加密牛市的下一阶段｜Chiefingza

We’ve talked about this for years, right? Range-bound markets for majors are great for altcoins when the environment is right, and it almost feels like that’s the setup here. Everyone right now is hiding out in majors, saying, “I’m safe here. I’m safe in Bitcoin. I’ll make more moves around the election, and I’m just going to avoid alts because if Kamala wins, the story’s over.”

I do think the market right now is obviously overweight majors and underweight alts, but the game with alts is just so much harder than it used to be. There’s less money in the space, so there’s more dispersion. If you’re able to pick the sector correctly, that’s how you produce alpha in this environment.

Welcome back to another 1000x podcast. We’ve got our favorite guest, Chiefingza, on to talk markets. Since we last recorded a podcast about a week ago, a lot has changed. Bitcoin is now above $60,000, people are no longer pre-rich—they are simply rich—and TAO is almost $600.

Things have gone well, but I wanted to start with the 2 major predictions that you made the last time we had you on the pod. One was that AI coins would absolutely rip, and you mentioned TAO. The other was that ETH/BTC would do well. One of those things obviously did not work, and the other worked really well. I think TAO is up more than 2.5x since you last talked about it, while ETH/BTC is down about 10%.

I just wanted to catch up and see how you’re feeling about the markets and your calls. Are you selling any TAO here? Are you buying ETH/BTC?

Thanks, guys. It’s good to be back. This is hands down my favorite crypto podcast and, I guess, crypto trading podcast.

Those last 2 calls—1 worked out well. I’m sure we’ll talk about TAO on the show. I’m not really doing anything with my TAO position. It kind of has remnants of some of the stronger coins that went on these big trending moves around this time last year, around October 2023. Obviously, there are risks there, but I’m still just as bullish.

ETH/BTC is an interesting one. I definitely got that wrong. I remember listening back to that podcast, and Jonah said ETH was kind of his Trump trade. I think that’s actually played out spot-on. As confidence in a landslide victory has waned, so has ETH/BTC.

There are also structural things that happened at that time, with people sitting in stale positions because of the ETF and that not really going as well as everyone planned. Again, not to sound like a broken record, but at these levels I do think it’s tough not to be somewhat constructive. Psychologically, 0.04 is kind of interesting.

Even the most vocal ETH/BTC bear, one of my good friends, laid out the exact ETH bear thesis in early 2023: everything that would unravel with the whole modular vision and how ETH was never supposed to be marketed as money. We actually spoke today, funny enough, and he was like, “0.04 was always what I was looking for.” I do think there’s nuance, and the election plays a big role, so we’ll talk about that.

I definitely want to get into some of the nuances around TAO and ETH with you, and also see what else you’ve been looking at. Before we dive into the minutiae of those 2 ecosystems and more, you were at Token2049. That was the talk of the town on crypto Twitter. Neither Avi nor I made it out there. Can you tell us what happened, what your general takeaways were, and what you think the pulse of the crypto market is right now?

It sounds like people were more excited about this conference, and more vocal about it, than they have been about many conferences this year, if not all of them.

The energy was great. Obviously, timing-wise, it was Token2049. You had F1, which brings the general business crowd together; Balaji was doing his Network State event; and obviously Solana Breakpoint was happening as well. The energy in Singapore was on fire.

My general takeaway is funny because something similar happened market-wise last year. I think we bottomed around the same time, but a lot of people were gone for the summer, traveling and doing whatever. A friend even said, “This is almost like crypto’s Davos.” If you’re in crypto, you’re in Singapore at this time.

I get the sense that a lot of people got together and really focused for the first time. Everyone was saying it was time to lock in for the fall. You got the sense that a lot of interesting things are being built and that there are a lot of smart people in the space, despite what you might see on CT or glean from all the memecoin discussions.

The other thing I noticed is that you get a sense of how big the industry really is now. Back in the day, in 2017 and 2018, you would go to conferences and see a lot of the same people. Now there are so many different side events and sectors that you realize how big the space is and how many new entrants are building new, cool stuff.

I had a great time. I’m feeling super energetic after that, and I think most people who were there probably feel the same way.

You mentioned people building cool, interesting stuff. Can you touch on a couple of projects or ideas that you heard about that were exciting to you?

One event that definitely stood out was a Bittensor agent meetup. It was very high signal: no real traders in the room, mainly subnet developers and some investors. DCG had a presence, and it had a real community feel to it. There were no frills, just technical discussion.

There were also a lot of decentralized AI side events. That’s where I mainly focused my time. I didn’t actually go to the conference itself; I went to a lot of these side events. There was cool stuff happening in the social world, a lot of excitement around RWAs and DePIN.

I did stop by Breakpoint, and the energy there was super strong. You could see a lot of new faces and a big focus on consumer apps. I’ve been meaning to go through some of the talks on the YouTube channel. Firedancer was presented as well, and I think there’s a non-voting client that’s live on mainnet now. There’s definitely a lot of excitement in the Solana ecosystem.

One thing people were talking about a lot was the performance of SUI, SEI, and all these L1s competing for a Solana spot. I always get SUI and SEI confused. One of them had a big event at Token2049. Did you get a sense for how real that is? I know a lot of it is driven by Asia and their focus there, so I don’t know if that bled through or if there’s a growing breadth in the industry as well.

I actually did miss Sui Builder Day. That was an event I wanted to go to but wasn’t able to. I can’t say that I heard specific chatter about it. Obviously, people were talking about the token price and whatnot.

Funny enough, SUI did hold strong against what is typically a pretty good top indicator. When a project usually has Steve Aoki play at one of its events, that has historically marked a local top. I think there have been 2 historical instances of it. It looks like SUI powered through. I think they had him playing at Marquee for an event, which I also wasn’t able to attend. There’s some real strength there if it’s able to get past the Steve Aoki curse.

A lot of people were talking about selling that as the signal: “This has to be the top.” Historically, conferences do mark crypto tops. You get a small pump into the conference, then everyone sells off. Token2049 seems to have beaten that curse, but I think it’s also because people were so mentally beaten down over the summer. Everyone got smacked around so hard that they’ve been conditioned to sell every rip.

Jonah and I have been talking on every podcast about how we’re in a range-bound market. At some point, you have to ask yourself: Are we ready to trend? I wanted to get your take on that. Do you think we’re ready to trend? Do you think this is still a ranging market? Are we still selling rips and buying dips, or are we just holding tight?

I think we’ve just kind of transitioned into a hold-tight mode. Majors can maybe chop around a little bit longer. You might have some front-running of the October meme, where we could get a flush into it and people say, “Look, it didn’t really play out,” but I don’t really see any big, sustained downside in BTC. Obviously, intraday flushes can happen.

I do think we’re kind of there. The hard part about having confidence in this view is that I actually think the alt setup is a bit more interesting. The election is roughly a month out, and you obviously have a lot of people using the election as their Schelling point to decide whether they want to allocate.

I tend to think the market is not really going to give people the chance to say, “From here until the election date, prices just aren’t going to move. Then we’ll have a really easy shot at allocating once Trump wins.” Trump winning is good for crypto, and Kamala winning is bad for crypto.

What I think is interesting is that, obviously, alts performed pretty well into today and over the last couple of weeks. The dominant theme is that the biggest risk for crypto is Kamala winning, and that Kamala winning would be specifically bad for altcoins. The way altcoins are moving now, with Polymarket widening in Kamala’s favor, makes me almost think the trade might be to be longer alts, especially utility alts.

I would express that with crypto AI coins. You almost want to be long alts into the election, and I’m toying with the idea that if Trump wins, that’s actually the trigger for majors to go vertical. If you think about the 2 camps that drive big price moves with majors, it’s obviously ETF flows, institutions, and big pockets of money. They’re far more disciplined, and they probably will actually wait until you get the election outcome.

It takes so much more money to move majors as opposed to alts. With alts, crypto-native capital can say, “Hey, it’s decentralized AI season, and I need to be allocated to the sector.” It takes so little capital to move those assets. Those investors might want to wait for the election outcome, but they’re also watching this market every day and are perennially bullish on the asset class.

If majors are ranging around, as we’ve talked about for years, range-bound markets for majors are great for altcoins when the environment is right. It almost feels like that’s the setup here. Everyone right now is hiding out in majors, saying, “I’m safe here. I’m safe in Bitcoin. I’ll make more moves around the election, and I’m just going to avoid alts because if Kamala wins, the story’s over.”

It feels like, from a positioning perspective, certain alt sectors will do well. I think dispersion continues, as it has all cycle, and then the election might be the trigger for majors. I still think majors can grind and chop higher.

We’ve been talking on this podcast for 9 months about keeping it tight, consolidating your line items, rolling into the majors, and getting rid of your crappy positions. So far, we’ve been dead right. BTC dominance has been up only, basically since December 2022, and I think the end is near for that trade.

I agree with you, Chief. I’ve sounded like a BTC maximalist for a long time, even though I’m not, but it’s been the trade. It’s hard to pick tops on BTC dominance, but you have a really strong point.

Interestingly enough, Avi, you tweeted one of the wisest things I’ve read in a while this week. You wrote, “A lot of people focus on finding assets that make sense in this world. The reality is a lot more simple: find the sector, find the best asset in that sector, and wait.”

It’s kind of amazing that we’ve got the Chief on the show this week, because he picked AI. He picked the best asset within AI, and that asset has gone parabolic while the rest of the space has been ranging. It does feel like we’re going to see a few more of those, doesn’t it?

One hundred percent. Just to add one thing on that tweet, I was stepping back and looking at the bearishness I held over the last few months and over the summer, when I said I was cautious going into the election. After the 50-basis-point rate cut, you have to sit there and ask yourself: What is the market actually going to let participants do?

Everyone has been saying, “Let’s wait for the election, and then we can make decisions,” which is exactly what Chief was saying. But why would the market give you that optionality? We’ve sold off a reasonable amount, and altcoins took pretty massive drawdowns from the March highs.

There’s an argument that if Donald Trump gets elected and altcoins are up 100%, 200%, or 300% in that scenario, versus Kamala getting elected and them being down another 30%, there’s a pretty massive asymmetry. Nobody was allocated, so the pain trade becomes up.

That’s kind of what we saw, especially post the 50-basis-point rate cut. It gave the market a chance to choose. Equity markets pushed to new highs, and the crypto market—every market is just a microcosm of another market—when Bitcoin goes up, money flows to the same thing in crypto. When equities push to new highs, money flows to crypto and down the risk spectrum.

What we’re looking at now is a pretty good environment for this stuff. Your first question should be: Where are people going to allocate? What are people going to push their chips into when they want to allocate to higher-risk stuff and make a general bet on the market?

They’re going to allocate to BTC and then to the best sectors. They probably won’t even do that much research. They’ll pick the best consensus names. The consensus horses are going to get the allocations in the beginning.

That’s why I tweeted that. This is the market environment to put chips on the table in the areas you think are going to get attention if the market goes up.

One thing I’ll add to my previous idea is that, so far in this cycle, there have really only been 1 or 2 times when you’ve had a very strong vacuum created by BTC and majors. SOL’s run was a vacuum where liquidity from the entire space was going into 1 asset. When BTC broke all-time highs, the way it was trading meant that all liquidity was moving into BTC.

If this scenario plays out where SUI is putting in 2x or 3x moves from the bottom into the election, and then BTC takes off on the back of a Trump win, I think there’s a good chance that becomes a liquidity vacuum.

We’ve seen this in markets many times. Anytime alts go crazy, people are sitting on crazy unrealized profits. The thought of missing out on a parabolic Bitcoin move is enough for them to say, “All right, I’m taking profit and moving back into the fastest horse.”

This would almost be the scenario—I hate when people use the term “max pain,” but I do get the sense that the market right now is obviously overweight majors and underweight alts. The game with alts is just so much harder than it used to be because there’s less money in the space, so there’s more dispersion.

If you’re able to pick the sector correctly, that’s how you produce alpha in this environment.

You could pick a few sectors and choose the strongest horse in each of them, per O.B.’s system or thought process—his philosophy, or whatever you want to call it.

For AI, it’s probably TAO. I’ll hand it to TAO. I have my doubts about it, but I own a little bit because we did a show about it and I wanted to get involved. I don’t know nearly enough, but I still think it’s the strongest horse in AI.

In DeFi, it’s hard to pick anything stronger than Aave. In DePIN, I don’t know—Helium. I love Helium, but it always kind of disappoints. If DePIN goes, Helium is going to be the one that goes crazy.

I know there’s hype around gaming and a few other sectors, but between Aave, Helium, and TAO, if that’s what’s in your altcoin suitcase, you’re probably okay if the pain trade is up. The only pain trades I’ve ever seen in crypto have been down, but if there’s an upward pain trade, I think you’re okay with those 3 in your cycle.

There’s also a little more nuance to that statement. When you’re allocating to crypto, a lot of people, especially once you get moves like this, think, “Let me try to find the catch-up trade.” The answer almost always is that you don’t waste your time doing that. You buy the thing that’s going up. You buy the thing that’s working, and that tends to outperform.

There’s a power law here. If you find a specific area that you like, invest 80% in the thing that’s working and 20% in moonshots. In general, you end up pretty sad when you try to chase a sector. If DeFi rips and Aave is doing the best, chasing other things is probably worse than just buying Aave.

I think that’s exactly right. That was a thought I had when I saw Avi’s tweet and was going to send it to both of you.

A lot of times, when 1 asset really starts to trend, or it has its YFI-type moment, diversification becomes a meme. You want to diversify for a couple of reasons. Obviously, you might have concentration limits, and you never want to go all in. But in terms of an alt allocation, you might say, “I have my majors, and then I can have all of my alt allocation in 1 asset.” That probably ends up being the right play a lot of times in crypto.

You can diversify by having your main pick—“This is the fastest horse”—and then having some percentage in secondary names. When the catch-up trades actually start going crazy, that’s a pretty good signal to get out. The worst trades tend to pump the hardest at the end.

It’s nice to have a little bit of money in those names just to keep you paying attention. When they start going haywire, it’s probably time to ring the alarms.

Let me ask you guys a question. We caught a little preview of things going parabolic and then right back down earlier this year with the memecoin bubble. For me, the top signal in memes was when people started revising their targets much higher for absolutely nonsensical reasons.

We’re starting to see a little bit of that. People are saying WIF is going to go to $100 per token because, after the Sphere is done, it has a hat. I think that’s when you generally see the greed on crypto Twitter: people start revising their targets way too high after a huge rally.

What do you guys think? How do you pick the top in one of those parabolic moves?

I always suck at that. I tend to get out way too early. For me, it’s never been about picking the exact top. I think that’s very difficult to do. It’s about making money and trying your best to choose the points at which you’re allowing yourself to maximize the fact that crypto does tend to produce 10x moves.

Chief, I know you keep a list of top indicators that you refer to. When a bunch of them hit, it’s probably time to take a lot of profit. There’s a lot you can learn from the past. If Katy Perry paints your nails, it’s probably a good sign to get out.

I’m generally with Avi on this. I think it’s a pure ego game to think you’re going to call it perfectly.

There are a couple of strategies. You can sell slowly on the way up, or you can wait for a clear blowoff moment. In crypto, at least with majors, things tend to distribute a little bit. Volatility is lower, so you have time.

I like to keep a list of both qualitative and quantitative indicators. On the quantitative side, looking at quarterly basis is always a good one because it shows you the general financing rates in crypto. In March, I want to say BTC hit 36%, or somewhere in the low to mid-30s. In this environment, with how many players are plugged in and have the infrastructure to take advantage of that basis, people paying 30% a year to long Bitcoin is hard to justify.

Funding rates are another one. You can look at funding rates across Binance and the more sophisticated venues, and then look at places like Bybit, where there are more retail traders. You can also look at divergences between them. Obviously, big volatility spikes, especially when skew goes haywire, are a good signal. Any big volume blowups are worth watching.

On the qualitative side—before you get to MVRV, which is more for the really big cycle moves—if you’re a semi-social person, people from the outside world will reach out to you asking what coins to buy.

I had 2 notable texts that I actually put on Twitter. If you put them on a chart, they were within 3 to 5 days of the top. A girl I know from New York said, “Hey, are you still in crypto?” I said yes, and she asked, “What coins do I buy? What’s hot right now?” I didn’t respond and left her on read. She followed up again asking what coins to buy, with exclamation points. That was an obvious top signal.

I got a text from a friend I hadn’t spoken to in years. He said, “Hey, you’ve been trading Solana memecoins lately? Let me know if you have any picks.” Then he said, “Hope you’ve been good, by the way.” The guy followed up with, “Hey, you been trading a lot of Solana memecoins?” and then, “I hope you’ve been good.”

Celebrities coming in are obviously another signal. The celebrity-coin meta was a clear example. Anytime you start to see these levels of grift and greed go up, it’s never a bad time to take some profit.

Now that we’ve covered picking tops, let’s talk about election night. Are you going to stay up all night, Chief? If it looks like Trump is going to win, are you just going to be hoovering Bitcoin, or is this not something you can actively trade? Do you have to be in or out ahead of it?

Funny enough, this actually came from a friend, so it isn’t an original idea. You’re likely to see another red mirage on election night because so many of the mail-in ballots that are going to go blue will be counted later in the evening, Eastern Time.

You may have the big media houses calling a big Trump victory because a lot of the early voting is going to skew in his favor. If you do have that red mirage, you probably get a euphoric moment in crypto where people say, “All right, we have confidence Trump is going to win. Slide the leverage bar to the right. Let’s go all in.”

That effect might be negated a little bit because Polymarket is now such a deep market, and there are venues for smart money to place bets. They might say, “We obviously know the early indications are going to be in Trump’s favor.” If you get that move, I would actually say it’s a tactical sell for your trading portfolio, not your long-term positions.

I haven’t thought about it too much in terms of exactly what I would do. It really depends on how we get there. In the instance I described, where alts do really well into the election, I would probably start looking to rotate some of them into majors—maybe equal-weight BTC, ETH, and SOL.

It really depends on what happens going in. If markets are going up and Trump wins, I’m probably not doing a whole lot because the market likely front-ran it. I do think the market is going to be horny for a Trump victory and looking for any sign. I don’t imagine there will be any new data between now and election night. I think the polls will fluctuate, but hopefully Harris is topping out around here.

I still think Trump wins. If Harris does win, I would look to hedge the portfolio with shorts. Off the top of my head, I’d probably short SOL because you need the most liquid alt representation. I do think it’s going to be a volatile time, and I get the sense that it’s going to chop a lot of people up.

I’m looking to see what happens as we go in. It might make sense to increase your TAO position going in, especially if things have done well, and then give it some time post-election to see what happens. If things are quite muted and Trump does win, I think BTC goes parabolic. I think it would be hard for it not to.

I agree with you. I think it’s going to be hard for BTC to go parabolic on election night, even if Trump does win. Let’s say you go into election night and it’s trading around $63,500. I could see it trading at $70,000 or $75,000 on a Trump win, but I don’t really see it going too far above that that night. I still think that would be a screaming buy.

As somebody who doesn’t like to trade events, or especially preplanned event trades, I think it’s a fool’s game. The night of the election, traditional markets are closed. Your traditional derivatives markets are closed, and the traditional investors who are going to be buying this the next day will be sitting at home watching the election with their families.

I think there’s going to be an opportunity for crypto natives to lift every token that’s out there.

Just talking out loud for a second: because the markets are closed, there’s an argument to be made that Bitcoin will be the election trade. On the night of a Trump win, you just get everyone slamming BTC. Even if Trump does win, it could overcorrect to the upside because, once the market opens, people will sell some of their Bitcoin.

That might be a dip to buy. I haven’t really been doing much event trading for a while, but it feels like crypto could have a big move.

Whenever crypto was paying attention to CPI, at least, 15 or 30 minutes before the release, price just wouldn’t really move. Everyone was waiting for it. I could almost imagine that on election night, assuming there’s no new information, BTC just doesn’t move much and people wait for any bit of news.

I’m not an election expert, so I don’t know the earliest point at which we might have market-moving news. At some point, I think BTC is just going to keep going up for a while.

It could be like when Elon announced his Bitcoin buys. That day, we had so many short squeezes. Perpetual basis was through the roof, and a lot of times you would look at that and say, “I can’t really buy here. It’s too juiced.” But it just kept going.

It’s one of those moments when you just get long, walk away, and realize it’s going higher. You don’t need to look at your charts for a while.

Chief, what tools do you use to monitor all these indicators and keep your finger on the pulse of the majors?

As Avi mentioned, Velo is definitely the best one. It’s the most all-encompassing. Twitter is obviously a great tool. I’ve also been playing around with Kaiko recently. It’s a good way to get high-level summaries of sentiment and information about a project pretty easily.

That’s really it. CoinAnk has some good data. Today, a lot of people were posting about aggregate altcoin open interest. I don’t think Velo has that yet. Velo, if you’re listening, please add that.

Velo honestly has most of what you need.

That’s super helpful. Here at the 1000x podcast, we’re all about process. Aggregate altcoin open interest is something I haven’t looked at in a while because alts have been so dead. How is it looking right now?

It’s reaching multimonth highs. I think we peaked this morning at around $13 billion, which was close to the high we reached in late July. Adjusted for market cap, it’s not that high, but it’s almost at the resistance point if you assume we’re still range-bound, which is the question everyone is trying to answer.

It has gone up. I don’t know the exact number off the top of my head, but we added a good bit. It’s not, at least for this cycle on an aggregate, global level, that insane. It’s not super frothy, but a good bit has been added.

That’s one of the hardest things about this particular moment: figuring out whether this is a sustainable move. If it becomes a sustainable move, the psychology required to go from a ranging market to a trending market is where most people completely screw up.

When you go from, “I’m going to start taking my 20% wins and offloading them,” it’s very hard to shake that. Probably every single person who actively trades or invests has, at some point, round-tripped their P&L and then perhaps even gone negative. That’s a terrible feeling. Everybody hates it.

If you’re listening out there, I’d love to hear some of your psychological tricks. One of mine is to always sell a little bit or buy a little bit. If your position is going up, you don’t have to make binary decisions. You can sell 10% or 5% and see how it feels. You kind of have to trick your brain into adjusting to the market environment.

I try to go top-down and have a view. I do hold the view, or at least I’m allocating on the view, that we did shift environments, obviously with a decent margin of error. To me, Bitcoin at $61,000 still means we’re in an uptrend.

You can wait for a clean break, but it also depends on your time frame. It depends on how you view your portfolio. I like to have long-term positions that I’m not really looking to touch. Those are macro 3-to-6-month holds. Then I have a more active trading bucket.

With the active bucket, if there’s profit and I’m feeling nervous, I’ll just take it. In this game, you really just want to survive. Something new is happening every week or every day. SUI and all these other things are up 3x from the lows.

It depends on how you’re allocating capital. If you do think you’re in a range-bound environment, I would sell rips and buy dips. I tend not to be active in those environments because they’re boring for me. Choppy environments aren’t really where I thrive.

With the broader market, I do think we’ve turned a corner. You have to be a little patient here. To me, it has separated into conviction levels. Things I have conviction in, I’m sitting back and letting ride. Things that are more speculative or might be technical trades, I took profit on some old positions this morning when I saw that open-interest move.

It could go higher; that’s fine. We had a big move off the bottom, and I’m not too concerned. Having that extra cash buffer also lets me buy the high-conviction names if we get a dip.

Your highest-conviction name right now is TAO. Very few people in the market have been as long and as vocal as you have on that one. We’re nearing the third act of the podcast, so should we take some time to debate it and understand the thesis?

It’s an important asset for the space right now, and it’s controversial. We need to poke some holes in it and understand what’s going on. It’s the first major alt breakout that isn’t just another alt-L1 trade. It’s the first real alt to do something in a while.

You went through your thesis in depth on the previous podcast, but could you recap it? Give us the elevator pitch, and then tell us about the developments and catalysts you expect to keep driving this uptrend.

Within the high-level thesis, there are 2 components: a fundamental component and a market-structural component. I think the latter is playing out, and it’s always going to be more important. This is obviously a trading podcast. Price always drives narrative, and I think structural forces have been supporting the price.

On the fundamental side, the whole notion behind this protocol is that it’s an incentive system—an incentive game—to drive the creation of better open-source AI models that can hopefully compete with OpenAI, ChatGPT, Claude, and, technically, open-source models like Llama.

More recently, a lot of the excitement has been generated by the fact that the incentive system is working. I’ve tweeted about it a good bit, but the quality of teams building subnets and generally building developer tooling in the ecosystem is noticeably higher.

This time last year, I think there were 2 or 4 subnets. Now we’re pushing into the 50s. Not all of them are great—most are bad—but you can see the quality increasing. As the protocol is designed to do, the weaker subnets are getting weeded out and losing incentives, while the more productive subnets are gaining market share and getting more control of TAO itself.

The reason this is controversial is that an incentive system on its own is a meta concept. But I think this is what blockchains have always been good for. What a blockchain really does is say that, because of strong cryptographic guarantees, we can guarantee property rights. Everyone playing the game can have full faith that those property rights will stick and that the rules of the game will be hard to change.

With that belief, people operate differently. When the incentive is strong, you can get people to operate in a certain way for some desired outcome. The desired outcome of the system is simply better AI models, which I think we can all agree would be better for the world if you had an open-source community building alternatives to the OpenAIs of the world.

My general take on decentralized AI is that, regardless of whether you think it can compete with OpenAI and Microsoft, it’s going to get built regardless. Pandora’s box is already open. We’re going to create the system. It’s going to rival the centralized world in some respects and probably fail across a lot of vectors, but it’s going to be an alternative in the same way DeFi is an alternative to traditional finance.

It’s obviously worse in a lot of ways, but this decentralized AI ecosystem is going to exist. People will keep building there and gravitating toward it simply because it exists.

That’s a big if. If decentralized incentives can build better models than centralized ones, or even quasi-centralized open-source models like Llama, that’s something we don’t know. It’s a venture-capital bet that it will happen.

If it does happen, ecosystems like Bittensor will be enormous. You assign some probability to that. Maybe it’s 50/50, maybe it’s lower. But the beauty of crypto, unlike traditional venture capital, is that you can trade in and out of your startup equity as hype ebbs and flows. Crypto gives you these tremendous 10x to 100x opportunities between when you put the trade on and 5 years down the road, when you know whether your thesis is right.

I totally buy your idea that, to use commodities terminology, the curve is in contango. The price of Bittensor in the future is much higher than the present because decentralized models might matter. In the meantime, you can trade that volatility and earn a substantial profit, especially if you’re convicted.

I wanted to bring up something else. I read a fascinating article in The Economist yesterday about AI and the microchip ecosystem behind it. There was an article about how China can’t access a lot of the GPU compute it needs to build AI models that compete with Llama, Gemini, and ChatGPT.

They’re building skinny, targeted models. You ask a model one question, and it goes to a specific language model designated to answer that type of question. China is finding ways around the chip sanctions because it can’t access NVIDIA’s latest and greatest hardware.

Meanwhile, I was thinking that there are probably a lot of countries with national projects like that, or that want national AI champions, but can’t access the silicon they need. Maybe decentralized AI will provide it for them.

I thought about Bittensor in the context of geopolitical use cases, similar to how Bitcoin permeates these hemispheres of global trade because it’s a neutral arbiter that everybody can agree to use. I could see a third use case for Bittensor, aside from dethroning Llama or OpenAI’s latest model: it could be a thriving ecosystem that helps countries with difficulty accessing silicon still get well-trained models into their day-to-day use.

I don’t know if it’s necessarily a way to source compute, though I guess it can be. The miners themselves are theoretically expending computing resources to run these models.

It plays into the notion of geographic, unfettered access to AI models. Bittensor plays a role there.

I think Wombo is one example, though I forget which subnet they’re working on. I think it might be called Dippy. They had a miner produce language-model outputs that scored higher on a standardized EQ scale. It was beating Llama 3.5.

These are independent developers. I don’t think you can assume that random open-source AI engineers working out of their mom’s basement will create better models than OpenAI. But I think the important point is that the alternative will always exist.

Creating such a bounty is valuable. Within AI startups, there’s no real chance for someone to compete with OpenAI because of the scale and resources available to it. Bittensor funds or covers that resource cost for a lot of developers. It makes it much easier for them to build models and covers a lot of their go-to-market costs.

That’s why you’re seeing startups like Inference Labs launch a subnet on Bittensor as a way to bootstrap their companies and their growth. I think that will continue.

Transitioning to the market side of the thesis, retail doesn’t have many ways to get exposure to AI. There are stocks like NVIDIA and Microsoft, as well as some smaller names, but for more risk-on investors or people who want to be visionary investors, crypto offers a path. Within that space, Bittensor is really the only project with a big-picture vision of building something that’s for the greater good and can be long-lasting.

It’s also forming into a true decentralized community. I don’t think many projects in that sector, or in the broader space, can say that. It’s easy to dream big about this.

Crypto markets tend to fully price in the potential of a project in a very short period of time. They go from extreme euphoria—“This is the future. This is going to work. Bittensor should be valued the same as OpenAI”—to the opposite extreme. Obviously, right now it shouldn’t be valued the same as OpenAI.

You’re playing on the inefficiency of the crypto market with this thesis. Even if you don’t think the fundamental case makes sense and believe the token is worthless, you can still take the left-curve view: AI goes up, so you long the best coin in the market.

There were a couple of good tweets, actually posted at high 3s. The stake rate of this is obviously super high. You’re not really locked, but you can just kind of feel it with TAO right now—it’s just kind of going through a bit of a supply squeeze. The first run went from $50 to $800, and then we ranged from $200 to $300 for 4 or 5 months. The cost basis of all the new people who got in is much higher than it was for the previous holders, and the levels they’re looking at to take profit are much higher.

From what I understand, there was also a big fund that sold a lot because it was raising a new fund and wanted to show DPI. They’re obviously out of tokens at this point.

There were some good tweets around the meetup in Singapore. I felt a strong community there—grassroots, no frills—and I think that’s shining through. There was a tweet saying, “All my smartest AI friends in San Francisco are working on Bittensor during the weekends.” It attributed the quote to a Paradigm backer in Dubai who would remain nameless, so it was probably nothing.

There’s truth to it, though. I’ve had a number of friends in the Valley tinkering with and running miners on Bittensor. One is gearing up to launch a subnet. Chris Dixon once said that, when he got interested in crypto early, he followed what developers were doing when they were off their regular jobs, at home, or over the weekend.

A lot of these things start as toys that you don’t really understand. That’s the beauty of decentralized networks: they’re networks at the end of the day. There’s a big social layer, and they can evolve based on what the community wants.

To me, this repricing is partly a market-driven thing: people want exposure to crypto AI. But part of it is the fundamental case and the social layer being built around the project. There are some incredibly smart people tackling very hard problems, and you’re seeing early signs that it’s actually working.

In crypto, such a durable source of innovation, that’s obviously super exciting.

Just to add to that, in terms of fulfilling expectations, it’s also about where the expectations are. I saw the news that OpenAI’s leadership is kind of falling apart right now, and it’s a reminder that, yes, crypto is new, but AI is also new.

We’re not exactly sure how anything is going to pan out. We don’t know the upper limit for either of these sectors, which makes it even more fun to bet on them. TAO could go to $100 billion. Who knows where it goes? We don’t even know what the right model is yet.

There’s no way to say TAO is the wrong model because we just don’t know. Even with OpenAI’s $150 billion round, where demand is apparently through the roof and $250 million is the minimum check, people might look at the surface-level numbers and say, “They’re making this much in monthly revenue.”

But theoretically, inference will probably replace search. What is Google worth? In hindsight, $150 billion might turn out to be really low. As those valuation caps go up, crypto will follow.

In crypto, I think the magic number on a circulating basis is $20 billion. That’s usually very difficult to break. Very few projects break that level. TAO is coming up on it, so I’m interested to see what happens.

TAO is around $4 billion on a circulating basis right now. You can look at it on a 1-year forward basis, because the inflation rate is high until the halving next year. Call it $8 billion. I still think 2.5x to 3x upside would not surprise me before then.

Before Google, there were a few different search engines: AltaVista, Lycos, and Yahoo. I remember Lycos was great for a while and everyone used it. Then that model became bad relative to the others, people switched to AltaVista, and eventually Google showed up and decimated all of them.

It doesn’t take much for OpenAI to fall apart. All the big technologists have left, there’s internal strife, and we’re in the midst of a bubble. We’re not quite at the SBF-goes-to-prison moment, but it’s possible.

Chief, you recommended Corcel as having the best user interface on Bittensor. I tried it, and it was incredible. I could easily see a world where the chatbots of Bittensor suddenly become much better than the centralized versions.

That’s not the most probable world, but it’s a possible world. In that world, OpenAI goes to zero and all that value goes to Bittensor. It’s possible. My point is that it’s still open season on dominating that market share, much like it was with search engines.

It’s still early in this network’s evolution—not necessarily from a price perspective, but in terms of where the community is headed. People are also getting excited about some network upgrades, and those are probably catalysts that people are factoring into their investment decisions.

The big one is Dynamic TAO. The way emissions are calculated will become a more market-based system, and you’ll be able to use TAO to speculate on which models are better. Imagine a world where, in the same way you need SOL to speculate on memecoins, you need TAO to speculate on models. That’s a pretty cool world. If you identify a model early, you’ll benefit from its price appreciation.

They’re also moving toward some EVM support. I don’t know what that will look like beyond having TAO available on the EVM within DeFi. I think there’s some smart-contract component for building apps, but I’m not too sure.

I know DCG is going to announce some sort of financing product soon. This is more from the shitpost angle—the more degen side of me—but Barry Silbert is shilling this thing like his life depends on it. He’s basically comparing it to the early days of Bitcoin.

The thing with this asset is that it has the same supply schedule as Bitcoin. As I mentioned, it feels hoarded right now. You would think the emissions are very high, yet the price keeps staying up here.

A lot of those emissions are going to Barry’s hands, Polychain’s hands, and the hands of the big stakers who have no interest in selling. You have to do the work of figuring out how many emissions are actually going to people who are just trying to sell.

There are definitely some sellers. The newest researchers and independent subnet owners are selling, but realistically that’s probably on the order of $20 million to $30 million a month. If you look at volumes, much more than that was bought in the last week.

I don’t think emissions are as scary as people make them out to be. It’s the same as the early days of Bitcoin. Tops and bottoms were dictated by miners and the supply side. When supply gets hoarded, and those holders decide to unload, that’s when it tops.

I just don’t see the largest holders looking to take profit anywhere near this level.

They do have a level, though. Silbert and Paradigm have LPs. The LPs aren’t just going to sit on their hands if this thing doubles or triples from here.

Barry doesn’t really have LPs, as far as I know. I assumed he was running some fund. I didn’t realize this was a personal-account trade for him, just accumulating.

They put out a pretty good research report on Bittensor, which is solid. VC funds can accumulate for a very long time and hold until they think the project isn’t working.

You saw that with Maker from a lot of the big VCs. They held it for almost half a decade until they decided it wasn’t working anymore, and then they started offloading it. These guys can hold for a very long time if need be.

I think that if it works—or if it isn’t clear that it’s dying—they just don’t sell until they wind the fund down. With Maker, it became clear that the project was being outcompeted by everything else. A lot of the time, these funds don’t sell until the fund is being wound down, which is telegraphed most of the time.

That was a good shitfest. Maybe we can hit Aave once we release this.

Luckily, nothing we shill on here is financial advice. It’s all hypothetical.

Of course. As we always say, if you listen to anything said on this podcast, you’ll inevitably lose all your money and end up on the street, so please don’t.

TAO just rallied a bunch. Don’t buy it off Chief. Or do. I think it’s a really interesting thesis, and decentralized AI is such a cool concept. It could totally work. Imagine if it did.

You just have to believe in something.

I believe. Green line chasing the green line.