Hyperliquid 终于迎来突破时刻

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What’s up everyone? Welcome back to the roundup.

People with British accents just naturally sound smarter than me. So much smarter. It’s crazy. Sadly, we don’t have British accents, so we won’t sound smart on this episode. Santi, Rob, how are you guys doing?

Is that a new haircut I see?

Dude, I was debating actually putting myself in the frame where you couldn’t see me, just so you could see my forehead. I had to accompany my wife to something, and I had 3 hours in Midtown Manhattan where I had nothing to do. I was trying to take calls, but I had 25 minutes in between calls.

I needed a haircut, and I’m traveling so much that I haven’t had time to get one. I walked into a random barbershop and was like, “Here’s what I like. Give me a good cut.” I have never had a worse haircut in my entire life.

It looks like your eyebrows. Did you wax your eyebrows? Did you get a little trim there, too?

No, I didn’t wax my eyebrows.

You look great. Even if it were true, he would never admit it. I will say, it does look very perfectly manicured right there.

Dude, I always have nice eyebrows. This is crazy.

I’m going to have to enhance right now.

No, it’s just because I have a big forehead now. I have no hair.

Ladies and gentlemen, it’s highlighting my eyebrows.

I’m enhancing here, and it looks perfectly trimmed right there.

For anyone not watching the video, we’re talking about Yano’s haircut.

Dude, this is brutal. My hair is receding a little, too. You can kind of see it. This is not boding well for me.

A little bit like you’re about to be in a production of West Side Story. You’ve got kind of a high look going on. You’ve got the eyebrows. It looks great.

1. Hyperliquid’s Breakout Moment

Okay, shut it down. Shut it down. Hold on. Let me get my hat. Hold on. It’s like, why is the guy wearing a hat for 3 weeks in a row?

Should we talk about some good news, which is HYPE is just—did I—All right, I might have a bad haircut. Did I call it or did I call it? A couple of weeks ago, I was like, “I’m buying the tokens again.” I haven’t been buying tokens in 2 years. The market’s getting hot.

I have to give myself a pat on the shoulder because you guys are ragging on me so much. I usually don’t like to give myself pats on the shoulder, but clearly you guys are not going to do it.

It is. Rob’s definitely doing it. It is a world of haves and have-nots. Bitcoin’s at $76K, so it’s been kind of muted all year. HYPE is up 2x since Liberation Day, right? It hit 23 on the low, and now it’s at—what is it now?

Oh, HYPE is $61. We are just sending. We love it.

Goddamn.

That DAT keeps hitting the ATM as hard as possible. We’re in DAT season again, but for HYPE.

Do you know, I remember I got on here—I think it was 2 or 3, maybe 3 or 4 weeks ago; I forget when it was—and was like, “There’s a hedge fund that’s thinking about buying Hyperliquid.” They called me because they read the Invest Like the Best Colossus piece, the best Colossus piece on Jeff, and they went long. They bought PURR.

PURR? PURR?

Yeah.

But the problem is that because they’re hitting the ATMs, PURR is actually way underperforming.

PURR, I know. I literally texted him this morning—or actually, a different hedge fund that I texted this morning, who’s also in PURR—and I said, “Are you going to go long the ETF instead of PURR? Probably better returns than the DAT.” PURR’s been—

So why is it ripping?

I think I have some theories. It was pretty surreal to see the Cerebras IPO in the classic form—the price discovery. I think it was one of the founders, or one of the VCs, who took a picture on the trading floor. In that picture, you see one of the traders had Bloomberg on one of his screens. He was looking at the Hyperliquid pre-IPO market, where the price discovery was happening.

Yeah.

It was kind of—I don’t know if that picture was altered or not. It seemed like it was real.

No, no. Real, real picture.

It was real. It was the Benchmark guy who did that deal.

Yeah, it’s pretty crazy.

I don’t even think he knew what he was doing. Then I think it was Matt Wong who maybe retweeted it, or maybe noticed it first, or maybe somebody noticed it and told him. He tweeted it out, and then it went super viral.

Now, of course, as we enter—you know, talk about macro here—the SpaceX IPO is coming up, and everyone’s looking at Hyperliquid yet again. So, pretty surreal to see.

Yeah, the SpaceX pre-IPO market is right now at about a 35% premium to what we’re being told SpaceX will probably IPO at. It looks like it’s going to get priced at somewhere between $1.5 trillion and $1.75 trillion. SpaceX, as of this morning, was trading at a little over $2 trillion—around $2.1 trillion.

Yeah, right now. And I mean, you saw this with Cerebras. The TradeXYZ pre-IPO price was something like a 30% or 35% premium as well. Then it doubled right when it came out, so it was more indicative of what the fair market value was, but not as high.

It is quite interesting to see these happen. There’s not a lot of volume on these things, and there’s not a ton of open interest. It’s fine, but it’s pretty small.

We’ve seen this really interesting time in the market where there are so many new ways to get data on markets, whether it’s through Polymarket—and this was a big part of the thesis that ICE had for the investment they put there—or now we’re seeing it with Hyperliquid.

It’s like, okay, now we have a market that can give us the real price of what the typical outcome is. We’re seeing it with Hyperliquid, where these hedge funds mostly can’t really access TradeXYZ for the vast majority of these things, but they’re all now using it to look at what the open might look like when they can then trade on CME or when the thing goes public.

We’re going to continue to see a lot more of that, and how these things are good price oracles for traditional markets when they can get access to the actual markets. Whether those traditional investors can actually trade on these markets is a different story, but from a price-oracle perspective, there’s no doubt that this has entered the mainstream.

All right. I want to know when Bill Gurley is going to go buy Hyperliquid, because he’s been talking a lot about how inefficient the IPO process is. I think if you look back since the 1980s, the average pop on IPO day is 18%.

Of course, you have some wild stories, like Figma’s IPO, which I think was 30 times oversubscribed. You could argue that the traditional book-running process—for anyone not familiar—is where the lead investment banks, like JPMorgan or Goldman, go out and reach out to their highest institutional clients to say, “Look, this company’s going public.”

There’s a roadshow. They go do the rounds on Wall Street and coast to coast, and then they price the book. You would think it would be good price discovery, but clearly there’s money left on the table.

Bill Gurley’s been advocating for direct listings, which you could also argue for. I think Coinbase was a direct listing.

Spotify was a direct listing.

Exactly. So, I’m curious. I definitely agree with you. I think Hyperliquid is an interesting price-discovery mechanism, if you have good volume behind it.

I agree, too. I wouldn’t understate how important Hyperliquid is for crypto right now. Hyperliquid pricing the SpaceX IPO is almost as large as what Polymarket did for the elections in 2024.

It’s, I’d say, the first time since Polymarket and the elections in 2024 that we’ve had a mainstream breakout thing. I think it’s actually still very early days. I know HYPE is ripping, and I’m still extremely long HYPE here because I think it’s only just starting to touch the general public, and it’s clearly the best thing happening in crypto today.

Yeah. The one thing that is interesting is that, on a fundamental basis, it’s pretty expensive here.

They just flipped Coinbase, right?

Yeah. Well, if you think about it, it’s doing whatever—$700 million of revenue right now. Most of that is, quote-unquote, profit because they don’t have a ton of expenses. But if you think about that versus OKX, OKX is actually still a bigger business today, pretty significantly.

They just raised money from ICE at a $25 billion valuation, right? There’s a liquidity difference and things like that, but you also can’t ignore that a lot of people can’t buy HYPE.

And so there’s an interesting story here, which is that for the longest period of time, HYPE was by far and away the best fundamental story as an investor. Now, I think we’re all very bullish on where it’s going and on the business, but it’s actually very expensive on a fundamental basis. So now it’s definitely more of a venture investment from here.

I wonder how that is going to play into the dynamics from here, because I also agree with you, Yano, that everybody was into buying tokens. A lot of people have been getting back into the market, and I was talking to 1 of the heads of 1 of the biggest trading firms in the space yesterday, who was saying, “Listen, I think everything is going to break out.” I was like, “Oh, like Bitcoin and SOL and ETH?” And he was like, “No, no, I don’t mean that. All of the good alt tokens are going to break out.” He was like, “I think Venice is going to continue to break out. I think HYPE is going to continue to break out. I think LIT is going to break out.” These are really good businesses with a token attached instead of just a blockchain.

Totally. Totally.

And so it’ll be interesting to see how that evolves and whether people gain more conviction, and then you start to see this sort of reflexive behavior in tokens in a way we haven’t seen.

I think Hyperliquid will drive institutional buying of tokens at scale for the first time, maybe really ever. If you think about the last cycle, you actually did see institutions buying tokens, but it was the majors. It was really ETH and SOL.

Bitcoin. There was a lot of Bitcoin.

It was Bitcoin, and then it spilled into ETH and a little bit of SOL, too.

A lot of stuff was coming in on meme coins on the retail side. I mean, I’m talking about the institutions.

Yeah. And I think this will be the first cycle ever where institutions start buying tokens. Wait, 1 point on Hyperliquid being expensive: I would disagree with that because where Hyperliquid is now is so completely different from where OKX is. OKX has been around for 13 years. Hyperliquid has been around for 2 years.

I don’t know what that has to do with valuation.

Because it’s a venture bet. It’s a venture bet versus—

That’s what I’m saying. You’re agreeing with me.

Yeah, exactly. I’m agreeing. You guys just did Variational, right? Apparently, it’s amazing. People have been raving about Variational in the chats.

Variational is not competitive with Hyperliquid. It’s more of a brokerage model.

What is Variational’s revenue compared to whatever valuation you did it at? Probably 100x revenue or something.

I’m going to put my Patagonia vest on and talk about valuation and price-to-earnings. Ladies and gentlemen, you pulled up the dashboard. Funny enough, I had it pulled up, too.

Last year, I think Hyperliquid did around $800 million. If you run-rate the latest quarter—which you should never do, ladies and gentlemen—let’s use rough numbers and say they’re going to crank out around $1 billion in revenue, call it profits, this year. If you think HIP-3, commodities, and SpaceX and all these non-token markets continue to rip, they do $1 billion.

The thing is, the fully diluted value is $58 billion, but I think CoinGecko has an interesting metric here: outstanding token value, which is closer to $34 billion. Even if you take the fully diluted value of, say, $60 billion, you’re at 60 times earnings for a very, very fast-growing protocol. I don’t think it’s that expensive on a relative basis compared with other things out there.

More expensive than the rest of the market. Coinbase is at what, 25 or 30 times?

The point is—and I don’t want this to get misunderstood—I obviously just said I’m not bearish on Hyperliquid. The point is that Hyperliquid is now fully valued. From here, you’re pricing in not just that the core business is going to continue to do well. You said it’s very fast-growing, but it’s not growing that fast at the moment because the market has been terrible. Their core business was down 30% in the first quarter.

You’d have to believe 2 things, in my mind, to go long HYPE.

Yeah, correct.

You’d have to believe that the non-token markets continue to grow quite a lot. I think Hyperliquid stands, probabilistically, as the number 1 protocol out there. That’s number 1. Number 2 is related to something both of you said earlier, which is that crypto rebounds from here. If you’re going to go long crypto, Hyperliquid is probably the best bet you could express.

Yeah, that’s probably right.

I like to think about the downside. If Hyperliquid doesn’t do well, that probably means 2 things: there’s no institutional interest in crypto, and token prices continue to drift lower, with HYPE back at $40 or $30. The rest of crypto does much worse than Hyperliquid on a relative basis, in my opinion.

The interesting thing, though, to put out there is that we see all of these—although they’re not all public—the reduction in core crypto perps on Hyperliquid in the first quarter, in terms of volume, was basically the same as what happened on the centralized exchanges. They were basically as exposed to the reduction in trading volume as the centralized exchanges were.

It’s not as if there’s some dislocation where they’re taking all this market share. It’s very correlated. What’s happening is that the HIP-3 markets are doing incredibly well because they’re able to offer price discovery, as we started talking about on the weekends and overnight, in markets that people care a lot about. They also serve people who already have liquidity on-chain and don’t want to go off-chain.

That’s super interesting, and that’s what’s allowed the business not to do as poorly as it did in the first quarter, on a relative basis, compared with some others. I think that’s the right point: from here, what you’re underwriting is the growth of the other markets. You’re not necessarily underwriting relative value in the crypto markets; you’re underwriting that they continue to do really well and grow in the other markets—the real-world asset markets.

So, to put a finer point on that, HIP-3 went live at the end of October last year. Back then, 100% of the volume was crypto-native tokens. Now, I think it’s gone up to 45% of all volume on Hyperliquid being ex-crypto, meaning oil, commodities, and now stocks. To me, that’s the most bullish indicator of any protocol in crypto at large. It’s a Paul Tudor Jones moment for the industry: this is getting the attention of people who had zero interest in coming to bid crypto.

Maybe a question for you, Santi: where does that percentage go for Hyperliquid over the next year or 2? Is it 80%? Does it peak at 50%? Or is there a world where 80% of Hyperliquid’s volume is ex-crypto?

I think there’s an interesting story here. It depends a little bit on what you think about tokens generally. What do you think is going to happen with the larger tokens, with Bitcoin, and so on? I’m not as bearish on tokens as you are, Santi, over the medium term.

I also think there’s an arbitrage that exists right now. The corollary to Polymarket and the prediction markets is actually a very good one, because there was a period of time when you were trading on Polymarket where there was basically no way to trade those markets during the periods when people were trading them. It was growing incredibly quickly because of that.

Then it got to a certain size, Kalshi started growing as well, and the deal with ICE happened. Everybody else started launching prediction markets, and now the market is getting a lot more competitive for prediction markets. Hyperliquid obviously launched HIP-3, which is not quite the same thing, but it keeps getting conflated with prediction markets, at least on Twitter. There’s also IBKR and all these other firms.

Now you’re starting to see the market find an equilibrium. I think prediction markets are going to be huge and will continue to grow, but that equilibrium is changing. I expect the same thing to happen in perps and in real-world-asset-related perps, because we’re starting to see some of the centralized exchanges grow in real-world asset perps, like the IBKRs of the world and CEXs.

And then we're almost certainly going to get regulation from the CFTC relatively soon on perps in the regulated space. You guys, I'm sure, have seen—if we look back to what happened with on-chain options, Deribit was the largest. None of the on-chain protocols did that well, but the second that CME offered IBIT options, options on crypto skyrocketed, essentially.

I think you're going to start seeing the same thing happen. You've got both Nasdaq and CME saying that this year they will probably go to 24/7 trading. When those 2 things happen, the market finds an equilibrium. So I think there's a lot of runway for Hyperliquid up until that point, and then we'll have to figure out where that equilibrium happens.

But isn't it the case that—I mean, we debated this privately at your wonderful event in Japan—that there's a huge part of why tokens will never die because there's a use case for people who want access to financial products? A lot of retail doesn't have an allocation in Cerebras, so you saw close to $300 million in trading. I would argue a lot of that may have been hedge funds arbitraging, but retail was also involved.

Even in the scenario where you have the CMEs of the world compete, quote-unquote, against Hyperliquid, I just think the addressable market is what you'd want to believe, and I think it is—

Massive, right? And so I don't think it's subtractive. It's not zero-sum here. You can still have, I think, a world where the CME launching perps is a huge validation to crypto and a huge validation to the product itself.

I'm just curious: How much volume do you think you'll see in the space leading up to the SpaceX IPO? Probably $500 million, close to $1 billion?

Yeah.

Yeah, 100%. I think you want to go synthetics to avoid this whole SPV physical settlement. Robinhood tried to do this, right? It's just super messy. But just to move on, I still think it's pretty amazing—not to get lost in the discussion—the Cerebras IPO itself. It was priced at $185, and it opened at $350. TradeX had it opening at $340. That's insane. No, no, I don't think that's right. I think it was like $200-something pre-IPO.

It ripped to $340, I think, right before it opened. I think—

TradeX was way closer, but it was still pretty far off. I'm pretty certain.

2. SpaceX's IPO

Either way, the point stands. I think there are maybe once-a-year, once-every-18-months breakout moments in crypto. It was Paul Tudor Jones calling Bitcoin the fastest horse in the race and taking away all the career risk for hedge funds to buy Bitcoin. It's the Bitcoin ETF from BlackRock being the fastest-growing ETF in the history of ETFs. It's Polymarket calling the 2024 elections. And now it's Hyperliquid being able to price the hottest IPOs in the history of the world, which it will with SpaceX.

And by the way, can we just talk about how Elon is a genius for front-running OpenAI and Anthropic, sucking up all the retail bid on this IPO? Like, it is—

It's the largest retail allocation ever as well. I will say, to your point, Yano, a lot of the people I talk to—hedge fund managers and people who are actively investing—say this is the biggest open question. They're all saying that if the SpaceX IPO doesn't rip and doesn't hold up, it's going to be very bearish for the rest of the market. I don't think I'm bearish, for what it's worth, but—

You're bullish on SpaceX?

I'm bullish on SpaceX. I'm not sure I would necessarily buy SpaceX. I love Elon and just betting on him, but I'm not sure I want to buy SpaceX, and I'm definitely not buying it because it's not profitable. It has been profitable, but Starlink's profitable.

In-space data centers—I’ve talked to a lot of people about that. Definitely, it's like enterprise. The terminal value of SpaceX probably is more than $2 trillion, but if you discount it back, I just think—I don't know. I'm definitely—

By the way, everything we just said about venture investing—there is no fundamental way to price SpaceX anywhere near where it is today. To your point—

It's the most venture-driven and the largest IPO, but it's still super, super venture.

Did you see the TAM? I think any founder raising venture money should go look at how Elon walks through the TAM of SpaceX, which is:

“We believe we've identified the largest actionable TAM in human history. We estimate that our quantifiable TAM is $28.5 trillion.”

By the way, I love the specifics on this. He included only $370 billion of space-enabled solutions. Then he goes, for illustrative purposes, there's something like $22 trillion in enterprise applications—these ridiculous numbers. And then, for illustrative purposes of sizing the TAM, they exclude China and Russia from their global estimates, as if these are real numbers in any way. So, lessons for founders who are pitching. I will tell you—

I've seen a lot of TAM slides in my life, as I know you guys have as well. I have never once looked at one.

Not once.

Yeah, of course. Obviously.

Okay. But can we just agree that Elon and Jensen are the best salesmen ever? You have to sell. I was listening to an interview with Jensen Huang and Michael Dell—I think it was on CNBC or Bloomberg—and they were talking about AI and the AI revolution. They're like—and Gavin Baker, what is it, the other guy based in Boston, ex-Fidelity, Gavin Baker, or—

Yeah, yeah.

And they're all saying the same thing: You are definitely, definitely underappreciating how big AI is going to be. I think Jensen was like, “There's no fundamental reason why the economy can't be 5 times larger with AI.” And you hear them, and it's hard not to be bullish once you hear it from them.

Um—

They just really are able to captivate and convey a message, and I think that's probably the best skill that you can have as a founder.

There's a Mark Benioff episode that he just did with the All-In guys on Friday, and they were talking about the CEO trip to China—the Beijing summit and stuff like that. There are these CEOs, and they're like, “Oh, you didn't get the invite?” And he's like, “Look, I'm happy all these guys are there. It's David Solomon from Goldman Sachs, Stephen Schwarzman from Blackstone, Larry Fink from BlackRock, Jensen Huang, Jim Anderson from Coherent, Tim Cook from Apple, and Elon Musk.”

And he's like, “The reason all these guys are there,” he goes, “is they're the country's best salesmen.”

He goes, “All these guys are the single best salespeople.” So for anyone worried about their job going away or whatever it is, and how to succeed in this AI future, I think sales will be incredibly important.

3. Are We Entering A New Bull Market?

So, last question before we move on from HYPE here: Rob, I know you guys as a fund are long. I don't know if you're trimming. Obviously, you can't share that.

Yeah, I mean, we haven't talked about it. But no, we've been long for a while, since somewhere in the 20s.

Are you guys going to continue holding your HYPE positions here?

Yeah. I also have a personal investment in HYPE. I will say that I was talking a little bit with people this morning about who's trimming and who's not. I've been surprised by the lack of profit-taking. If you look at the order book and trade activity, there actually hasn't been a lot of profit-taking yet.

Everyone in crypto—and this is me too, all of us, I think—has been trained to see crypto trading as a flows game. It has mostly traded as a flows game, which means that every time you get these reflexive uptrends, like we've had in HYPE recently, there's usually pretty quick profit-taking, and that hasn't happened yet here. Or you've seen at least a lot of buying into that profit, which is surprising.

Rob, I don't agree with that. I think that is how crypto works in bear markets. You have little bull pumps in bear markets where people quickly take profits. I think in bull markets, you tend to have these extended moves.

Definitely not in a bull market yet.

But I think that is what people are thinking right now: Are we entering a bull market? If we're entering a bull market, why would I ever sell my HYPE if we're entering the next crypto bull season? I think it's an important thing to consider.

That might be right. Maybe this is the start of that mentality, right? But if you looked at Venice, which also has extremely strong fundamentals, it traded up reflexively over a couple of days, then sold down quite a bit, and now it's regained. I think there have been a couple of things that have done that.

This was the point I was getting to: Everything else that has done well, especially for fundamental reasons, has done that. HYPE is the one where we have not seen that happen, which maybe is just, “Hey, we're going into a bull market,” or maybe it's that the people who are buying HYPE are a little bit different from the others and they're not just crypto natives.

I think the thing I was going to point out, which is helpful here, is that if you've been following the HYPE perps on Hyperliquid, what we've seen is that a lot of the time, they've had these really quick run-ups over the last few days. The funding has actually gone negative, and that's very uncommon when things are running this way, because usually what happens when things are running is people are loading up on leverage and on perps. They're paying a lot to get more leverage and go long.

What it tells you is that there's probably actually a lot of spot buying over the last few days, because the spot price is outrunning the perp price on Hyperliquid. It tells you that there's maybe something very fundamentally different happening in terms of the buying here than we've seen in tokens at other times, which is probably more bullish for the price.

Totally. Sorry, last thing, and then we'll move on from HYPE. There was one last thing that we didn't cover: the SEC innovation exemption for tokenized stocks.

Rob, you mentioned that Anthropic said you can't buy these SPVs, and other people followed suit. The counter to this is that the SEC is preparing to release an innovation-exemption framework for tokenized stocks, I think as early as next week, which would basically allow crypto platforms and DeFi protocols to trade digital versions of public-company shares, like Apple, Nvidia, or SpaceX, under lighter regulatory rules without full broker-dealer registration.

You could have, I think what they said, third-party issuance made possible without issuer consent or backing. Even though I said the same thing, Rob, 2 weeks ago—I was like, “I think this could end in tears for some of these guys”—I might have to change my tune based on what the SEC is saying.

The SEC hasn't put out its guidance yet, so everything that's been out so far has been—

Oh, theoretical, based on what they could. Okay, okay.

Yeah, right. If they haven't put it out yet, that means it's still being debated. These things are debated up until the really last minute, right?

The thing I would caution is that I think people are probably—I was talking to people in D.C. yesterday—and I have a perspective that there's probably a lot of things happening on the timeline about how people expect this is going to look that are probably far more bullish for DeFi than is actually going to be true.

Now, I do believe these wrapped versions of public equities are going to be able to trade on-chain with some sort of gating at the on-ramps and off-ramps, right? That's what we've seen people do so far internationally. They've just been taking risks because there hasn't been an explicit innovation exemption. But I don't actually think it's likely to look that different from what we see today.

What I also believe is, again, people need to read CLARITY. The one thing I think Kyle Samani has been tweeting—he's been warring with a bunch of these people on Twitter, telling people to read CLARITY—and he's right, because all these people are saying things that are explicitly untrue based on the current version of the CLARITY Act.

So there's likely to be an ability for DeFi to exist and for DeFi to allow tokenized versions of things to trade. But if they are a security, there is going to need to be, at least at the gates, KYC, and there's going to need to be real—you’re going to need to have potentially some sort of licensing.

I think what we'll probably get—and this is what somebody was proposing to me yesterday—is that the framework the SEC is getting in its head is that DeFi is probably most like an ATS. So people look at ATS regulations, and we'll probably get something that's sort of like a hybrid ATS regulation.

It won't be DeFi as it is today for these securities. It'll be something a little bit tighter, but not as tight as broker-dealer licenses. So there's a lot to come there.

4. Why Ethereum Is Overvalued

Okay, I didn't understand it like that. That's super helpful. All right, let's go to the other side of the L1 trade: Ethereum. I don't know if you guys have been following the Ethereum Foundation—3 protocol heads left.

There are now 5. So there's basically been this rapid wave of high-profile Ethereum Foundation exits. You had Tim Beiko, Carl Beekhuizen, Barnabé Monnot, Trent Van Epps, Josh Stark, and actually others.

There's this intense speculation happening about what's going on. Is it internal restructuring? Is it talent migration going to Hyperliquid and Solana or other places? Are they not paying enough? Is it compensation? Is Vitalik coming back and meddling with everybody?

I don't know if you guys have a take on this, but it culminated in David Hoffman posting yesterday that he has sold all of his ETH. David Hoffman is obviously from Bankless—a good friend, and we like what they do.

Ryan Sean Adams, who's his co-founder of Bankless, said, “End of an era. For the first 6 years, we were very focused on ETH. Now I'm taking a backseat.” Ryan's always been the more ETH-maxi than David. Ryan said, “I'm taking a backseat.” David tweeted and said, “I've sold my last ETH today.”

Oh wow. Who would have known? Well, ETH is still a $255 billion asset. I mean, what is the real value here of Ethereum when you think about it, sitting at around $2,000? You're basically sucking all the value from—you know, all the L2s continue to suck the value.

I think the rollup roadmap was broken. Vitalik conceded to that earlier this year. I just don't, for the life of me—I mean, is this a clear short? I don't want to short in the crypto markets, but when you talk about Hyperliquid seeing all this traction, still sitting at $40 billion, and Ethereum being basically $255 billion—

No, I think protocols just don't die. I think the protocols of the pre-2017 era just have staying power in a way that is not rationally explained. I'm not here to say that Ethereum is going to go to zero, but I think it is a slow death.

I wrote about it in October of last year. This reminds me of Cisco. It will just never recover, never breach its all-time high, unless there's a major shift.

Wait, Santi—Cisco is up 50% in the last 6 months.

And, by the way, Intel, too, right? Intel just kind of breached its all-time high from the dot-com crash.

I know it took 20 years.

But if you look, this is a very competitive industry. You have Tempo and Hyperliquid, and it’s challenging to hold ETH here. It has been for a while.

I don’t think institutional adoption happens without ETH. The question is—and we’re seeing that, by the way—all of these institutions are looking at a few different chains to build on, and ETH is always one or two. You at least had the conversation.

I think there’s a real question that you’re allowed to have, which is the one you’re proposing: relative to the value and relative to value capture, what matters for the token? I still have a perspective that if all of this institutional adoption we’re talking about ends up happening, it’ll do well as a network and in network value.

But on a relative trade, would you rather be relatively long whatever one of these businesses we’re talking about versus the base layer? You can totally convince me of that. I think the same conversation is true for Solana, honestly, right?

I don’t know what happens over time. But I think if you’re going to be long the space and you don’t want to—sure, we can just put all your money into Hyperliquid—but if you’re going to be long the space, I still think you’re supposed to own Bitcoin.

I fundamentally disagree. I mean, David said it himself: You can be constructive and supportive of the network, but the asset—ETH—and the network are 2 different things.

This was David’s tweet, sorry, just to interrupt. For people who aren’t watching on YouTube, David said, “I have consistently supported Ethereum, the network. ETH, the asset, is increasingly questionable. Let’s not conflate the 2.” Sorry, go back.

Yeah, and I literally just said this to you. It’s literally the thing I just said, which is: You can debate the value capture and the relative value, but I do believe that there will be—honestly, if there ever is a bottom signal, David selling all of his ETH might be the bottom signal.

People have said that for several months. Dankrad leaving was the bottom signal.

I didn’t say that.

No, because when you think about people like Dankrad or people who have left the ecosystem, they are employees, and they are employees who, for the most part, went to make money. They pursued different opportunities, different interests, and so on.

David is an evangelist, and he was a member of the church, right? When a member of the church leaves, I think that’s a little bit different than an employee who leaves. Again, I don’t want to downplay Dankrad and what they’ve done for Ethereum, but people have a lot of interests, and they have a lot of reasons and incentives for how they make decisions. I don’t think those things are quite the same.

I’ve always liked that the Ethereum network pulled off probably one of the most impressive coordination stunts of humanity. I think just upgrading Ethereum and moving to EIP-1559—I thought that was impressive to see. It’s harder to underwrite now when you think about it. I think the roadmaps of Ethereum are 10-year roadmaps.

Last year, we discussed a lot about new blood coming into the Ethereum Foundation. The Ethereum Foundation and Consensys were just not well coordinated, and I think you saw Etherealize come in and say, “Okay, we’re going to be more institutionally friendly and interface with institutions.” I think that was part of some of the DAT game as well.

It is really tough to say, “Okay, can they pull off the roadmap?” It’s incredibly hard to do as a decentralized network when you have this leakage of talent. It’s tough versus having an incredibly centralized team like Hyperliquid. You want to see a very centralized, tight ship like you see in Hyperliquid. You could argue Solana has that to some extent.

But I guess, when you think about institutions, where are they going to build? You could argue that there are a number of institutions that are just not going to build on top of Tempo for competitive reasons. But is it still true, and does it matter for a BlackRock, a Janus Henderson, or some of these folks? Does this compute when they see, “Hey, wait a minute, this Ethereum network—I’m seeing a lot of management leave, key executives leave. What’s going on? Should we actually build this?”

Do you think that’s actually how they think, or does Ethereum have this brand staying power that is somewhat independent of key personnel leaving?

Ethereum has had a problem for a while, which is that when somebody wants to build there, there’s nobody to call and talk to about, “Okay, how do I build there? What should I be doing? How do I think about the roadmap?” That is what Etherealize was supposed to solve: somebody at a bank or an asset manager could call.

The EF also just hired an institutional sales team.

Yeah. So they understand they’ve had that problem.

When you talk about who makes the decision, you have to think about how institutions make decisions. Most of the people who make decisions on products that are not huge revenue drivers—or future products—already know they’re taking risk. When they decide to take that risk, they decide to take the least amount of risk within that risk parameter.

What does that mean? You do the things that your boss knows easiest, or that everyone else does, for the same reason everyone ends up using the same custodian or the same service provider. You’re not going to get fired if everybody is using Coinbase for custody. You’re not going to get fired for using Coinbase for custody, even if Coinbase gets hacked, right?

Ethereum has had that working for it because that is where most of the institutional adoption has been built, maybe on L2s, et cetera. It’s been the most battle-tested of any of these blockchains for asset issuance—not for trading, because obviously trading doesn’t really work on L1 for any of these things, but for asset issuance.

I will say that I heard this from somebody at Solana recently, too, who was saying that Canton is crushing the institutional BD game. Solana was very worried about Canton as well, according to this person I talked to, and they were losing deals they thought they were going to win because of that.

You do have this future world where maybe Canton, Tempo, or these more tailor-made blockchains start to win more of this institutional adoption. Maybe that means Ethereum is going to continue to bleed out because of that.

I have a perspective that we’re at this point in time where people are more bearish than they probably should be about Ethereum over the long run as a base layer and a network that people are going to continue to want to build on top of. That’s because it is the most battle-tested. It is something that also has years and years of people getting comfortable with the architecture and with how to build on top of it.

But they don’t have the game—the BD game. They don’t have the ability to go sell people on it from a centralized perspective the way Solana does, the way Tempo does, or the way Canton does.

In the world that we are talking about—or that I envision for the future—in terms of institutional adoption on-chain, there is not enough blockspace still to this day. Everyone says there is enough blockspace. That is not true if the world comes to fruition that I think will, which is that all of these assets are traded on-chain.

5. Content of The Week

That means there will be multiple winners, and this is not zero-sum. I agree. But you just have to ask yourself which company selling the blockspace is going to do the best at selling the blockspace. Right now, ETH is not doing a good job of selling the blockspace. That would be my take.

Actually, you know what? They are doing a decent job of selling the blockspace.

Yes.

The institutions. Yeah, okay.

But the token is a different point. I think this is all a valuation. It's a relative-value and value-accrual point, not an “are people building?” point.

Can we go back to one point here about interfacing with institutions and credibility? No question, Ethereum is still, I think, number 1 in terms of visibility and in the minds of most people. I would say Hyperliquid, and then Canton a distant third.

I would put Solana in that chat too.

Solana, yeah. Although, interestingly, BlackRock initially did not select them, if I remember correctly. They selected others, like Aptos and a couple of other networks, which I found interesting. I think that happened last year, around March.

I would underweight those types of deals because it's all a game behind the scenes of how much—

Yeah, Western Union—I think you mentioned this, Yano. Anytime you see an institution announcing something, there are a lot of grants behind that. There's probably the biggest one ever in history coming soonish, and it is the most amount of money I have ever seen a chain pay. These deals are still happening. Is that Canton?

Linked to? Okay, interesting. Solana.

Sorry, go ahead.

I'm not telling. No.

I would say that—and, sorry, you should talk about this—but I want to reiterate the point that Yano just made: basically every announcement you have ever seen, other than on Ethereum mainnet, is almost always paid for.

Fair enough. On this point, when we talk about institutional credibility and interfacing, you talked about Etherealize. I don't know if you guys have an update on that, but I do want to bring attention to Tom Lee. He goes on Consensus in Miami and says his target for the end of the year for Ethereum is 9,000 to 12,000, and for BTC, 150,000 to 200,000. I actually think the BTC target is sensible.

How much damage, or not, have these new factions that have come in to evangelize crypto, particularly Ethereum and ETH, done? Is that net positive or negative? I know the DAT structure has been very destructive for crypto, but specifically for Ethereum itself, is this restructuring that we saw last year net positive or negative for the Ethereum ecosystem?

I don't think it has done anything, actually. Tom Lee has built his brand well. He was chief equity strategist at JPMorgan for about a decade, and then he built Fundstrat. His whole brand at Fundstrat, which he started over 10 years ago, is the permabull. He's always put out these crazy, ambitious price targets that often defied broad market consensus, and I think that's how he built his brand.

If it wasn't ETH, it was—I actually don't know his other calls. I think the institutional folks who care what Tom Lee says know that's what they should expect from Tom Lee. I don't know if you would disagree, but I think people are kind of used to that. It's like Jim Cramer. If Jim Cramer started saying crazy stuff about Hyperliquid, Solana, or ETH, it's like, “Yeah, well, it's Jim Cramer saying it.”

Yeah. Tom Lee, Cathie Wood, and Jim Cramer—they're all the same.

You know what you're getting from them. They're market commentators, and nobody expects anything different.

Yeah.

What's the difference between Elon’s take and Tom Lee saying Ethereum is going to go to 12,000?

I mean, Elon is building the thing, right?

That was a layup, Rob.

Yeah, and he's continued to deliver. When it comes to building hardware or material goods, there probably hasn't been a better entrepreneur since the railroads, essentially. He's done an incredible job. Twitter—you can debate how successful that's been, but when it comes to tangible goods, he's done an incredible job.

Folks agree.

I'm going to have to drop and break tradition of content of the week.

Wait, you got one? Content? Oh, you have a call in a minute. All right. Hit us real quick.

Content of the week? Gosh, I don't really have anything. I will say—I mentioned it earlier—that interview with Gavin Baker on Invest Like the Best.

That's the one I was talking about.

Yeah, yeah, that's the one everyone's talking about.

Rob, what do you got? Santi, you can drop.

Okay, Jen, great to see you.

Yeah, I'm going to say 2 things. One, if you're into horror movies like me, there was a really good podcast on The Big Picture, which is my favorite movie podcast, about the 10 best horror movies of the year last week. That gives you the—

And what got number 1?

Their favorite of the year was Bone Temple, which is the 28 Days Later piece, and then they really liked a few others. One of the ones I'm going to suggest is Obsession, which just came out and was a super interesting movie.

The thing I thought was most interesting about the podcast, though, was—and I've said this a few times on the podcast—horror, and independent horror, is the only part of independent film where you can still make money today. People are making films for 5, 10, $15 million, and they're returning $125 million.

We've now started to see the YouTube creator-to-production pipeline on the horror movie side, which I think is super interesting. There's a ton of horror movies coming out this year, so it's a big year for horror. And, off topic, also listen to things that will enrich your life, but horror films—a big year, the year of Hyperliquid horror.

Interesting. Our head of creative showed me the new AI video models, and it is nuts. It was almost like a ChatGPT 2023 moment for me. I think they're so clean. I played with this maybe 2 months ago and couldn't really build something good, honestly, and he basically built a movie.

I didn't know that was happening with the YouTube-to-production pipeline in horror, but it's going to be really cool to see what happens with all movies as these models get better and better. The video I saw—you couldn't tell it was AI at all. It was unbelievable.

Yeah. Content of the week: the new Drake album, where he mentions your boy—

Shane Coplan.

Shane Coplan. Yeah. Hold on, let me pull up a—do you remember the lyric?

I don't know. Yeah. I'm not going to try to sing a Drake song.

Are you going to rap?

That'd be bad.

Did they put it on the track? “Better treat me like Shane Coplan. Bank tellers better stay clocked in.” There you go.

They also call out Polymarket. They mention Shane, and he also mentions Polymarket in another song, I think.

He mentions Bitcoin in like half the songs.

Is it really that many?

It's probably—I think there are, I don't know, 20 songs on the album, and probably 3 or 4 of them, actually.

Yeah.

All right, folks. Good pod.

You didn't give your content. Oh, I guess you're just saying Drake is the content.

It's Drake. I can't give another David Senra or Invest Like the Best. I'm forcing myself not to.

Yeah.

Listen, that's why you're the great entrepreneur. I'm just sitting over here as the VC.

Please, please, please, please.

All right, guys. Hope you guys enjoyed the Kagney podcast. We’re debating a slightly different guest-episode format. Right now, we release these episodes every single week, every Monday, and oftentimes we’ll feel a little forced to get a guest in here. It tends to lead to some of the mid-tier podcasts we do because we’re scrambling at the last minute. We’re probably going to move to a mostly in-person format where we’re comfortable skipping weeks. Sometimes we’ll do three in a week; sometimes we’ll do zero.

I was thinking about a lot of my favorite podcasts—Invest Like the Best, David Senra, and a lot of these. They don’t have a forced schedule. They still record all the time, but I think there’s more of a focus on quality over quantity. We’re thinking about moving toward that. If you have thoughts, drop them in the chat, and we will see you next week. Cheers, folks.