Hacking Just Got 1000x Cheaper
KevinJasonJoséYanCeterisJake Sylvestre
- The discussion estimates cyberattack costs have fallen “probably 100, maybe 1,000 fold,” while defenders may spend 10–1,000 times what attackers spend. Compromised trust infrastructure can turn an old device into a starting point for further attacks. The exchange argues that better defensive models do not remove the attacker’s advantage: finding one entry point can suffice. One panelist calls the resulting demand “very bullish compute.”
- Anthropic’s S-1 eases near-term financing fears without resolving the long-term economics of frontier models. Ceteris highlights cash reserves and no customer exceeding 10% of revenue; open-source commoditization remains unresolved. The compute trade still depends on demand absorbing efficiency gains: a panelist warns that Jevons’ paradox taking five years would still be a problem.
- Jake expects SpaceX and Elon to “clean up this market in the next 12 months,” particularly through stranded compute and weaker operators. Execution speed, diversified revenues, and financing advantages underpin the call. Another panelist points to the cloud business’s short-notice contracts and spot-price exposure as substantial downside risks.
- Hypercall’s options thesis rests on making underwriting and hedging cheaper through Hyperliquid’s existing liquidity. Jake reports roughly $250 million of associated perp volume over 30 days and estimates equivalent Binance hedging would cost 10–15 times more under generous fee assumptions. Around-the-clock trading, fractional contracts, and composable collateral are the customer proposition; retail distribution remains the execution problem.
- Bitcoin’s quantum tail risk produces the episode’s sharpest disagreement, particularly over whether a fork could preserve value after compromised coins move. José argues holders would choose the fork that protects value. Other panelists warn that a fork or compromised coins could be damaging; one estimates roughly 90% downside. Jake expects quantum cracking eventually and stresses that compromised Satoshi keys would imply a much wider migration problem.
- Large IPOs and AI financing could drain public-market liquidity while recycling exit proceeds into venture. A panelist sees exceptional conditions for agile early-stage funds, supported by mega-fund demand and scarce investable companies. Yan warns that weak Anthropic trading could reset private marks quickly, while Kevin wants retention evidence behind startups reaching $100 million ARR before they have meaningful cohort histories.
- The crypto stance is patient rather than aggressively leveraged, with Bitcoin around $80,000 and a possible retest of the $70,000s still inside the bullish framework. Jason holds previously raised cash because “if I don’t have a read, I don’t play the game.” Ceteris remains constructive on 2027, while Yan sees on-chain financial activity and debasement—not a single treasury buyer—as the cycle’s underlying drivers.
1. Cash remains a position while crypto lacks follow-through
Jason expects little surprise from the Fed meeting and admits his claim that the 10:30 seller had disappeared immediately failed. He holds cash raised during the earlier on-chain trading surge because his market read keeps reversing: “If I don’t have a read, I don’t play the game.”
Ceteris does not think the cycle is over and expects 2027 to be good, but sees “no follow-through.” Bitcoin is around $80,000, Zcash between $1,100 and $1,300, and HYPE around $80. Midterms the following Tuesday might change conditions; meanwhile, patience beats pushing leverage on the first breakout. He acknowledges possible complacency.
Yan expects chop followed by a stronger year-end, though Bitcoin could retest the $70,000s from roughly $80,500. His cycle thesis is TradFi activity moving on-chain through RWAs, stocks, and perp DEXs such as Hyperliquid and Lighter, potentially with institutions providing front ends. Debasement adds longer-term support; midterms could constrain Trump-related policy risk.
2. Anthropic’s balance sheet buys time for the AI trade
Ceteris reads Anthropic’s S-1 as materially better than feared: substantial cash extends the runway, and no customer accounts for more than 10% of revenue. José notes that this counters speculation about extreme dependence on Meta or Jane Street. Ceteris thinks removing those near-term concerns helps money return to adjacent AI names.
The distinction is between working capital and eventual business value. Cash “kicks the bucket down the road massively,” but cannot answer whether open-source competition commoditizes models. That remains unresolved; an S-1 could not have settled it anyway.
José describes SK Hynix’s quarter as “absurd,” estimating “60 billion, something like that” in earnings. He sees some mechanical downside support when memory stocks trade around three times forward earnings, while acknowledging cyclicality. Neoclouds have also rebounded, but remain “very hard to understand businesses.”
3. Efficiency gains can redistribute value across the AI stack
Jake questions why the whole stack trades together. He cites a Google paper he thinks was called TurboQuant cutting memory requirements by 80–90%, and SanDisk’s prospective high-bandwidth flash alternative to high-bandwidth memory. Advances across memory and fiber could “really nuke the value out of these neoclouds”; he expects greater dispersion.
Ceteris sees upside in the roughly $500 billion of compute commitments being discussed because much of that capacity was secured below spot prices, which he says rose about 44% this year. José identifies the correlated downside: take-or-pay obligations leave unused capacity precisely when resale prices collapse. He cites telecoms in 2001 and SemiAnalysis’s 50-gigawatt forecast for the following year.
Jake asks whether a sudden tenfold reduction in training and inference costs could expose finite demand, as cheaper blockspace did in crypto. José thinks AI demand is more real, but warns that Jevons’ paradox taking five years would still be a problem. Over half the Fortune 500 reportedly spend above $100,000 annually with Anthropic, yet that represents only 0.1% of the Fortune 500 companies’ overall expenses.
José describes the frontier-lab CFO’s trap: underbuy compute and competitors undercut or out-train you; overbuy and a downturn can blow you up. Yan expects cheaper compute to deliver multiple expansion for beneficiaries outside AI. He cannot determine how much of Microsoft’s cited 60K layoffs reflects AI and rejects a neat layoffs-equal-spending explanation.
4. Cheap attacks compound through compromised trust
Jake calls the PHP issue “kind of a nothing burger,” since hosting providers or Cloudflare can intercept many attacks. The scarier issue concerns an intermediary certificate provider whose name he tentatively gives as eMudra. Older devices retaining compromised certificate trust could accept impersonated services—for example, a gas meter receiving a malicious software update and becoming permanently difficult to patch.
The discussion estimates attack costs are down “probably 100, maybe 1,000 fold,” and describes how one compromise can seed another: vulnerable devices become botnets and create further entry points. A panelist speculates that Railway’s problems might connect to the certificate compromise, explicitly noting the absence of a postmortem. Its GitHub build connections illustrate how stolen credentials could propagate damage downstream.
A panelist asks whether defenders’ access to better models and more compute should give them the advantage. Another responds categorically: “No, not at all.” Attackers need one opening, potentially beneath an otherwise secure application. The discussion puts defensive spending at 10–1,000 times the attacker’s expenditure and raises the hope of an eventual equilibrium favoring defense.
A panelist argues AWS and Google Cloud are safer than smaller hosts on scale grounds and points to national-defense data as potentially richer targets. José counters that cloud-hosted stablecoin minting keys could enable enormous issuance. Another panelist asks how much value an attacker could actually realize, even with access to massive holdings.
5. Bitcoin’s quantum risk divides the panel over recovery
José says he considers Satoshi’s vulnerable coins less threatening than a few months earlier. He expects any breakthrough to involve a lab tied to the U.S. or China and doubts a government would destroy the holding’s value. Another panelist calls governments historically paper-handed; Yan says a Democratic administration “would just dump this to zero.” José replies: “No, they wouldn’t.”
José thinks holders would favor a fork removing stolen coins over one allowing an attacker to dump them. Other panelists warn that a fork itself would be damaging; one estimates Bitcoin could fall roughly 90% in the adverse scenario. Jake adds that even burning compromised coins would be bearish because the underlying message is that someone accessed supposedly secure keys.
Jake expects quantum computers eventually to crack Bitcoin and stresses that cracking Satoshi’s keys would mean other keys also need migration. Ceteris estimates moving everyone’s UTXOs could consume half a year to a year of block space, while new signature schemes introduce risks. José questions the appeal of governance that is extremely slow to change; Yan distinguishes immutability from security.
Jake offers an explicitly unlikely, non-quantum scenario discussed with core developers around 2019–2020: an early Windows XP random-number configuration might expose one experimental key, allowing 50 BTC to move without compromising everything else. “I don’t think this happens,” he emphasizes. The point is that a nonfatal technical event could initially look fatal; the others expect severe market panic.
6. Synapse’s bridge economics explain its options pivot
Jake says “bridging was dead” economically by 2022–2023 as Across started getting traction: margins fell roughly 100-fold in a year. On some chains, a million messages generated about $1,000. Demand was not expanding enough to offset that compression. Interoperability work—such as using bridged GLP as lending collateral—suggested a different application: improving options collateral efficiency.
A perp market maker can operate with leverage and an ADL backstop; an option writer might post 10–100 times the premium received. Jake calls full collateralization “crazy.” Earlier Dopex work with GMX showed the concept, but fees and liquidity were inadequate. Hyperliquid supplied the missing liquid on-chain hedging venue and made building the product compelling.
Keeping SYN reflects Jake’s preference for founders pivoting with their existing investors, rather than repeatedly launching tokens. He compares startups raising $5–10 million and still pivoting with one or two months of cash left. Hyperliquid also inspired him by refusing familiar crypto games and winning anyway. Ceteris subsequently discloses that he recently bought SYN.
7. On-chain options compete on access and capital efficiency
A host asks what remains distinctive if Robinhood offers comparable assets. Jake identifies 24/7 trading, particularly when Middle East events drive volatility outside market hours, and fractional contracts. A one- or two-week at-the-money S&P 500 call can require a ticket of several thousand dollars; fractional options could keep even year-out contracts accessible for a few dollars.
Jake says Hyperliquid delta-one positions can offset option risk, while purchased volatility can also support margin. Vaults add options to existing spot and perp strategies, enabling covered calls, basis trades, and more aggressive structures. His composability example: deposit Nvidia, write a covered call, collect premium, then borrow against the position and loop it. Yan also sees vaults supplying structurally needed volatility sellers.
Hypercall generated roughly $250 million in Hyperliquid perp volume over the preceding 30 days, mostly taker flow from delta hedging, Jake says. Under generous Binance fee assumptions, his team calculated equivalent hedging would cost 10–15 times more there. Competing options venues therefore need competitive perp execution too—a harder undertaking than simply shipping options infrastructure.
8. Retail distribution and perp partnerships shape adoption
Jake expects short-dated retail options first, with flows eventually supporting longer maturities; RWAs look like the clearest opportunity. “No one trades options” strikes him as “one of the dumbest takes,” given Robinhood usage and India’s daily notional. He anticipates a HIP-3-like trajectory: months of flat activity followed by a liquidity flywheel.
A host presses on distribution: working infrastructure does not automatically attract traders. Jake’s practical answer is user-generated TikTok content, citing FOMO, plus builder codes and wallet integrations. His bridge background informs the warning: bridging looks seamless in quiet markets, then liquidity disappears when a price move makes everyone want to trade simultaneously.
Jake sees Robinhood as a closer competitor than another crypto options protocol, with Polymarket or Kalshi potentially entering through a DCM. Structural difficulties remain, but they have substantial dry powder. He expects an oligopoly of two or three major players, each partnered closely with a major perp DEX, because managing both products together is difficult.
Outside options, Jake favors new lending models. He mentions 3Jane’s loans against Binance accounts, while noting he has not reviewed it for several months. Non-overcollateralized credit remains underexplored; crypto-card providers can build repayment and spending profiles. “They’re credit card companies, right? They should extend credit.”
9. IPO supply could tighten public-market liquidity
A panelist expects potentially the largest public-market liquidity drain in history over the next 12 months. Yan adds AI capex and tightening debt access, citing Paul Tudor Jones’s caution about 2027 despite a constructive year-end view. Kevin thinks markets can initially absorb Anthropic, but worries about later issuance turning equity supply positive after roughly 10–15 years of contraction.
Yan would avoid Anthropic initially because other investments could benefit if it succeeds. Depending on pricing around a possible $2 trillion valuation, Ceteris expects a better entry after listing, potentially resembling SpaceX’s initial drawdown. Staggered vesting and unlocks matter. The balance-sheet reassurance does not make the opening public-market price automatically attractive.
10. Venture’s financing advantage still depends on exits and retention
José thinks early-stage private markets have “never been in a better spot.” Mega-fund demand resembles index flows into scarce qualifying companies, amplified by “low float, high FDV”: companies sell perhaps 10% each round, while existing holders cannot freely sell. Few businesses can absorb nine-figure checks. He favors a small, agile early-stage fund over roughly five years.
Ceteris finds private markets “spooky.” Yan warns that weak Anthropic trading would establish a lower clearing price, remove markups, and tighten funding throughout the stack, as in the previous venture cycle. José acknowledges that Instinct at $30 billion looks extreme. Yan’s qualification is blunt: “It works until it doesn’t,” and the reversal can travel downward quickly.
Kevin questions what extraordinary revenue ramps actually prove. Startups now reach $100 million ARR so quickly that some lack usable retention cohorts. What does Instinct’s retention look like 12 months later? Fast growth followed by churn in intensely competitive AI products could force more disciplined underwriting and spread caution through private markets.
11. SpaceX’s operating advantage comes with spot-price exposure
Jake expects consolidation among stranded compute and weaker neoclouds in 2027. The premium shifts from promised data centers to installed, working capacity earning revenue now. He cites companies paying substantially higher prices for compute secured into 2027 and says SpaceX and Elon are positioned to “clean up this market in the next 12 months.”
Yan emphasizes financing: diversified revenues, scale, and lenders’ desire for future business can secure better terms. Kevin expects acquisitions of smaller operators whose delays and financing costs have undermined their economics. Their assets may retain value if a capable operator brings them online. Yan also expects TerraFab’s scale to support strong margins.
José pushes back on valuation and downside. In his understanding, cloud contracts can be canceled by either side with three months’ notice, leaving substantial spot-price exposure. He estimates pricing near $50 per watt versus CoreWeave’s $10–15. SpaceX is therefore a leveraged AI bet that could suffer badly if compute prices fall; Yan thinks diversification improves its recovery prospects.
A panelist raises Kessler Syndrome as a speculative tail risk: satellite collisions create debris that causes further collisions, potentially rendering low orbit unusable. He connects it to reported military satellite activity and a tweet about buying SpaceX puts. The concern extends beyond one stock to communications infrastructure; he sees little portfolio protection against such a scenario.
12. Familiarity remains the panel’s strongest allocation constraint
José wants better exposure to power, grid construction, and infrastructure, already holding the GRID ETF. Commodities might become interesting over the next few years, but he would prefer specialist expertise. Yan thinks commodities call for active trading around events. José ultimately admits little appetite for distributing money across numerous managers.
A panelist and Ceteris prefer staying close to crypto, where sustained attention occasionally reveals an unusually obvious opportunity. “I just wish I had more of everything,” Ceteris says. Jake counters that paying less attention sometimes worked better this cycle; group chats still surface opportunities for him. The disagreement is over attention, as much as allocation.
Full transcript
The cost of cyberattacks is down probably a hundred, maybe a thousandfold.
I just think SpaceX and Elon are going to clean up this market in the next 12 months.
I think we’re going to have probably the most liquidity drain from public markets in history. Early-stage private markets have just never been in a better spot.
The one where they’re not.
BTC is probably cooked. If the Dems win, they would just dump this to zero.
No, they wouldn’t.
Everyone I talked to was like, “Yeah, no one trades options.” This was just one of the dumbest takes.
If I don’t have a read, I don’t play the game. So I’m just chilling.
I did buy SIN recently, as a disclosure, but you guys can’t tell Duncan because I can’t have a Moien [?] thing. I just wish I had more of everything.
Well, if only there was a way.
All right, welcome back to the Delphi Hivemind podcast. We’re joined by a special guest again this week, Jake Sylvestre, the founder of Hypercall. Jake, sometimes we like to do our own roundtable, but I think you’ve got a lot of expertise and some great takes, so we want to get you thrown right into the mix with us.
I want to start with how everyone’s feeling about the market since the last time we chatted. Jason, we’ve got Fed day today. Do we expect any fireworks? We’ve seen a little bit of volatility. What are we looking at?
Last episode, Jason said that the 10:30 seller was gone.
He was gone, and he immediately came back, yeah.
Clearly a lie.
Clearly, I have no idea.
That’s one listener out there.
I don’t really think the Fed meeting is going to bring much. It’s pretty expected; they’re not going to do much today. It’s just a wait-and-see type of thing.
The market, I don’t know, man. Like I’ve said over the last couple of weeks, I don’t have a strong read on any of this. I’m just sitting in spots, sitting in cash that I raised when we had on-chain season go crazy for a few months. I have no read, honestly. Every week I’m like, “Oh, this looks all right. Oh, this looks like shit,” and it just oscillates back and forth between that.
One thing I’ve learned over the 10 years of doing this stuff is that if I don’t have a read, I don’t play the game. So I’m just chilling.
Yeah, I don’t think this cycle is over or anything. I think 2027 will be a good year, but it definitely feels like one of those periods where there’s no follow-through right now. We’re just chopping around all the time, and it’s a good time to be more patient and not slide the leverage bar up on the first breakout or something.
Midterms are next week, right? Next Tuesday. So I assume the market will probably change after that. I think Santa rallies are more common than not. We’ve had some bad years going into year-end, but those are pretty specific periods. I remember 2018 was really bad going into year-end, and 2021 was bad for crypto going into year-end. For stocks, it wasn’t until the new year that they really started to do poorly.
I still feel pretty good about most things overall and where the market is. I think the market’s in a pretty healthy position. We’re just chopping around $80K. Zcash is chopping between $1,100 and $1,300. HYPE is around $80. Maybe that’s complacency on my part, but the Anthropic thing, which we’ll talk about later, seemed pretty good, all things considered—the Anthropic S-1.
Yeah, I’m expecting chop and then a strong end of year, or at least I don’t think we really have a reason to go down. I think you get clarity post-midterms, which the market generally likes. I don’t think midterms are going to lead to anything too problematic.
If you want to be bearish on Trump’s behavior, then midterms take away his ability to do things. So if you think that’s a tail risk to the market, that kind of gets removed.
There’s no reason for the cycle to end here, because it boils down to what’s driving the cycle. I think the main things are TradFi and all of that activity continuing to move on-chain, with RWAs, stocks, and everything else coming on-chain. I think Hyperliquid, Lighter, and these other perp DEXs will continue to onboard users, particularly as they get more in bed with TradFi institutions and allow those guys to be front ends for them to some degree.
I’m also super bullish on options. I think all of these types of products will continue to bring activity and capital on-chain, and ultimately that’s what’s driving the cycle. It’s not Saylor, it’s not something else. The debasement side is still going to be a long-term trend that’s positive for the space.
So it’s kind of just chop until we eventually break out higher. We could very easily retest the $70Ks, especially when we’re at $80.5K. But I don’t really see a reason for the cycle to end here. Chop can go in either direction, and you just wait it out.
How do you guys feel about the AI momentum names that aren’t looking too hot?
You’re seeing a pretty good rebound today, especially in some of the memory names. I think SK hynix’s earnings were definitely a bit of a boost, and they dovetail right into Anthropic’s S-1 and those takeaways.
Neoclouds have had some relief too, right?
Yeah.
I think memory—SK hynix just had an absurd quarter, right? I think it was around 60 billion, something like that, in earnings this quarter. We’re seeing a pretty good bounce in memory off this stuff.
Obviously, people love to remind you on Twitter that these things are all cyclical. But there’s mechanically some floor on the downside when these things are trading at 3 times forward earnings. I still think memory looks interesting here. Neoclouds have bounced pretty nicely, but I’m in the same position as last week: I think they’re very hard-to-understand businesses.
How much do you guys think Anthropic’s performance out of the gate affects all these momentum names?
It’s a million-dollar question, right?
I think the Anthropic S-1 was a lot better than people feared, and they still have so much cash on hand. So I think that—
That was one of the big headlines, and I think it’s a major takeaway.
It can still go sideways at some point, but I think that gives a lot of people confidence that the runway on this is going to be extended for a while. So you’re seeing money get comfortable coming back into a lot of these other names. That’s just my general read. I’m not an expert on memory, neoclouds, and stuff like that, but—
Yeah, I mean—
I agree that the cash on hand absolutely kicks the bucket down the road massively in terms of concern. I feel like the general concern was more about whether these models end up somewhat commoditizing because of open source, and how strong their business model is in the grand scheme of things. That’s harder to address with a balance sheet.
Yeah, but I don’t think that was what this addressed. I think it removed a lot of near-term concerns, which is what people were concerned about. They don’t have one customer that’s more than 10% of their revenue. That’s a good thing, right? They have a decent—
And that was a big FUD people had, right? That Meta was spending billions of dollars, or Jane Street was 100% of their revenue, and all this stuff.
Yeah. And then they have the cash. So I think the main concerns everybody had were kind of rectified here. All your open-source concerns are still an open question, but that’s something the S-1 wouldn’t have addressed either way.
No, that doesn’t get addressed now in any shape or form.
Yeah.
That’s what I mean. There’s one that’s a balance sheet, working capital, financial situation, and the other is long-term viability and what this company is ultimately worth as a result.
Mm-hmm.
I thought it was interesting as well that—oh, sorry. Go ahead, Jake.
1. AI Compute Economics Shift
One of the things I was going to say is I’m kind of surprised that different parts of the stack are moving together so uniformly. There was an interesting paper Google put out, I think it was called TurboQuant, on quantization. Basically, it reduced the memory requirements by 80% or 90%.
I think there are a lot of chances for this to happen across the stack. Another example is SanDisk, which I think is coming out with high-bandwidth flash as a kind of replacement for high-bandwidth memory. That’s something that can drive down memory costs a lot. There are other advancements across fiber and other pieces of the AI stack that could really nuke the value out of these neoclouds.
You’re seeing every piece of the stack move in unison. Similar to what we’ve seen in crypto, with more variance among altcoins, I think we’re going to see that within these AI and semiconductor names. I would agree with that. I think we’ll definitely see more dispersion. I’m still very bullish on compute and compute markets more broadly.
I agree, though, that 2027 probably shapes up to be a year of consolidation among stranded compute and some of these neoclouds that simply don’t have the economics or the margins to continue. But it’s still amazing to me that, when you look at forward compute prices, companies are paying massively higher rates than they were for the compute they locked up over the last 2 or 3 years. I think Gavin Baker was just on TBPN or some podcast talking about a lot of their portfolio companies trying to secure compute well into 2027.
I still think that compute dynamic is a big revenue generator. But I think stocks and companies like SpaceX are really well positioned to execute on that, because it’s going to shift from data centers and building the ability to potentially have future compute to a premium on actual, installed, working compute that you can monetize and generate revenue from today. I just think SpaceX and Elon are going to clean up this market in the next 12 months.
Yeah.
He’s just running unhedged, though, right? He’s basically selling at spot, whereas everyone else is mostly selling at forward rates. That’s why these $500 billion of commitments are interesting. A lot of that is bullish, because they’ve secured that at well below the spot price, which is up about 44% this year. I think the challenge—
With this, obviously, a lot of Anthropic’s capacity is take-or-pay. The bad scenario is kind of correlated, right? If there’s an industry-wide slowdown in demand, Anthropic has unused capacity and the spot price crashes, so it’s hard to resell. That’s kind of what happened with telecoms in 2001.
SemiAnalysis is forecasting—I mean, they had a pretty bullish forecast, depending on how you want to look at it—but 50 gigawatts next year. They’ve historically been really good at this, because they have satellite images of all the data centers. They can see how complete they are, and they have everything very well mapped out. I think that’s the bad scenario here. That’s why I think the spot compute price is, other than total token spend, one of the most important numbers in AI right now.
Is there a point where increases in efficiency make you start getting worried? If tomorrow Google comes out with a paper and inference and training are now 10 times cheaper, are you guys worried about the market? If not, is there a multiple where you’d be extremely worried?
Worried about—
Basically, like, Jevons paradox doesn’t hold up?
Yeah.
Yeah. We kind of saw this in crypto last cycle, right? There was supposed to be infinite demand for block space, and then it turned out the demand wasn’t infinite at all.
I think AI demand is much more real than block space demand ever was. But I do think Jevons can take time. It’s a problem if Jevons works, but takes 5 years, you know? That’s another interesting thing about Anthropic’s S-1: I think over 50% of the Fortune 500 are spending over $100,000 a year with them, but it’s still only 0.1% of the Fortune 500 companies’ overall expenses. So there’s a lot of room for growth.
That’s why it’s such a hard equation to balance. I think the hardest place to be is the CFO of one of the frontier labs. You don’t really have any uncorrelated cash flows, and you’re just trying to figure out how much compute to get. If you’re not aggressive enough, you get completely hosed by competitors that can undercut you on token prices, and you might not be able to train the next model. If you’re too aggressive, you can blow up in a down cycle or something like that.
I don’t know. That wasn’t really an answer to your question. I also think the efficiency stuff is mostly bullish for everyone except the frontier labs.
Yeah, exactly. Even outside of AI, they’re probably the biggest beneficiaries in terms of cost savings and margin expansion. I think there’s increased revenue, too. Every part of the stack gets more efficient. I’m not saying anything novel; that was part of the thesis for the outperformance of a lot of the non-AI names. They benefit as customers and are less plagued by overspending or under- and overbuilt scenarios that are kind of inevitable in this process, because there are so many moving parts.
I’d be curious to know how much of Microsoft’s 60K layoffs are attributable to efficiencies in AI. It’s hard to say. That’s such a massive number, so obviously not all of it. But I think that stuff will make waves through the space, including reduced hiring of people straight out of college. Early grads are the roles that get commoditized the fastest.
If compute really goes down, I think you see multiple expansion—sorry, the cost of compute goes down, and I think you get multiple expansion on basically everything outside of AI that can benefit from it. You can run stuff locally.
There was a tweet from—
Yeah.
—I forget if it was the Bitwise guy. It was basically saying the layoffs pretty much match what their spend is going to be for the next few years. I wish I could find it. Or maybe it was the VanEck guy. I don’t know.
Yeah, I remember seeing the tweet, but I think there were some holes you could poke through in that logic. It was more just a fun coincidence.
Okay.
Yeah, I mean, that makes sense. I’m not saying they did that for exactly that reason, but, yeah.
I do think it could be a signal of what’s to come, though. I don’t think they’re—
Yeah.
—I don’t think they’re the last.
Before we talk about options, which I know a lot of people tuning in are really eager to hear about, maybe, Jake, your background was in cybersecurity and stuff, right? Is that correct?
Yeah.
2. The Cyberattack Cost Collapse
So what’s the deal with this PHP stuff? Is the internet broken? Are we all going to die? Maybe only some of us are going to die? What’s going on? I saw some people saying, “Just touch grass for a week.”
Yeah, it’s pretty bad, honestly. The PHP one is kind of a nothing burger. A lot of these older sites run behind Cloudflare or a hosting provider that can stop attacks as they come in.
The SSL one was pretty scary. I don’t know if I’m saying the company’s name right, but I think it was eMudra or something. They’re what’s called an intermediate certificate provider. One way to think about an SSL certificate is that a company signs it. Then you have a chain: another company signs further down the chain, and eventually it gets to you.
When you buy a new Mac, for example, you have this chain hard-coded onto your Mac. When you update, the certificates update. But that certificate being compromised means any IoT device, anything that hasn’t been updated, can now trust this SSL certificate, which isn’t valid. That means I can go to your Fitbit, if it’s connected to Wi-Fi, and pretend to be Fitbit’s API.
There’s so much legacy software running that I think you’re going to start seeing a lot of these older devices getting compromised and then spreading their own malware. Fitbit is one example, but let’s say it’s a gas meter. I can now pretend to be the gas company and push a bad software update.
And now it’s never getting patched. This goes into a broader trend we’re seeing: the cost of cyberattacks is down probably 100, maybe 1,000-fold. I think we’re going to keep seeing more and more—not just complex attacks, but attacks that happen because of earlier attacks. Emotet causes this gas thing, which creates a botnet. It’s quite scary.
So, wait—
So how do you think it plays out?
And also, should you always be updating your stuff? Or, if this is hijacked, is your update going to be a malicious update?
You should generally update all the time, but I think you guys see the danger here: there are a lot of assumptions that rely on SSL certificates being trusted that are no longer true. If you look at Railway, I don’t think they’ve done a postmortem yet, but it wouldn’t surprise me at all if that was related to the SSL compromise. Anyone hosting on Railway—you can see it going down the chain. Railway does its builds through a GitHub connection, so now they kind of have GitHub credentials for anyone who was working with Railway. These attacks just branch out, and that’s what’s very scary.
So, yeah, how do you think this plays out?
Yeah, I guess that wasn’t really an answer.
No, no, I know you were answering his question first. Yeah.
I think basically it’s very bullish compute. Everyone ends up spending close to infinite tokens defending against these attacks, and then attackers get better and better. Hopefully, we approach an equilibrium where the defenders have some kind of advantage. But right now, you’ve got to spend 10 to 1,000 times what an attacker is spending on defense.
Interesting, but it seems like defense generally has access to the best models, like the most compute. Shouldn’t defense be structurally advantaged just by virtue of the fact that the best models are gatekept for that purpose?
No, not at all. The reason is you only need to find one point of compromise, right? Then you can use others to escalate from there. You could spend your entire life making sure a system is completely secure. Maybe you’re hosting on AWS, and someone’s found a way to compromise the hypervisor, or maybe they’ve found a way to compromise the network access table, which leads into these other computers. There are just so many entry points for an attack that there’s a massive asymmetry favoring the attackers.
Interesting.
Actually, I think AWS and Google are a lot safer than Railway because of scale. If you hack into Google Cloud, odds are the most profitable company to pilfer there isn’t a crypto company, even with private keys being there. There’s just more valuable data.
I’m not sure, because I think some of the minting keys and stuff are hosted on… Like, some of Tether’s and other stablecoin minting keys are—
Yeah, some of the bridge ones.
—like AWS-hosted. So you could actually just infinite-mint or something and dump it on-chain. It is still—that’s my biggest worry, if AWS or something like that gets hacked. I do think crypto… What do you think is a better honeypot for people to go after?
I think Google Cloud and AWS are both what’s called FedRAMP’d, so a lot of national secrets are there, and there’s a lot of national defense stuff that’s probably worth—
Yeah. I mean, if you’re a state actor, I guess there are probably more attractive things.
Yeah.
Yeah.
Thank God they don’t want my coins.
A couple hundred million dollars—not bad.
Yeah, my keys are definitely not on AWS.
Not on their list.
Also, you hack Tether—how much can you really get out, right? One of the things we were talking about with quantum risk is, let’s say you’re Satoshi and you have all the keys, or you’ve managed to compromise every Bitcoin address. How much do you guys think you could really get out, especially with that large storage base?
That’s a good question.
Satoshi’s stash.
Well, you’d short ahead of time.
You need capital to short.
Yeah. If you’ve been able to crack that, I imagine you have some resources.
But yeah, you’d short. I guess you’d—well, what would you do? Just borrow a bunch—
The optimal way to do this—
—borrow a bunch of USC, I guess.
Short puts.
Like, you know, infinite-mint.
The optimal way for Satoshi’s coins is actually kind of similar to the Zcash bug thing, right? Do you try to sell as much as possible right away when you figure it out, because then you’re like, “Somebody else is going to figure this out quick”? Or do you slow-drip your way out of it?
His coins?
Well, no. You wouldn’t start with his. You’d start—
Yeah.
—with old ones that are also exploitable. There might be some… You keep stealing those, and nobody sees Satoshi’s. They just think old coins are moving, right? But Satoshi’s aren’t. And you can be selling those for a bit, until you start seeing more reports like, “Hey, my old coins got stolen,” blah, blah, blah. Then that’s when it would really accelerate. People would be like—
I think step one is you short. You short a lot. And—
No, but again, you have to have the money to—
I understand, but—
The assumption is if—
—in order to hack it—
Yeah, the assumption is you can hack it.
If you hack it, you have to have the resources to do that, which is—you can’t have—
Well, yeah.
—you can’t hack it and not have money.
Yeah, just go on paper trade, bro. 1,000×. Easy. Capital solved.
You short paper-trade generational wealth?
I don’t know. I don’t think Satoshi’s… I’ve thought about this a lot. I don’t think it’s as big of a deal as I thought it was even a few months ago.
Really?
Yeah, I think it’s just going to be the U.S. or China.
José.
We talked about this last week.
Dude.
I—
I think it’s huge. I don’t see how it’s not, because—
No, I think it’s too bad. I don’t… Whoever takes them can’t… If someone took them and was actually just dumping them, the community would just fork them out, because what fork’s going to win? The one where someone stole Satoshi’s coins and is dumping them, or the one where—
What?
—they’re not.
Dude, BTC’s—
No.
—probably cooked.
Cooked at that point.
No.
Yeah.
No.
Yeah.
No way.
Oh, at least 10% of the supply is gone.
Dude, it’s down, like—it’s down, like, 90%, I think, in that scenario.
It’ll be a euthanasia roller coaster after that. It’ll pump again, but it’ll just be lower, lower, lower.
Okay.
No, you’ll just fork them out.
That—
I mean—
—on its own is damaging as shit.
First of all, that on its own is damaging as shit, and then they’ve already dumped a ton before then. Like, you—
I don’t think they can actually dump that much.
Yeah, I don’t think they can—
Like—
No, they would short first. They’d make more on the short.
Yeah.
No, you—
Because you could just short endlessly, and if it’s moving against you, then you just dump.
Yeah, but you can’t short.
Like, you—
Can you short enough versus the five…? Because it’s 5% of BTC supply, right? So it’s nearly $100 billion.
No, but you won’t be able to—
No, but it doesn’t matter. Your exit process on the spot side is the same either way, but to maximize your outcome, the short doesn’t really have any bearing on how you exit.
I mean, the issue is where you put the shorts on. That’s, like, everywhere.
Or you buy puts on Hyperliquid.
No, I’m saying, yeah, puts and shorts.
That’s a good one.
My point is—
And they can short for you on Hyper—
If you’re doing it on a CEX, like Binance, or even Hyperliquid or something, they can maybe do something about the positions, but—
No way.
You don’t think so?
Like, you do it. How can you identify who is—
Oh, yeah. I’m saying, yeah.
The thing is—
They would have to know—
I don’t think some random—
—to do something.
—actor is gonna get these coins. I just think it’s a lab that has strong ties to the U.S. or Chinese government, and they’re gonna take them.
Really? They just found a way to finance all of their—
They’re gonna altruistically hold their coins?
No, they just financed their build-out for the next 5 years. The stock rips, and they’re chilling.
I’m not even convinced that the coins will ever actually be stolen by quantum, either.
Everyone over the past year has just decided, “Oh, yeah, they’re definitely gonna get stolen at some point because of this.” And listen, I’m not a quantum scientist. I don’t fucking know. But—
This is classic CT behavior. Yeah.
—but I’m reading from as many experts as I can, and it’s not consensus that this will actually—
I thought it was consensus. That’s interesting, because everyone I’ve read, and everyone in the Nick Carter interviews and stuff, just seems like it is. I thought it was consensus.
It’s a done deal? Yeah.
Yeah. Who’s saying it’s not?
I don’t know. Jake, what do you think? Do you think it’s a done deal that we’ll get a quantum computer that can hack Bitcoin?
Yeah, eventually. And I think the coins are gonna have to move by then. The really hard part about saying “just fork it” is that, at the point where you can crack Satoshi’s keys, you can crack basically any key, right? So everyone has to move.
Yeah.
Unless—there was a funny scenario I came up with, which I don’t think is that realistic. From what we know, Satoshi was basically working off an old Windows XP laptop. The pseudorandom number generation went through an old OpenSSL library in one version; in another, he was just using the Windows XP base version. And the Windows XP base version had some kind of bug, right?
There was a scenario I was talking about with some core devs in 2019 or 2020. He has one private key that he misconfigured, right? So it has no bearing on the rest of his setup. Someone manages to replicate the random number generation he had on his computer in 2008. You take the running processes on the Windows machine, the time, the IP, some other stuff, and put it in this random number generator. They manage to move 50 BTC, right? Nothing else is at risk because he was just testing something out, but there’s mass panic, right? I do think there are a bunch of nonfatal scenarios that could happen that, at first glance, look completely fatal. I’d be curious how the market would respond in that case.
Horribly.
And, by the way, if this were to happen, if you look through the Git log—I don’t think this is likely at all. I don’t think this happens. It’s just an example. But where it’s most likely to happen is one of the earliest blocks, right? That’s where you’re messing around, testing things, and Bitcoin isn’t worth anything. It doesn’t even have to be him; it could be any other dev from back then who wasn’t too careful. I think that would be pretty scary.
Wow. Super—
Is it too much for an—
Super positive, dudes. This is great.
—is it too much hopium just to assume that the attacker would absolutely fumble this, too?
Fumble how?
How do you mess that up?
Everything we’re talking about makes it blatantly obvious that this is going on, and somehow the market or the community is able to move—
Ahead of time. That’s my—
One thing—
That’s my biggest struggle with all of this—
Oh, yeah.
—is that I’m also not a quantum expert by any means, so it’s hard for me to really underwrite this.
It’s hard because of the timeline for knowing what to do. One thing is that Bitcoin’s so slow, and quantum signatures are so expensive, that moving everyone’s UTXOs would take something like half a year to a year of block space, because of Bitcoin’s throughput. So you definitely want to start the process of moving some things to more quantum-secure signatures, I think. Not as an individual, but maybe as larger custodians.
At the same time, there are also novel risks with moving to this completely new quantum-proof signature scheme, too, right? I don’t know. Maybe this is naive of me, but I honestly think we’ll be fine.
I think the market absolutely craters on that. If you think about how much volume you need to move the market, and what percentage of people you need to actually panic, then you think, “All right, there’s gonna be this percentage of people that panic. I will respond accordingly.” It’s just—
Okay, but wait. This scenario is some actor we don’t know who is actually selling, right?
No, one of those early—
Or just moving—
Yeah, one of those early coins starts—
Yeah.
—moving out of nowhere. It’s a handful of people who could have actually mined those, based on—
That would be bad, for sure. I guess I’m more—if quantum hacks Bitcoin someday, I’m fully expecting the U.S. or Chinese government to announce that they took Satoshi’s coins. I think that’ll definitely lead to short-term volatility and probably nuke it a bit, but I think it’ll be okay in the long run.
I agree that the idea of some old 50-coin block—50 coins that were mined back in the day—having some of those get lost here or there would definitely be pretty spooky for the market, because nobody will really know what’s going on.
I don’t know, man. I think governments are some of the last people on Earth you want holding large amounts of coins. They’re some of the most indebted, paper-handed, historically paper-handed institutions on Earth.
Yeah, but it’s too much to sell—
—institutional holdings.
If you actually want to use the value of it—
Yeah, but they don’t care. If you think about it, it’ll be controlled through the administration.
Yes, they do care, because they want to maximize the value of it.
Just do a two-tier TWOP. It’ll be fun.
If the Dems win and they somehow are in power when this thing gets hacked, they would just dump this to zero.
No, they wouldn’t. No, they wouldn’t. They would not do that.
I also think it’s much more about the principle. I think it’s actually super bearish if all of Satoshi’s coins get burnt by a compromise. I think the market nukes on that.
Right.
Because that means someone has somehow accessed the keys, and maybe now your Bitcoin isn’t safe.
Yeah.
Yeah.
My main takeaway is just that the appeal of immutability has gone down a lot, you know? The appeal of being this thing that’s really slow to change and really hard to change has gone down a lot for most coins now.
I don’t know, man. I might have to buy more Bitcoin after this show.
I disagree. I disagree with that.
You don’t think so?
I gotta trade all you guys on this.
I think immutability and security are kind of different, though. As long as it’s actually still immutable and quantum-resistant—
I mean immutability in the sense that the Bitcoiners are like, “Well, this will never change. Upgrades are really hard. We don’t adopt anything.” The fact that there’s no organization that can unilaterally change things—all these things were seen as very bullish, right? Because it makes it stable.
Okay, but that doesn’t matter. That’s a minority group. If something happens where the holders of Bitcoin in the world are like, “Which coin version are we gonna use? Is it this one that’s going to zero but keeps the original ethos of the hardcores, or is it the one that everybody else wants to protect the value of?” The one that everybody else wants will win, and I honestly think it’ll still do fine.
Bitcoin’s already been co-opted. It’s already ETF and institution—
That’s not co-opted, though. I think that’s fine. That’s just adoption. I don’t really think that’s a co-opt. Co-opt, I think, is—
Well, I don’t think—I mean—
Something more underlying, based on its ability to be held—which is broken by quantum—or something on the mining side would be a co-opt.
Yeah, I want to continue this conversation, but I know Jake has a hard stop at 10:30, and we haven’t talked about options, so I feel like we should pivot to that.
Let’s do it.
Honestly, Jake had me at “This is all bullish compute,” so—
Maybe, just to give everyone a quick overview: Synapse has been around for a while. You guys did the bridge back in the day, then I think you tried to do some sort of chain, competing with something like OneBalance—a similar kind of chain-abstraction idea. Then you pivoted and decided options were where you wanted to go. What led you to options on Hyperliquid? And why continue building it under the SYN and Synapse brand, rather than launching a new token, which I think a lot of people probably would have done?
These are both great questions. A lot of people are surprised by this, but I think options are a very natural pivot for a bridge. It was pretty clear to us by 2022 or 2023, when Across started getting traction, that bridging was dead. The margins went down probably 100X in a year, with no signs of slowing down or stopping.
On the messaging and oracle side, there were chains where we were doing a million messages, and I think we made like $1,000. You really needed Jevons paradox to kick off in a huge way for this thing to work, and we didn’t see that happening. When you think about options and what makes them a lot harder than perps, probably the biggest factor is poor capital efficiency.
In a perp position, you’re 10X levered, with ADL as a backstop. If you’re a market maker, you can use most of your capital; you’re probably a bit levered up. Whereas if you’re short a call option, you might have to put up 10 to 100X the amount of capital you actually receive in premium, which is pretty bad.
When I think about OneBalance, for example, or a lot of the ideas we had at Synapse, many of them were about letting you bridge GLP to use as collateral in the lending market on Ethereum. To me, it was very natural that you could use interoperability to make options a lot more efficient to write, and in that way make them a lot cheaper. Putting up full collateral for an option is crazy.
That’s where the idea came from. We looked at the market, and there was basically nothing in on-chain options doing substantial volume at the time, so it seemed like a very natural space to compete in, with very deep moats. The missing element for us for a while was an on-chain perp exchange. There was a brief window when Dopex did this with GMX, and it was okay, but the fees and liquidity weren’t there.
When Hyperliquid came out, it was obvious to me that this was something we had to try. We started building it from there. As far as building it under SYN versus launching a new token, I think one of the biggest problems in crypto is that you have serial founders who launch a token, things don’t really work out, and then they launch a new one and do that serially.
I think a much better frame of mind is the startup world, where new founders who have raised $5 million, $10 million and are down to their last 1 to 2 months of cash will still pivot with their existing cap table and make it work. You see this quite a bit. As long as you’re not dead and you haven’t given up completely, you owe it to yourselves and everyone else to keep pivoting and make it work. If crypto had more of that ethos, a lot of the problems in the space wouldn’t exist.
That’s fair. It’s definitely commendable to keep the old token running.
I was going to ask about that—oh, sorry, go ahead, Yan.
No, go ahead.
I’m actually curious—and it’s not about the token—whether you ever considered pivoting outside of crypto during this time. AI came along, and you have a background in cybersecurity. I think one of your co-founders went to work at OpenAI. What made you want to stick around and keep grinding it out?
Synapse was a huge swing and very successful as a protocol. I think most people in your position got burnt out throughout the bear market and either pivoted or quit. What made you want to keep going in crypto?
It was definitely Hyperliquid. You had all these other teams behaving in ways that weren’t very conducive to trust or to what I thought founders should be doing. A lot of the founders who were doing the right thing were getting smoked for a couple of different structural reasons, mostly because they didn’t want to play a lot of these games. Here you had a protocol that said, “We’re not going to play any of these games,” and still managed to win. I think that was very inspiring.
Then there was the size of the opportunity. Everyone I talked to was like, “Yeah, no one trades options.” Having grown up in the U.S. and having a lot of friends here who punt on Robinhood all the time, I thought that was one of the dumbest takes I’d ever heard—
Everybody trades options.
—I’d ever heard.
Yeah.
What do you think is the correct path for option adoption to grow as a protocol?
I still think it’s probably retail, with pretty short-dated options. From there, I think you get flows that allow for longer-dated options. Right now, RWAs are probably the most obvious place to grow. I suspect it’s going to look a lot like HIP-3: it’s flat for a couple of months, then you get this liquidity flywheel going, and it shoots up.
On the structural framework for how you create liquidity, there’s naturally a long bias, which means you kind of lack vault sellers. You guys recently announced the vaults, which accomplishes two things at once: you create a yield product on an asset that otherwise doesn’t really have yield, and you provide a structural vault seller to offset this and help with hedging.
It’s not just hedging; it’s also the margin requirement. If you’re short an option, your margin requirements are pretty high. That’s probably one of the biggest issues here. On the one hand, we let you use your delta-one positions on Hyperliquid, which is huge because they offset your risk. On the other hand, being able to buy vol and use that as margin is huge.
Yeah, go ahead.
For people who aren’t as deep in this world as you are, what’s the benefit of on-chain options? Options have historically been traded elsewhere, and they got popular when Robinhood and others went commission-free seven or eight years ago. Options trading blew up, and there’s a whole speculation narrative that continues. But the layman’s question is: what happens if Robinhood moves into offering similar types of options on similar types of assets to what you guys could offer? What’s the benefit, or the unique advantage, of an on-chain options protocol?
I think there are a few different things. Number one, it’s 24/7, which is huge. Most of this vol is happening outside market hours anyway now, because a lot of it is driven by the Middle East. That’s one thing.
The other is fractional options. If you want to do an at-the-money S&P 500 call a week or two out, your minimum trade size could be a couple thousand dollars. That’s crazy for retail. All these options protocols allow fractional options, so you could trade options a year out and your minimum contract size would still be a few bucks, which is huge.
Then there’s capital efficiency and money Legos. You can imagine a world where you have a covered-call vault: you deposit Nvidia, write a covered call, receive the premium up front, and then borrow against that position and keep looping.
And I think there are going to be a ton of protocols built on top of these options products that have really creative ways of generating yield.
And yeah, I’d love to understand how various options protocols are taking different approaches. Some are using or building the perp desks themselves to facilitate that liquidity, because, as we mentioned earlier, the big unlock is allowing the same pool of capital you’re using as a market maker on the short-option side to also be used on the hedging side. Do you see a structural disadvantage to rebuilding from the ground up versus piggybacking on existing Hyperliquid liquidity? I think there’s also really interesting long-term alignment, given the amount of volume you guys end up doing on Hyperliquid RWAs.
Yeah. Over the past 30 days, we generated about a quarter billion dollars in volume on the perps. Most of that is taker flow because you’re delta-hedging with the market, which is huge. We did a pretty in-depth comparison on Hyperliquid Insights into the cost of doing this on any other perp DEX or CEX. Even on Binance, with the most generous assumptions around fee tier, it costs 10–15× more to hedge the same option we hedged on Hyperliquid.
I think that, to believe a lot of these other options DEXs are going to compete, you kind of have to believe they’re competitive with Hyperliquid on the perp side. Maybe there’s a world where that happens, but I think it’s a lot harder to do than a lot of these people imagine, just because I’ve seen Binance and Lighter really struggle with that.
So it’s one thing to have the infrastructure built out and actually working, right? The other big challenge to crack is distribution. How do you actually—
Yeah.
—get people to come and trade these things on-chain, or come to you guys? I’d love to hear your thoughts on how you’re thinking about that and how you’re tackling it. What do you think is the catalyst that finally—
Yeah.
Because we’ve been talking about options for years, right? I think everybody here agrees it’s one of the last major financial primitives this sector needs. But there’s always been this push-pull: how do you get people to actually come on board and trade these things? What’s the best way to get distribution and drive volumes from here? What’s that catalyst?
Honestly, I think it’s probably just running UGC on TikTok. We’ve seen FOMO have a lot of success with this. Frankly, I think the market is a lot bigger outside of crypto than within it. Options are, or historically have been, the biggest instrument in a lot of these markets.
In India, they trade more notional a day than in the U.S. This has historically been true across Asia and everywhere they’ve been legal. I think that’s pretty huge. Builder codes are a big one, too. We come from the bridging space, so we understand how hard it is for, say, a MetaMask that has Hyperliquid perps integrated to bridge to some ZK L2 to trade options, and what that costs.
One of the hardest parts is that you can make bridging feel very simple when the market isn’t moving. But as soon as users all want to trade at the same time—which is after a market move—liquidity dries up, and the product becomes unusable.
Who do you think of as your biggest competitors? Are they the more direct comps, like Derive or what Paradex is building out, or Lighter? Or is it the big incumbents, like Robinhood? Who do you think is actually your biggest competitor?
It’s probably much closer to Robinhood, or someone who could figure out how to come in and do this in a crypto-native way. Another potential competitor I’ll throw out would be Polymarket or Kalshi getting a DCM and going from there. I think there are a lot of structural reasons that make it pretty tough for them to actually do this and build it out, especially when you see how the perp rollout has gone. But they just have a lot of dry powder.
And in terms of the way you imagine this market evolving, do you see it being winner-take-most, or do you see multiple players existing because it’s difficult to build up liquidity on specific assets? Or do you see commoditization happening around liquidity, if people just want to trade a certain amount? I’m curious how you see the space evolving.
Yeah, it’s a good question. I do think it probably ends up being some kind of oligopoly, where you have 2 or 3 big players. I think basically every big player eventually is partnered with one of the major perp DEXs, because it’s kind of too hard to manage both products at once.
But I do think every major perp DEX will have some options component, with a protocol building hand-in-hand with them.
Makes sense. I guess you guys released some recent news. Maybe it’s worth touching on that.
Yeah, we’re super pumped about vaults. Basically, they let anyone run vaults on Hypercall. You could do options, perps, spot—anything you can do in a Hyperliquid vault, you could also do here. Then you could also do options on top of it.
This unlocks covered calls, basis trades, and some of these more risk-on options strategies. A lot of leveraged ETFs actually run through options strategies, so I think we’re going to see a lot of really cool things built on top of vaults.
Before you go, obviously you’re very bullish on options, and I think most of us at Delphi are too. We have a really big options report coming out in a month, and then we’ll talk about it in our Year Ahead reports too. What’s one other sector or protocol you’re most interested in going into next year? And you can’t say Hyperliquid. Do you think alternative monies to Bitcoin are interesting, or is that kind of a flash in the pan? Maybe social stuff. I’m not really sure. What do you think is the most interesting other area?
I think it’s probably new kinds of lending. I haven’t looked at it in a few months, but 3Jane is one that comes to mind, where you can get a loan against your Binance account. Non-overcollateralized lending is underexplored. I think we’re going to see a lot of protocols making strides there and doing interesting things, especially some of these crypto card providers too.
Right, because you can build up a profile based on your spending and repayment ability—
Yeah.
—and create new—
Yeah, I mean, they’re credit card companies, right? They should extend credit.
Yeah.
Awesome. Jake, again, really appreciate you coming on and sharing your thoughts. You jumped right into the mix with us, which is what we’re always looking for. You shared some stuff on Hypercall, an area we’re all really excited about. We’re excited about what you guys are doing, so appreciate you joining us.
Thanks, Jake.
Thanks for joining.
Thank you.
Bye.
Summer baby.
Yeah, he’s cracked.
He’s a smart guy, yeah. I’d never met him or really talked to him before.
Yeah, me either. My—
Most of my history with Syn is honestly Duncan yelling, “Syn’s summer baby,” at me. So I probably didn’t fully get to know who the actual founder was and all that.
Yeah.
So that was good.
My exposure to them is through Duncan, which might not be the purest form of exposure.
I mean, I did buy Syn recently, as a disclosure, but you guys can’t tell Duncan, because I can’t have him win on that, and he’s been—
It’s been climbing the—
…gonna get me to buy it forever.
…the wall of Ceteris worry for a while.
Yeah, I mean—
You bought Hyperliquid recently. You bought Syn recently. Dude, where are your principles? Where are your—
Yeah, I’m cooked.
Yeah. Honestly, it might be time to get out.
He was buying ZCAT. He was buying memes for the first time in years too. I don’t know.
I think he’s the only—
Who is the Ceteris?
…BlackBull holder here.
No, I sold that a while back.
Yeah, yeah. He is. He’s the only one.
Once the cup and handle broke down, I was like, “I’m out.” The cup and handle’s gone.
The cup and handle, yeah.
The cup and handle shattered in spectacular ways.
Yeah, it was like cup and zero.
Ansem’s bearish. I feel like Ansem’s nailed it.
Ansem is good. High-level, I think.
He’s good. Yeah, high-level. I mean, I think he’s been high-level over the last 5 years. I wish I’d listened to him the last time he was bearish, which was, I forget now.
It’s interesting, though: if the market nukes, should BlackBull go up because Ansem was bearish?
You sure you sold?
Yeah, I sold it. I’m not interested in buying it back anytime soon. I think—I don’t know.
I think you did pretty well. I know you were pretty early to it, from what I remember.
Yeah.
Not early enough.
Yeah.
Not early enough. I think I doubled, so I can’t complain.
Okay.
But not a lot in size.
That’s pretty good.
Is there anything you guys are not interested in touching at all, in terms of…?
Blackwell?
Most stuff.
Most stuff.
On the consumer side, yeah.
I was going to narrow it down and go back to the AI names, because I know what I don’t want to touch in crypto. That’s pretty obvious. But more so for the AI names, different parts. Is there anything you just don’t want to touch at all, mainly at Jupiter and Yahoo [?]?
Probably Anthropic right now. I just think there are better bets to make if they do well.
I also think you’ll get a better buying opportunity, depending on where the pricing shakes out, right? At $2 trillion, who knows if they’ll sell price at that point, but I think you’ll get a better buying opportunity even if you’re bullish on Anthropic after it goes public. I could see it having a very similar chart to SpaceX, where you have the initial sell-off. It’s just the classic post-IPO initial drawdown. They’ve got staggered vesting schedules and unlocks, so that’s also similar to SpaceX in that regard. The difference with SpaceX, though, is that if you buy and get dumped on, you’re actually helping fund the greater good, right? You’re the exit liquidity for the effective altruist movement.
Yeah, there are going to be some really bad things getting funded next year.
There are going to be a thousand new startups.
So bad.
I think it’s going to be no worse than other IPOs, except people are just going to be spending—
Yeah, yeah. I think it’ll be fine.
—their excess cash.
No, no, I’m talking about what those freaks are going to do with their money.
They’re going to be doing cool shit.
I’m talking about EA causes. I’m not talking about their investment choices.
Yeah, but I think EA’s got a lot of justified hatred given SBF and some of the stuff there. But I think in general, their causes are pretty good.
Yeah, I agree. I think their causes in general are good, but the way they rationalize what they do is poor, right?
Right.
SBF’s whole thing was like, “I’m okay to fuck all these people because I want to take their money and put it toward these other causes. They don’t need this money as much as those causes do.”
“I’m a better steward of the money.”
So it’s not that the cause was necessarily a bad thing. If these are just founder shares and there are willing buyers on the other side, and they want to go fund whatever, then that seems…
3. The IPO Liquidity Drain
What do you guys think of this idea? With crypto, when you have a big token launch—or in the past, when we used to have big token launches—that was bearish for the markets because it generally drains liquidity, right? And I think we’re probably going to have the biggest liquidity drain from public markets in history in the next 12 months.
That’s Paul Tudor Jones. He just did that interview on CNBC the other week, and he’s very, very, very cautious on equities into 2020. He thinks the end of the year is going to be good generally, but he thinks 2027 is going to be extremely challenging, mainly because of that.
Mm-hmm.
I mean, some of that has already been going on.
Well, it’s that and CapEx, right? Just thinking about the financing needs, that money’s got to come from—
Yeah.
—somewhere. Obviously, debt markets are different, but there’s still a lot of capital being spent.
He made the point that debt markets are starting to close up to different names and stuff. Combined with massive issuance, I do think it’s so bullish for private markets, because I think so much of this money finds its way back to venture, given these are going to be the biggest venture exits ever—literally by a lot.
I don’t know.
Private markets are kind of spooky to me right now, to be honest. I’d rather have private money than private markets, if I’m picking one of the two.
You don’t like Instinct at $30 billion?
I think private markets are really interesting. I think they’re in a… I don’t know. You just have this bid from these mega funds. I think early-stage private markets have never been in a better spot, honestly.
Yeah.
These funds try to put liquidity in.
It does depend on how Anthropic trades, though, too, right? You saw it back in 2021, the last big venture cycle: once those big funds didn’t get markups, it kind of trickled down and everyone gradually tightened their purse strings. You could see something similar. If Anthropic doesn’t trade well, then all the other private stuff gets marked down because you finally have a real market-clearing price for these assets. I agree that the money does trickle back, but it can be offset by what these funds end up doing based on how Anthropic trades.
Money invested in venture has been up only, and secondary liquidity has been up only, too. It’s back to all-time highs after 2021. I think it hit all-time highs last year, which is kind of crazy if you think about it—that it took until last year, or maybe even earlier this year, to get past 2021. I think the mega-fund bid and the size of these funds act almost like indexes in public markets. There’s interesting research by Michael Green on indexes; he calculates that every dollar of index flows increases market cap by about $5, and obviously overweights the biggest names.
I think you have the same thing, but even more extreme, in private markets, because these things are low-float, high-FDV. No one can sell, right? Only the company can sell. You’re selling 10% in each round, and the equivalent of index inclusion is when you get to a big enough size that a16z, Sequoia, and these mega funds can invest in you. There are only a limited number of names that you can plow 9 figures or multiple 9 figures into. Those things just keep going up.
When you look at the delta between the top-end exit value and late-stage valuation growth versus seed stage, it’s way higher. I just think it’s a really good time to be early with a small, agile fund in venture in general for the next 5 years. I’m not saying this is—things look pretty hot. Obviously, Instinct at $30 billion is pretty crazy.
That’s what I was going to say.
I think it’s pretty crazy.
It works until it doesn’t. I think people probably underestimate how quickly it reverberates down the stack. But yeah, I agree.
I think a lot of people are going to learn. Yeah.
Yeah, but I agree: the early-stage stuff is great because you’re still pretty insulated from it, based on how many rounds are ahead of you.
Yeah. And the revenue ramps are just unheard of.
Sorry, go ahead.
Yeah. I was just going to say, I think the market in the short term can absorb the Anthropic IPO. Once you get into the later stages of next year, and equity supply finally flips positive instead of having negative growth, as it has for the last 10 or 15 years, I think the market will wind up stabilizing and can absorb it. In the short term, I think Anthropic will trade similarly to SpaceX.
The tough part about the revenue ramps and underwriting them on the startup side is that it seems like every single week there’s a new company that gets to $100 million in ARR. It’s not even a badge of honor at this point. I’m really curious, especially with the AI-focused companies, what retention actually looks like for some of them. Some of these companies are too early to even have retention cohort metrics. What will Instinct’s retention look like 12 months from now, for example?
If we start to see a lot of fast-moving capital coming in, or fast growth, but that leads to a lot of churn in some of these products because the landscape is so competitive, that could make private markets more spooked or more diligent about underwriting these companies. Then it can have that trickle-down effect, like Yan said.
Yeah. On the capital front, I think Elon and the neocloud stuff was definitely an interesting one that—
Yeah, what do you guys think about that?
—potentially put a bottom in—
Seems like he’s quite bearish.
I mean, he’s basically doing—
He’s talking his book for sure.
—the easy thing to do: basically nuking competitors and scooping them up on the cheap, which makes sense.
Sending them into space.
But at the same time, he’s going to get insane financing terms because he has this diversified revenue stream that no one else has. As a lender, you’re much more comfortable giving him better terms. He’s also Elon, who has an ungodly amount of money. And you want to be a lender to him because you want to potentially be the one to help take him public, right? I’m sure that was part of the rationale a lot of the debt financiers had when it came to Twitter, because of the fees they earned from IPOing his companies and just having him as a customer—or as a client, rather.
I think he’s going to get the best terms because of his size. I think Terafab is insane and will probably have some of the best neocloud margins because of its scale. I think he’s pretty unparalleled as a builder, so it makes sense for him to gobble up quite a bit of that market.
Yeah, I think they go on a big buying spree next year, if not sooner. The ability to execute—
The neoclouds?
—on neoclouds. Maybe not the largest ones, but maybe the tier twos. There are a bunch of bare-metal operators that are basically selling to companies like Together AI. There’s so much compute being built out, but a lot of it is also being stranded because some people have never operated data centers before, or thought they could do it at an Elon-like level, and are realizing it takes a lot longer, costs are higher, and their financing costs are higher, too.
If you can’t bring that compute online on the timeline you promised, the economics start to skew against you. I think there are going to be a lot of cases where the assets themselves are very valuable if a really good operator can come in, take them over, and turn them into what you want to call powered land at this point, or real online compute. There really isn’t anybody better moving at the speed that Elon and SpaceX are on that front.
Yeah. Part of me sits there and thinks, do you just buy SpaceX and walk away? It’s hard to see them losing.
Do you think so? It’s just so expensive.
Yeah, I know.
It’s like—
But it’s going to carry this premium forever, and—
I mean, I haven’t looked at the latest numbers, but I think, given the growth in their cloud business, space is probably a minority of their revenue at this point.
Yeah, for sure.
Their cloud business is just very levered to long compute prices, right? All their deals with Anthropic and the others are cancelable with 3 months’ notice by either side. That’s why they’re able to charge such a markup. I think they’re charging around $50 per watt, versus $10 to $15, which is what CoreWeave was charging. I think it’s a very good leveraged AI bet, but when it goes wrong, they get hurt pretty badly.
I think they’re financially able to recover more than most, just based on their diversified revenue stream and the credit options they’ll have because of that. One thing I actually wish we’d brought up when Jake was still here: I don’t know if you’ve ever gone down the Kessler Syndrome rabbit hole. The idea is that you can get to a point where there’s enough debris in low Earth orbit to make that whole area unusable. One satellite crashes into another, then these things just start orbiting, and eventually it becomes this massive ball of trash that makes it almost impossible to have any satellites up there.
Seems worse than quantum.
Yeah, it would be horrendous. He tweeted about buying SpaceX puts as a result, because a headline came up that there was a secret Russian military satellite hunting a U.S.-registered one. So there’s already some degree of space war happening. If you’re North Korea, how do you cause as much global chaos and reset the playing field as effectively as possible? It would be by initiating something like that.
That’s one of those tail risks that nothing is protected from. Global communications could go down massively. Obviously, fiber exists, but so much relies on satellites that it would be a pretty nightmarish scenario.
Is there anything you guys feel underexposed to before we wrap up?
Wow.
Everybody’s perfectly allocated, huh?
I’d love to have a manager I’d be confident getting exposure through to power, grid buildout, infrastructure, and things like that. I hold this ETF called GRID, which has done well, but I think it’s a very interesting sector. It’s pretty boring. Commodities could get pretty interesting over the next few years, too, if you understand that market, given geopolitics and stuff like that. Those are two areas where I’d love to find managers, because I don’t think I have the time or ability.
Commodities are more of a trading thing, though. You want a liquid manager who’s trading around events and just going long—
I don’t know. I really have no desire to give my money to all these different managers.
I do.
I don’t feel underexposed to anything. I just wish I had more of everything.
If only there was a way.
If only there was a way. Yeah, I don’t know.
I’m kind of in the same boat as Ceteris. When I used to work in the real world, I was doing high-net-worth stuff at JPMorgan, and I was looking at all the stuff we did for clients. I was just like, “Nobody needs any of this.” You could do all of this—
Oh, yeah, the bank stuff is terrible.
Yeah, right? I’m sure—
Yeah.
I mean, the credit solutions they have are actually kind of good if you have a lot of money. But other than that, I just know crypto so much better. It might not be as exciting as it was a few years ago, but every couple of years you’ll find something that comes out that’s an obvious home run, and other people are just not aware of it for whatever reason. You can do extremely well. I’m kind of in the same boat as Ceteris.
Yeah, it’s hard for me to divert. I’m interested in all this new stuff with longevity, neurotech, deep tech, all this stuff.
I just know myself. I know crypto, and I'm always going to know it so much more than 99.9% of people. Even when the market is boring for a whole year, I still keep interest in it all the time.
Because then you find Zcash, and all of a sudden those 2 years are worth it.
There you go. It pays for the 2 years, right?
But even Zcash and stuff, right? If you just stopped paying attention to crypto, you would've woken up and seen Zcash went to 1,500, and you'd be like, “What?”
I paid very little attention to crypto, but—
Yeah, but you're in—
It's almost like paying less attention worked better, especially this cycle.
To be fair, you're in a lot of group chats where things get surfaced to you.
Yeah, exactly. And just being a Delphi subscriber, I think, is—
Yeah.
Hey, you.
Hell yeah.
All right, we want to wrap. I think this is a good episode. I'll let Kevin do the send-off, but before we go, thanks, Jake from HyperCall, for coming on. Next week, we're planning to do an episode with Omnia, Kinetiq's founder. They have their chain going live on November 9th, I think, so we have another good guest coming on. They're doing a lot and have had a lot of partnerships recently. I've seen Uniswap, FOMO, and some other stuff, so that'll be a good chat.
I don't even need a send-off. That was perfect, Ceteris. Good job.
There you go.
Coming from you, Kev.
See you guys.
Bye.
Later, guys.
See you, dude.
See ya.