如何与 Flood 一起交易加密周期

I think crypto is an inevitability in the sense of stablecoin adoption. Bitcoin adoption still continues to rise in third-world countries as a way for them to opt out of their currency and monetary systems. I think we will see this transition from Bitcoin being this hypervolatile, 3x-levered Nasdaq to more of a safe-haven asset, or more of a countercyclical position for some asset managers, very similar to gold.

It may take some time before we get there. So, yeah, good time to re-underwrite, but definitely still long-term bullish.

We've got an awesome guest that a lot of you probably know, and for those that don't, he is an absolute OG. He's been around the block, has been in Bitcoin forever, and has a lot of spicy takes on Twitter, both crypto-related and not crypto-related, recently, which has been good to see. Welcome, Flood, to the podcast.

1. How To Structure A Portfolio

Yeah, thanks so much for having me. I'm very happy to be here. I've been watching the 1000x podcast for quite a while, actually. I think since you guys started, it's sort of on my podcast checklist when I have time to kill throughout the day. You guys have been consistent and crushing it. Happy to be here.

I appreciate that. It's been a fun ride with Jonah. Jonah's unfortunately feeling pretty sick today, so we're not going to have him here. It'll just be you stuck with me and Flood, but hopefully that'll be good enough.

2. Trading BTC In 2014 vs Today

I'll start with this: I know that you've been in Bitcoin for quite some time, basically since 2014. At least for me, this has been a very, very, very weird last—call it—12 months, where it almost feels like the entire crypto space is getting disillusioned. People are feeling pretty bad about Bitcoin. It's been performing pretty poorly, and the rest of the crypto market has been performing horrendously.

It's almost like shorting altcoins is free money now. I'm curious how you think about BTC. Is it still on a cycle? Are you still bullish on Bitcoin? How are you thinking about it?

It's a question that everybody needs to ask themselves, especially during time periods like this, where fundamentally everybody in crypto is pretty bullish on Bitcoin—or at least on the ideologies of Bitcoin and the ability to opt out of a monetary system that you have little input over. I think we all love the idea of that. But when you see assets trading the way they have—specifically Bitcoin, when you compare it to gold, indices, or the flood of investment in AI and downstream AI-related infrastructure—we've been lagging significantly.

I am still bullish on Bitcoin. I don't think there's a reason not to be bullish on Bitcoin, other than potentially quantum risks, which we can get to later. During time periods like this, when prices are down, it's actually the best time to re-underwrite your thesis, because if your thesis is unchanged, guess what? You're getting much better average entries.

I think people sometimes don't take enough time to sit down and really think through their portfolio and why they have the allocation they do. They should think about whether they need to rebalance, whether they should add to certain positions, or whether things have actually changed and they should make some compositional changes.

Long story short, I'm still very bullish on Bitcoin. Whether it's slightly delusional or not, I think crypto is an inevitability in the sense of stablecoin adoption. Bitcoin adoption still continues to rise in third-world countries as a way for them to opt out of their currency and monetary systems.

I think we will see this transition from Bitcoin being this hypervolatile, 3x-levered Nasdaq to more of a safe-haven asset, or more of a countercyclical position for some asset managers, very similar to gold. It may take some time before we get there, but it's a good time to re-underwrite, and I'm definitely still long-term bullish.

I'm actually curious about that process. You're talking about re-underwriting the thesis. I assume that you've done that. What does that look like for you right now when you're looking at Bitcoin? What sorts of things were you challenging yourself on or trying to think about when you were re-underwriting Bitcoin?

I think I saw in some chat somewhere that you were actually buying—you were adding down here—so presumably you've got some conviction.

Correct. We have a pretty standard process where, if we really don't feel like we have anything good to buy, we'll probably just continue adding to our Bitcoin position. We're a trading firm at my family office that focuses exclusively on crypto and crypto-related securities. We'll trade things like Robinhood and Coinbase, but we really try to focus on not necessarily directionally trading Bitcoin, but trying to get better average entries than the average market participant and being a bit more tactical in terms of when we're protecting downside.

When I think about re-underwriting my Bitcoin position, or why I hold Bitcoin, I have to think about what I believe is going to happen in the future with monetary policy. I think everybody, myself included, learned a very valuable lesson in 2022, where we had the idea that Bitcoin had completely idiosyncratic returns, rates didn't matter, and we were going to be up only forever. You see that that's completely untrue.

Along that same vein of thinking, if you take a look at the current structuring of monetary policy around debt and the current deficit that we have, it seems like it's an inevitability that more capital will need to be printed, the U.S. dollar will be debased, and Bitcoin will be a very compelling asset to own. I don't think that changes just because it's sold off 50%.

We think about our portfolio composition in that way. We also have some recency bias because we've made a considerable amount of returns by being in Bitcoin very early, so it feels like a very safe asset to us, even if it is more volatile than some other things we could own.

The real question we're asking ourselves is: What is it going to take for nation-states to actually hold Bitcoin rather than sell it? For example, if a nation-state discovered a large gold deposit, or if it found gold that was buried in an ocean or in a territory that it controlled, it's pretty likely that it wouldn't just instantly sell it.

Whenever you see a lot of seizures from criminal organizations, you actually see a lot of governments—especially in Europe, with Germany coming to mind, along with a few other places—just instantly selling the assets. You have to ask yourself: Is it an educational problem? Do they see risk? Is it politically unfavorable? It's very interesting to think about why nation-states continue not to hoard Bitcoin and why they continue to sell it.

3. How To Find Edge As a Trader

When we think about long-tail Bitcoin upside outcomes, that's one thing that's been discussed for a long time in the Bitcoin community: the nation-state hoarding game theory, the replacement of metals, the replacement of the U.S. dollar, or the replacement of other potential currencies held in reserves with Bitcoin. That just clearly hasn't taken place. I think we've been very wrong on that, but I don't think there's a set time period where, if it doesn't happen in the next year, it will never happen.

4. Where To Allocate In Crypto?

It's tough to have an investment thesis based on that. But that's sort of why you may think Bitcoin's long-tail value and topside are fundamentally mispriced. That may be why you want to own the spot asset: You think there's a decent chance of the U.S. government or other countries eventually saying, “Hey, it might be a good idea to own 5% of our currency reserves in Bitcoin,” for whatever reason, or even just starting to hoard it from seizures and setting off this game-theoretical chain reaction. We really haven't seen that take flight yet.

I think it's interesting, because that's one of the reasons people have been so down on Bitcoin versus gold. We're seeing that with gold, right? We're seeing a ton of central banks stockpile gold on their balance sheets, and that's one of the reasons gold is going up in a straight line. This is a geopolitical play to shore up reserves, and we haven't really seen that with Bitcoin yet.

We've just seen a lot of retail step out of BTC. One thing I look for in bottoms, and I'm curious whether you look for this as well, is people starting to move on. I feel like I've seen that a lot recently: People raising their hands and saying, “Okay, I'm sort of done with this. I'm going to start looking elsewhere. I'm going to start investing in other things.”

Maybe disinterest is the right word. When there's a tremendous amount of disinterest in Bitcoin, I think that's probably the most bullish time period to start buying, at least on a 6-to-12-month horizon. But I don't know. It's an interesting question, because this time feels a little different with the types of people who are stepping out.

From your perspective, how does it compare to the other bear markets you've seen? I saw the 2018 bear market, but I wasn't really here for 2014, 2015, or 2016.

I wasn’t here for Mt. Gox. So, I’m curious: was it worse back then, or was it better back then?

It was just different. The populace in crypto, I think, had fewer traders. Trading notional volumes were probably 1/100th of what they are now. The majority of the attention around that time period was more in theory-crafting and ideological discussions, leading up to the block-size wars: What is Bitcoin? What should it be? What can it eventually be?

The bear market around that time period was actually, I think, not quite as bad as the bear market of 2017–2018 into even 2019, because what we saw specifically in 2018 and 2019 was a total volatility death of the asset. There was a period in 2019 where Bitcoin traded in a $3 range. There’s a famous print where it traded in a little $3 range.

That sucked so hard. That was so boring. I remember that—like, all of our lives are wrapped up in that. Sorry to cut you off. I was just like, wow. You brought me back.

No, of course. Yeah, that was a really surreal time period. It must have been a weekend, but even still, you were just like, man, this market might just be totally dead. That obviously ended up not being true, but I definitely look for that. I look for Bitcoin vol to come down. I look for open interest to slowly just bleed out. Exchange inflows to really stop and lower.

When comparing it to AI, it also feels like crypto has become a bit less socially acceptable. If you’re in AI, it’s not seen as cringe because the upside is potentially infinite. Unfortunately, in crypto, we’ve gone through a time period where so much was promised and so little was delivered.

This isn’t really in relation to Bitcoin. Bitcoin kind of promises to not deliver anything and remain mostly unchanged, which is a benefit but also a potential flaw if it faces idiosyncratic risk like quantum, which you don’t really know how to price. When you think about who has been rewarded in the form of capital, it’s actually been people who have been very momentum-heavy. These are people who have piled into AI names, chased very large funding rounds, and been very futurist and bullish on the advancement of technology at an even more accelerated rate than people might be assuming.

The people who have been punished have actually been loyal crypto holders who are bullish on crypto companies, products, or tokens. If you look at crypto-related equities, even businesses centered around crypto, they’ve really been hammered, right? And when you think about the average altcoin one-year, two-year, five-year return, it’s horrendous.

I think a lot of people are just tired of crypto promising new finance or promising better products that will materially improve your life. Really, all we’ve figured out is how to make gambling slightly better. [Laughter] And that’s okay, right? But I think the value and the returns are finally going to coalesce in a more mature market around the only things that really make sense.

One is a monetary store of value. That could be Bitcoin, arguably Ethereum. Then you could go to trading and the proliferation of permissionless trading. Hyperliquid comes to mind. Other DEX copycats come to mind, and Solana comes to mind, where for the first time ever, decentralized applications have a comparable experience to their centralized counterparts.

The third thing is obviously the proliferation and adoption of stablecoins, which also feels inevitable. If anyone’s ever tried to make a large bank wire, no matter if you’re at J.P. Morgan Private Bank or anywhere else, unless you really own the bank, it’s a complete pain in the ass. It’s extremely difficult. It’s T+1 settlement—not T+1, but it can take a full day. It closes after 5. It just feels super antiquated.

I remember I was one of the earlier adopters of Signet, which was Signature Bank’s sort of instantaneous wire. When I looked at it, I was like, oh, this is just USDC under the hood, which was crazy. But I think we’re going to see advances in that.

I think it’s going to be easier to spend your crypto, on- and off-ramps are going to get better, and the crypto world will merge into this soup of centralized and maybe mostly decentralized or partly centralized products that blend the best of both worlds. That’s where the value will accrue, too.

I think everything else will continue to get hammered. I think it’s really important to separate crypto from things that are just outright scams and frauds. I think it’s about time we call these things what they are. People are experimenting, and it’s entrepreneurship, if you could call it that. But really, the majority of tokens over the last 5 years have just been slightly innovative, or not even innovative, ways to try and scam retail. And it makes me sad.

I think there’s a lot to unpack in those statements, but generally, people are feeling that, right? They’re saying, “Well, I don’t even know where to put my money in crypto anymore.” All these things that you’ve outlined make a ton of sense, but people start to think, “Where do I put my money if stablecoins are going to explode? How do I make money on this? What am I investing in?”

You can’t buy USDT and hope it goes to $2. That ain’t happening. So you have to figure out where you’re actually putting your capital. And that’s why I think a lot of crypto was driven by trading. I mean, you’re a trader, right?

A lot of crypto was driven by people saying, “Okay, well, even if this thing right now is totally useless, its utility is that I can buy it low and sell it high based on some narratives, based on some VCs investing, or based on this or that,” right? You kind of even see it now. If you look at the market, NEAR, for example, is going up because everyone’s excited about AI.

So I’m kind of curious: what are you doing to actually make money in crypto? How are you thinking about, “Okay, I think this space is still going to grow. This space is still going to explode”? How are you putting your money to work? Are you actually still trading, or are you more on the investing side now?

Yeah, correct. I still trade. I’ll give you a breakdown of what we do at my family office and then also at Full Stack. A very short summary about myself—which maybe we could have started with, but that’s okay—is that I’ve been in crypto for 11 years. I was a very amateur trader initially, and then I joined a large family office, where I was doing basis trading for a while.

This was on BitMEX. Back in the day, annualized returns on perps were quite good, in the high double-digit percentage range. At times, there were even some futures arbitrages—not on very much liquidity, but with some fairly amateur market makers or very uninformed traders who were paying 3% to short the futures into a week from expiration. It was just totally crazy stuff.

After that, I left, and I’ve just been slowly building up my own family office. What we do here is a mix of everything. We do quintessential market-making, and we do HFT taker. I mainly do special situations. Crypto has this propensity to trade down 20%, as we all know, on random days, and there are actually quite a few manual arbs or very interesting, cute trades that you could put on.

Something that I missed, which I went back and talked to one of my traders about, was the 10/10 depeg. One of the most interesting trades that you could have put on was buying LSTs and then borrowing spot or selling futures, even at a slight discount, because some of the LSTs—specifically fairly liquid ones like Marinade on Solana and other things—were trading at around 60 cents on the dollar, presumably because of portfolio-margin liquidations on Binance and the Binance risk engine just spitting them out.

You could have gotten in for tens of millions of dollars across a few LSTs, then shorted the future and had a very cute and clever arb there for 10% in maybe a day, just because you have capital when other people don’t. This is sort of what our overarching theses or tenets are at our company.

When we believe perps are an optimal way to transact value, they will replace options trading for retail. I can go more into that later. Second, we try to have capital when other people don’t. Third, we try to give ourselves a lot of levers to push and pull at different market times.

For example, for a HYPE position, we will typically have a HYPE delta spot position. We will also potentially be short the future, and then we may or may not have options on, depending on whether we think they’re fairly or unfairly priced. This gives us 3 different levers to pull as the market gyrates up and down.

It gives you a lot of options to say, “Hey, I’m long 10 million HYPE. I’m short 1 million of futures against it.” You’ll actually be paid to put on this trade. Then, when the market goes down, you have a button to click to not really buy more HYPE, but cover a directional position, right? This gives you tremendous amounts of flexibility.

I notice a lot of people’s crypto portfolios are very inflexible, where they’re like, “Ah, I own 80% Bitcoin, 10% altcoins, and 10% cash.”

Well, okay, if the market goes down much further than you ever thought, you're not going to be able to drastically alter your portfolio composition. But if you're simultaneously long and then short the future, and you have some options that you can open or close or roll or do whatever you need to do, it gives you a lot of at-bats, or at least it helps us.

For example, on the HYPE blowup day, we were fortunate enough to be short HYPE on Binance, and Binance had a very significant depeg against the Hyperliquid spot market because the Hyperliquid spot market had the autonomous buyback going. This also created a situation where market makers were just totally killed on Hyperliquid. A lot of top market makers who have since made the capital back and presumably had offsetting P&Ls on Binance were just not really operational on Hyperliquid.

It was probably hard to get their capital there because gas fees were so expensive, and they were focusing on defending their positions on Binance and other CEXs where they may have credit lines. It's a lot easier for them to actually transact and trade there. Plus, their positions are going to be materially larger on the CEXs, as Hyperliquid is only around 5% to 6% of market share, also creating inefficiencies.

If you're aware of this dynamic, then you will say, “Hey, assets may be very mispriced on Hyperliquid relative to Binance, Bybit, or OKX. I should have capital sitting on both that is ready, or positions sitting on both that are offset, to be able to take advantage of these potential inefficiencies.”

My CIO, Kyle Saska, who I don't know if you've ever met, but maybe you have—he's based in New York as well—kind of has this quip where he's like, “Markets are like a pop quiz, especially crypto markets. If you didn't study, you're going to fail, and if you studied, they're actually really easy, and there's free money on the floor.” [Laughter]

So we try to have portfolio construction that is malleable. We have the ability to make adjustments if things change, and we have the ability to actually react very quickly when a large opportunity presents itself. Ideally, our systematic strategies are continuing to generate cash, so we'll just have more and more cash to deploy. That's sort of how we've constructed our portfolio.

5. Becoming a Trader & Finding Opportunities

I love that quip. I haven't heard that before, and I haven't met Kyle, but I think that's pretty great. It almost reminds me of a tweet—the famous MGR tweet, basically: discretionary trading, you do nothing, you do nothing, you do nothing, and then 5 times a year there's free money on the floor and you pick it up.

I think one of the things that probably is most interesting to our listeners, and also to me, is figuring out how to study for that pop quiz. That's what we try to do on this podcast a lot when Jonah and I are talking: try to teach you how to study for that pop quiz. I think a lot of traders get lost in, “What do I even look at? How do I even think about the markets, what could happen, and how I should act in these certain situations?”

I'd love to hear your take on that. Maybe one of the best ways to do it is just to describe some trades you've taken. How are you guys basically studying for this pop quiz?

Yeah. So, there's a lot to cover in crypto, especially if you're a single manager—you're managing your own capital, you're a trader. There's a lot of psychological pressure that people put on themselves when they're trading for a living, or whatever that means. You can trade for a living. It's entirely possible, but there's a lot of pressure there.

You should definitely separate your capital between, “Hey, this is my actively deployed trading capital,” and “This is my long-term buy-and-hold portfolio.” If you go through periods where you don't have alpha and you don't know it, which is very scary, you should also have capital set aside for living expenses. That way, you're not commingling the three. I think people put themselves under duress because they're not able to bifurcate their capital into different buckets.

We try to focus—and we think edge really comes from understanding 1, 2, maybe 3 protocols in crypto really well, and potentially betting on their adoption or betting on their failure. One example in the past was Luna. This was a trade that we missed that really drilled this philosophy into our heads. It's a lesson that we never forgot.

We were sitting there looking at Luna imploding. We'd done the math on Luna. We understood that once it got going in one direction, even if Jump stepped in, it could pass a point of no return. But we were just scared to short it. It's very difficult to fade Jump. It's very difficult to think, “Hey, I should potentially fade this thing.”

But the obvious trade was shorting UST, shorting the stablecoin, right? Or finding a borrow or something—finding a way to get short exposure to the stablecoin—because your downside was so capped. You could have shorted UST at 95 cents on the dollar, and you had just over a 5% risk if it ever went back to a dollar. That was it. You had a very clear, completely defined risk-reward trade for something that, if you had done the work in advance and really intimately understood it, you knew had the potential to go to zero.

So you were getting something like 20-to-1, which is an incredible trade, right? Following that, I think we really spent time understanding exchanges and how exchanges function. There was a lot of asymmetric information around Hyperliquid, where when we would ask people—even people in crypto—“Hey, how much do you think Binance makes a year? Or how much do you think the global perpetual swaps market generates in fees and revenue a year?”

People would say, “I don't know, $1 billion to $2 billion, $3 billion.” It's more like $10 billion to $20 billion, sometimes $30 billion, in 2024 or something like that. And you're just like, “Wow.” So on the airdrop, people were going to fundamentally misprice Hyperliquid because we thought that Hyperliquid had a chance, based on its current growth, to potentially have a high-single-digit percentage of the global perpetuals market.

That would mean $1 billion to $2 billion of revenue. People were implicitly maybe pricing that at $100 million or $200 million of revenue, and so they were going to sell at 10 times, which is a $1 billion to $2 billion market cap. We were a significant amount of the hour-one, day-one volume on the Hyperliquid airdrop.

This also transposed to the call-option trade that we kind of famously put on through likely Flowdesk. Shout-out to likely Flowdesk. We did 40/60 call spreads, where Flowdesk was pricing it at an 8% chance that Hyperliquid would go to $60. We believed there was more like a 20% to 25% chance, so you get some expected value on the options there.

The reason why was that we went back and modeled, for every dollar of Hyperliquid market cap bought, based on our guesstimation about liquidity and the dynamics around the Hyperliquid spot market, what impact we thought the buyback machine would have—in terms of, like, $1 of buybacks is X amount of market cap, right? We had a pretty basic formula, and we were like, “Huh, if they buy back a couple—what was that number?”

We estimated it was like 1-to-20, basically. So for every dollar of buying, it could be like $20 of market cap, or on Bitcoin—

That's actually pretty huge.

Yeah, exactly. Because again, $1 of buying—

No, sorry, go ahead.

No, I said I just wouldn't—I guess it's kind of true with crypto in a nutshell, though. That's a smart way of looking at it.

Well, yeah. When you hear “flows matter,” right, what does that mean? Well, $1 of buying does not mean $1 of market cap, because of the way that markets function and slippage and liquidity. So a dollar of buying on Bitcoin can translate to like $7 or $8 of market cap. The inverse is true with selling, right?

I think that's something we looked at for Hyperliquid. We were like, “Well, people are pricing in the impact of the buyback machine, but are they pricing in the multiplicity of supply, and especially active supply?” This is something you can't really model, but who was selling their Hyperliquid airdrop? It was people who would have been actively trading it or actively selling it, or motivated sellers. That supply was being taken off the market and not just going to another person who was making a short-term trade—it was literally taken out of circulation.

These dynamics, I think, made Hyperliquid a very misunderstood asset from $2 to $60, basically. We trade in and out of it. We trade everything, and we still maintain a large Hyperliquid position because we think Hyperliquid has kind of set itself apart from the other competitors.

6. The Opportunity For Perps

Yeah. I especially wonder now, too—I'm sure you saw the news that the CFTC is clearing a path for U.S. perpetual futures, which some people are saying is good for Hyperliquid and some people are saying is bad for Hyperliquid. Either way, it's probably going to introduce a lot of new trading opportunities for us here. Hopefully, it brings on retail.

I'm curious what your take is on that around Hyperliquid specifically. Also, do you think it's going to impact market structure in crypto at all if perps come to the U.S.?

I hope so. Anytime I have the privilege of talking to a regulator or people in the administration—which I do fairly frequently—I say that I think America has 2 great exports.

One is culture; one is liquid, standardized financial markets. The fact that we don't own crypto derivatives is a travesty because we own and dominate every other market except for maybe metals, right? Which is also kind of a problem, but that's for another time.

I think consumer preference will be on perps. Binance has 400 million-plus KYC accounts, right? It has a single-digit percentage of the global population on Binance. Of those accounts, around 20% to 25% have created derivative accounts. You get a separate user ID.

Of those accounts, over 92% have traded perps; only 8% have traded options. It's one of the largest consumer preference studies in history. Binance is a for-profit company. If users were clamoring for options, they would just provide options. But the reality is users prefer perps.

If I had to guess why, it's because it's a linear payoff function. It's very easily understood. If you tell a retail trader, "Hey, build me a payoff function for 10% out-of-the-money, 6-month Meta calls," they're going to be like, "What?" You try to tell them about convexity, and they don't really understand.

People misunderstand: retail is looking for sufficient leverage to make their trading interesting. They're not really looking for convexity. Those aren't necessarily the same thing. Even when you look at the products that retail trades, retail trades zero-DTE options; they're over 56% of options volume. I looked at a shocking statistic: Robinhood has 7.5% of U.S. equity-options volume now through its platform, which is just unbelievable.

For now, retail in the U.S. is trading options, but I think if you give them the opportunity to trade a perp, they'd much rather trade a perp. I'll give another example: What is a prediction market? A prediction market is just a perp that settles at 0 or 1, right? It's basically a future that settles at 0 or 1.

Retail has actually shown that they prefer this sort of market, this sort of easily understood payoff function, to sports-gambling odds. A lot of volume has actually shifted from the sports sites to these swap-like, future-like instruments in the form of prediction markets. I think that'll continue. If you give retail sufficient leverage on U.S. equities and on individual stocks, they'll trade it.

I think the third example is that you're already seeing adoption globally on HIP-3, where there's decent volume on single-name equities and significant volume on commodities. There's decent equity volume on the indices there, in the hundreds of millions per day, upwards of single-digit billions. I think you're seeing that retail really does enjoy trading perps. I think it's a better instrument and also a fairer instrument.

Options are segmented by strike, by duration, and by contract. There are a few different contracts for S&P-like exposure, and this fragments liquidity. This gives market makers more edge because they can charge bigger spreads. This is where a lot of—the majority of—the money for Jane Street and a lot of these firms that you hear about, the boogeymen, comes from: trading option spreads against retail, right?

On a perp, all the liquidity is uniform, and a retail trader can express a position for 1 second or 1 year with 1 contract. It's simple, it's a linear payoff, and it's easily understood. Also, they don't have unlimited risk. Retail in the U.S. can sell an option and potentially lose more money than they have in their brokerage account. With a perp and nonrecourse liquidation, the leverage we give in crypto, that's not possible.

Yes, I will die on this hill. I really fundamentally believe that perps will dominate options volume over the next decade.

As somebody who grew up in crypto, I absolutely hate trading futures. Whenever I trade oil now—I trade a lot of commodities—and I'll trade these markets, I wish there were a really, really liquid perp that I could go trade, because it is a much better user experience.

One thing that I've been trying to think about is, what does this unlock? What gains the most if we both genuinely believe—which I think we do—that perps are just a much better product than options and will get adopted? Who are the major winners, and who are the major losers? Where do we put our money to work? Are we shorting some of these publicly traded companies that make options markets?

I wonder if options volume goes down, because one thing that is true is that products do cannibalize each other a lot, especially when the product is just, "Where do you get your leverage?" I think we saw this super clearly with MicroStrategy. The MicroStrategy premium collapsed in on itself. It was already trending down, but it really collapsed after options came out on IBIT, because people were just using MSTR for leverage, and then they moved over to trading IBIT options.

I think probably something similar happens if you get perps in the U.S., especially Bitcoin. I think people probably start trading more. But I do try to think about what is going to fundamentally benefit the most and what is going to be hurt. At the end of the day, what we're trying to figure out is where do we put our money, right?

Yeah. I don't know if there are any obvious shorts that come to mind. I don't think it's going to be a complete destruction of options where volumes go to zero. I just think some of it will be supplanted by perps. More so, I think the perp market will just grow, and general interest in finance, interest in trading—trading as even a form of discretionary entertainment spend, as opposed to sports or other forms of gambling—is sort of what you want to bet on, or what I think may happen.

I self-rationalize what I do—being a trader and advocating for perps and trading—because I understand and empathize that a lot of retail traders lose. I'm not ignorant to that fact. But I do think that it's much better for someone to lose money speculating on something real rather than playing blackjack or a slot machine at a casino. I just think the capacity for potential future learning from playing blackjack is almost nothing, right? Or pulling on a slot machine is nothing.

But if someone loses money trading Nvidia, they may be like, "What is Nvidia? What is a chip?" They may become more educated in hopes of potentially having better returns. So, there's a motivational aspect or some potential second-order benefits. If losing money is inevitable, I'd rather they lose money trading. Also, that would be better for me because I can trade against them. [Laughter]

Fair enough. You heard it here first: When you lose in the markets, it's Flood taking your money.

No, not always. Our trading returns have actually been fairly lackluster, given we've continued to average down on Bitcoin, where we've kind of been blown out a little bit. We haven't shorted anything against it. Thank God we didn't short gold.

I think we're looking at a lot of these ratios and trying to figure out why we're wrong. But I think there will be a violent snapback in the market, especially if it looks like there's more optimism around Bitcoin becoming quantum-resistant, as that has been a concern of quite a few managers and even some large sovereigns.

I want to touch on one thing in crypto that I think isn't really discussed enough, but people are coming around. Vitalik put out a thesis about L1 value accrual and L2s, and this is something that my firm has talked about internally a lot: Where will the value actually go in crypto?

If we think that crypto adoption is inevitable, if we think that these products are comparable and potentially may have competitive benefits versus centralized counterparts, who makes the money? It's been very clear to us for a long time that the money will actually be made by applications.

I'll use an example from traditional finance. When U.S. retail trades in America, they say, "I'm trading through Robinhood, Schwab, or Interactive Brokers, maybe Webull." They don't say, "I trade on the Nasdaq," or, "I trade through NYSE, or I trade through Direct Edge or BATS." They aren't even aware, unless they check the trade confirmation, of where their transaction actually landed.

Through the advent and proliferation of payment for order flow, trading is basically peer-to-peer with market makers. We look at crypto and the way that retail has to be deterministic about where they trade, where a user says, "I'm trading on Hyperliquid, not Lighter. I'm trading on the Solana blockchain, not Ethereum. I'm trading on Polymarket, not Kalshi."

Functionally, I think a lot of these products are fungible to some extent, if not identical. We'll see retail traders having that choice removed by products that provide a very aggregated trading experience. It's a sort of super-app thesis, where I think new entrants in crypto won't feel particularly strongly about which blockchain their assets are settling on.

Just like a user now in crypto who trades on Solana doesn't have a strong, particular preference for which AMM they swap through, right? We will actually see apps—things that provide simplified onboarding experiences, aggregated trading experiences, and more capital efficiency, removing this choice or forced understanding of crypto for users—actually accrue a lot of the value.

It's part of the reason we're spending a lot of our time building full-stack, which is centered around this thesis: you can deposit to one place and trade all the products you want from one app. I think that's where the value goes. I always ask people, would you rather own Nasdaq in an uncertain environment where perps may be a product that they're either able to smash or not smash, or would you rather own Robinhood, which can service perps, which could service sports betting, which could add banking, gambling, payments, and crypto trading—whatever they want to add—and can swap? Robinhood fundamentally owns the customer relationship.

7. Are Altcoins Still a Short?

It's clear to us that Solana will not own the customer relationship in the future. Ethereum people won't feel particularly strongly about where their assets actually sit. They'll say, "Give me access to the products I want, make it convenient, and ideally make it low-fee or no-fee." If you can do that, users will predominantly prefer your platform.

Yeah, I think what makes me nervous about that statement—and probably makes people in crypto nervous—and we've been talking about this on the pod for quite some time now is that, basically, I agree with the thesis, but what that means is that most crypto applications end up going to zero if you're crypto-specific, right? I think serving the crypto crowd itself is slowly starting to fade. There used to be this idea of all these crypto-native applications that would solely service the community that we're in.

Now, I think what we're all seeing is that crypto enables a ton of stuff to be done on the back end. It enables applications to be faster, more responsive, and more efficient. But at the end of the day, you need to build a business. You can't build just a crypto application anymore.

I almost fear that there's still a tremendous amount of capital locked up. There's more than $500 billion of market cap value across a lot of these altcoins that don't seem to be making that pivot. So I guess two questions for you are: one, do you think that the great alt short is still on? Do you think that you can still ride these things to zero? And then, two, are there any applications that you see in crypto right now that you think could grow into real businesses that you're looking at?

I wouldn't short alts down here because alts will always drift around. Because of structured products from founders and VCs who own altcoins, they have a lot of beta to the majors. It's not even that someone is necessarily buying these altcoins. I think a lot of them are zeros, zombie companies, or completely dead, just minding the shop and grifting the treasury.

But that doesn't make them good shorts, because they don't need to trade to zero, right? Fundamentally, an asset could trade to zero—where it's delisted from most exchanges, or it does low volume, no volume, and there's no liquidity—but you still don't get paid on the short, and you have all the risk. Then maybe you're getting chipped away by a funding rate.

So I really think when I put on the large trade in 2025—the kingmaker trade, where you long HYPE, long BTC, and short alts—that was the time to do it. I remember there was a period of time where Celestia was trading at dollars, not cents. That's the time to do it. You really have to pick your spots shorting alts.

But I honestly think shorting alts primarily is a waste of time unless it's offset with a very sharp long, right? You basically want to, again, back to our thesis of multiple levers to pull, say, "I think alts have extended to the downside a little bit too much. I'm going to cut 50% of my alt shorts and look to re-add higher, or take some of that capital and double down on my long." By closing shorts closer to what I think is the bottom, I should also be getting cheaper prices on my long legs, right?

People do not give themselves enough ability to make decisions. They're allocated to something, and then prices go in either direction, and they can't make adjustments. They're just like, "I'm still long the same amount."

No, I wouldn't short alts. I would just not pay attention to them. I would go through and really ask yourself, "Do I think this company, token, or chain has any competitive potential?" If not, then I'm just not going to spend any brainpower even paying attention to it. It squeezes like “Bear Chain.” It squeezes 150%. I could not give a fuck at all, honestly.

I just think it's destined to go to zero, and it will go to zero, and it's an inevitability to some extent. You shouldn't waste any time thinking about it.

Jonah Van Bourg

That's, I think, the most hilarious explanation of these things I've ever heard. Yeah, no. One thing that we talked about on the pod is picking spots. We got flamed at the beginning of the year because I said that I thought memes would be a phenomenal short, and then I clarified that you tend to want to short these things after they get squeezed up.

Then Pepe squeezed up like 90%, and everyone heard the first part and not the second part. I do want to reiterate that point: shorting in crypto is really about being super, super good on timing to do that. But I do think that a lot of these coins are still phenomenal shorts.

If Worldcoin ever is up 50% to 70% over some period of time, and it's blown out all the shorts, I still think that's a phenomenal short. But I think you're 100% right. It's all about picking your spots.

Are you still directionally day-to-day trading in your family office, or is it mostly just market making and then three- to six-month bets, like accumulating BTC and letting it ride? At some point, I know there was edge. I know that you were probably trading Bitcoin day to day. Do you still think there's edge for the retail trader in trading Bitcoin day to day?

I certainly don't have any edge trading day to day. I'm notoriously terrible at short-term calls, actually. [laughter] Pretty bad.

Fair enough.

Mid- to long-term calls, I'm decent at. I would say above average, given that we've had pretty spectacular returns. But short-term, I'm pretty terrible. So I would say no.

Just on account of the market participants, in 2025 we noticed that a lot of systematic strategy capacity just went down quite a bit because suddenly likely SIG, Jump, Tower, HRT, and all the other firms could wholeheartedly trade and not feel like the SEC was going to come and kill them or something. They basically got the green light from the administration to trade crypto, or they felt empowered to do so because they felt like it was a good, calculated bet: enforcement actions were signaled to have been decreasing and stuff.

So the market has gotten harder, and that would lead me to guess that retail has less edge. I'm retail, and I definitely feel like I have less edge in this market.

Jonah Van Bourg

You genuinely think you're retail here? I mean, you've got a market-making firm that presumably has some good tech.

I mean, yeah, but I'm not deploying systematic strategies, right? I'm more of an LP in that. I'm not doing signal generation or anything. I'm just candidly not smart enough and not good enough of a programmer.

I think I'm decent at mid- to long-term capital allocation, and I'm decent at saying, "Hey, I have this thesis," and potentially being correct on that thesis. But more importantly than that, you have to bet on the right thing for the right duration, right?

You can say, "I think DEX trading is going to grow," and then you're stuck long Ethereum instead of Solana. You were right, but you were also wrong. You could have said, "I think perps trading is going to grow," and you longed Lighter at a $1.5 billion valuation, like Founders Fund did, and you should have just bought Hyperliquid and you would be up hundreds of millions of dollars.

I think it's one thing to be right about what's going to happen. It's another thing to find the right thing to bet on. I spend my time doing that rather than trying to guess the direction that the wind's going to blow for short-term Bitcoin trading.

But I think there are just spots that feel obvious. I'll do most of my volume on a day where Bitcoin's down 20%. I'll look at even something like Ethereum and say, "Is Ethereum roughly 20%-28% less valuable than it was yesterday?" Probably not, right? You can have some reasonable assumptions about mean reversion there, and you can put on a trade.

Back to shorting alts as well, I think people forget: if you have alpha, you should not only have alpha in picking longs, but you should also have alpha in picking shorts. And yes, if you are outright naked long something and it goes up 10% and your short leg goes up 3%, you've only made 7% instead of 10%. But risk-adjusted, it's much better.

You are paying slightly higher fees, but if you do have alpha, you should be able to pick something that's going to go up less when your long leg goes up and go down way more. It's much more important to protect your downside in crypto because I fundamentally believe a lot of the returns come from having capital when people don't.

Crypto is very leveraged. Crypto is very volatile, and these opportunities present themselves where everybody understands, “Hey, I think Bitcoin’s cheap here,” or, “I think that this is a temporary dislocation because of something that happened,” but they didn’t have capital to buy. When FTX happened, unfortunately, I had quite a bit of my cash on FTX, which really hurt.

Even though everybody knew Bitcoin was unbelievably cheap at 18K or wherever it traded down to, it didn’t matter because no one had capital to buy. But someone who did have capital to buy, whether through luck, skill, or cunning, was able to make unbelievable returns without any of the headache of trying to guess short-term price movements in Bitcoin.

No, I totally agree with that. I think the number-one thing is just capital preservation. I remember that the most money I’ve ever made was post-FTX, because we just went super deep into Solana, super deep into Bitcoin, and specifically GBTC. We bought a ton from the FTX estate after they liquidated.

It was crazy because, in situations like that, you’re not fighting with anybody because, as you said, nobody has the capital. Nobody has the capital to deploy. So, I think if there’s probably 1 lesson to take away from this entire chat, it’s: make sure you don’t blow up.

8. Trades For 2026

Managing the risk of your portfolio, whether that’s not just straight-up naked longing, layering in shorts, or using options to do that, is extremely important. So, I think with that, the last thing I want to ask you, because everyone’s going to hound me if I don’t, is: What are your big 3—or maybe there’s just 1—big 3 trades for 2026 through 2027? What are you super convicted in right now, if anything?

Bitcoin snapping back and correcting some of the ratios between QQQ and gold. Outright long Bitcoin should get paid at some point. I don’t know when, but that’s our bet for this year. I wouldn’t use long-term options and pay theta. I would just buy spot or levered spot.

I think perps are going to continue gaining market share versus options, so own things that will, in the future, proliferate the adoption of perps, segue into it, or just outright be perp-dominant, like Hyperliquid or HOOD comes to mind. I believe we do own HOOD, so I have to be careful and preface it with that. This isn’t a security recommendation, but we do have—

HOOD got totally nuked recently. So, if you’re bullish on HOOD, this is probably a great entry for people.

Yeah, correct. We’ve been adding recently. I think there are 2 facets. There’s Hyperliquid for the on-chain, more tech-native, more informed, sharper capital that understands the benefits, and then HOOD for the average, everyday American retail. You kind of want to own both, as they serve 2 fundamentally different marketplaces.

The market should grow, so you want to own both segments. 1 may perform better than the other, and you should be intellectually malleable to slash your exposure between both. Then I don’t think—I know; I fundamentally believe this—aggregated trading experiences, not just crypto, but ideally encapsulating all the relevant products that people want to trade, are going to accrue all the value.

That’s why we’re spending all our time building something like Full Stack, which, in short, is going to be 1 platform where you as a trader can touch all the relevant products you want from 1 deposit source. You won’t have to bridge, and you won’t have to think about moving your capital across different venues. You may be able to be completely chain- and venue-agnostic if we do our job well enough, where you just feel like you get convenient access to the products you want.

I think trading generally is going to continue increasing—retail adoption of trading, retail interest in trading. I’m pretty—I am pretty bullish on AI, candidly. I think you are still going to continue to get paid to be delusionally bullish on the progressive nature of technology advancement. And so you—

So you’re not a Sutskever doomer?

No, I’m not a doomer by any means. I just think there’s so much capital in the world, and it has to go somewhere. The potential upside for AI is infinite, right? I’m summoning digital god. I’m going to make something that gets me all of the value and all of the money. That’s a very compelling argument that isn’t easily dispelled.

The Bitcoin argument of, “Oh, this is going to be the dominant currency of the entire globe and it’s going to win everything,” is probably going to take longer than we expect, or maybe never play out quite to that scale. But that’s a pretty good sell for capital. AI, fundamentally, from a sci-fi perspective or an infinite-return perspective—what’s my risk-reward if the returns are infinite? Well, I should always make that bet.

From an expected-value perspective, AI is still pretty good. So, I wouldn’t fade AI this year, candidly. Politically, I think we’re in for a lot of volatility. I think if you had to be long societal unrest, political unrest, you should do that—

That’s probably the gold trade, but yeah. I think a portion of it is dark, but hopefully it’s some time out. Maybe we get a few years before this really comes to a head.

Dude, this was an awesome conversation. I really appreciate you coming on the pod and talking about it. I know our listeners are going to love this, especially the way that you think about trading and investing, which I think is pretty unique and, as evidenced by your returns, has been pretty successful. So, we appreciate you coming out.

I really appreciate it. I really appreciate you taking the time to have me on. I don’t do many appearances, and I try not to be repetitive. Hopefully this was more of an approach to trading. I haven’t talked about trading in a long time. I’m really happy to be here.

If people are interested, I think I’ll leave the podcast with 1 thing. I think crypto is very isolating. It’s very easy when prices are down to become apathetic about crypto and to quiet quit and slowly just leave, bleed out, or whatever. I totally understand that.

But if you have the mental fortitude to realize this is where the returns are generated, this is where the most asymmetric opportunities occur, because there are just fewer eyeballs and fewer dollars looking at them, if you’re able to have a framework around that, that is where potential amazing returns can come from. And not just with your capital, but also with your time.

Thinking about where I should spend my time, what company I should work at, and being very thoughtful about that is something I think people, candidly, spend too little time on. Or thinking about: What is my career trajectory? Why am I working where I’m working? Am I just optimizing for capital and stability, or do I really want to work someplace with tremendous upside?

I always leave any podcast with this. If I could implore 1 thing of all people, it’s this: People making media and putting content out there—the haters are always 10 to 1 compared with the positive people. Haters are very loud. People who are enjoyers are very quiet.

It means the world to someone, especially when you have no idea what their mindset or mentality is. It’s very important to tell that person you appreciate their work. So, Avi, I really appreciate the work you do at 1000x. I really appreciate you having me on. I sincerely mean that. But for everyone else, go out and tell someone whose work you admire—

Dude, that was an awesome close. I appreciate it. I just want to add 1 thing, just because you said something that is—you literally did exactly what we set up the podcast to do, which is, when Jonah and I started the podcast, we said, “I think we need to help people figure out what to do with both where to put their money and what to do with their time.”

You wrapped it up beautifully there. So, thank you again.