Undercapitalized Alpha: Why Crypto Still Offers Outsized Opportunity - TOKEN2049 Dubai 2025

uh we're going to be here talking about what are the under capitalized opportunities that are left here in crypto. So I want to just give I think most people probably know you guys but just to give a quick framing of what we've got here on stage. So Raul, you're a macro mega bull. You've called for Bitcoin to go to $1 million. I don't know when, but yes, maybe.

You're bullish. You're very bullish. You're very bullish. Okay. Dogo, your background.

You built Anchorage, one of the largest uh custodians in crypto, very institutional business, and now you're a VC covering tech, fintech in the crypto space. Um, so the first question I want to ask you guys is what are the indicators that you guys look for from a macro perspective that you think are most if if someone's just going to look at one or two indicators that are going to tell the most of the story, what should they be looking at? For me, it's pretty straightforward. When I look at what moves Bitcoin, 90% of the entire price action is explained by liquidity. So yeah, we build complicated models for that.

How do people look at it? Pretty simply, look what the dollar's doing. And the other one is look at global M2, which I think you can get on Trading View. Those two will give you a pretty decent idea of the forward direction of the market. It leads by about Global M2 leads by about 3 months.

So that's an easy way our financial conditions easing or timing is liquidity coming into the system. So what's M2 saying right now? M2 says and it's been mapping like a 98% correlation recently which is very high and it won't last but it just basically says up only all the way through to the end of the year. And is this only for Bitcoin or is this alt as well? No.

So what happens is particularly at this phase in the cycle which is the debt refy cycle. What usually happens in year four of a crypto cycle is that alts start to pick up as well. So risk takingaking goes out the curve and goes further out. So Bitcoin dominance tends to be high with a few projects that have been chosen. So Salana and Sue have probably been the two of the last two years.

But what happens in the latter part of the cycle is usually alt season. Um and it won't be everything because there's millions of alts now. I mean who knows, right? But generally speaking, a lot of things just number go up. So, it becomes a much easier risk-taking environment and you confuse yourself with being a genius because everything you touch goes up.

I I hate that I'm dressed as the macro investor and you're dressed as the the startup guy. I there's a mistake here. I don't know what's going on here. I will not do macro, you know, prediction. One thing to to say is that obviously across time there have been a ton of different narratives and if we're talking about something like Bitcoin, there's not a uniform narrative.

There's a bunch of narratives that are overlaid on it. There's a risk asset narrative. There's the obviously store of value narrative. There's the u mimemetic narrative. Uh there's the opt out narrative.

There's the payments narrative no matter how small it is. And so there's all these narratives that are overlaid. It just makes it so hard to understand because it's like extremely complex system and the overlay of all these things kind of moves alongside it. Ultimately in general I agree that liquidity runs a lot of the things around us. Let me just switch the focus a little bit.

Obviously crypto is many things. Um, one of the things that it is is companies and stable coins and companies that have real revenue. And so, one of the things that I like to look at is what is the global set of the sum of all of the either run rate or recurring revenues that the companies that are actually operating crypto have. Obviously, you have accessory companies and infrastructure companies, legitimate recurring revenue. You can sum all of that.

You have run rate and uh, GMV and GPV and all these other metrics that you can collectively look. And I like looking at from the lens of companies versus the lens of the blockchain because as you know historically we've had things like TVL which are easy to fake and fool and it's very hard in a company that has metrics that has quarterly. So so if you're just looking at companies obviously the you know the biggest companies making the most money in the space are exchanges and their revenue is very procical. What is what does that tell you? Where where are we right now in the company revenue story?

They're the issuers making the money. Uh the exchanges that's true. That's Tether's also making a lot of money. stand number one. No.

And and you look at it and you realize that they actually have many different um businesses. If you look at the Coinbase K1, you realize that a big portion of their revenue uh which is great for them diversified on dollars is obviously coming from Circle and USC. You realize they have Coinbase cloud which is a growing business combination of recurring um run rates in platform fees and staking fees. You realize they also have like the fees themselves for the trading components. They have the institutional side.

So we look at this actually pretty carefully. they're very well diversified revenue businesses and that is a good way to actually go at the system um and inspect and say okay this is recognizable publicly traded numbers that are actually being reported with with legitimate accounting versus going to a blockchain explorer and saying okay this is what's actually okay so so Robin Hood uh Q1 numbers I think just came in and they were below what they were in Q4 so it looks like trading volume has pulled back somewhat in Q1 um what does that tell you it's all about liquidity it's all about liquidity that it's all about liquidity it's all about liquidity so when liquidity is drying up in the system, there's less volume. When liquidity is plentiful, people have more money. Now, one of the things we've got right now is the business cycle is still pretty negative. So, at the ISM below 50, what does that mean?

It means companies aren't earning as much and households aren't earning as much. So, therefore, people aren't taking as much risk. As liquidity comes in, people start recycling capital into financial markets. Volumes go up. So we saw that the back end of uh 2024 Q1 was the payback for the strong dollar and high rates to happen in in you know with the 12week lag.

So I it's all liquidity corporate earnings and liquidity and business cycle too. If we're looking at the crypto public markets, sure, but at the same time, early stage is different, right? Issuance is at the all-time highs. RWAS keep being issued on chain. GMV of a stable coin companies are blowing up.

Revenue is increasing. These companies are 3xing year-over-year. They have great retention rates. And so, crypto is not a monolith. There's all these companies.

If you want alpha, obviously, as venture investors, very long-term horizons, we're investing in these early stage companies, but it's not just about the tokens. Yes, we have token warrants. have these liquidity dependent components at the end of the end of the rainbow in terms of liquidity. But there's a ton of crypto that has nothing to do with publicly traded tokens and that is growing and in fact it's fantastic because we if you look at crypto as overall before we had Bitcoin then we have all these other things and now we actually have a pretty good set of a of a portfolio of different things that operate in and are you finding more opportunity in the equity or the token side of early stage? It actually even that just it's a wave.

Yes, there's been the L1 narrative and there's been kind like the primarily tokens where all the Ves were looking at it and for example we were into bridge um and we were part of the acquisition into Stripe and if you see that that was an investment almost three years ago so three years ago you had to be looking at equity only none of these companies ever going to issue a token Anchorage certainly is not really going to issue a token we're a fally chartered bank and so it's like that actually takes away from the reputation and trust and there's so many businesses that are growing so fast that are so necessary to bridge this tradefi world with the DeFi world that have real alpha that are generating revenue and we should talk about the M&As, right? This year alone, we have like three multi-billion dollar or over a billion dollar acquisitions. So, what a great way to show that the market is maturing. So, that that's certainly a good sign for the industry. At the same time, you know, if you look at the the crowd of people here, they don't get to participate in private market investing, right, for the most part.

So, their their access is through public companies or through tokens. Now, your story, Raul, is that most of this is being driven by global liquidity. uh when is there ever going to be a point where crypto asset prices decouple? No, I mean just to go back to the points you're both talking about, there's another factor here that's really interesting to me because one of the things I uh I also run as a fund of crypto hedge funds. What we're finding is VCs get in early.

The price of the token generation event is generally too high for the market demand because liquidity. So what happens is the tokens drop early and then what it leaves is the hedge funds who are the really the primary sources of capital in the secondary markets and they're not that big to find tokens now at a discount. So these things all fall about 70% and it gives them a secondary opportunity that is the same opportunity retail gets as well. So it's not to buy the token generation event. It's let it settle for a month or two and then look at classic you know network adoption model.

What's getting adoption? I use kind of metaf's law approximations to do that and you can find from that great opportunity. So you can get a double stab at the same thing which is why you're seeing these hybrid funds as well that will also you know do the early stage get the token do the token generation event and also will buy tokens. So there is opportunities for retail within this. Okay.

You know we're also seeing by the way I think in general with venture major pullback on any kind of fundraising round PTGE just people are realizing that it's actually the worst riskreward. you're demanding the highest valuation before the token gets listed and you have made basically no progress. I already inspect your test net or whatever the difference between a test net running and the mainet running. There's no difference and you're trying to get a massive uptake on the valuation. So here is interesting and I I I hear you on retail does not have access to the private markets.

It's been one of the major conversations over the past few decades where if companies are staying private for longer even outside of crypto then retail doesn't have access to hopefully we would have an ability to do it and I think one of the narratives that is actually pretty exciting right now and that actually may change this is crypto taking its own hands IPOing crypto companies so onchain IPOs I think that would actually be one of the ways in which we can solve this liquidity so are we going to see a rise of the ICO market in a different format for capital formation it feels like it has to happen that is okay that is a fantastic fantastic debated fantastic conversation. I think the one way in which we have to come at it, we came we came at it on the ICOs with just this is a fundraising mechanism in which essentially people have no rights and now what we're doing is no no regulated institutions that can issue securities on chain that have already have rails and platforms and are under the SEC and have told the SEC and are collaborating with them are creating tokens that are a superposition of a publicly traded equity and an onchain token that have the same rights, same set of rights. So now you have uh rights to the obvious cash flow, you have governance rights and these things actually are in a superp position. That is actually what's exciting to me is sort of the availability to the markets that the ICO markets were available. Yes.

So the liquidity comes from more retail um earlier on the so not institutional necessarily institutional but the same type of rigor and transparency that we have uh or at least very close to it to the public markets. I think this is actually the new innovation that we can help ourselves to solve the problem that you're saying. So people can without being major institutional investors get access to tokens and crypto companies and equity even on an early stage onchain without having to suffer through this candidly what we saw with the ICOs which was there was there was no control there was no standards there was no really standards for transparency was all okay let's talk about the private markets then so uh the title of this talk is about under capitalized alpha historically in 2021 2022 you saw an enormous supply of capital being provided to the market huge huge private fundraises, huge VC funds getting raised and what you've seen over the last couple years is a major pullback in the amount of capital coming into the space. Now, some people would say that that's good, some people would say, well that's bad. How do you guys read the change in the capital supply in crypto and what effect it's had on the overall market?

So, for me, there's there's still a skew which is VC versus professional um capital in secondary markets, right? The hedge fund industry is about 12 billion in crypto. It's $4 trillion in traditional markets, right? Well, VC, let's say take a peak of 2021 raised $64 billion. So, we've got what happens is these token generation events happen.

There's just not enough professional capital, which means that for me, the hedge funds have huge alpha because they're not competing with there's currently in the US there's more hedge fund managers than there are managers of Taco Bells, right? There is so many, right? So that's how competitive that market is. But why why do you think there's such a big delta? Because they haven't been able to raise capital yet.

But why why why aren't they able to raise capital if the alpha is there? Because there's it's easier for investment committees of family offices and institutions to put it in the VC bucket because then they don't have to say it's crypto. They can just say oh it's technology, right? And then they don't need marktomarket because they don't know how to deal with the volatility. Right?

So these hedge funds are volatile. If they're directional, they're very volatile. But the returns have been stupidly large, but the investors don't know how to deal with them yet, but it's coming. So there So VCs were relatively attractive because they're hiding the volatility in these illquid marks. Very much so.

What's your take, Yogo? Well, I think crypto really proves out the inefficient market hypothesis. Uh nice. Look, there's a lot of there's a lot of alpha, especially when you're actually looking at how inefficient these protocols are. Protocols coming out all the time.

Tons of interesting new economic mechanisms. There's so many ways to actually like onchain to make money on arbitrageages and on just participating in these protocols. Think about this. What we've created as an industry with tokens is this magical power to overcome the cold start cold start problem. We can overcome the cold start problem by aligning incentives as our early users with the actual network participants and create a network that has network effects in which value acrews to token.

That is a superpower. But it has a super weakness. The super weakness is the fact that tokens hide away product market fit. Nobody really knows if these things are working or not. And I think related to this is the fact that there's a lot of alpha and a lot of if you understand what's actually happening and how the economic incentives are actually structured can actually make great business decisions on on on how to make money here.

But this is the active side of the market, right? We spend a lot more time and I spend a lot more time thinking about the active side of the market of how I can like I don't know triple lever use some flash loan to actually take advantage of some arbitrage. That's really not what I do. There's always going to be alpha in amazing founders building amazing products in some new rails or some new opportunity that's just come up. That will never change.

It hasn't changed to this point. Uh we have been doing this for a century of the venture capital markets uh or just under that. And every new wave of technology creates a new set of founders that see the opportunity and actually are able to capitalize it to build real businesses. So that will always have alpha at the earlier stages of like really like seeing through seeing the present clearly seeing through the lack of part market fit through the tokens to the incentives into real businesses. Sure.

So one of the things that we've seen over the last few months is the relative outperformance of Bitcoin underperformance of alts and it's been something of a bleed that's been happening over the last roughly year and a half call it. And one of the common refrains you hear from people of why this is happening is an over supply of tokens is that basically there's too many tokens launching. Yeah, the valuations are high, but also there just too many of them. And does this resonate with you guys? You think this is correct, or is this a misdiagnosis of the problem?

I think there are more opportunities than there is attention. We're still in an attention-driven market. So, you know, we saw with meme coins, it got oversaturated, then attention gets spread, and therefore number doesn't go up anymore. But overall, if we if we think about alts again, it's it's where are people in the risk-taking cycle? It has been driven by the ETF uh flows.

We've not had household earnings going up. We've not had capital to reinvest. Liquidity. It's always liquidity. It's liquidity.

And so what will happen is yes, a bunch of these alts will not go up and they'll go to zero. We all know that, right? They're all still early stage businesses and the tokens are very early, but there'll be a whole chunk of this stuff that will outperform and we'll be scratching our heads on why Doge has outperformed Bitcoin in the last 10 years. Why does this liquidity story predict the disconnect between Bitcoin and alts? Because it's every time it's the business cycle.

So, I've got a nice chart that shows every time the business cycle picks up, what happens is alts outperform Bitcoin. It happens every cycle. It's exactly the same as small caps outperforming large caps, emerging markets outperforming developed markets, the same for high yield outperform. It's the same risk curve, right? We think that crypto is some unique beast.

It's the same macro thing. It just happens to be a more volatile and faster growing opportunity. Okay. Well, do yoga is a VC. You and I are we part of the problem?

Are we creating too many funding too many of these tokens? Yeah. Yeah, for sure. Um, do we need tokens for everything? It's the answer is no.

But again, like it hides broad market fit. It looks like everything is going initially very well. You can mark up your bag. So, the incentives for VCs are also not aligned because you can yourself get up like caught up in the fact that these things are working when in fact they're not. and then only when the tie goes out you actually see who's uh who's swimming naked right so I will say on Bitcoin look we don't we can't have all these tokens have this characteristic of reflexivity and moneyiness moneyiness is one of the things that has clear network effects and and so there's not that that much space for as many of these it turns out that these other tokens can't benefit from from that characteristic and have to benefit from the closer to business metrics characteristics and some other types of utility and so when you see that obviously there's not as much space for all of these the way that I see for what it's worth and we still see layer ones being like funded and whatever.

The way I see this comparison is actually an interesting one which is probably the best analogy is programming languages in terms of how many blockchains will it have what's the what's the answer to how many blockchains will we have and so how many tokens uh will we have that are layer one tokens and we can talk about like the ones on top of that but if you think about it programming languages literally all do the same they are all turning complete definitionally if a problem if a program can be programmed in one language it can be programmed in another turn complete language so they're all the same so why the heck do we thousands of them and right now hundreds of them that are actually used on a natural basis. And why do they change the top 10 over time? Well, it turns out that programming languages there's two reasons why they actually get to popularity. Number one, they create some new intrinsic innovation. So you go from something horrible like assembly into something that is actually much easier to digest like C.

Um and then from C you have memory safety, you have thread safety, you have um English-like programming ability with Python and reasoning and um and then that's one of them. So technological changes and I think you can actually make the equivalent of like you know bitcoin being assembly, ethereum being C, Solana being rust whatever it is that you want to talk about you can like see these and the next thing that happens is the only next programming language that gets popular is because of some external technology wave. What are those external technology waves? The rise of software, the rise of web give r the web programming give rise to ruby on rails and the rise of AI gives uh rise to python and AI specific programming languages. Um mobile programming gives rise to objective C and swift.

That is the only case in which now the next top 10 programming language actually gets to exist in sort of because there's tokens we VCs forget that to get to the top 10 programming language and to have actually a massive outcome you actually need an external wave of technology because we already have all the competition on the ground we already have all of the basic programming languages and I used to to look at all of this stuff to assess you know what is going to last is all of this uses network adoption models so there's a lot of people are using discounted cash flows and all of that it doesn't work the reality is it's network adoption. So how do you approximate metaf's law? Meet's law is what Google is, what the programming languages are, they're all network adoption. Explain what metaf law is. So metaf's law is essentially the square roots of the number of users or the square of the number of users, but that's complicated.

What it really means is number of active users and total value transacted on chain or number of builders. You know, you can approximate that side. I found the easiest way to approximate it is total value transacted let's say in a week or a month total number of active users over the same period. You chart that and it exactly mirrors almost every crypto. So the market is pricing it according to network adoption.

So then what you're looking for is num number of users going up. Okay, that's number one thing. If not or you have a few number of users but massive value. Now Bitcoin has both high number of users massive value transacted. Ethereum, lots of value transacted in smaller transactions but huge numbers of users.

Salana, they all fit into this model. So, it's a easier way to decide what's got real network effects, what's a real project and what isn't and not using stuff like TVL and all of this stuff because so much but but there's a bit of a disconnect here between the story the two of you are telling which is that increasingly what you're seeing in in criticism of a lot of these tokens is that okay once upon a time they traded on a narrative of like oh you know I'm an A I'm an L1 for AI I'm an L1 for this L1 for that and now increasingly those stories are being jettisoned in favor of show me the revenue, show me the fees, show me the TVL. He's got the harder job because he needs to decide can this have network adoption. Hard you're giving too much credit. But you've got to decide could this have network adoption.

I'm more secondary market active and the hedge funds that I invest in are all secondary market active. Their job is to say, well, I just prove that it's got network adoption. It's much easier than I think the VC. But you can you can fake network adoption, right? So we say users really we mean addresses.

Um yes but addresses need to have activity. So it's the two things you can fake it for a period of time but if not they the foundations run out of money. So you know there is a period of time that how how is the way that you've underwritten these chains changed over the last call 3 four years is it basically the same or has your approach changed? No it's definitely it's definitely changed. I mean there there was a time in period in uh in the ecosystem where TVL was the only thing that mattered and we saw so many games being played together and earlier from that there was a a time in which people actually cared about addresses generated.

I mean think about that you know literally hashes of public keys the number of hashes of public keys that are out there transacting obviously that's not a good metric for anyone even it's at best like you know a paintbrush style of approximation we just didn't have uh better ways this is actually evolved and in fact it kind of ends at the end in end in end state which is kind of fascinating I I this is a recommendation that we tell um entrepreneurs all the time which is sometimes at the earlier stages actually much better to go fundra on a story than real revenue so do not show me the 100k or the 200k of revenue you have because you're going to be judged on whatever growth of this lowbase which is meaningless. But you can't get out of the fact that it's only 200k and you invest it at a $200 million valuation in a company generating 200k. But it's much easier to invest in a $200 million valuation company has zero revenue, but it's going to be 200 million, right? And so it's kind of funny. And the reason why I'm saying this is because you get all the way to the other extreme, which is deepen are projects that have some kind of like physical representation in some real revenue model or a cleaner revenue model.

And so they're the worst affected by the lack of narrative because there's something real that I can point to. So to a certain extent in crypto you've seen this and it's part of the reason why again I think there's a divergence between bitcoin and everything else because bitcoin has moneyiness has all this like intangible way of um of of pricing it and even though I agree that generally over time like developers and all these other mexes have been decent proxy metrics like I think everybody else that wants return over the long term especially venture style returns 10x really trying to write on something else that is more real more real to the business especially as around us now we have stable coins being issued on these chains we have RWAS that's real tech create those are real business real institutions and so to a certain extent it's like how much of that value should be acrewing to the the blockchain it it's basically crystallizing there's real revenue metrics now crystallizing that's actually worse for valuations which is funny because it should be the opposite way okay so coming back to under capitalized alpha you mentioned deepen what are some of the sectors that today you guys feel are under capitalized and need more investment is it deepen is it RWA is it fintech like where do you feel like the the money should be going but isn't going today. I think it was with CZ yesterday. He said this thing that everybody says, totally says it, everybody says it. It's like people are not building enough applications.

So we can build infrastructure stuff, we can build, you know, the financial stuff will happen anyway. There's so much um incentivization to get involved. When you say applications, does that mean social? Does that mean games? I'm like, where do the billion people come from?

Where are the two billion people? Well, finance is one of them. Okay, we know that. But then there's the big cultural communities of gaming, entertainment, sports, um, social media, all of these things. We've we've failed to get any of those any traction.

But the soon as one of those happens, it's going to change this entire industry of crypto cuz suddenly we go from 500 million active users or 600 million where we are today, we will go to two billion, three billion. Digital ID, digital ID, one thing could easily get three billion users. Okay, that's a gamecher. They're not high economic activity and metac law, it's a lot of those but very small value, right? But once you've got that, if you think of what happened in India with Aadhaar and the India stack is once you build out the UPI payment system, they built all of the fin fintech rails on top.

So once you've got users who are active, you can build anything on top of it. Do you agree with the story? No, I'll I'll take the other side of this one and let me just say the following, which is I don't know what's under capitalized, but there's things that are clearly over capitalized. It's much easier to tell to tell what's over capitalized, you know, layer ones, what's etc. There's not enough either technical innovation or some new external wave of technology that requires one of these.

We basically've built like through the cap theorem all combinations possible of this thing, which is fantastic. It's what it's supposed to be. And what the market is telling us is that again, like we've already done enough of experimentation and there's already a bunch of winners and we sort of already have our winners in the category. So I'm not going to take the the market's not going to compensate me from the risk for the N plus innovation unless it's actually really really ma major. Now it needs to be major innovation.

So that's the market telling us that that has been over capitalized. The reason why I'm taking the other side of this is because build it India will come in general is a bad bad investment strategy. But it's kind of funny how stable coins have been that right we built stable coins because we wanted to trade over the weekends and we wanted to have a crypto a dollar that moved at the at the speed of crypto rails. So we built it for trading, for speculation and all of a sudden we can see it with our own eyes, not just businesses, but just retail accessing dollar and like these applications just adding uh ledgers and dollar ledgers permissionlessly in all these countries. And I've seen the pitches.

I'm being pitched tons and tons of like consumers uh consumer fintex that would never pitch me because they didn't have a crypto angle except that now they do because they're building all of their infrastructure in crypto. So I actually don't see people I we also see people starting with crypto rails and people fintex but the cool part of this space is that the fintex are using crypto and they're moving wholesale to the crypto rails and those people have users. It's very common for me to see someone that has 10 million monthly active users 20 million money monthly active users um in in in in Africa or in South America or in Asia and they already have this customer base and they're sort of moving to crypto rails and that to me is very exciting. Yeah, and I I agree. Fintech was one of the buckets I said excluding fintech because it's obvious that money is one of the largest applications on earth.

Aha. But the beautiful part here is that the reason why we never talk about non-financial products in crypto or non-financial use cases is because crypto turns everything into a financial use case. You cannot give me you cannot give me an example of a crypto company that I can't just turn it around and say no that's a financial company. everything like social I'm selling my social network like when you add to but everything is already a transaction you just don't know it so every time you go onto Google every time you go on to X somebody's monetizing you exactly and the idea of web 3 is we can monetize ourselves so it's a broader distribution of the capital available that gets monetized so everything we do is a you know time is money that's right that's right our time our attention is money and the other thing by the way that I'm very I'm very complaining about this one in crypto is that every time something works just the public in general like removes it as something that crypto did. So a good example like stable coins are the way like stable coins are no longer crypto.

People don't even give us the credit that that is actually cryptos. They just say no no no that is that is a payment system that is something that I can see value for whatever. So to a certain extent you start excising the things that are working from crypto. Oh RWAs are institution just wanting to have like faster settlement and more liquidity. That's not crypto.

Oh stable coins are just you know tokenized dollars. That's not crypto. And then you end up removing and you end up with what? They won't let us have nice things. That's right.

You can't have you mentioned institutions. I want to talk for a second about institutions. Um, obviously Anchorage, you service a lot of institutions when you're building Anchorage. Um, there's been a long time refrain in crypto. The institutions are coming.

The institutions are coming. Black Rockck now has launched some of the most successful ETFs in history. They've got their own onchain money markets. We've got RWA growing at a record pace. Stable coins, as you mentioned.

Um, you know, even folks like Morgan Stanley and JP Morgan, all these people are coming around the table. Is this it? The institutions are here. Is this is this what it means for the institutions to be here? Are we waiting for something else or like is it is it over now?

The institutions are in and now we have something else to look forward to. So I I'll take this one just because I think what you're implying here is sort of like do Bitcoin is 16 years old. We keep saying that this is early. Um and is this still early? Is this is this early?

So no, it's not early for Bitcoin. 16 years I don't think is is is early. However, I think it's fair to say that crypto again is not a monolith. There's so many things that are happening simultaneously. RWAS the the the infrastructure I mean look legitimately until 18 months ago we didn't have sub one cent instance settlement in a blockchain that people trusted we didn't really have that that available it wasn't it wasn't there and definitely wasn't there where institutions thought it was trustworthy which is the other next step now it is and so that's why you're seeing now this adoption but we're at the beginning of that cycle so you can't put stable coins and say no Bitcoin has been around for 16 years where the hack is like stablecoin like why is not 50% of the remittance market in the world?

Well, the answer is because, you know, we had issues with things that were called stable coins that were installed stable coins that set us back. We didn't have blockchains with someone on transactions. Transactions were very expensive. We didn't have issuers that were transparent enough um and that had transparency that such that the institutions could trust. So, you can't actually I think it's unfair.

You have to unbundle it and you have to like look at every cycle um on its own timeline. And in that sense, yes, institutions are here and they are really building. It's just it's been two years, three years for some of the big ones. And there's two parts of the institutional space. There's all of the financial industry itself using blockchain rails.

But what matters to them is a the transaction they do amongst each other. The other thing is a function of customer demand. So the big pension plans, the big pools of capital, they've barely done anything. I mean, barely done anything so far because the regulatory environment has been so difficult. So we've got all of the endowments, all of the pensions, the insurance companies, the reinsurance companies, these massive pools of capital, hundreds of trillions of dollars have barely started.

So the banks and the entire financial industry, you're seeing Apollo tokenized funds, stuff like that. Well, who really wants to buy that stuff yet? Their customers can't do it. So they're solving small parts to test out the technology. This whole thing really is going to play out over the next 5 years and not the next one year because these guys don't move at that speed.

Got it. So institutions are coming but of a different kind than the one that we already see. Yeah. They're here and there's various component parts that need to change and a lot of this you know to get equities on chain that's a big battle amongst so many incumbents right that's the hard thing as you were mentioning and they're also not startups. Uh it's not like they're here and then all of a sudden in three months they build like amazing products.

No these things can like stay on their labs for 18 months and then they kind of like get to prod. And the best thing to have an institution do something is when another institution does about does something about it. And so obviously Black Rockck was extremely important for the space. Um all of these large institutions like Visa, Stripe coming to the space those are the catalysts basically like the starting guns have been when some large institution does so you can only start measuring like when institutions will have real products that use crypto at a large adoption not from the time where stable coins were created but from the time where Black Rockck actually adopted. Yeah.

You're setting the clock for the adoption effects now and you need to look at that. Yeah. Okay. So to to wrap up, I want you guys to paint me a picture of what this cycle is going to look like. So paint me a picture just from from now, call it to the next 12 months.

What should I be looking forward to? What are the big milestones? What should I be watching out for that's going to matter to the overall shape of this market? Dio, why don't you go first? Thank you.

As the macro guy. Yeah, as the macro guy, clearly. Um, so let me just say I hate making predictions because I hate being wrong. And so this is actually where I come from. Go ahead.

You're on stage of token. We're here. We're here to make predictions. So, what one of the ones that I have from for myself is I think one of I don't know if it's this cycle, but I think it will be this cycle still. Um, this concept of onchain IPOs of let's not lower the bar of quality, but let's lower the bar of revenue of what's necessary for a company to actually be listed on chain.

Um, and make that a path to actually then be listed in a public traded company. Companies are staying private for longer. $500 million is known to be one of the marks in which like an actual underwriter gets excited. Why? Why is that the case?

So let's actually like solve our own problem and actually create value and create utility by automating and making it easier for companies to to be listed. I think this is actually a good thing and it's a narrative and I think we're already seeing announcements people trying to do this and it's not distributed generally as a trend but I think it's going to be a trend for this next cycle is going to be onchain IPOs which is a fascinating turn of events. They're actual securities. They're actual securities are registered securities. They're legal.

They have all of the apparatus that are going to be on chain. The second one that I like, but it's kind of like more pie in the sky is this thing that I've been calling generative finance, which is most of AI to crypto combination is obviously not not not very real. Like a lot of these things are not real. But one thing that's kind of interesting is I can say two statements that are pretty uncontroversial. One of them is that right now we have the ability of turning language into code and that those are LLMs and it's only getting better.

And the second statement is we also have the ability through DeFi to turn code into financial instruments. So if you take one in the other that means that we have the ability to turn language into financial instruments and that is what I'm calling generative finance which is pretty cool. So a lot of innovation I don't know if it's this cycle but a lot of stuff will come from hyper specialized financial products hyper specialized products that can just be built on top of these um this combination. Okay. So nothing about liquidity.

Nothing about liquidity. Okay. What next 12 months what should we see? I think IPOs and that's a big deal. VCs need to recycle capital and the investors need to recycle capital.

That is liquidity. But we're at the point in the cycle where that has to happen and that will unlock the next wave of capital investment into projects that come out in two or three years time. So I think that's really important. I think the rise of the sovereign wealth fund investor that completely solidifies what Bitcoin is to everybody on earth that is happening. So that's going to be a big thing for the rest of the year.

And I think somewhere somebody this year is going to make a big stab at digital ID. That has to happen. We cannot have AI. We don't know who's who on on X anymore. This is a massive problem that's going to have to get solved and somebody's going to have a stab at it.

Excellent. Well, thank you for sharing all this alpha with us. Round of applause for these two gentlemen. Thank you.