. Good or bad investment at $8 billion?

I think they're great. I really like those guys. He's a good guy; we're friendly.

Banks are essentially all the same. You can look at bank multiples and say, “Okay, Nubank trades much higher than these other banks trade at,” et cetera. But if you do a regression on their book value, or the price-to-book multiple relative to the return-on-equity percentage, basically every bank trades on that line. It's very clear that's how the market looks at these things.

When you see banks growing really quickly and trading at higher multiples, what you can probably expect is that the market is expecting their return on equity to be very high and the equity to continue to grow. Those are the 2 things that are really affecting that.

Erebor right now is essentially the fastest-growing bank ever. They just announced that they're over $4 billion in deposits. I think they've been very smart in the way they've leaned into trying to get capital into a capital-starved industry, which is defense, and using an industry like stablecoins and crypto, which has a lot of capital to lend because it's a very fully collateralized business in a lot of ways.

I think they've been really smart. They're growing very quickly.

Their ROE right now is actually low because they’re trying to tell the regulators that they’re going to be very conservative. They’re hitting their capital ratios, so they basically need more common equity in the business if they’re going to continue to grow. That’s the reason they continue to do it, but they’ve been very smart about trying to hoover up as much capital and equity as possible because that is the only way a bank can grow.

Hey, Rob, on this question, what’s his name? He used to be at Genesis and is now there—Roshun?

Ro.

How do you think about this? Are they generally filling a gap in the market that exists, or are they going further down the risk curve, extending loans to maybe a lot of the venture network of Palmer, obviously the defense network with Anduril, and so on? I’m curious: when you see a balance sheet grow that much, is the standard high, or are they loosening some of that and extending more loans?

We have the precedent of Silicon Valley Bank, where they were very concentrated and very exposed. The market is at an all-time high, there’s a lot of interest in neo-primes and all this stuff, and there’s reshoring and the Monroe Doctrine 2.0. Do you have any insight into the rigor of their underwriting standards?

JPMorgan and these other banks also want that business. They would naturally step in because they see a $60 billion company going public, and they’ll likely extend a loan there. I’m not singling out Anduril, but I’m curious.

Listen, I’m not there for the underwriting, so I don’t know what’s going on. Obviously, they are filling a hole in the market, which as a general rule would imply that they’re willing to take on certain risks that other people aren’t. That is just the common way to think about how you fill these holes in the lending market.

It might not be that much risk; I don’t know. I don’t really know how to think about lending to a cash-flow-negative drone company that has raised a bunch of venture capital, which is some of the type of thing they’re doing. I think Ro is actually doing lending to crypto companies. He’s running the crypto side of that desk, and then there’s somebody else who does the defense side.

On the crypto side, ever since Genesis, where Ro was on the team, there’s been a real dearth of credit in the crypto ecosystem. The largest lenders today are primarily the stablecoin companies, and then a little bit of people like Alameda and FalconX and others. It hasn’t recovered in the way it had been before, and obviously that was because of Genesis.

They’re doing some of that, and on the defense side, I think it’s very clear that with Palmer there, they’re going to have an edge in being able to serve that ecosystem. How they’re thinking about underwriting, I don’t know. But they’re growing deposits much more quickly than they’re growing loans, which is a good thing.

Yeah, that’s a good thing. There’s some other really good news for us to talk about. Starting from the top, Paolo just tweeted less than an hour ago that Tether underwent its first full financial audit for Tether International, conducted by KPMG, the so-called Big Four, which resulted in an unqualified clean opinion, marking the highest result possible.

Tether faded into shambles.

I quote: “An unqualified opinion is the best possible audit opinion an independent auditor can issue.” I don’t know if this is true.

Interesting. Look, this is the biggest open question around Tether, right? Why have they never done a full audit? I haven’t dug into the details.

No, I haven’t either. I’m just saying Tether’s financial audit is, by at least an order of magnitude—I’m not sure how he measures that—the largest inaugural audit in the history of finance. I guess it’s true. They’re just on their side.

Wow. Okay, so that’s one. What’s your other one?

That’s one. The other one is not so much this one. Apparently, the guy who created Forbes 30 Under 30 was just fired from Forbes because he took $6 million in payments from a founder of a firm that does business for the magazine.

There have always been rumors that Forbes 30 Under 30 is just a joke because a lot of people paid to get on there, or that it’s sort of a pay-to-play kind of thing. It’s obviously a well-known meme, and it’s funny that the guy who created it now got fired because he was taking money off the table.

Yeah, that was also a good one.

7. Is Collector Crypt Just Gambling?

Does this get you excited about crypto? Is this interesting or not to you? I saw that you sent the Collector Crypt tweet.

So, Collector Crypt, for those who haven’t seen it, is part of this whole TCG space. TCG is trading card game, and there are a lot of on-chain players like BZ and Collector Crypt.

Pokémon cards and baseball cards.

Yeah, but the on-chain players would be BZ and Collector Crypt, basically. I saw that you sent this tweet to us: Collector Crypt has officially crossed $1 billion in gross revenue, which is massive.

Actually, I think the single best-performing asset of the last couple of months is Pokémon cards. They’ve outperformed AI, outperformed any crypto token, and outperformed anything else. It’s Pokémon cards. I think Collector Crypt has been absolutely ripping, and I don’t want to take away from the growth. It’s almost a billion in gross revenue.

That’s gross, not net. What’s their take rate there?

Not net. If you look at this, net revenue equals gross revenue minus the gacha buyback repurchase. Gross profit is net revenue minus COGS minus the secondary-market repurchase cost.

Just like any marketplace business, you really have to look at how they’re counting revenue.

Yeah, totally.

And, for what it’s worth, I think Collector Crypt is operating better than nearly any company in crypto today. I could see them going on to raise a lot of venture money. I think they’re doing very well. So is a company like BZ. But with all marketplace businesses, you have to look at how they’re counting revenue.

Okay. What I will say a little bit on this is: what are these gacha games? You go on and say, “Okay, I’m going to buy a pack of Pokémon cards for $100,” and you buy a pack for $100.

I think Collector Crypt specifically says, “The EV of this pack is $98 or $102.” They tell you what the EV of the pack is, so they tell you straight up front that the EV of doing this is negative, but you might win big.

It’s negative just like trading perps, just like making a bet on a horse.

I know, I know, but I’m making this point: it’s not different from this other stuff, right? The EV is negative. You spin, you get the card, and it’s probably worth less than you paid for it.

They offer to buy it back right away. They’ll buy it back at a 15% discount to what they say it’s worth. They’re saying, “We have proprietary data and we take all these other data sources, so we say it’s worth X.” There’s no real way to understand if that’s actually true or not.

That’s how these games work. Something like 99.5% of people actually just sell the cards back every time. They’re not taking delivery, and they’re not holding the cards. It’s not actually collectors, right?

What does that actually sound like to you? It sounds like a slot machine where you win something every time. It’s essentially a slot machine where you always make some amount of money; it’s just EV-negative.

These things are going crazy. There’s Triumph, Courtyard, and these other guys, and they’re expanding. They’re not just doing cards now. I think Courtyard is doing handbags for women, and they’re doing all these things.

To say, “I’m excited about this, but I don’t like the trading stuff,” feels very disingenuous to me because the actual user action is essentially the same thing, even if you could take a bag or card home or whatever else.

Agreed. Agreed.

Yeah. Yeah.

Look, this is the point I make: the market creates these weird distortions. Wall Street is okay, but Vegas isn’t necessarily as okay. It’s kind of the same thing, right? Robinhood is okay, but FOMO and pump are less so.

Gambling is not okay, but lottery tickets that the state sells are okay. If you're doing 10x—if you're doing some complex arb or 3-leg situation where it's going 3 or 4 times leverage—versus someone in Vegas parlaying, where's the difference? I'm not trying to be a moralist here, by the way. This is the nature of the beast. I think the world is hyper-financialized.

I'm a collector at heart, so I don't know; I don't have any insight into this. I do think this is one of the positives of crypto. You look at a business like StockX and collector marketplaces, and this was a sector that I ranked pretty high on my list of interesting opportunities. Where's the friction in that type of business? It's provenance and how fast you can settle, and sometimes the collector doesn't want to take physical possession.

BlockBar is doing this in liquor, actually, Teddy, which is really interesting. Eighty percent of collectors don't actually want to drink the bottle of wine or the whiskey, in the same way that most collectors just want to hold. Crypto is really good at that. An NFT is a good artifact to facilitate this trading, and you don't have to go through a centralized party.

Your margin is my opportunity. If you look at how much something like StockX takes, it's massive. It's a lot, and NFTs could really collapse that. The issue, though, is verification. Verification is quite expensive to do with shoes, sneakers, and cards. There are a lot of counterfeits and a lot of fraud, so that's where most of the costs are for these marketplaces. You need to basically create legitimacy that it's a good card.

The ultimate debate on this, I think, is to ask someone the question: Do hedge funds provide a service to the world?

Hm.

Aren't they making markets more efficient?

Right, so then does that provide a service to the world? Is that a benefit to society?

Yes.

I think very obviously yes, to be honest.

I think we probably shouldn't go down the road of asking what's more real.

Dude, it's turtles all the way down.

Yeah. I think the reality is that there are different forms of everything. We had this discussion around memes earlier. As much as anything, this has to do with how people feel about it. People felt really bad about Robinhood early on. They were like, "Oh, you're gamifying trading, and this is gambling, and you're taking all this money from everybody."

Now most people are pretty okay with what happens on Robinhood, but maybe they're not okay with prediction markets, or they're not okay with memes. Humans can get used to anything. The broader point here is that financialization has just seeped into every piece of our lives. That is a reality that is not going away.

Some people think you need to regulate it away. That is probably not going to happen, and I don't think it's the right way to think about it. But we have to be cognizant of it and figure out ways to do things that are both productive and GDP-positive while also understanding that some things are going to look and feel a little more speculative.

They grow up so fast, Yana.

Oh, look at Rob stepping up as host number 2. Oh my gosh, and this is where the rubber meets the road.

Uh-oh.

Wrong tab, dude. Don't share that. Rob, don't share that.

I'm kidding.

Oh, you got me. I was like, "No, no." I panicked.

Rob panicked.

If he panics, it's because there's something there. We got him.

Someone asked me at a dinner last night, "If someone walked up next to you while you were sitting on a bench and said, 'I know what you did,' what is the thing that comes to mind?" This is Rob revealing it. Priceless.

Anyway, this graph was going around from Betterment last night, which is essentially saying—and this is about sports betting specifically, because we've obviously been talking about it a lot—that 12% of all people, but 26% of Gen Z, said that they believe sports betting is a part of their financial strategy.

Fifty-two percent of Gen Z said that they had taken funds they would have otherwise invested in the stock market or something else and moved them into sports betting. I think sports betting has a specific framing for all of us: This is gambling, and this is what it is. But a lot of the other stuff we're talking about is no different whatsoever.

Even if we might treat them differently in the way we talk about them in D.C. and with our friends, we have to understand that financialization is now a core part of especially our youth, young adults, and teenagers. Figuring out how to build good products around that for them is going to be important. That's the only way to go forward.

Hearing you say that, Rob, I feel like my conclusion is that crypto has always been: If it's going to happen, at least make it in a more transparent venue.

Yes.

Unfortunately, the flip side of that is that the lack of privacy makes it more susceptible to criticism from the outside. Whereas if people really understood how much investment banks and brokerage accounts are raking in from unsuspecting retail, you could make the same argument. You just don't have enough information to make that conclusion.

The one thing I will say, and this ties back to clarity, is that tokens are not dead. We're going to continue to have tokens. We need better standards for market integrity and disclosures. I'm going to play up the Token Transparency Act because we have to, right?

If these things are going to happen, the cat's out of the bag. We're going to have tokens. We're going to have 100 times more tokens in the next 5 years. Prediction markets are not going to go away. Whether the CLARITY Act passes or not, we owe it to ourselves, for the sake of this industry, to implement certain disclosures and focus on market integrity.

If we do that well, then we actually have a much higher probability of moving more flows on-chain. There's a reason public companies go public. As much as you don't like 10-Ks and 10-Qs, you have much more market integrity, and that gives market participants confidence to put more money to work.

Yeah, I will say I 100% agree with your point that crypto gets a bad rap because we can trace these things on-chain. It's actually easier to figure out what is happening and, at times, easier to identify and stop illicit activity. You can look at people who are on-chain and off-chain, exchanges, and so on. There are a lot of people doing the same exact stuff, but we point to the on-chain activity because it's easier to understand.

This is a broader societal point about the way we're engaging with the world today. It is not a crypto point. As people who are put here to be at the forefront—to talk about and push forward this industry—we shouldn't get so down on these things or say that they're terrible without acknowledging that this is more about what is happening outside of crypto and in crypto, and crypto just happens to be a part of that.

I think it is a net win for all of us, so we need to bring that context when we talk about it. Now I will get off my soapbox.

You shared your screen, man. That's all we need.

One small step for man, one big step for Empire in crypto.

I will never share my screen again. All right, I think that's all we have for this week. Anything else that we should talk about that we missed?

8. Why Santi Is Long AI

Oh, stocks. Well, ladies and gentlemen, stocks are at an all-time high. The stock market—

Santiago, when do you sell your memory stocks?

No, I mean, as I said, I'm built for this. Volatility does not concern me.

If Micron went down 40%, would you sell?

No, I'd load up the truck, man. I always keep cash. I would load up the truck.

Is there anything that will make Micron a 5-year hold for you?

Yeah, I think NVIDIA went from being what memory is today—where it went from being super boom-busty to now being the most valuable company in the world—and that was because it was riding this massive AI boom.

Not that we got earnings, but CapEx is up and to the right. You have neoclouds ripping, and the contracts there are getting renewed. The lifetime of the hardware is increasing. No one would have predicted that H100s would have this useful a life.

You’re just climbing and climbing this wall of worry. And content of the week: go listen to that podcast from the Benchmark guy. It’s like you’re just not bullish enough on AI.

And I think that the reason why I think the markets are at an all-time high is that we had a really strong earnings season—very strong. To your point around the midterms, it’s not showing up in labor shortages or cost reductions. Companies are just not hiring as much because they hired too many people after COVID.

It’s pretty remarkable what we just had in earnings season. I’m not doing too much in my portfolio. I did the work, I put in chips, and I’m going to ride it out. Obviously, I monitor it, but these things have locked-in business contracts for the next 3 to 5 years, which really dampens your downside scenario if it reverses.

Not to get too much into the weeds, but we should have Logan from Brex on. He’s much closer to this than I am.

I will say to that: you brought up the Benchmark podcast again. Phenomenal investor—the best. One of the things I really liked at the end was one of the last questions he was asked: What are the debates happening internally right now among the partners at Benchmark?

I think it’s what a lot of us are debating: Where does value actually accrue over time? Now there’s a bunch of stuff working, but do certain things get commoditized? Do certain things work? I thought it was interesting how he said, “I just think everything works,” meaning every part of the stack will go make a bunch of money. Crazy future.

He’s obviously an incredibly good investor and incredibly smart. I also loved how he said, “In 12 years, I’ve only done 18 investments,” which is incredibly tough to do as a venture capitalist and be that kind of sure of yourself.

9. What Benchmark Gets Right

I’d be interested to know what’s happening in the rest of those Benchmark debates and what the other GPs are saying, because that has to be not what the consensus view is there. There’s a lot of stuff not working, but definitely listen to it. It was super interesting.

My content pick is a movie called Tony. I grew up on Anthony Bourdain. I used to—

I did too. I’ve watched every single episode of Parts Unknown.

Parts Unknown.

Every Anthony Bourdain thing I can get my hands on, I think I’ve watched.

Yeah, he’s so good. They made this movie that’s kind of a prequel to when he became famous, became a chef, and all that. It’s called Tony. I thought it was super touching and really enjoyed it. It’s not completely historically accurate, but that’s not the point of the movie. Go see it for sure.

It’s a good movie. Good enough to see.

I thought it was good. I liked it. August is, unless you’re into Spider-Man, a weird month for movies, too. As somebody who loves movies, as you know, I thought it was great.

Yeah, nice. I’m a sucker for old internet blogs, the old blogging days. Fred Wilson had one, AVC, and even before that. There’s a guy, Om Malik, and he actually passed away recently, so I saw a lot of people posting about him. I went to his personal blog. The guy’s been blogging for 30 years. It’s just om.co, and he’s got all these great reads. I’d call them 2- to 4-minute blog posts.

I read a bunch: “Symbolic Capitalism,” “We Are Living in Pinocchio’s World,” “Velocity Is the New Authority,” and “The Golden Age of Half-Truths.” I went pretty far back. This one’s from 2019. I went back a while and just got lost in this guy’s blog for a couple of hours. I found it to be really good.

If you know anything about this guy, DM me. I’d love to learn more about him. He seems like a great fellow.

How did you come across Om Malik?

I saw people posting on Twitter because he just passed away. People were saying he’s got some of the best blogs ever written. Again, I have a whole note in my Apple Notes of blogs that I like, and if I’m ever bored, I try not to scroll—I’ll just pull up a blog and read some stuff. So, yeah, I added Om to the list.

So, anyways folks, good Friday. Hope you have a good weekend wherever you are. We’ve got an episode with Hayden Adams from Uniswap coming out on Monday. Very excited about that. We just released a really good dashboard on Uniswap. So, go check that out, then go listen to the episode on Monday.

And then get your DAS tickets.

Get your DAS tickets.

God, I forgot again. Link below. Click on the link below, you know.

Cheers folks.

Get your DAS tickets.

Have a good weekend.

Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed.