The Unknown World of Crypto Hedge Funds Exposed

Summary

In this insightful discussion, Richard Galvin, a seasoned hedge fund manager, shares his perspectives on the crypto market's current state and future trends. He emphasizes the importance of patience and strategic allocation amidst volatility, highlighting Solana, Yearn, and Telegram as top holdings due to their significant user growth. Galvin also discusses the potential of new layer-one protocols and the convergence of AI with crypto, suggesting a digital future where blockchain technology plays a pivotal role.

Takeaways

• 😀 Richard Galvin, a former banker with 20 years of experience, now runs a crypto investment management firm, DACM, focusing on long-only BNC strategy and institutional family office capital.
• 🌐 The crypto hedge fund industry is significantly smaller compared to the VC industry, with a focus on professional expertise to navigate the complex and growing market.
• 💡 Galvin's investment thesis revolves around the idea that to capture the full performance of the crypto space, one must look beyond just Bitcoin, Ethereum, or Solana for the next big breakouts and potential 100x returns.
• 📉 The crypto market has been weak for several weeks, acting as a canary in the coal mine, signaling potential downturns in traditional markets, which was observed in 2012 and is being seen again in the current market scenario.
• 💹 There's a substantial mismatch between capital in the pre-listing or VC market versus the listed market in crypto, leading to inefficiencies and potential profitability for hedge funds.
• 🚀 Galvin's approach to navigating volatility in the crypto market is to remain patient, stick to the strategy, and avoid panic selling or buying at market tops and bottoms.
• 🔄 The market phase for crypto is currently experiencing a cycle similar to 2019-2020, with a focus on major coins and ETF launches driving capital inflows, particularly into Bitcoin and Ethereum.
• 💰 Galvin's firm, DACM, maintains a high allocation to crypto assets, typically over 80%, even through periods of volatility, to capitalize on the potential for outsized returns.
• 🔑 The importance of patience in crypto investing is emphasized, as the biggest mistakes often happen at market extremes; thus, sticking to a well-researched strategy is crucial.
• 🔮 Looking forward, Galvin anticipates that the crypto market will continue to evolve, with new layer-one protocols potentially emerging as the next big opportunities for growth and investment.

Q & A

What is the primary service offered by Kraken OTC mentioned in the script?

Kraken OTC offers a premium over-the-counter (OTC) trading service for executing large crypto trades of more than 100,000 off the open exchange, providing 24/7 access to deep liquidity, minimal slippage, and competitive execution and settlement services.

What are the two options for trading provided by Kraken OTC according to the script?

Kraken OTC offers two trading options: chatting securely with their trade desk for a personalized high-touch service, or using their self-service RFQ for super-fast automated OTC trading.

What is the role of Richard Galvin in the crypto space as discussed in the script?

Richard Galvin is the founder of a crypto investment management firm, DACM, which he started in early 2017. He has been running institutional family office capital through the crypto space for about six years, focusing on a long-only B2CV strategy.

What is the current size of DACM, the crypto investment management firm mentioned in the script?

DACM manages around 400 to 450 million dollars of outside capital, making it one of the larger and longer-established crypto hedge funds.

What does the acronym 'TMT' stand for in the context of Richard Galvin's background?

TMT stands for Technology, Media, and Telecommunications, which is the sector Richard Galvin focused on during his 20-year banking career at Goldman Sachs and JP Morgan.

What is the thesis of Exponential Age Asset Management as mentioned in the script?

The thesis of Exponential Age Asset Management is that to capture the performance of the crypto space, which is expected to grow from $2 trillion to 1 trillion, one needs to identify the next big breakouts where significant gains can be made, which is a complex task requiring expertise.

What does the script suggest about the current state of the hedge fund industry in crypto compared to the VC industry?

The script suggests that the hedge fund industry in crypto is significantly smaller than the VC industry, being about a fifth or less of its size, and that there are not many professional participants in the crypto market, which makes it inefficient and potentially very profitable for hedge funds.

What is the main reason suggested in the script for the inefficiency of the crypto market?

The main reason suggested for the inefficiency of the crypto market is the lack of professional participants, with the market being dominated by retail investors and a few large players, particularly private trading shops out of Asia.

What is the strategy Richard Galvin's firm uses to navigate the current volatility in the crypto market?

Richard Galvin's firm focuses on being patient, sticking to their investment thesis, and not deviating from their strategy during periods of volatility. They battle test their portfolio and ensure they own assets for the right reasons, avoiding panic selling and focusing on assets that can ride through volatility and prosper on the other side.

What is the general view of the speaker on the future of crypto and blockchain technology?

The speaker is optimistic about the future of crypto and blockchain technology, expecting the market to grow significantly from its current size of $2 trillion to 100 trillion by 2032 or 2034, with multiple protocols coexisting and thriving due to the large potential of the market.

Outlines

00:00

😀 OTC Trading with Kraken and Hedge Fund Insights

The script opens with an introduction to Kraken's Over-The-Counter (OTC) trading service, highlighting its benefits such as deep liquidity, minimal slippage, and competitive execution for large trades exceeding 100,000. The speaker then segues into a discussion about his background in the hedge fund industry, his experience with crypto hedge funds, and his belief in the potential of crypto assets. He emphasizes the importance of subscribing to his channel for valuable content and introduces the topic of the conversation with Richard Galvin, a prominent figure in the crypto hedge fund space.

05:02

😉 Richard Galvin's Background and Crypto Market Discussion

This paragraph delves into Richard Galvin's extensive experience in banking and crypto investment management, particularly his role in founding DACM, a crypto investment firm. The conversation explores the current state of the crypto markets, with a focus on market volatility and the strategic approach of being a long-only investor. Richard discusses the importance of patience during market downturns and the potential for significant returns in the crypto space, especially when compared to traditional markets.

10:04

🤔 Navigating Crypto Market Volatility and Investment Strategies

The speaker and Richard Galvin discuss strategies for navigating the crypto market's volatility. Richard emphasizes the importance of sticking to a well-researched investment thesis during periods of market stress and avoiding emotional decision-making. They talk about the tendency for investors to make the biggest mistakes at market extremes and the need for discipline to prevent panic selling or euphoria-driven buying.

15:05

💡 The Role of Hedge Funds in the Crypto Market

This section examines the relatively small size of the hedge fund industry within the broader crypto market, despite the significant opportunities it presents. The conversation touches on the inefficiencies in the crypto market, which can be profitable for hedge funds, and the impact of retail investors. Richard shares his insights on the importance of being ahead of the curve in the market and the role of hedge fund managers who understand the market's complexities.

20:06

🌐 The Impact of ETFs and Market Capital Allocation in Crypto

The discussion moves to the influence of ETFs on the crypto market, particularly how they have drawn capital away from other areas of the market, focusing on Bitcoin and Ethereum. Richard talks about the structural issues in the crypto space, including the mismatch between capital in the pre-listing or VC market versus the listed market, and the impact of altcoin space and meme coins. The conversation also touches on the potential for liquid market returns to outperform VC returns over the long term.

25:08

📉 Market Dynamics and the Influence of Asian Trading Groups

In this paragraph, the conversation centers on the changing dynamics of the crypto market, including the shift of capital to meme coins and the bypassing of traditional altcoins. The speakers discuss the influence of Asian trading groups and market-making firms on market movements. They also explore the concept of patience in investing, especially when dealing with market inefficiencies and the potential for high returns in liquid markets.

30:09

🚀 The Potential for Layer One Protocols and Emerging Crypto Opportunities

The speakers discuss the potential for layer one protocols in the crypto space, highlighting the need for these protocols to offer unique advantages to attract users and developers. They talk about the growth of consumer apps and the potential for new layer one protocols to capture emerging opportunities. The conversation also touches on the potential for AI and crypto to intersect in the future, creating new opportunities for investment and development.

35:11

🎮 The Intersection of Gaming and Crypto: The Next Big Opportunity?

This section explores the potential of gaming as a significant opportunity for crypto adoption and investment. The speakers discuss the challenges and potential of integrating crypto into gaming, whether through traditional games that incorporate crypto elements or through crypto-centric games designed to engage users in new ways. They highlight the importance of creating sticky, engaging experiences that can retain users and foster growth in the crypto gaming space.

40:12

🔮 Looking Ahead: Richard's Portfolio Insights and Crypto Market Predictions

In the final summary, Richard shares insights into his current portfolio, focusing on his significant positions in Solana, Yearn, and Telegram due to their strong user growth. He discusses the potential for a revaluation of the crypto space in the medium term and emphasizes the importance of being patient and focusing on fundamental metrics like user growth, TVL, and fees generation. The conversation concludes with a look ahead at potential opportunities in the crypto market.

Keywords

💡Kraken OTC

Kraken OTC refers to the Over-The-Counter trading service provided by the cryptocurrency exchange Kraken. It allows large volume trades to be executed outside of the standard trading environment, offering deep liquidity, minimal slippage, and competitive execution and settlement services. In the context of the video, Kraken OTC is mentioned as a premium service for significant crypto trades, highlighting the importance of such services for institutional investors and large-scale transactions.

💡Hedge Fund

A hedge fund is an investment fund that pools capital from accredited investors or institutional investors and invests in a variety of assets, often with complex strategies. In the video, the speaker discusses their experience in the hedge fund industry and the role of hedge funds in the crypto space, emphasizing their expertise and the potential for high returns in this market segment.

💡Crypto Trading

Crypto trading involves the buying and selling of cryptocurrencies like Bitcoin and Ethereum. The script mentions that crypto trading involves risks of loss, which is an important consideration for investors. The video discusses the complexities and opportunities in crypto trading, particularly for institutional investors and hedge funds.

💡Liquidity

Liquidity in financial terms refers to the ability to buy or sell an asset quickly without affecting its price. In the context of the video, deep liquidity is highlighted as a feature of the Kraken OTC service, meaning that large trades can be executed without causing significant price movements, which is crucial for large crypto transactions.

💡Slippage

Slippage is the difference between the expected price of a trade and the executed price, often occurring in markets with low liquidity. The video mentions minimal slippage as a benefit of using the Kraken OTC service, indicating that trades can be executed close to the desired price, which is important for maintaining the value of large transactions.

💡VC (Venture Capital)

Venture capital refers to funds invested in startups and early-stage companies in exchange for equity. In the video, the speaker contrasts the size of the VC industry with the crypto hedge fund industry, noting that the latter is significantly smaller. The discussion also touches on the allocation of capital to crypto VC funds and the potential for high returns.

💡ETF (Exchange-Traded Fund)

An ETF is a type of investment fund that is traded on stock exchanges, similar to individual stocks. The script discusses the impact of ETF launches on the crypto market, particularly how they have driven capital inflows, especially towards Bitcoin and Ethereum, and the potential effects on market dynamics.

💡Macro

In the context of finance, 'macro' refers to the study of large-scale economic factors and trends that affect the overall economy. The speaker mentions being in the 'macro crypto' space, indicating a focus on broad economic trends and their impact on the cryptocurrency market.

💡Token

A token in the crypto space represents a digital asset that can represent various things, such as a utility in a blockchain network or a representation of ownership in a project. The video discusses the complexities of the token market, the thousands of tokens that exist, and the challenges of identifying the next big breakouts in the space.

💡Meme Coins

Meme coins are cryptocurrencies that are created as a joke or for fun, often based on internet memes or trends. The script mentions 'memes and all the other stuff in the space,' referring to the volatile and sometimes unpredictable nature of certain cryptocurrencies that gain popularity quickly but may lack fundamental value.

💡Layer One

In blockchain, a 'layer one' typically refers to the base protocol or platform on which other applications (layer two) can be built. The video discusses the 'layer one' race, indicating competition among different blockchain platforms to establish themselves as leading ecosystems with unique advantages and use cases.

💡DeFi (Decentralized Finance)

DeFi refers to financial services that are decentralized, operating without traditional financial intermediaries like banks. The script mentions DeFi applications and their growth in users and revenue, highlighting the potential of these services within the broader crypto market.

💡Revenue Generation

Revenue generation in the context of the video refers to the income produced by crypto projects, particularly DeFi platforms. The speaker notes that despite significant growth in revenue generation, the prices of related tokens have remained flat, indicating a potential disconnect between fundamental performance and market valuation.

💡TVL (Total Value Locked)

TVL is a metric used in DeFi to represent the total amount of value (usually in cryptocurrency) that is locked in a protocol or platform. The script discusses the growth in TVL as an indicator of the health and activity within the DeFi space.

💡Altcoin

Altcoin is a term used to refer to cryptocurrencies other than Bitcoin. The video discusses the performance of altcoins relative to Bitcoin, the potential for altcoins to lag in market cycles, and the factors that could drive their growth and investment.

💡Market Inefficiency

Market inefficiency refers to situations where the market does not accurately reflect the true value of an asset or where there are opportunities for returns that exceed the norm. The speaker mentions the inefficiency in the crypto market as a potential source of profit, particularly for hedge funds that can identify and exploit these inefficiencies.

💡Patience

In the context of the video, patience is highlighted as a key virtue for investors in the crypto market. The speaker suggests that remaining patient and sticking to a strategy, especially during periods of volatility, is crucial for long-term success in the market.

💡Structural Issues

Structural issues refer to deep-rooted problems within a market or system that affect its functioning and performance. The script discusses structural issues in the crypto space, such as the mismatch between capital in the pre-listing or VC market and the listed market, and how these issues can impact the allocation of capital and the performance of different sectors within the market.

💡ETF Launches

The launches of cryptocurrency ETFs are mentioned as significant events that have driven substantial capital inflows into the crypto market, particularly towards Bitcoin and Ethereum. These launches are seen as contributing factors to market dynamics and the focus on certain cryptocurrencies.

💡Market Neutral

Market neutral is an investment strategy that aims to be unaffected by overall market movements, often through hedging or taking offsetting positions. The video mentions market neutral strategies in the context of crypto funds, which may use such approaches to manage risk and pursue returns regardless of market direction.

💡Retail Investors

Retail investors are individual investors who invest their own money, as opposed to institutional investors. The script discusses the role of retail investors in the crypto market, their preferences for certain types of investments like meme coins, and how their behavior can influence market trends.

💡Macro Trends

Macro trends refer to large-scale economic or societal developments that can shape the context in which markets operate. The speaker mentions macro trends in the context of the digital revolution and the long-term growth potential of digital assets, suggesting that these broader trends can be favorable for crypto investments.

💡Asset Allocation

Asset allocation is the process of distributing investments across different asset classes to manage risk and return. In the video, the speaker discusses the importance of sensible asset allocation in the crypto market, particularly the decision to hold cash for potential investment opportunities during market downturns.

💡Market Cycles

Market cycles refer to the recurring patterns of economic expansion and contraction or the ups and downs in market sentiment and performance. The video discusses the concept of understanding where we are in a market cycle as a way to inform investment decisions and strategies in the crypto space.

💡Layer Two (L2)

In blockchain, a 'layer two' refers to secondary protocols built on top of layer one protocols to improve scalability and reduce transaction costs.

Highlights

Kraken OTC offers 24/7 access to deep liquidity and minimal slippage for large crypto trades exceeding 100,000 off the open exchange.

Private and secure trading options are available, including personalized high-touch service and self-service RFQ for OTC trading.

The importance of subscribing to YouTube channels for content creators and the impact on booking quality guests is emphasized.

Ral Pal introduces 'The Journeyman' show, focusing on macro, crypto, and technology discussions with industry experts.

Ral Pal's background in hedge funds and his asset management company, Exponential Age Asset Management, investing in crypto hedge funds, is outlined.

The crypto hedge fund industry is highlighted as being significantly smaller than the VC industry, presenting inefficiencies and potential for high returns.

Richard Galvin's background as a TMT analyst and his role in running a large crypto hedge fund, DACM, is discussed.

The current market conditions in crypto are analyzed, with a focus on recent weakness and its potential implications for traditional markets.

Strategies for navigating market volatility, including the importance of patience and sticking to a long-term strategy, are shared.

The concept of market phases in crypto and the challenges of determining the current phase within the cycle are explored.

Richard Galvin's approach to investing in crypto, focusing on fundamental analysis and avoiding panic during market fluctuations, is detailed.

The potential for liquid market returns to outperform VC returns in the long term is debated, considering the current market dynamics.

The impact of ETF launches on capital inflows and market focus, particularly on Bitcoin and Ethereum, is discussed.

The role of Asian trading groups and market-making firms in shaping the crypto market and the influence of retail investors is highlighted.

The potential for a shift towards more fair launches and the impact on token valuations and market efficiency is considered.

The future of layer one protocols and the potential for multiple protocols to coexist and capture different aspects of the growing crypto market is predicted.

The importance of user growth as a key metric for investment in the current crypto market and its potential to drive future returns is emphasized.

Transcripts

make large crypto trades with Kraken OTC

execute orders of more than 100,000 off

the open exchange through our premium

OTC trading service get 24/7 access to

deep liquidity minimal slippage and

competitive execution and Settlement

Services private and secure trading

options include chatting securely with

our trade desk for a personalized High

touch service or use our self-service

RFQ for super fast automated OTC trading

non-investment advice crypto trading

involves risk of loss and is offered to

Us customer customers through payward

interactive Inc for more information go

to realvision

docomo hey everyone look sorry this is

the cheesy Interruption that you get on

YouTube channels but they're really

important I'd really appreciate it if

you just hit the Subscribe button you

see it makes a difference to know how

I'm doing seeing the growth in

subscribers if we're getting the right

content obviously comments help as well

but the hitting the Subscribe button

allows me also to book the best guests

it really does make a difference so if

you do enjoy this content and I know you

do cuz you keep coming back to watch it

just please hit the Subscribe button

sorry again for the cheese but it is

important I appreciate it so much take

care hi I'm Ral pal and welcome to my

show the journeyman where I travel with

you to that Nexus of macro crypto and

the exponential age of

technology I have been in the hedge fund

industry for 30 odd years now um I've

both sold to hedge fund funds many of my

friends are hedge funds uh I've run a

hedge fund and so they're dear to my

heart I even have an asset management

company called exponential age Asset

Management xan which invests in crypto

hedge funds you see my thesis it's a

fund of funds my thesis is that if you

really want to capture the

performance of this space in cryptos it

goes from $2 trillion to1 trillion

dollar you're not going to get it all by

being just in Bitcoin ethereum or salana

you're going to have to figure out what

the next big breakouts are where the big

gains can be made where's the next 100x

and that is incredibly complicated with

the thousands of tokens that exist and

tens of thousands of memes and all the

other stuff in the space you kind of

need to rent it to

experts and these hedge funds are the

experts now what's interesting about the

hedge fund industry in crypto for me is

it's incredibly small versus the VC

industry it's about a fifth or less of

the size maybe a tenth of the size of

the VC industry there's actually not a

lot of secondary Market um professional

participants in crypto which makes it

very very inefficient which means it can

be very profitable so hedge funds can

make super normal

returns they focus all day every day 24

hours a day uh s days a week cuz it's c

crypto on doing this in traditional

markets there's about $4 trillion in

hedge funds in crypto Market it's about

10 billion i. nothing the big players

who push prices around you know some

people would say the more manipulative

players tend to be the kind of private

trading shops out of Asia they're very

big in the space then there's the market

making firms uh people like um well jump

Capital who are now moving out of the

space but there are other Market Mak

firms and then there's some hedge funds

but a lot of retail you know as retail

investors we got to front run a lot of

the money coming into the space and

that's been the gift that keeps on

giving in crypto is being aead of all

streak for once but there is a group of

hedge fund managers who really are

fabulous because they understand this

Market it's super de their job is to

find the big trades and one of my

favorite managers and as a disclosure

Pam has invested in dacm Richard galin's

firm is Richard galin he grew up as a

TMT analyst um over the tech years he

understands the technology deeply and he

runs a very large hedge fund in the

space but he's also just a brilliant

thinker and I love to sit down with

Richard from time to time pick his

brains where we are what's going on and

what we should think about so I really

hope you enjoy this conversation with

Richard Galvin now before you go I do

urge you to pop over to the real Vision

platform because a conver conversation

like this is long form there's going to

be a lot of information for you if

you're on realvision docomo

join you can then use the AI summary

that's already there once you come on

the transcript you can clip it into your

own AI or the real Vision AI That's on

platform that will help you summarize

you can you can search for the keyword

so you can understand and also so if

there's a great trade idea you can post

that trade idea on real Vision either

privately for yourself and it populates

the um the p&l to show you how you're

doing or you can make it public and

share it with others so people can see

your ideas too comment on it like it

that kind of stuff there's a lot going

on on the realvision platform there's a

lot of crypto content there that's not

on this channel so go to real vision.com

and see if you can watch this interview

there because I think you'll absolutely

be blown away by the experience anyway

let's speak to Richard

join me Ral pal as I go on a journey of

Discovery through the macro crypto and

exponential age landscapes in the

journey man I talk to the smartest

people in the world so we can all become

smarter

together Richard Galvin how the devil

are you I'm okay we live in very

interesting times yeah listen before we

get cracky into all of this just for

some people who don't know you um you

have a bit of your background what you

do now just to frame up our conversation

sure I was a banker for 20 years uh

largely TMT so Tech and TCO Banker at uh

at Goldman and JP Morgan and and started

a crypto investment management firm dacm

back in early 2017 so we've been running

institutional family offers Capital

through the crypto space for what is it

six years now and um we're we're an

investor so we run long only B NVC

strategy so we're long Market uh looking

to play the growth of long TR trajectory

growth we see over so multi think growth

in his s class and you know for people

who don't know DM is one of the larger

crypto hedge funds and one of the longer

established ones as well yeah so we run

around about 4 400 450 million of uh of

outside

Capital so look we're recording this on

a Monday it's it's Tuesday morning for

you Monday evening for me um this won't

go out till Thursday so you know we we

can't talk particularly you know in

granularity but what's your take on

what's going on in the markets right now

because it's it's actually been a pretty

crappy market for a while sideways

sloppy corrective pattern what's your

take on the on the overall market for

now before we dig into some more stuff

yeah I think one of the interesting

things we we've kind of seen this is

probably the second or third time

crypto's kind of acted a little bit like

a canary in the col line so you know as

you mentioned crypto has been weak for

you know for the last six or seven weeks

right so it's kind of in a way uh been

ahead of what we've seen over the last

24 hours in traditional markets and to

be honest we kind of saw this back in

20122 as well where crypto was kind of

weak well before we saw traditional

markets kind of fall over um I think

we've been in uh and we can talk a

little bit about this later later on as

well I think putting aside the the sort

of the short-term Market factors we can

talk about also think there's been some

structural issues in crypto over the

last 6 to 12 months and we've got a

we've got a substantial mismatch between

the capital that's in the the

pre-listing or VC Market versus the

capital that's in the listed market and

we've seen that play out particularly

around the altcoin space and then on top

of that you've seen the ETF launches

which is driven you know incredible

Capital inflows but very much focused at

that Bitcoin and now on the ethereum

level and then at the other end of the

Bel at the other end of the barbell

you've got the mcoin kind of mania so

you're in a you know you've seen some

pretty different sort of structural

flows in the way the capital's been

allocated across crypto than we've seen

probably in the last sort of six years

before that so let's talk about just how

you're navigating the current volatility

because you've been through plenty of

volatility in the past you're a long

only guy so you know this is all part of

the game uh you know you come in over

well you're looking like we all were

over the weekend and everything turns to

what do you do how do you think

about it you know what discussions you

have

internally yeah I think we've um we've

found that we've been rewarded over the

journey for being patient and I think

the crypto Market one thing it

definitely doesn't have his patience so

we generally try to stick to kind of our

knitting through these sorts of periods

and and make sure we battle test the

portfolio and everything that we own

continue to sort of test that we own it

for the right reasons and clearly owning

Assets in this market for momentum based

reasons when something like this happens

can be a disaster so we're very much

focused around what we'd say is that

sort of fundamental into the crypto

Market assets that we see can ride

through this volatility and prosper on

the other side I guess a period like

this is just a chance for us to sort of

retest the thesis on what we own and

retest the the data and the the data and

the statistics we follow to sort of get

a update on the assets and check that

everything's still in line with what we

think and then really our approach has

been long only and we're are 80% plus

long in our liquid strategies through

these periods is then just to hold our

nerves now we found through the

Journey crypto the biggest mistakes

people make in crypto generally happen

right at the top of the market and right

at the bottom of the market so we're

very disciplined on making sure that we

don't panic in these types of periods

just like we're try not to get too

euphoric on the other side of the coin

as well when things go away and I've

found sort of over these sort of six to

seven years that's the period where

you've really got to focus and stick to

your strategy strategy and your

allocation process and make sure you

don't deviate from that because it's

hard not to get caught up in this yeah

that's right and how do you know what

Market phase you're in because that's

what I find gives me the comfort is like

where are we in the market structural

phase you know in the cyclical elements

of this how how do you think about that

when it comes to testing so you'll test

your individual tokens you have we got

the right stuff do we still believe in

the thesis but then there's the market

question you know are we just stupid

what are we testing against what do you

use as a as a as kind of metrics to

measure where we are yeah I think when

we start with the the the macro tole and

I think you'd agree with all got that

we're you know we're owning digital

assets going through digital Revolution

so yeah the the the longer you the

longer you sort of zoom out um the more

comfortable you get that you're in the

right place now as you start to get onto

smaller time frames you start to get

into the questions you asking around you

where we are in that specific cycle as

opposed to that sort of

structural sort of societal change I

think we're going through over the next

10 to 15 years which is definitely in

our favor so where we're at in the cycle

I think we try not to rely too much on

the individual sort of cycle Maps um

they've been when you look back they've

actually been pretty strong in crypto

but it's Al it's it's always a risk that

things change and I think to be honest

if we look at sort of 2023 2024 it's a

little similar to sort of 2019 2020 but

it is pretty different and the portfolio

constructs we have used have been a

little different in that regard I think

we've seen a skew much more towards the

majors than we would have seen if we

tried to track it back to the previous

cycle and that's probably partly been

driven by the ETF as well but we also

have seen crypto sort of revert back to

its somewhat uncorrelated sort of uh

sort of behavior which I think is

generally our Assumption of the steady

state that in a normal Market where

tread is either not going crazy

exponential up or down crypto kind of

does its own thing and that's probably

what we've seen over the last six to n

months periods like yesterday where you

start to see substantial volatility

that's when the correlation start to

come back to normal and do you

hold Cash ever for times like this so

you you've got flexibility to add when

you get you know great prices again yeah

so we run uh up to 80% 80 we're 80% low

uh through the Journey we're probably

been sort of low

90% and we'd actually built up close to

20% cash up through sort of June into

and ahead of the sort of the crashing

July we deployed most of that capital in

early July with the market for 20% in

sort of five days which is sort of

similar levels to it's got did today um

we do do that look we take a we take a

view that when you when you sort of zoom

out from a macro level if you're in an

asset class that's got you exponential

growth potential over a 10 to 15 year

time period the last thing you want to

do is Sho yourself in the foot for by

being in and out of that asset class at

the wrong time and the other factor to

consider is crypto returns and losses

come in very concentrated periods so you

could be out of the market um for only

three or four days each year and you can

dramatic Ally reduce the returns that

you get over a 5 to 10 year period in

crypto because they the 3 to five days

where 30 40 50 60% of the use gains are

made so we've sort of stuck to that we

we extremely strong tile wind as an

asset class we know if we're in the

asset class and we make sensible

allocation decisions we can win and make

make outsize

returns will we try and smooth

volatility through that well that's kind

of undo the first point right like if we

don't get the trading right and getting

the actual trading days right is much

harder than just getting in the right

asset class it's got the toe wins behind

it so many people don't understand this

they're desperate to dampen the

volatility but dampening the volatility

risks you missing the upside volatility

and then you screwed up the whole game

yeah I think and you would know through

your history like even the greatest

Traders you can't get it right yeah are

wrong a lot of the time right and if

you're wrong those three or four days of

the year or in a couple years in row

you'll substantially hurt your returns

probably more than moving in out of the

market now I think the

general um problem a lot of people a lot

of investors have even you know at a at

a retail level up to the largest head

fund manager is to fiddle around right

because you feel as if you got to do

something um we try to sort of step back

as much as we can try to step back from

that and sort of make that sort of

decision and stick to stick to that

decision no matter what the sort of

intraday moves do and it is very

tempting to sort of play around and

around from time to time but you know we

try to stick to picking the right asset

that's where we're going to generate the

elf for beating the right assets that

can make it through these sorts of

cycles and deliver the outsid returns

over sort of three to five year view

it's interesting I have hourly charts

open next to me yet I never trade but so

I can kind of mentally trade to fight

that urge but I just don't trade I kind

of lock it away on my ledger so I can't

do anything to it because you know

you're Your Own Worst Enemy in this kind

of stuff I mean a friend of us who are W

name that we we both know very well a

legendary hedge fund manager he's like I

mean he's one of the best traders of all

time he's like I just refuse to trade

this because it's it's very hard to

trade and there's a lot of you know 22

year old kids on on Twitter who think

they're genius Traders at it but it's so

hard to trade them and my guess if you

look back and look at their returns over

a couple of Cycles they're unlikely to

be as good as just a Buy and Hold yeah I

think you and and look you find it from

the you know the greatest

hedge fund and prop Traders at

investment Banks the the amount of

people that think they're a great Trader

is quite a big population the amount of

people that are a great Trader is a

pretty small population and that even

those great Traders would admit that you

know they're wrong a lot of the time and

you know you look at crypto look at

who's made some of the most substantial

returns and if you look at sort of you

know interesting sort of Topic at this

point in time the mount g distribution

like you look at the Monstrous Returns

the people getting coins back from that

process of made just because they had no

access to their Bitcoin for like yeah

what is it almost coming up on 10 years

now and they get the full returns back

now the ones that the people that get

that opted to get coins back some of the

substantial returns they're going to

make right just because they've had no

ability to trade like you're saying

putting your Ledger in a vault making

that Vault hard to access is sometimes

the best in investment decision you can

make in crypto now we try to we try to

bring that patience to the way we invest

we're a little bit more active of course

because we're you know we're moving down

the stack a little bit where things can

go wrong or things can go right in

shorter time frames and you've also got

to make sure that you know part of

crypto is that emotion part of that is

those new trends is that new technology

that comes around so you need to live

and breathe it dayt day to make sure

you're not missing those sorts of things

and you're you're across that but it's

getting that balance right of living

that sort of day day by day Keeping Up

with the Kardashians type sort of

atmosphere in crypto but they're not

letting it not letting it over take a

sort of trigger finger on the buy and

sell bu so as a disclosure you know

exponential age asset management xam is

a an investor in your funds so just so

everybody knows that

but what what I want to understand is

why is the hedge fund industry still so

small I mean you're one of the biggest

funds there's a few others bigger Allen

how and a few others but there's not and

the others tend to have a lot more mix

of VC and other stuff in their assets

why is it so so small as an industry

compared to the kind of two two and a

half trillion asset class it is why is

that because it feels like it's a place

where you need professional Capital to

manage the kind of other stuff yes sure

we can all hold Bitcoin and a few tokens

but when it comes to navigating what's

the next big thing it's not Bloody easy

what why is that yeah I think it's a I

think it's a multi a number number of

factors both to do with the way the

capital's allocated from

uh you know traditional institutional

investors and partly to do with crypto

as well so if we step back if you look

at the allocation of capital it's vastly

gone to VC funds in crypto so if you

look over sort of 21 2022 there's about

sort of 50 to 60 billion dos went to um

went to to crypto

VC um now why did that happen if you

step back firstly there's been some

incredible returns in crypto you we run

a an early stage crypto fund as well and

there's been some insane returns in that

category you know ey watering time

returns that most people have never seen

in their life right so you've seen those

returns attract Capital the second thing

is VC funds are closed end funds closed

end funds don't Mark the market every

day like a liquid fund or every month

like a liquid fund or even every quarter

yeah it's basically locking away your

Ledger really yeah it's it's it's the

equivalent from a from an allocation

from an allocator perspective of locking

away your Ledger you're giving Capital

to a space you're not getting a month

month-by-month decision to make on

whether you you know withdraw that

Capital increase that Capital you're not

getting that month-by-month

volatility um which you've got a report

back to investment committee you're

effectively making a you know five to 10

year investment decision and you get

reporting based on that investment

decision as opposed from a month to

month and that sort of fits I think with

a the mindset particularly given the

volatility of crypto um with the mindset

of you a lot of the way capital's

allocated these days most allocators

don't want 30 40% month-on-month

changes in in the way they in the in the

funds they invest in and realistically

that's what liquid crypto can give you

through certain parts of the cycle and

the other point is you know VC crypto

fits within a VC SLE within a

traditional allocation it's it's really

just a different it can be a tech

allocation right yeah it's a different

Tech within an already existing team

that's allocating Capital to VC whereas

liquid's not it's a it's a new tech but

it's liquid so it sort of fits within

hedge funds but it doesn't but it has VC

type returns with and it has volatility

like nothing else that they've got in

their portfolio so we've seen you know

both the returns and I think the fact

that it fits neatly within an existing

sort of bucket within an allocator zones

and it's got low volatility and if

you're you're an agent allocating

Capital you know you don't want to

allocate capital and the next you know

the next five days it's now 30% in the

first five days or whatever it may be

whereas that's not going to happen if

you're in a closed in fund that's got

sort of five to 10 year view five to 10

year in reports on that basis so we've

seen outsized allocations go to that

space versus the liquid market and

liquid funds where you've seen probably

20 to 30 billion of capital go over that

same period but a lot of that capital's

then G to Market neutral in long short

funds which AR providing the same kind

of you know buying of that BC Capital as

well he everyone listen if you want

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comes out see you there what do you

think my hunch is that liquid market

returns over the 10-year time Horizon

will beat VC returns because there's so

little capital in the

space yeah well I think well how does

this get fixed so you know the way it

gets fixed is either more people start

to allocate to liquid to liquid to

liquid funds that start to buy more of

those sort of coins as they coins and

tokens as they come to Market or you see

price readjustments and that's probably

partly the the second one seems to be

leading the way as we go through things

now you we're starting to see some of

the more elevated Capital raising

valuations we've seen in VC Market just

not get met by the liquid Market you

know that the the the retail investors

have moved down to mecoin land for the

time being

where they can see a more sort of hon a

more honest kind of exponential bet

where they can make it against a sort of

a fix fix Supply mcoin Market um and

you've seen a lot of those new tokens

that had come to Market had that sort of

sort of graph that we're unfortunately

all all too familiar with where they

launch at a you know very small float

very elevated you know fully fully

deleted valuation and then Trend down

over a short period of time it's it's

just not the buyers or the Capital to

support those sorts of valuations and so

we're in that sort of period now

particularly it's been exacerbated even

more over the last 24 hours where we

start to see a lot of those projects and

even some of the high quality projects

start to trade down below their sort of

last liquid of their last private

Capital rates and so you start to see

the listed Market starting to buy some

of these assets at discounts to what

that VC Market paid and that's where you

start to see I think that kind of uh

that distribution of capital start to

play out as you start to see those sort

of

valuations reig to sort of match the

capital basis that they they're faced

with my hunch is if you under allocate

to secondary markets the secondary

Market opportunities tend to be

bigger versus the crypto the the VC

because VC is overallocated so

everything goes to high valuations

quickly it then falls into secondary the

secondary Traders wait they buy these

things at a discount when the market's

at the right moment and you tend I think

to do get better returns my view is the

liquid will probably do better than VC

for now until this this structural shift

changes the only other big players in

the market so I don't know if you see it

much is because we don't have that much

professional Capital so there's a bunch

of hedge funds and the number of large

hedge funds with anything over 200

million is you know there's like 10 I

mean there's not that many particularly

directional ones um is the Asian

trading groups you know those are often

kind of murky private go pulls of

capital do you and they seem to be the

ones who move size around do do you see

that I mean they seem to be the the main

Traders plus a couple of the market

making firms I me I think Jun Jump's

leaving the market but yeah you know

there's Jane straet a few others how do

you see those other players well I think

you know if we look through and and this

is why you each period in crypto can be

different if we step back to the last

sort of cycle we went through you would

see a much more kind of flow of capital

from the majes to the altcoin space and

they would be a that would be a material

mover of a lot of these sort of you know

outside the top 10 coins um I think this

cycle the difference is that capital's

gone straight to the mean coin space and

kind of jumped over the you know what

would it be the traditional kind of

let's step down from the majors to find

a higher a higher growth opportunity

that's gone to the frogs and dogs coins

as opposed to the Defi and AI coins in

in this cycle so that's probably

something that's changed from a

structural perspective in the market

well I wouldn't say structural cyclical

at this point in time has changed in the

market over the last few years and that

puts the advantage back to retail

right it does it does as as you trade

some of them and most of the hedge funds

trade some but it's a small allocation

to kind of understand Market structure

and that kind of stuff yeah and I think

you need to be across that and then a

lot of the tech that comes out of that

like trading Bots and those sorts of

things can be pretty relevant for the

way we allocate capital and play some of

that growth so then it brings you back

to the the more traditional investors

and of course I completely agree with

your view that longer term those liquid

returns can be very high when you're

buying those sorts of assets because you

know there's nothing better than buying

a you know high quality asset at a cheap

valuation at a material discount to what

the last VC round was at and you've got

liquidity right that's just a you know

that's just discount upon discount upon

discount now the one caveat I would put

on that is the market can stay

inefficient for a long period of time ra

so that there's patience right you need

to have patience and as I mentioned kind

of when we started this discussion

that's what's in shorted Supply crypto

and that's something that we sort of

make sure that we continue to keep up

the patience to buy those assets when

they are at that discounted level but

then the patience to hold them until the

market works that

out now one of the things that I thought

has kept the mark Lids on the market for

the last three six months um since it

peaked out in March was there's just an

enormous redistribution of tokens out of

old hands from the last couple of Cycles

into newer hands so as you mentioned

this Mount GX has won so that was a long

time ago but they're finally coming to

market the FTX estate that whole bunch

of stuff had to get sold took liquidity

out because a bunch of hedge funds and

family offices took up the liquidity but

it still takes liquidity out of the

market um we've had the Germans selling

distribution we've had jump liquidating

a portfolio we've had a bunch of token

unlocks from these things um plus new

Supply coming and tens of thousands of

mean coins and it feels like there were

just was not enough liquidity so the

market I think has done pretty well

absorbing that by trading very sloppy

sideways in the major sure the olds get

crushed because they're getting replaced

with these other things how do you think

about that kind of structure going on

yeah I think I'd had the Bitcoin ETF and

now more recently The Ether one and the

unwinding of the gray scale as well well

I think the Bitcoin ETF in way is

probably is is different sucked Capital

out of the rest of the crypto market

right so if you look at you know we

speaking to our LPS speaking to our

perspective LPS speaking to my PE group

I think there is a bunch of capital that

would have come more broadly across the

market um over the last 12 months that

hasn't because the etf's become a

simpler easier sort of First Step

solution for a bunch of family offices

and institutional allocators and so I

think there's a lot of capital in those

Bitcoin ETFs that probably would have

come more broadly across the crypto

space ex that ETF wasn't there now

longer term I still think the ETFs are

an incredible uh positive thing for the

crypto Market but we have been in that

sort of short-term window where I think

they have been on top of the other

factors you've mentioned have taken some

Capital out of the broader crypto market

and partly driven sort of the out

performance or the the extended out

performance we've seen from Bitcoin um

through the last s eight eight months

yeah so so so I think that's one of the

other factors that we've seen it play

there that that that that sort of

changed the market Dynamic from what

we've seen the last few years now I

think you know at some point that that

that that plays out there's only so high

Bitcoin and you know now ethereum and

those sorts of really valuations can get

versus the rest of the space um before

you see those sorts of valuation gaps

close but again I come back to my other

point that takes patience I mean we look

at the altcoin space um and in

particular some of the sort of key key

defi coins and there's an index of about

the 12 kind of core defi apps that have

been around since you know since 2020

2021 and so they have good track record

of you know generating users and

revenue we look at we we look at that

that that that that subset that covers

you know all sorts of that sort of defi

activity um we we look at their their

revenue generation so this is revenue

that could go to token or fee generation

that could go to token holders they've

grown that by four to 5x from that FTX

Gap so from the bottom the market in

2022 so they've grown daily uses they've

grown Revenue sort of you know 4 500% or

four or 5x from that period over that

same period and you know adjusting it

for what's happened in the last 24 hours

their prices are flat right so you've

seen the fundamental side of the sort of

the non Bitcoin crypto sphere sphere

actually do keep up its turns with

bargain know they've generated the users

they've generated incredible Revenue

growth and these numbers are getting

pretty close to alltime high right we're

getting close to 2021 peaks in terms of

that fee generation token price has done

nothing now should the token price have

matched that Revenue growth um to a

degree well you got to have you know to

use a trfi term multiple sort of

recalculations in that as well but from

all the metrics we look at you know from

a fundamental perspective crypto

Market's healthy across the whole sphere

it's it's attracting users it's it's

generating the revenue the token prices

lag but at some point that's kind of got

to give you know when you're getting

tokens that are doing BuyBacks of 25% of

their tokens in a year or paying cash

yields of 20 plus percent there's only

so long that those sorts of things can

be sustained before people start to see

that sort of value you know one of the

things there was you know Kobe on on

Twitter he was one of the things he

mentioned was and that made me stop and

think he's like well I don't think the

altcoin bare Market has finished yet and

if you go back and look at 20

2017 olds didn't bottom until I'm sorry

you know 2016 the market bottom but

2017 olds bottom so a year later so the

equivalent of 2025 this year uh also in

2020 the same thing they bottomed later

before after Bitcoin so maybe there's a

delay in alts versus Bitcoin by maybe 12

months and maybe that that is something

we haven't kind of factored in yeah if

we look at uh 2019 2020 you had some

kind of false starts where you had some

kind of

initial uh sort of your layer ones come

come to the market toward the 2020 2019

early 2020 they got some pretty

substantial kind of market upticks and

some of that sort of ped out I think the

the thing that really sort of drove the

altcoin space um and it comes back to

the fundamental point I was just making

was really the the the launch of

defi at a at scale where they started to

see you know we saw compound come to

Market you saw saw RVE and other players

come to Market start to use tokens to

bootstrap a protocol start to see quite

enormous sort of growth amongst users

and tvl and start to see some sort of

real fundamental growth and that starts

to drag Capital away from the luxury of

just sitting in Mages and trying to get

beater into this sort of high gr sphere

and I think that's what gets the altcoin

market going it's got a you know we're

not we we try not to be too passive and

think thinking about what can drive

prices in the altcoin market it's not

just a you bitcoin's gone up a lot I'm

going to allocate to altcoins altcoins

they're a smaller higher risk less less

liquid investment they need to demand

that investment so they need to actually

perform to grab that capital and we saw

that in defi summer as it's

affectionately known back in 2020 as

they started to see huge user growth out

of conent zero right you started going

from sort of four users to 10,000 users

to 50,000 users over a few weeks and

that starts to demand investment as

opposed to just a passive reallocation

and I think that's what gets altcoins

going they need to demand that

investment now I think the difference

we're kind of seeing this time in the

way we see we're starting to see it out

from a financial perspective they're

starting to demand investments just

given some of the metrics that are on

offer for some of these more mature

protocols that have been around in the

market for sort of four or so Years

also if you speak to younger people in

this space

the more Bitcoin goes up and the more

you see this lag of

alts the more they say well what's the

point of owning Bitcoin ethereum salana

I can't make the

returns because they you know they're a

30 32y Old they've got $10,000 saved up

they like a three or 4X in Bitcoin just

doesn't move the dial from me I can't

buy a house I can't do anything and you

and I talked about this a bit in

Australia is like they they're forced

out the risk curve um which is why memes

have been so big but once alt start to

move it it feels like that Capital gets

recycled into those yeah I think that's

the difference this time around like

traditionally we would have seen with

the strong Bitcoin runs we would have

seen D5 or you know for this cycle AI

coins or whatever it may be attract a

lot of that Capital looking for that

sort of higher risk higher return today

to your point it's gone down in that

mcoin space where you can get that five

or 6X in a few days now that comes with

all sorts of other risks and all sorts

of things that you know everyone's going

be aware of but that has been one of the

differences this time that's attracted a

pretty substantial amount of capital now

the one thing I would say is as you've

started to see that get more attention

as you've started to see more kind of

celebrity coins and those sorts of

things I think that Runway and that

mcoin space where it was pretty open to

some good traders that made some

Sensational returns and you know credit

to them for taking that risk and you

know sort of taking you on that

marketing getting you that sort of

short-term specialized skill to pick

those sorts of coins that it

differentiate that's we're starting to

see that sort of slant a little get

little way little way against those

investors there as you start to see more

sort of inside of returns coming to that

market so yeah have you would be you

start you start to see some of the

Returns come out of that you start to

see retail investors looking for

probably a little bit more lower risk a

little bit more sort of a something that

a little bit more tangible that starts

is not so T against them as that mcoin

market seems to be trending towards the

mar don't forget it was a year ago much

easier there was Bonk there was a there

was like 10 you know new mean coins

there was the old ones from the old

cycle and then suddenly pump. fun comes

and there's 10,000 a day being

launched right and then it becomes

impossible good for salana of course

great for salana this is an attention

economy game right and there's a fixed

amount of attention yes the space is

growing but right now we still don't

have that many new entrance into the you

know physical coin Space versus ETFs so

the more coins you give the harder it is

to focus attention so the harder it is

to capture value when there's very few

and people go oh this is a fun idea they

all do well so you know you're you're

trying to divide divide attention which

is a finite resource only driven by the

number of new people in the space or

people yeah you get the you get the

anomaly like in the mcoin space where

you get stuck in in Sniper Bots and it

goes from owning the right main coin to

owning it first and getting out of it

almost instantly right so you you create

sort of micro attention periods even as

a sort of another layer on top of that I

think you know you do get that sort of

that that velocity in that space that

people sort of Crave in crypto that

they've traditionally wanted from the

altcoin space but yeah to your point

you're starting to see that over Supply

and to be honest that's you know that's

that's that's a bunch of the story we're

starting to seeing the altcoin space as

well you we we've already spoken about

the what I'd say is the underallocation

into the liquid space V is a VC space

which has driven that you know VC coins

effectivity of VC coins and tokens come

to the listed Market at some point in

time um and so when you've got a $60

billion Market trying to sell into a

market where you've got 10 to 20 billion

dollar of allocated capital A lot of

that isn't even net long you can start

to see what's going to happen right and

so you're seeing the same Dynamic play

out even in the altcoin space as a mcoin

space there's just too many alts for too

little Capital now as I mentioned

there's two there's two ways that fixed

you allocate more Capital to that space

or that space gets vastree valued that's

that new coins coming out and that's

what we've probably seen over the last

sort of 12 months or so we've seen a

dramatic revaluation in Bitcoin in some

of the majors and we've seen the alts

that over Supply push the value of alss

down and we're starting to see levels

now where we're starting to see that

sort of fun fundamental value come

through yeah because I mean there is a

limit to the number of layer twos

because I mean what's the difference

between one to the other it's you know

we starting to see that narrative coming

at first people like well let's see how

these layer twos are going to be valued

Etc the first round Matic and stuff from

last cycle did pretty well and then

they've just been nuked to death because

these are kind of infant replicable

things right yeah and I think the you

know it needs to the markets fix them or

heal themselves through all sorts of

different phases and it means that you

know VCS will start to make a lot less

money and start to lose money on the

next l Layer Two or the next layer one

that they're investing and so you start

to see the whole sort of structural

shift in the market because I think

today in crypto you know the the the big

returns in the VC space which you we've

been fortunate to to to participate in

as well have been in picking those lay

those those right layouts like picking

that that salana picking that avalan

that VC that that VC type around where

you get those sort of your 100x type

returns um and that playbooks played out

probably longer than most people

expected but I think we're starting to

see that online now so you start to see

the valuations come down in the liquid

market for that next layer too and start

to come down below the the levels that

VC markets have funded them at and so

you start to see less funding of those

things happen and the market sort of

heal themselves but it does take time

also I I thought it was very interesting

what coinbase did by launching Bas which

is a layer two with no token and that

kind of made sense to me in some

respects is some of these things don't

need tokens

no and we're starting to see people sort

of reinvent the way these tokens are

launched you know if you look back at

the the broad crypto environment that

probably generated the the broadest

spread of returns you know of retail

versus insiders was back in the Ico

craze of

2017 now that had a whole bunch of other

issues around legal risks and

disclosures and I'm not stepping back

from that but if you looked at it that

was probably the most even playing field

in capital markets across any asset

class we've seen for a long period of

time right like as crazy as it was you

know retail investors were making huge

returns and the returns they were making

versus the Insiders in that market were

probably the most balanced we've seen in

the crypto market today right and now

that's gone away for a whole bunch of

different reasons but oddly enough that

that that that sort of

drove um a much more balanced Market

where people were investing in the

liquid Market because there was still a

lot of valuation upside left on the

table from those I Ico launches and a

weird way it had got to a place in a

very short space of time that the IPO

Market you know where I spent spent a

bunch of my time as well has got to over

50 years in the equities right you don't

list an IBO and ibos don't price at

their maximum price they price at a fair

price to leave something on the table

for secondary Market investors so

initial investors make money secondary

Market investors who take that risk on

day one day two and IPO generally make

money as well and that's a much more

conducive Capital Market to what we

we're seen in crypto lately where either

the Insiders W way too much money or the

listed Market waste way way too much

money and it's just getting that balance

right so I think what we're starting to

see is teams more sophisticated teams

think about how do I approach the crypto

market and the funding Market in a more

balanced way that avoid some of the

pitfalls we've seen over the last few

years and so we're starting to see what

we think is a trend towards more of a

fair launch type approach you know

something that's just really interesting

that we're following at the moment is

you know the rwe team launching their

protocol AO where it's a completely Fair

launch the team don't have any tokens no

insiders have any tokens you effectively

have to farm that token by giving either

owning our weave and getting access to

the Token or staking your e so you stake

your e to a contract you earn AO tokens

for doing that and the team gets to keep

the staking rewards to effectively fund

the development and anyone can access

that that contract anyone can

effectively earn those AO tokens over

the next you know over the next three or

four years in size by giving up the

yield on their e to effectively earn

them and it's a fair launch it's open to

anyone with you know half an eth to

10,000 eth and you know the team even

starts with none right so you start to

get that sort of fair open access

allocation to anyone that wants to take

the opportunity to get involved in the

ecosystem and turned up and so when that

protocol launches you're not going to

have this Capital that's got in a much

lower price in the prices and um is

looking to exit um that's you got

different sort of you know a different

sort of risk return profile that people

buying the sign Mark yeah and people try

to get around this whole concept by air

drops and kind of

um um

points but it it still disadvantage

everybody and and it it it just also

felt like what you did was rent

attention and you didn't boot bootstrap

most of the networks who did it people

just went there got the airdrop dumped

it as fast as they could did exactly

what they accused the VCS of doing which

most of the VCS actually don't because

they're usually locked up but they'd

farm this stuff figure out how to get it

get the airdrop dump it and move on to

the next one and it's like well that

doesn't not work either no and then that

start to get gamed right so I think the

um

yeah there's two things that make people

committed to an investment longer term

which is what you want when you're

building an asset when you're building

an ecosystem or a protocol you want

people alongside you that are committed

now there's two ways to be committed

it's either capital or time capital and

overtime right now I think the the

problem the airdrops faced was that made

people committed but over a very short

period of time and so attention just

moved to the new new thing as soon as an

air drop passed and you effectively gave

away

substantial quantities or ownership of

an asset to people that were only there

for a few weeks for a few weeks in time

now when you're building something and

you're a team and you've got tokens and

you've got you've got skinning the game

over a five year plus time frame that

kind of doesn't make a bunch of sense so

what I think we'll start to see is

things where you're making that

commitment to an ecosystem over time

like staking capital and giving their

return or giving up a return over a

longer period of time to earn those

tokens over a longer period of time and

so you start to get alignment between

the

investors um and and the team and the

ecosystem that's building that's

building over that longer period and

look this isn't rocket science this is

how traditional markets have work right

VC is make investments in traditional

markets over five to 10 10 year time

frames you know they go through the the

good and the bad of building things from

the ground up and you know that's

traditional markets have worked out

that's the best way to get alignment

with capital and Builders and the crypto

Market will get there over time and

starting to get there out and the other

thing is as you mentioned because of

this misalignment between um between

tokens that have a lot of VC investors

that come to Market or have token

overhangs from

unlocks they tend to get really quite

cheap at this point in the cycle you've

got this hugely stretched relationship

and for me I think the big game that I'm

looking at is usually there's a chosen

group of

four you know the four horsemen the ones

that get chosen for the next cycle if

you remember last cycle it was avalan

polygon Luna salana they were the kind

of that was the big race where this huge

gains CU they got sold off they were all

like eth was sold off as soon as it had

its um Ico as well they came off like

70% they kind of stabilized and then as

the market regime changed the capital

came in I'm really eyeing kind of I'm

doing a lot of charts of One Versus

another trying to figure out okay what

is strong once you filter out Market

movements but that feels like that's a

big game and it feels like it's probably

a layer one game because they're bigger

sure there's going to be other stuff

we'll talk about the other stuff in a

sec but how do you see that layer One

race I mean do you agree with that

thesis that there is probably going to

be another group um my current view is

it's probably and again I don't know

don't really have don't really have an

Insight but I'm guessing it's something

like Avalanche even though it's last

cycle token they seem to be doing

interesting stuff um s an atos because

they are you know a whole different kind

of ecosystem but all all of these have

this kind of high LDV low you know low

float um I think monad has not not come

to market yet that's another one U Maybe

I don't know what do you what do you

think is what do you think is this this

race and again it's very early to pick

it so I'm not holding a gun to your head

but what's your hunch yeah I think we we

look at ler ones as a um we've always

had a view that there's going to be a

number of what we'd say a multi-trillion

dollar layer one protocols now how big

that number is I think is a harder thing

to predict but when you think but

they're but they're going to offer

different things right they're going to

offer different opportunities different

they're just decent centralized

businesses that sell block space yeah so

they need to have something that's

unique about that block space either

it's you know speed of transactions it's

security whatever it may be it's

language on them whatever it may be so

you know we've always taken a view that

there's going to be multiple

multi-trillion dollar layer ones um

they're all going to find some area

where they have a comparative

advantage that comparative advantage is

going to lead to more and more apps and

use cases being built around that and

that's going to crowd out other use

cases and you know we've already seen

that play out I would suggest between e

ethereum and salana you know it's it's

not you know it's not a coincidence that

the pump dot farm and all the mean coin

activities happened on salana versus

ethereum because it's a it's a fraction

of the price to do that on Solano versus

ethereum now that's not a bad thing for

Sol not a bad thing for ethereum it just

means that ethereum has become more

valuable to people like us that are

moving millions of dollars around in a

transaction right and we're happier to

pay the higher fees although that's been

addressed a little bit by layer TW but

we're happier to pay the light the

higher fees for the security and that

that comes with ethereum but then that

left the door open to Someone Like A

salana to grab that you know initially

that nft Marketplace and now that mcoin

marketplace where you've got that sort

of Rapid transaction speed and that

launch capability to launch tokens at a

at a minute fraction to what it was on

ethereum and so salana has grabbed that

market from ethereum now that's not you

know that just plays into our thesis

that there's not going to be a chain

that's you know everything to everyone

they're going to find this specialist

use case that use case is going to

become successful that's going to grab

all that block space that you talk about

and dominate that block space and Crow

out other use cases and those use cases

will find another another chain that

suits the purpose they want yeah and and

my view is this space is you know $2

trillion today after the selloff um and

I think it goes to 100 trillion that's

just extrapolating out the log trend of

adoption or just the market cap total

market cap chart put it on the log scale

put a regression on it it guess 100

trillion by let's say 2032

2034 so you can see the space is still

player versus player a lot they're like

oh my God sana's robbing

ethereum it's not the whole thing is

going to explode so as you say there's

plenty of space for five six seven

multi-trillion dollar ecosystems yeah

we've never we've never seen the we've

never adopted the you know ethereum

killer or Bitcoin killer type approach

to anything because I just think it's

the wrong mindset um I you know we we

have exactly the same view as you that

this asset class is growing Way Beyond

anything it's at today which means that

you know you know Rising tide can float

or votes it means that you know salana

and ethereum can definitely win together

it doesn't mean you know the P the

player versus player is the interesting

thing and you know to degree that

actually plays in the favor of crypto

around you know that whole ecosystem

building having people that are

passionately focused on one asset or one

ecosystem actually is you know

advantageous to that ecosystem but from

a purely Financial perspective doesn't

mean one fails or the other prospers

because I just think this space is too

big to be CED for by one one protocol I

mean we're starting you see a whole

bunch of consumer apps start to come to

Market start to get that sort of

traction that we haven't seen previously

in crypto and that opens a new

opportunity for new layer ones you know

we're we're sizable investment across

our firm in year for example which is

started see real sort of uptick on that

consumer app level that we haven't seen

in crypto before you know and that's a

new market that we think you a ler one

AER one can grab that some of the some

of the players like a salano or ethereum

don't don't have or probably probably

won't grab it this more given the use

cases they're chasing so you see new

opportunities come along and you see new

protocols like a year or a telegram or a

ton open network start to grab those

opportunities and that doesn't mean that

takes growth away from salana or etherum

at all it just means that you're

broadening the market and I think as you

know as investors in crypto and as in

people that also passionately want

crypto to succeed and blockchain

Technology to get to where we wanted to

get to that's what you want to see you

want to see a broad B based growth

across multiple protocols and across

multiple apps that have different use

cases so any other layer ones that are

on your radar screen that might

participate you talked about ton uh

you've talked about neara anything else

that's kind of on your radar screen yeah

outside of the outside of the I guess

the recognized Mages they're the two

biggest Investments that we've got at

this point in time they're the ones that

we think bring something differentiated

to crypto outside of the outside of the

Salan an ethereum um you know telegram

is a is a unique approach in crypto you

cryptos generally build the tech and

they will come type approach right and

and you know some something like ether

has been incredibly successful at doing

that um but that's a very different

approach to the telegram where you've

got this you know billion plus user

ecosystem with a chain now getting

introduced to that so it's the other way

around right like let's grab the users

from an existing EOS system onto a

protocol which is something that crypto

hasn't had

before um given the amount of

bootstrapping that's gone into the tech

today and we think that's a super

interesting opportunity we also think

with the way a lot of the consumer apps

are going and even the way a lot of the

trading apps are going you know the

things like banana gum bot and and uni

bot and some of those other trading Bots

which are pretty incredible technology

you're starting to see that sort of that

that sort of crossover between web to

Consumer apps like a telegram into the

crypto system sphere and you're starting

to see a much more seamless user

experience around that whole let's get

users across to crypto without having to

interact with the Ledger that's in the

vault that he talk about right start to

get those clicks down to a more web to

type basis start to reduce that friction

which has been one of the key issues I

think that crypto's had in terms of

getting those new users onto onto

platforms and we're starting to see

things like Telegram and things like

some of the consumer apps starting to

abstract away that crypto thing that

that crypto part finish your crypto part

of the equation and use crypto what it's

good for processing transactions

providing security moving value at high

speed but let's make a web 2 interface

or let's use an existing Web Two

interface to bring that you that

usability to it to a whole new user

class of people and that's how you get

to the billions of users as opposed to

to the millions and tens of millions the

other one that I thought was a was a

great breakthrough for the industry was

poly Market it's just a beautiful

application that nobody knows really or

cares that it's on blockchain and it

works exactly as it should and it's

captured the world's attention and

people don't even know it's crypto yeah

I think that's what that's what we get

most excited about when people are

starting to use use

applications for their solely for their

utility and it's got nothing to do with

it having anything to do with crypto or

anything to do with an underlying coin

or whatever it may be they're using it

because it delivers more utility than

the web2 version that they've been using

and so things like things like poly

Market yeah which prosers because of the

utility off has got nothing to do with

the fact that it's using crypto it's

kind of like the the Holy Grail right

what we want to see there's a there's

investment we've got on the VC side in a

small messaging app called session um

which has you know over a million users

today um growing at sort of getting

100,000 downloads a week out of the app

out of the App Store

and you 80% plus of the users have no

idea that it has anything to do with

crypto you know it offers a messaging

app that's just got far better security

because it uses a decentralized NW

Network to deliver those messages so

it's effectively completely private and

untraceable and so it's offering a

solution better than an open source

solution like signal with better

security um with functionality that's up

there with web2 functionality and you

don't have to know anything about crypto

to use the app you download it from a

App Store just like you download signal

and you can use it just like you can use

signal and it's using web 3 to deliver

the

security benefit that you can't get in a

web3 environment and that's what we need

to see more apps like that that sort of

have web3 under the hood and deliver the

benefits of web 3 without making users

go through a whole lot whole new gates

to sort of get that utility so on the VC

side are you seeing less deep Tech and

more application stuff or is it still

more Tech infrastructure and still less

applications because we're kind of

waiting for this applications layer yeah

I think we're starting to see a little

bit more on the application layer I

think we're starting to see that cycle

play out like I mentioned earlier

because the returns from sort of deep

Tech um are rapidly reducing right and

so the VC Market starts to get more

sensible about how they allocate Capital

you know the next you know creating a

layer three or a layer four isn't the

easy money that people started to think

it you know started to think that it was

right and so you start to see overtime

turns force that Capital to look for

look for Investments that offer better

risk rewards and we see that more in the

application space to be frank on the on

the VC side now where we're starting to

see apps you know like the ones I

mentioned where they're starting to get

sort of tens of thousands hundreds of

thousands millions of users trading at

Material or or raising Capital at you

know vastly discounted valuations versus

anything in the protocol space so from

our perspective that's that looks like a

much better risk reward bet for us on

the VC side now we're not seeing as much

of it as we'd hope to see at this point

but I think that's driven by success we

just need a few of these apps to get the

sort of the returns to the investors and

the founders that we think they'll get

over the next one to two years and then

that

drives that drives part of that

allocation and part of those Founders

just F focus more on those apps and get

that sort of success and it only takes

you know you see it in crypto all the

time right like you see one D app like

compound suddenly bootstrap users out of

nowhere and it drives a whole sort of

vertical in the space it only takes one

of those success you see something like

an axi come out of nowhere with users

from sort of zero to gazillions

overnight and it drives the whole sort

of gaming allocation both at a VC and a

liquid space so you just need those

success stories I think to sort of show

that show that what could be achieved

and capital follows I think one of the

things that you know I follow from from

people that I know is I think there are

some very big game launches coming I

think Off the Grid is the first one

that's probably this month um which

these are kind of AAA Ultra good games

and that becomes if anybody has a

breakout in that that's very interesting

because obviously the user the size of

the number of users for a big game it's

not an easy game in itself to launch

games you it's pretty difficult thing

but if you get it right somebody's going

to really bootstrap a network

unbelievably on this yeah I think yeah

you basically got people taking two

approaches right like it's take the

traditional approach of building a a

game that's competing with a web 2 game

today but uses crypto for that sort of

value transfer or functionality that you

can't get in the world Garden approach

of most with two games today and I think

that's super interesting and and like

you we're waiting to see the the game

that kind of sort of cracks that nut and

that's the you know that's where a lot

of the capital's gone in the VC space

when you look over over the last two to

three years so we'd expect some big

Winners to come out of that but you know

like developing games in a web to space

or movies when you step further back Pi

wi it's h you know one of the one of my

earliest memories from uh banking days

is listening to our our analyst who was

covering News Corp at the time come in

and give the download to the morning

meeting about what a massive flop News

News Corp had wasted billions of dollars

on called

Titanic um and how this movie here just

being to like the pre screening as one

of the analysts was going to be the

biggest fire year in in movie history

right and it ended up being a massive

money spinner and you know really smart

guy sophisticated guy covering you he

was a top rated media Analyst at the

time but it just goes to show how hard

it is to pick winners when you start to

get into that kind of artistic type

overlay into the investment space I

think one of the other interesting

things is games that have taken the

other approach that have taken a much

more crypto specific approach crazy

thing like you combat hamsters and those

sorts of things where you're getting

like you hard to verify these numbers

but you're getting tens up to hundreds

of millions of users that are coming out

a much more crypto Centric type approach

so I think you know we're we're starting

to see two kind of valid options come

here one takes a one takes a more

traditional approach and sort of bolts

on crypto in a in the way that it can

add utility to an existing Avenue and

vertical the other ones taking a more

traditional crypto sort of off the- wall

the pro let's come up with a game where

you got to click a screen to effectively

earn something over time and that's

bootstrapping yeah but we seeing those

can be very fleeting right they're

almost payto playay you kind of do it

cost you money you get a bunch of users

and they off to something else so

it's kind of but I mean that's the

challenge for the developers right can

they then develop that game into

something that becomes more sticky so

you've got the audience and you know as

we know getting the audience is

generally the hard part

so that's can someone you know someone

can someone again crack that n off you

know I've got these tens of millions of

users from clicking the screen can the

second iteration of this game now hold

them yeah and you know someone will get

that right as well right someone someone

will get that next iteration of that

game that'll become the next Candy Crush

so what other sectors interest you right

now I know this might change you know B

you know what what are you kind of

focused on in other sectors thinking

this opportunity yeah I think we started

off as uh

um particular looking a year or so back

pretty skeptical around Ai and the

crypto o overlap um I think when we look

forward sort of five to 10 years we

could absolutely see that that we could

see the the two coming together I mean

you you start to think about agents

operating in a digital world you agents

aren't going to be sending Swift

transfers right so you you yeah it's

natural that when you start to operate

you know at a autonomous level at

digital speeds that crypto is going to

play a part in that I think we became

more skeptical when we started to see

some of

the shorter term sort of use cases on

the radar around you know the ones that

could use you know kind of more the

models in AI space today um and overlay

that with crypto just given you know the

amount of capital in some of the

traditional players and the amount of

growth they were starting to see I think

where we got a little more excited is

where we started to started to see two

things happen firstly the use cases and

some of the entrepreneurs we talk to

come up with more sort of tangible

shorter term you use cases around AI

that made sense to us and we started to

see which I think was interesting on the

traditional side some pretty big

missteps from some pretty big players

you know people like Google you we also

around their sort of um their image

generation and those sorts of things

starting to skew their AI down avenues

that sort of started to show that there

was a place for open source and

verifiable type attributes to play in I

AI you know where people could actually

understand the model they were using and

understand the output was coming from a

model that they understood was unbiased

or giving the results that they wanted

to see they wanted to see unfiltered um

and I think we didn't we didn't we

thought that use case would come over

time I think it's going to come faster

than we thought just given some of the

missteps made on the made from some of

the traditional play where in arvie

they've kind of sh shot themselves in

the foot to a degree it open the door

for new players so just to summarize

because we've been talking for an hour

already I can't believe it where's the

biggest position your portfolio knowing

that it may change tomorrow or it may

not or whatever but where's the where

where's your concentration of position

you know what what are the the names

that that you're mainly focused on

obviously you look at a lot of stuff but

just the general direction yeah look I

think we've um uh we've actually our

biggest position across the f is in

Salah and we've we've done that um

basically if you look across crypto at

this point in time growth at most points

points of time growth is getting reward

growth in users gets rewarded and that's

where Sal wins at this point right um

fees and revenue and those sorts of

things we think uh ultimately will drive

Vue longer term but at this point where

we're at in the market as users that

have been driving growth and when we

look across the CH very active users and

they're very active on Solana right yeah

and and and so the three you know three

the bigger positions we go across the

firm are the three that have got the you

know the growth in daily daily users and

monthly users that's salana that's year

and that's Telegram and that's what the

market at this point rewards so when we

we spoke about earlier around those sort

of 10 or 11 defi apps and how they've

grown Revenue by 3 four 5x but their

prices are basically

flat you know so Revenue tvl those sorts

of things aren't getting rewarded what

is generally getting rewarded is users

and that's the one metric that we follow

that has get has been rewarded with

price and that was I mean that when you

go back to your TMT days the early stage

of the Internet Was the Same it was used

first and then eventually business model

gets the reward in the end wins the game

yeah and I think that's you and so it

makes sense that investors are

allocating capital and rewarding that um

given that they're the chains that got

momentum and that's what people want

they want to see growing ecosystems they

want to see chains that are attrac

attracting that sort of you triple digit

us a great level and there's a bunch of

protocols out there that you know have

reached all-time highs in their in their

user levels sort of month- on month as

we see here even in July as prices are

trading in a fraction of their all-time

highs so that's when value starts to

emerge so you know three of the biggest

positions we got across the firm salana

and Nia and telegram for that reason

they're the ones that have got user

growth outside of that new protocols

coming to Market AO is one that we're

excited about and so we we hold a bunch

of our weave to effectively get access

to that you know it's a fair launch it's

doing an approach that we think can see

a token grow over time in a much more

traditional Fair Way without that sort

of VC Dynamic and overhang that we've

spoken about and it's interesting Tech

focused on new use cases and so we own

our weave to get that and we also use

some State uh State death to earn that

as well over time so that that's also

bigger positions and AO will also you

use R we on the storage site so we think

it can drive that sort of high user

growth high high functionality growth to

our so we sort of win on both sides of

that both sides of that investment if it

plays out the way we think does the next

12 months and are you

thinking that we see price acceleration

at some point relatively soon you know

relatively soon meaning next two to

three months that we start to see you

know the more typical crypto price

action for you know that kind of

election period postelection period how

are you thinking about that in terms of

structureal prices going forwards again

not talking about Market timing but just

talk about overall

structure yeah I think we um look

there's a lot of there's a lot of

factors I didn't say the word banan Zone

but you know you know what I

meant yeah I think we uh look I think

the name of our game is to be patient

right so you know we remain supremely

confident that that that you see a vast

revaluation of the space um over the

medium term whether that's three months

six months one year it's hard to be

there's a lot of factors outside of

crypto's control right you've got us

presidental

elections are playing a big part in you

know price direction of crypto now more

so than never before right and that's

clearly something that well apart from

the money that crypto is giving Which

does influence to some degree that's

clearly something that's out of all of

our control right and but it's going to

have a big influence on on which way

crypto trades we're seeing things on the

macro Market particularly last 24 hours

which which might change the sort of

short sh short-term liquidity profile

materially and that could sort of give

crypto a jol in one way or another that

we can't sort of predict in the shorter

term I think where where where we take

comfort is when you know we see price

moves like we we've seen over the last

to be frank over the last six weeks in

the last 24 hours but the underlying

things like user growth and tvl and fees

generation is just trending in One

Direction One Direction only and so at

some point as you know markets generally

get this stuff right over medium or

longer term so things need to fix so you

if we were seeing altcoins trade like

we've seen them trade or we were seing

defi trade like we've seen a trade over

the last 12 months but use accounts

looked and emic and all those sorts of

things then going be much more panicked

than we are today but we know longer

term these things get you markets get

these things right over the longer term

brilliant as over my friend really good

to talk to um let's see how it plays out

you've given me some stuff to think

about this I think there's something

really strong in what you're saying is

some of these alts have prices near

their lows over the cycle yet their user

growth or other quality metrics are

expanding I that's a really good thing

for people to look at now the problem is

there some of these kind of a gained in

terms of user growth and stuff so you

need to do a bit of work on doing it but

I think there's something really big in

that idea that becomes very interesting

because this is very discounted versus

you know as you said the the VC markets

and other stuff Richard fantastic to see

you and uh let's see how it all plays

out right thanks for having me good to

speak again

yeah great to see you

cheers so a fascinating conversation

with Richard as ever we covered an

enormous amount of ground we got out of

him what some of his favorite tokens are

we understand his thesis on salana and

where the space is going overall I

really like Richard's view that which is

basically my view which is tomorrow is

going to be more digital than today so

in which case the super Trend continues

and everything else is noise now I also

like the fact that he's tends to be just

a long only investor and is's looking

for interesting opportunities as the

markets sometimes dislocate I found it

profoundly interesting when he's talking

about some of these VC tokens that

people don't like that's the narrative

are now getting very discounted in the

market and I see that myself in many of

these tokens and you're start to think

huh maybe that is interesting because

maybe now that's been taken accounted

for in the price and therefore there's

big opportunities so I for one i' be

looking for the next big trade here what

the next big layer one is and starting

to look at this stuff that's got pretty

discounted you know when salana is near

the highs many of these are near the

lows and it's was like okay time to

start doing some work um the good thing

the hedge funds will get them first so

xam should benefit from that but um and

obviously I'm an investor in that that

helps but I I also am intellectually

interested in the next big trade which I

think is coming so lots to do there

again if you get a chance do me a favor

um son it's a real Vision because I

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that Journey from um from information to

knowledge to wisdom that's the place to

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