Unchained - The Chopping Block: VC Tokens, Memecoins & Celebs, and Seasonal Patterns - Ep. 663

Episode Date: June 19, 2024

Welcome to The Chopping Block – where crypto insiders Haseeb Qureshi, Tom Schmidt, Robert Leshner, and Tarun Chitra explore the latest trends in the crypto world. In this episode, we dive into the impact of celebrity-endorsed memecoins, featuring discussions around Iggy Azalea's 'Mother' token, Waka Flocka Flame's 'Flocka' token, and other celebrities. We debate the broader implications of these phenomena on the crypto market, address criticisms of venture capital's role in crypto, and explore the seasonal nature of crypto trading. Tune in for an in-depth look at how pop culture intersects with cryptocurrency, shaping current market sentiment. Show highlights 🔹 Seasonality in Crypto: Exploration of the historical seasonal trends in crypto markets and their implications. 🔹 Memecoins & Celebrities: Insightful discussion on the rise of celebrity-launched memecoins and their impact on the crypto world. 🔹 Market Cycles: Exploration of the different phases in market cycles and their effects on asset creation and liquidation. 🔹 VC Funding in Crypto: Examination of the role of venture capital in the crypto ecosystem and its impact on market dynamics. 🔹 VC vs. Liquid Funds: Debate on whether venture capital funds are beneficial or detrimental to the crypto markets. 🔹 Institutional and Retail Adoption: The importance of growing crypto usage among both institutions and retail investors. Hosts ⭐️Haseeb Qureshi, Managing Partner at Dragonfly  ⭐️Tom Schmidt, General Partner at Dragonfly ⭐️Robert Leshner, CEO & Co-founder of Superstate ⭐️Tarun Chitra, Managing Partner at Robot Ventures Disclosures Timestamps 00:00 Intro 01:58 Market Sentiment 07:34 Celebrity Involvement in Crypto 16:00 Celebrity Coins vs Endorsements  25:24 Influencer Economy and Social Tokens 27:41 Legibility and Value of Memecoins 28:37 Crypto Influencers 31:07 VCs vs. Retail 36:50 Future of Crypto Markets 43:53 Institutional vs. Retail Adoption 50:45 Taking on Populist Takes Learn more about your ad choices. Visit megaphone.fm/adchoices

But there's not much to understand about the meme coin. Like there's not, there's not like a clear, obvious like, oh, this thing will like lose all your money or you don't get these guarantees or whatever. It's like, hey, there's just this joke asset, right? And if people have attention on it, it'll go up. There are enough crazy fans in the world. Like, think about Swifties. The Swifty economy has got to be bigger than the market cap of all of the meme coins combined.

Mean coins are kind of dumb, but they're at least not net destructive because it's all zero sum, right? It's like some people make money, some people lose money, but there's in some cases no insider, right? So in Dogecoin or whatever, flokey, there's no insider. In these select tokens, there is no social contract as far as I can tell. Nobody has explained when is WakaFlakel supposed to sell their tokens. When is it okay? In what way is it okay? How much of the liquidity are they allowed to take for themselves, right?

What makes it not a rug? What makes it a rug? If you look at the previous cycle, one of the criticisms that many people levied against crypto influencers and against VCs as well was that there was a lot of bullshit that everybody knew was bullshit. And most people didn't say anything. And I think on some level, that was one of the lessons that I really took away from 2022 was when you see something as bullshit, you should say it. Not a dividend. It's a tale of two pawn. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. I'm in the trading firms who

were very involved. I like that eat the ultimate policy. Defy Protocol is part of the antidote to this problem. Hello, everybody. Welcome to the chopping block. Every couple weeks, the four of us get together and give the industry insider perspective on the crypto topics of the day. So quick intros, first you got Tom, the Defy Maven and Master of Memes. Hello, everyone. Next, we've got Robert, the Crypto connoisseur, and Tsar of Superstate. GM, everybody. Then we've got Tarun, the Gigabrain, and Grand Puba at Guntlet.

Hey. And finally, I'm a see of Head Hype Man at Dragonfly. So we're early stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Please see Chopping Bloch at X, X, Z for more disclosures. So boys, another week down. It's been kind of a choppy week in the crypto markets. So it feels like although equities are doing well and things are hitting all-time highs on the equity side, mostly driven by AI stocks, a lot of other stuff is down.

But it seems like crypto macro is a little choppy. And I feel like as a result of that, there's been a lot of infighting. There's been a lot of people with swords out. I see my timeline on Twitter. It seems to be quite depressed. People are just finding things to complain about. Crypto feels particularly PVP right now. I don't know what you guys are feeling,

but what's the vibe check right now in Crypto Land? Robert, what's your what's your vibe? Well, I don't think it's that PVP. I just think people are a little bit bored. And therefore, they're quick to pounce on anything that's new because price action has been going in circles a little bit. So, you know, I just think it's, you know, summer boredom. Yeah, summers traditionally tend not to do well in crypto.

I don't know why that is. Anyone know why that is? But like in general, like... This sounds like astrology. No, this sounds like astrology. Seasonality is a very real thing in retail-driven markets. I mean, if that's right, selling me and go away. Go on.

That's truly the case. There's like alpha just being a calendar. Yes, which requires you to be patient, which nobody in crypto is, right? Like, to actually gather that. Like, who has the patience in crypto to, exit the market for like three months. I mean, if there was actual alpha to being in or out of a market on specific months, people would do it.

I just think this is like, you know. Isn't there that famous story about like, what was it, like December or something or January in equities, like for up until like the 90s or something? Like that it was very, very obvious seasonality that took like decades to get arbed away. Do you guys know what I'm talking about? There was something like that. I don't remember I read about it once. No, but I want to Google it.

yeah there's like well all right well hopefully somebody in the comments can reply of what what it is I'm thinking of but there there was something like this that was extremely obvious and basically didn't go away French stock market lunch time thing that did take a long time to go away stocks go up or down during lunch just volatility went down so you just short volatility during lunch and then get out of the trade outside of lunch so you'd buy like you know you short you just do index options yeah yeah exactly Right. Right. Interesting. But this was in the 90s. This was in the 90s. So like I feel like this is like very long gone. This was like probably when it was like pseudo electronic trading like kind of low frequency. You could get away with doing things like this. I highly doubt this exists anymore. But it's in a lot of books as an example. I bet there's some rich guy out there who made a fortune on like the lunch volatility.

I mean, Renaissance. They're the ones who are famous for this trade. They did the French lunch. shower. Interesting. Yes. And then they told everyone that once it was gone. So that was like how they showed up in a ton of books. It's great marketing.

Yeah. It's, yeah, it was very good marketing. Someday there's in the, whoever writes the book about crypto and all the craziness that we've lived through, they're going to write about the summer effect that went away in, you know, 2025 or 2026. 2024 because we talked about it on the chopping block and then everybody. That's true. That was, we are the renaissance of crypto, really, if you think about it.

that just laid all the alpha out there. Guys, stop trading in the summer, get out of the markets. You heard of here first. No, but honestly, it would not, like, you really, hold on. Let's actually just take a moment there. Do you really think crypto markets are that efficient? No, that's what I'm saying. There's no opportunity just to, like, trade calendar months.

No, I'm saying I think crypto markets are incredibly inefficient. So inefficient in the sense that you think there's a huge seasonal opportunity that somebody could deliver excess returns by capitalizing on. I think it is, I mean, it's obviously not such an obviously, you know, it's not like the yen USD thing. It's not, it's not like that egregious. It's not like you can make a crap load of money every single time. And like, obviously, it's not every single summer.

But it is one of these things that you just have seen now for the last decade. Is that summers are, I mean, I don't know. I don't know. Obviously, N equals 10. So it's not, you know, this is not. not the kind of thing that you could print money off in a reliable way. But I don't know. After this show, I'm going to go home and just like,

if Bitcoin returns money. Nothing in here is financial advice. Don't hold me to any of this. But yeah, anything. I mean, it's kind of like those charts about the having or people are like, well, you know, when Bitcoin halves, it doesn't go down or sorry, it doesn't go up immediately, but it goes up within three months of the having, which I'm like, okay, that just means that it didn't work.

Like it stopped working. And so now you're like expanding the rule of when crypto goes up after the having. Yeah, this all sounds roughly like, you know, pseudoscience, you know, to me. It could be. It could be. On some level, it also doesn't surprise me if it is true just because I think crypto just attract. I mean, it may become less true today just because there's so many more institutions in crypto.

But like there's just been so many people who are just always long. They're just like always balls long and they can never not be long because they're just too bored. And in the summer they sell, like at the beginning of the summer, the middle of the summer? I don't know. Yeah. Anyway, okay. Speaking of things that are happening. Speaking of things that are happening.

Meme coins. So, unfortunately, we have to keep talking about them because celebrities have gotten more and more into the game. Over the last week or so, we've seen more and more meme coins coming into the fray and more celebrities, now increasingly B and C and D-less celebrities getting into the first. in launching their own meme coins. So we talked before in the last show about Iggyazalia. Now we have Waka Flame. Who's sorry, Waka Flaka Flame,

who has launched Flaka. Waka Flaka Flame. Launch Flocka Token. Apparently Waka Flaka Flame does not have a great reputation of a lot of sketchy projects that he has previously pumped. There's the rapper Lil Pump. And Sexy Red, who has also gotten into the meme coin, game. I don't even know who sexy red is, but, and just recently there was news that potentially

maybe Barron Trump has launched a meme coin in the name of Donald Trump has not been confirmed, TBD, whether that's real. It might be, don't trade on that. Might be fake by the time this show goes live. But so we see more and more of this kind of crazy, you know, celebrities coming in to try to monetize their fame using meme coins, much as we were talking about on the previous show. Now, there's also been increasing conversation within the meme coin community about whether or not this is good for crypto. So on the one side you have folks like Ansem who, you know, very famous meme coin trader who now is kind of one of the quote quote main characters of this meme coin trading cycle. And Anselm is being criticized for legitimating these celebrities coming

into crypto, launching their meme coins and try to get, you know, Anson's attention to get them to endorse what they're doing or onboard them, quote, unquote, into crypto by. launching their own meme coins. On the other side, you have Kobe, who recently was critical of Anson, saying that this is not a good way for celebrities to be engaging with crypto. Celebrity should be doing what everyone else is doing in crypto, which is just buy crypto. That's how you engage with crypto. You don't need to go and start a thing with your name on it, just be a participant in the crypto economy, and that's good enough. So there's now this kind of hand-wringing and a lot of criticism flying around the meme-coin

community about what is the right way to deal with all the celebrity interest. Most of the time when celebrities see that there's something interesting going on, they want to get involved, but what is a productive way for them to get involved that allows them to use their advantages as celebrities besides launching celebrity meme points? So thoughts around the table, how you feel about the current celebrity meta and all these celebrities jumping into the fray? Yeah, I mean, I don't think much has changed since last week besides more celebrities jumping into the fray. It seems like there's, you know, momentum here and it's not slowing down.

You know, we talked about the mother token last week on the show. It is Azalea tweeted that we were boring and didn't get it. You know, I don't think there's any breaking new, you know, information that's come out besides just more celebrities have jumped onto the bandwagon in the last week. And this looks depending on if you, by the time the show comes out, the, you know, Donald Trump official meme point is a hack or not. not, but it also looks like an attack vector against the public at large, which is to use celebrity names in some way in conjunction with misinformation or a hack to get them to buy a

mean point. You know, these things take off incredibly quickly when there's the prospect of celebrities involved. You know, they jump in value from zero to extremely large numbers very quickly, based solely on celebrity. And so, you know, this might emerge as, you know, not just a tool for celebrities, but tools for, you know, hackers, fishers, you know, con artists, you know, and mass. I'm going to take the opposite side of you guys on this, actually.

Because historically in crypto, celebrities, notion of endorsement has always been indirect. It has been by endorsing a different asset, has been by endorsing exchanges, has been by selling their likeness indirectly in a way that they actually don't really have control over how it's used, whereas I actually feel like this is a step up from Tom Brady and FTCS. You know, like significant step up.

Now, why you can step up? Well, in one case, Tom Brady is reportedly kind of giving credence and reputation and security, a feeling of security to people for something he doesn't understand whatsoever. But there's not much to understand about the meme coin.

Like there's not, there's not like a clear obvious like, oh, this thing will lose all your money or you don't get these guarantees or whatever. It's like, hey, there's just this joke asset, right? And if people have attention on it, it'll go up. People stop paying attention to it. It'll go down. It's a much simpler thing. And the celebrity actually can understand it. It doesn't have to be the black box that they're endorsing that then it turns out then when that the person who owns a black box commits some fraud, then like now they're associated with it permanently. right? Like, I actually think the direct

the direct connection between the endorser and the asset is I'm not saying it's like great, right? Like this is not curing cancer, right? We're not, I'm not, I'm not certainly not saying something like that. I'm very surprised to hear you defending this. Okay, so are you saying that

Tom Brady was a victim in the FTX scenario, which it sounds like, and I kind of agree. He was a willing victim, right? He was like willing to take the money to endorse something he didn't understand. Right. In this case, I don't really see that type of thing. And like, I generally think like, fine, it is, it is just sort of this weird, you know, thing that people are selling for their likeness. But like, how different is it really to selling merch at your concert or whatever, right? Like, I'm not like that. I honestly don't feel like it's that, that crazy.

I just think it's like a step up from what was already very bad. At least if you're buying merch, you get a t-shirt or like a cup or whatever, right? Like, I mean, Kobe made this point when he was arguing with Anselm that, like, if you think about what are these, what are these celebrities who are launching meme coins doing, right? They own a bunch of the meme coin, they tell retail to buy it, and they sell it themselves. That's the only way you can make money. Like, you, you sell the meme coin.

So they get you to buy it and they sell it to you, and what are you buying? You know, I guess in case of Iggyazalia, there's some particular things that you can do of, you know, buy merch as well as, you know, this MVNO that she's partnered with. But for most of these mean coins, there's absolutely nothing that you can do with the meme point. And do you really believe that these people are going to be

endorsing these meme coins for five years, for three years? I mean, one, the mean, the mean, remember who's the guy

who, the NBA player who had the NFTs? Oh, yeah. I know what you're talking about. What was it, Dinwiddie or something? I can't remember his name. But like,

what happened to those NFTs that he was selling to retail? What did he do with them? I don't know, but I kind of assume they have, like their utility expired when people lost interest. So I think on the whole, merch like is boring and it's not speculative, but it is a more straightforward way to monetize your celebrity that doesn't create, like I don't like using

the term victim because I think it ascribes a little bit too much intentionality, which I don't think is really there. But I think the reality is that at the end of this cycle, you know, I very much take Kobe's side in this, which is that the people who buy celebrity meme coins will be disappointed than the celebrities stop caring about the meme coins in like five years, way before five years from now, but almost certainly within five years. I don't disagree with that.

I'm just trying to say that compared to what has been true in the past both cycles, this is at least like feels kind of neutral to me relative to like the celebrity not even knowing what they're selling you. They're just like, you know, kind of blindly like trusting a bunch of people who are scammers.

Like I feel like this is a, a lot better. This is a bit more like not your keys, not your coins, but in a very weird way. It's more direct transaction and monetization of fame. Yeah. And it feels like that to me is like more direct, like it's like causes less harm than the indirect one. The indirect one is always where like everything bad happens. What? Okay. So, so Kobe brought up the example in his post about Kim Kardashian and Ethereum Max. So if you remember Kim Kardashian settled with the SEC over, uh, not disclosing that she was paid to endorse this, like, crappy Ethereum Fork called EthereumMax. It was like a very scammy Ethereum Fork.

And Ethereum Max was not like, oh, my God, I can't believe Kim Kardashian is endorsing something. Everyone go buy this thing. It was like this crappy project that didn't really get much traction, didn't make a lot of money. It was not a bit... I think the market cap is smaller than most of the meme coins that we see today, even like the random celebrity meme coins. And I think in large part, the fact that they were endorsing something that wasn't their own name was probably on some level net better

because one, at least it was plausibly a real product and the people who were buying it had to have some understanding of like, what is Ethereum Max? I mean, like, yeah, okay, Kim Kardashian says to buy this. What is this? This is some Ethereum thing that claims to be a technology. You look at that and you're like,

I don't know what that is. I don't really understand what it is. So most people who follow Kim Kardashian did not buy it. But obviously, if this thing is, buy Kim Kardashian coin and I'll retweet you and talk to you all. all day long on Twitter. You'd be like, great, I understand that. That sounds awesome. I'll buy that. And as a result, you have many more people buying these meme coins than people who are buying any

of the celebrity endorsed random crap projects of yesterday year. That does seem like it is likely to impact more people net net than, you know, the Ethereum Maxes or whatever, you know, insert random crap coins that were endorsed by celebrities. Well, yeah, I mean, anyone who saw a tweet about Ethereum Max from Kim Kardashian either thought that she was hacked or thought that it was just like a horrifically lame paid proportion. I don't think anyone genuinely thought that Kim Kardashian was like researching, you know, copycats of Ethereum and trying to find one that she believed in. I'm sure some people did, right?

And I feel bad for those people, but it's a much, much small proportion. But I think you're you're kind of distorting the like these kind of one-off endorsement examples from like the ones where like the brand used it as their face. you know, in the FTX case, that was very obvious, right? They used all the celebrities as their face. And even going back to, you know, the early Coinier West, speaking of someone who sued to kind of get there and do the opposite where they didn't want to be on the coin.

And I just think like there is a sense in which this just doesn't feel as value destructive. Like, yeah, sure, people won't like it. But it's like, yeah, sure, they bought, maybe they got drunk and bought. way too much merch at a fish concert and then couldn't sell it. I feel like it really is not that crazy. There are enough crazy fans in the world.

Think about Swifties. The Swifty economy has got to be bigger than the market cap of all of the meme coins combined. Easy. When central banks use it to describe their inflation, it's like a very clear net inflow of cash that's taking place. And I don't see 90% of the shit that these people buy. as like that different than buying a meme coin, to be honest. And like I, you know, it's like they bought the shirt and then they wore it the one day

and then they, it's a lives in their closet forever. I think like don't, don't underestimate that aspect of this. Okay, so, okay, first thing I'll say, like you're sort of comparing meme coins to celebrity endorsements generally, right? And it's like, oh, well, look at the FTX endorsements. Aren't these really terrible? Well, but obviously FNNNFluencer sponsors. Most, yeah, yeah, yeah.

Like, I think most endorsements in crypto, if you, you know, yes, FTCS was bad, but FtX is not every company in crypto. You look at, you know, who's that guy, the TikTok, or KB lame, who endorses finance or, you know, messy or any of these people who endorse a lot of the big crypto exchanges or companies. Like, those endorsements, I think have been fairly positive. And I think in general, this is the, I mean, Robert made this point in the last show. This is the oldest thing in history is some trusted or celebrity figure endorsement. a product that people like and bringing attention to it and, you know, kind of attracting their audience

toward a new product. I think that is normal and healthy. The idea that instead, hey, you know, instead of going and endorsing some product that people might find useful, instead you should launch your own coin, convince retail to buy it, and then eventually sell it on the market. Like, that does not seem to me like, first of all, what meme coins represented in the first place was this idea that it's a meme and there's no team, there's no utility. there's no, like, I don't know why we call these things meme coins. They're not memes, right? They're social tokens.

They're not meme coins because what's the meme? The meme is, oh, okay, well, I'm famous. That's the meme. And I own 20% of this or 10% of this and I'll eventually dump it on you. The other idea behind meme coins was that there was no insider. It was all just, you know, like Dogecoin. It was all a joke. Yeah.

It was all a joke and nobody has a monopoly on this, right? These celebrity coins are not like this in any way, right? they're intentionally manufactured by a single person. All of it relies on that single person being the distribution for this thing. So, I mean, it's fine if we call these things celebrity coins or social tokens. But I think conflating these with meme coins, like, I agree with you, meme coins are, like, I think meme coins are kind of dumb, but they're at least not net destructive because it's all zero sum, right? It's like some people make money, some people lose money, but there's no, I mean, in most cases,

or not in most cases, in most cases, there's no insider, right? So in Dogecoin or, you know, whatever, Flokey, there's no insider. It's just like this big joke that everyone is playing together. But in the case of a celebrity coin, there is one person for whom it's not a joke, which is the celebrity. Tom, what's your take? Yeah, I think I'm more or less agree. I think, you know, going back to what you're saying, I think these are actually, like, less explicitly transactional, which I think is what kind of makes them a little bit problematic, right?

Like if I'm buying somebody's NFT, great. Here's the price of which you're buying this NFT and you get a link to a link to a And you sort of know outright, like the boundaries of the engagement, what you're purchasing. It's kind of like you said. And this is kind of why, like, walk a flak a flame is getting, yeah, a bunch of shit is because, oh, well, these addresses that were linked to, like, the contract employer, they sold a bunch of the tokens. And so it's like, okay, well, when was he supposed to sell?

Was he not supposed to sell at all? It would have been cool if he sold some up front or sold directly to people. Like, it just feels like this weird kind of kind of nebulous, oh, it's, hey, we're trying to create this thing of value. And then actually, I'm going to, like, go sell. And I think maybe to your broader point, too, it's like, you know, the purpose of this market or any market is to be, you know, having efficient capital allocation, right? And what are we really trying to incentivize more production of here? Like, what is the point of this market? It feels just pure PVP. It's not, as you said, like, you know, you can say, hey, you know, Tom Brady maybe encourage people to go use FTX, but, you know, Mark Wahlberg maybe encourage people to use crypto.com and they went and bought some Bitcoin and great. Like, you know, want people to go use a exchange. and maybe they like it and fine. Like that's just sort of, you know,

how these things are supposed to work. But we're not building anything here. There's no extra greater company or purpose or mission or like product. It just, look, look, that's not something. That's not something we're disagreeing on.

I think the only thing I'm, I'm just trying to say is like, celebrities endorsing themselves just feels like, okay, fine, whatever. There's like, it's certainly nothing to be like, oh, I'm super excited about.

But it's like, I don't, people want to do it if they're going to do it. Well, here's the point of permissionless network. Yeah, here's a thought experiment. What if every celebrity had a token, right? Like, what if you just took this to like the extreme conclusion of it? And like every celebrity had a mean point that they made, not that like, you know, some startup made for it.

Right. What would the end result be? And would it be like an efficient market? Would it be a good use of capital for people to be speculating on these? Like what are, like, what even are they, right? If every celebrity had a mean point, there'd be, you know, 20,000. Sleptoins. What would that imply for society?

I think for society, like, okay, if you take the current concept of celebrity coins, which is I'm a celebrity, I own 20% of the supply of this thing, and I pump it and try to get other people to buy it, right? Like, to Tom's point, the only way that makes any sense

is that eventually you'll sell your tokens. When will you sell your tokens? Over what period of time? What's the social contract about how and when it's okay for you to sell your tokens, right? in crypto, we do a lot of stuff to try to make this legible. The team vests, and there's like these expectations around how you're supposed to liquidate and blah, blah, blah, blah, blah. In celeb tokens, like, I'm going to stop calling the meme coins because I think that's like a misappropriation of the term.

In these celeb tokens, there is no social contract as far as I can tell. Nobody has explained when is walk of flakaflame supposed to sell their tokens. When is it okay? In what way is it okay? How much of the liquidity are they allowed to take for themselves? What makes it not a rug? What makes it a rug? We don't know.

Walk a Flach Flame doesn't know. He's just going to do whatever he's going to do and then people are going to get mad at some point in the future and say, oh my God, I can't believe this happened to us, right? The thing that people want to do is they want to bet on their favorite celebrity. They want to bet on them becoming more famous,

becoming more well-known, becoming more successful in their careers. And I think that is sensible, and many projects have tried to create that, these sort of betting markets on celebrities. So, of course, Big Cloud way back in the day, tried to do this. There are many ways in which you could kind of manufacture

prediction markets around individual people. But I think this idea that the celebrity themselves gets you to buy their token, that is what feels not socially useful, right? That's what feels like kind of value destructive. If instead you're like, look, I think Taylor Swift is going to keep crushing it. And I want to buy your token because I bet she would become more famous and even more awesome. I have an alternative reality for you. But I'm not trying, I'm just trying to play.

In general, I just am like kind of neutral about this stuff. You guys all seem to have like these like strong. I hate this because it doesn't help society thing. And I'm like, I'm like, there's so many things like that. I can't even begin to talk about all the things in the world like that. But the thing I will say that's interesting is like, you know, if I look at the influencer economy on TikTok or Instagram, it's like this like kind of weird.

I don't really understand the economics, but clearly there's a lot of transactions going on in the background, type of industry. And I just like the idea of being an influencer and people who want to like buy time to make you do some thing is like they have to buy your asset. They have to. And I kind of feel like at the end of the day, these social tokens, all these. They're very hard clunky, hard to use, hard to get liquidity for, right?

That's the reason they so far haven't had this type of takeoff. But I think there's still this dream of that type of thing, right? It's like all these celebrities don't want to deal with like selling their rights to private equity to get liquidity. Selling stuff to influencers to get liquidity. Dot, dot, dot, right? Like there is some truth, even if this is like all kind of mainly smoke and mirrors. There's some kernel of truth of why people want this, right? And like, I think you have to respect that that exists.

But who wants it? Is it the users who wanted, the fans who wanted? Or is it the celebrities who wanted? I mean, arguably the fans benefit only indirectly. I think this obviously I don't benefit at all I argue the fans

of the losers right there's a value transfer happening here yeah but merch is a value transfer and most of the time people don't really care

they forget about it right but at least in merch it's legible to you what you're getting and what you're paying right in the case of a meme coin

just eligible to me it's some amount of liquidity I could provide in a pool I mean if you're a walk a flock of flame and you know how much money are you going to make from this meme coin? TBD. If you buy the walk of flak a flame token, how much are you giving to walk a flock of flame? You don't know? It's very unclear how much of every dollar that

you spend is going to walk a flock of flame. Clearly the amount is some amount of that, right? Some amount of every dollar spent buying his celebrity token will go to him in the long run, but completely unclear how much that is. And I would argue that that is what I mean when I say it's less legible. We know that eventually he's going to sell and he's going to dump and the price of your tokens are going to go down because walk a floggleam dumped. But that is to me, I mean, so you made the point that like, well, you know, there's always bad things happening or stupid, you know, value-destructive things happening. Why get mad about this one? I mean, I'm not that mad about it, but I do think that if you look at the previous cycle,

one of the criticisms that many people levied against crypto-influencers and against VCs as well was that there was a lot of bullshit that everybody knew was bullshit. And most people didn't say anything. And I think on some level, that was one of the lessons that I really took away from 2022 was, was when you see something is bullshit, you should say it. And it may not matter. And obviously, a lot of people also think that we're not alone in thinking that celebrity tokens are stupid. But I think it is important for people to hear us say it,

even if it's kind of like, yeah, but there's always stupid things. Yeah, of course, they're always stupid things. But this is like the big thing happening on Twitter right now and the big thing happening in our industry. And I think it is valuable for people to, you know, it might seem obvious to us that, yes, this is how someone would think about it. it is that yeah, walk-off, lock of flame has to eventually sell his tokens. But there is the retail

investor who might have just heard that for the first time and thought, huh, yeah, you're right, huh? Why didn't I think about it that way? Well, I think most people probably don't think about it because these things were created eight hours ago and it's shiny and new. And most people think they will make money off it, right? Most people think, like, yeah, I know that, but I'm going to time them, you know, I'm going to get in and get out and I'm a great trader. And obviously, many of them are, which is why some people have made a lot of money on your coins. Yeah, these are assets that are hours old. So questions about what happens in the future, like a week from now or a month from now,

is like the timeframes are just, you know, apples and oranges. And this is also why I make the claim that I don't think this, you know, meme coin carousel slash celeb coin carousel is sustainable because I think it's like it's just too fast. There's not enough repeat players to not overgraze the commons, as Tom put it on a previous show. but for now at least this is definitely the meta it's not going away it's not changing anytime soon

and I certainly it's going to be more celebrities who get in the game there was a very good there was a very good tweet by Marad who's like an old school Bitcoin guy

and trader and it was a fund manager I don't know if he still is but he it was in 2017 don't worry don't worry this token has utility

please don't go after me 2024. Don't worry, don't worry. It's talking as no utility. Please don't go after me. It's kind of true, right? It's like... It is absolutely true. It is absolutely true. Yeah, it is... Okay, so speaking of venture, so one of the big stories this week has been...

I mean, it's kind of a recurring story about whether VCs are good for crypto. So Paradigm, one of the leading crypto VC firms, they recently announced their new fund. Their new fund is $850 million. which, if you recall, their previous fund was $2.5 billion. And so this is now 29% of their previous fund is their new fund. Now, you know, paradigm, I know they're not alone.

Many funds that are out fundraising have hit relatively smaller portions of their previous fundraise. You know, sometimes up half of their previous funds do even less than that. And it just shows we're in a new environment. Now, obviously, a lot of this is macro. So rates are higher. That means there's less interest in deploying into private markets because, you know, government debt is obviously paying a higher yield, and so the risk-free rate is higher.

But also, I think a lot of these mega-funds have not really done great. They've not performed as well as people might have originally hoped. And so a lot of the industry is right-sizing. Now, another part of that story is that there have been increasing calls from people saying that these venture funds, so, you know, paradigm previously, obviously they had a very large venture fund, $2.5 billion. There's now been claims that even their $8.50 million, dollar venture fund, which they said is an early stage fund. This quote-unquote early-stage fund,

there have been multiple people who've claimed that this is actually bad for markets. Now, why do they claim that this is bad for markets? So if you look at one of the big people who I engage with on crypto, Twitter arguing about this was Arthur Chong from Defiance, he claimed that this was bad for crypto because if you're an early-stage fund, if you raise $850 million, you are going to deploy this into early-stage projects that are eventually going to, you know, launch tokens and launch out at high FDVs and sell the tokens to retail or, you know, markets are going to have to absorb all the tokens that you create. And so you're just ultimately going to create even more sell pressure because you're going to be selling those tokens on public markets

at three to four times what you originally deployed because, you know, you're going to have markups and whatever. And so therefore, you are extracting more money out of the crypto economy. And instead, we should have more liquid tokens or liquid token funds that buy tokens on the public markets, right? And I saw a lot of people kind of plus oneing and saying, yeah, totally, you're absolutely right. These VCs are extracted from the industry and they're bad for the market. And I thought this is a very interesting sentiment shift because I'd seen many things about, oh, crypto VCs, these high-fdv low-flow launches, they're extractive, they're bad for the industry. But I've never heard the claim that early-stage VC is bad because they create tokens and launch them

and then they're going to extract more money from the markets. So I wrote this big tweet kind of arguing against this claim, but I want to go around and kind of get your guys' responses to this sentiment that we've seen is that unlike in the yesterday year, it used to be that it was uniformly positive. It was uniformly seen as bullish that people raise big amounts of money to deploy into crypto. And now if it's venture, it's seen as bad for crypto, or at least negative for crypto markets.

Curious to get your take, Robert. Well, I will flat out say I think this is a pretty preposterous view because, you know, look at any industry or vertical that deals with venture capital, right? In general, the venture capital is there so that people can create billion dollar things. And without that financing and money available to them, they can't create a billion dollar things. I don't think anyone's concerned about, you know, oh, once, you know, a Silicon Valley company goes public on the New York stocking. exchange, you know, the VCs are sell pressure at that point. I mean, that's just the economic reality of how financial markets work, right? Of course, there's sell pressure after a company goes public, right? And it doesn't mean that venture capital funds are bad and hedge funds that are in

the business of buying and selling stock are good, you know, all the same, you know, less sophisticated views on hedge funds are, you know, the similar, you know, go and read about Citadel, you know, from the GME and the ape people. You know, it's like, you know, people have a horrible view of the hedge funds that are, you know, just buying the liquid assets, you know, versus the private market investors, you know.

So I think people in general are always just going to be, you know, against most economic systems unless they're directly benefiting from it. So let me give you the devil's advocate. Let me give you the devil's advocate. I've had a lot of people in my comments kind of giving me the counter argument. So first, that may have been true back in the day in crypto, right? But now crypto venture is very overfunded.

So it is really zero sum. If you go raise $8.50 million, that's $8.50 million less. But the money is already there. It's not as though nobody wants to do these deals if it wasn't paradigm doing them. So one, the markets are already overfunded. Second is that crypto is different because these tokens get sold to retail. And retail is dumb slash undistinguishing. And so any token that launches is ultimately going to be.

to absorb retail dollars. All right. Same with every IPO. Same with every IPO. Well, in the IPO market, there's more institutional investors. And, you know, these guys are very long-term holders. Retail is kind of faster money. And they don't really understand what they're buying in crypto markets.

Therefore, in crypto, the VCs are more value extractive. That's a devil's advocate. Yeah, I hear that. I mean, I don't think crypto is that unique. It's another financial market, right? It's not like it's that different from traditional equity markets or that different from any other asset class. At the end of the day, I think there's a lot more similarities than people appreciate. I think you should always be thinking of markets, especially if you think about markets historically via credit boom and bus cycles.

There's also the asset boom and bus cycles, right? There's like cycles where lots of new assets are created, those new assets that are created, maybe are sort of like underfunds. in the sense that their revenue or whatever, they're supposed to be dividending or returning to holders over the long period is lagging what the price is, but that's because everyone's betting on the growth in the long run. And then those assets enter, you know, if they survive, they enter kind of a extract phase, right, where people are just trading them around based on like there are speculation on how much they can extract in kind of long term value to medium term value. Some of it's speculative, some of it purely dividended or whatever, some of it, you know, whatever way you want to view at governance value, et cetera. And then, you know, you have the third phase, which is kind of like the, hey, there's no new money coming in and there's tons of M&A and private equity and buyouts and things that are removing assets from the market, right? They're kind of generally asset destructive, right? So you kind of have this birth,

oscillatory diffusion and then death process. And like this has happened over many cycles from like the 50s to now. In many different economies, you have tons of examples of these like asset boom, asset extract, asset crash scenarios. One interesting thing is crypto just hasn't had too much of the last part. It has had asset crash in that the equity value has crashed. Hasn't had asset crash in that there is value that people, extract by merging things and doing kind of like, you know, investing that's like sort of more

in the kind of like aggressive style. And I think there is an argument to be made that, you know, if there's a lot of new VC money, that means you expect a lot of new asset creation. If you think that there's not that much new asset creation, we're kind of out of the credit bubble side, then you should be funding hedge funds. And, you know, I guess the kind of more like vulture investing P type of stuff you would fund in the last. last case. But the weird part of Cryptover, everything else, like I said, hasn't really had the last case

in terms of activist investors, vulture funds, etc. So I think like in some ways, there is some, I think like in, you know, kind of like normal finance, the ones who do that try to not be known. It's better. You know, they don't, the opposite

the VC, right? When you're creating new assets, you need to be really public because you need your assets to have more people knowing about it. When you're trying to merge assets and, shove them in together and do buyouts. You don't want anyone knowing until you're already done doing it. So it's just like a totally different communication style. And I just think like this debate is just a matter of people debating where in this kind

of credit cycle we are. And it's not, to me it's just like not very clear whether we're kind of, you know, because we don't have this last phase of like cleaning up dead assets in crypto, we just, it's not clear to me which one is the right. So I kind of want to just take this like kind of monetary and asset history kind of lens on this and say like, hey, if you're like saying there's too much VC money, you're just saying that there needs to be no new assets, right? And that the assets that exist are sufficient. I think it's a little bit hard. People, you should be buying the assets that I already own is what is what Arthur is saying.

No, I'm not, I wouldn't give him total a lot of flack for that, right? Because there's a ton of venture-backed investment that just have had horrible failures in the liquid markets, right? And like, there is real evidence that there's a glut in some part of crypto, right? But there's also evidence that like sometimes something comes out that attracts an infinite amount of capital, like restaking. And then it's like, oh, every dollar that went into restaking was 100% worth it relative of net in net value to the investor. than putting your money into the restaking protocol possibly, right? In terms of asset creation versus the amount of yield you get from actually being in the protocol. And so I think there's a sense in which you need both.

There's some equilibrium. The native yield that the liquid part offers, if there was too many people in the liquid market, staking yields would be zero. And so you also have to consider that aspect, right? there's some impact cost to like the carry cost of holding liquid assets goes down or goes up. And so your profit goes down. So I think it's on the simple argument. And look, I get for Twitter you want to have a nice justice story of one side or the other.

But it's like kind of this complicated thing in my opinion. Tom, what's your take? Yeah. I mean, I think the point around they're not sort of being asset consolidation and crypto is very true. I think I always say it's like it's very hard for a point. to actually stop trading. Even the deadest token, even the deadest coin you can imagine or think of, probably still traded some nominal amount of volume today. And I think in aggregate, obviously, that kind of kind of affect market liquidity. But look, I think, you know, markets are extremely

good at revealing information. And it's easy to shit on the high FDV, low flow VC coin meme. And I think some of that is maybe in aggregate badges for the optics of the market. But like, look, if that if we were truly burned out and no one wanted to buy these things or, you know, there's complete over-allocation in the early stage, we would see that in sort of the later stage markets and, hey, like, you know, these things would sort of be trading at, you know, flat to their last round or there'd be absolutely no liquidity or no demand for these tokens in the launch. And in practice, that's just not true.

Like, like, ultimately, like, sort of people's preferences and, you know, the market is sort telling you exactly what it thinks. And so you can complain that, hey, there's no, you know, sort of like in sort of like the IPO market, If there's no IPO pop, maybe some people get mad, but like, yeah, that just means it was priced to perfection and there's no new information being revealed. And I think that's kind of what we're seeing here where if there were some amazing opportunity in liquid markets later stage, people would be going and raising funds and deploying there, but there's, you know, isn't. Yeah, that's a good point. I mean, if you go look at the pre-market trading on Avo or hyper-liquid or

whatever, you can see what the coinbase. Or Coinbase. As of today. Yeah. Coinbase? Coinbase is doing pre-market? Offshore. Oh, wow. Wow, what are they listening? Egin. I'm listening, I can, okay. I mean, that makes sense because, like, yeah. Wait, does I, I can then want that? I assume they would not want that.

Okay, but interesting. All right. Well, it's probably one of the largest assets that doesn't have. Yeah, I think it's like the math on the fees. We're all investors in it. Right, right, right, yes. That's just surprising to me because I would assume Coinbase would only be, anyway, whatever.

I have no idea. Yeah, so my take, I mean, I won't surprise. you guys that my take is that I think this is nonsense and that obviously venture is good and because we're funding new stuff and if crypto is going to win it's because new stuff gets created and we create new

products that help people and so anybody who's claiming that well crypto doesn't have a use case and it's all speculation it's like okay yeah then what you're demanding is more startups more products more creation now you might say like well but the VCs don't fund that they fund instead more high FTV low float launches that get dumped on retail

yeah I just think I mean for one, a lot of the products that have been very successful, one, they were back by paradigm. So, you know, like, Blur and, did Blur do Yuga Labs? I don't think they did, actually. But they did Axe Infinity. Did Paradigm do Yuga labs? They did. They did do Yuga.

Yeah, they did do Yuga. They've done a bunch of stuff that's like consumer. Yeah, I think they did. I think it was both Andrewsson and Paradig that did Yuga. I could be wrong. Whatever. They've done stuff, right? The point is, like, they've done everything under the sun.

Now, have they done high, FTV, low flow type things that are down? Absolutely. By the way, everyone has. Like, there's nobody who hasn't invested in startups that have gone down in value. But, you know, net net, if the market basically thinks that like, hey, these things aren't valuable, then they'll stop doing them. Ultimately, these people are responsive to the market. Go ahead. To be fair, a lot of the venture consumer CPG stuff of like the 2015 to 2020 era, if you look at their IPOs, they look very similar to the high float.

Oh, totally. But wait, all IPOs. All IPOs. All fint. Our low float, high FTV. Every IP. But these ones are the like the all birds of the world. Oh my God.

Those are like abysmal. Those those look like worse than the worst. Oh, yeah. And a lot of the consumer tech stuff, you know, and like a lot of the, you know, like, what is a bird and a lot of these other people are very hyped. I'm going to take a stand here. All birds deserves it because they're such shit fashion.

It's like startorial murder. Like no one should be caught dead wearing that shit. I think so you know about bird scooters. which are trading key sheets for like, like, I think they're like a few hundred K in total market cap because it's like the liabilities are so huge. No, it's bankruptcy. It's bankrupt. Yeah.

Oh, it is bankrupt. It's traded for hundreds of thousands of dollars of just like stub equity value that has no value. Right. Right. You're just on the option value that like maybe the accountants committed fraud and actually there's a bunch of money. Correct. Yeah.

It trades for non-zero for like edge cases. It's just for the memes. It never goes to zero. Never goes to zero. Every once in a while a bankrupt company's equity actually is worth a ton, but it's very rare. Yeah, because they messed up. But then also, the other thing is like, okay, well, let's imagine. So Arthur's claim in this post is that, well, it would be better if they were liquid funds.

So two things that I would claim on that. One, all of the mega funds bought a bunch of liquids, right? Everybody who raised multi-billion dollars, they had to deploy in liquids because their funds were so big. So the idea that these smaller funds are, or like the mega funds are bad for you, is like, no, we should wish they were bigger because the bigger they are, the more they have to buy liquids.

And they have to go to treasury sales. They have to do all these things to displace assets that would otherwise be hitting liquid markets. So it's backwards to think that early stage or that like, you know, paradigm raising 850 million is bad for you. It's actually good for you.

You want them to raise bigger, even bigger than they currently are. Second is that the idea that like a, liquid markets fund is going to be better for liquid markets is also not obviously true. If you look at an actively managed head fund, these guys are, you know, long shorting things. They're doing pair trades. They're getting out of stuff. They're not necessarily going to be buying Bitcoin to make the Bitcoin price go up, right? That's probably not what they're doing. They're probably, you know, they're charging 2 and 20 or they're charging whatever fees they're

charging so that they can go and get alpha over the market and extract money from retail. They're making more money from retail. They're making the markets. not as soft as they would otherwise be. They make it harder for retail to survive in the market. So I think it's, like this is not the door that you should be banging on to my mind. Ultimately, the long-term capital is,

like, you know, in the long run, crypto will only work, not because of hedge funds or VC funds. VC funds might help because they fund new products, but at the end of the day, the thing that you need is institutional adoption

and retail adoption, right? Like that needs to grow. And a lot of those is going to grow, not because of anything we do or because of anything that a hedge fund manager does, but because crypto is just better. Crypto just wins over time because people who believe in crypto get older and get more purchasing power and eventually are at the seat of the economy. And the people who right now are like, yeah, I'm in my 20s and I think crypto is obvious. They go into their 30s and 40s and they have a lot of purchasing power and they still think crypto is obvious, right? That, I think, is going to be the vector by which crypto adoption grows in a very obvious and straightforward way.

and what happens in the meantime, if you get a VC fund or a hedge fund that goes in and buys crypto, they are, in a sense, doing an intertemporal transfer of the people who are going to buy Bitcoin tomorrow, they are front-running those people and buying Bitcoin today.

But in the long run, the reason why these things are valuable, all these things, hedge funds and venture funds, they're short-term, right? They have fun lives of, you know, five to 10 years or whatever it is, but eventually all of them have to sell. The VC funds have to sell,

the hedge funds also have to sell. The only real long-term thing is the underlying adoption of crypto, which has been happening, but it has to continue happening. And I don't think that is going to be shortened or delayed at any way by VC funds. The only thing that could possibly make it go faster is that we have new products, new UXs, better onboarding, and a better experience for retail users. And that's like ultimately what VC is here to do. Now, if they're failing at doing that, they're failing at doing that, and the markets will ultimately correct it. But in the long run, that is what we get paid to do.

to do. And so the other thing that people often criticize VCs for is that, oh, they keep funding these new blockchains, these new L1s, blah, blah, blah. And I'm like, dude, have you seen how bad these blockchains are? Like, everyone complains about the UXs of the blockchains, and they also complain that people are funding new ones, right? I think that it's very clear, there's a lot of room to go on the technology. And it might, and obviously it'll be true that mostly startups don't succeed at becoming the future of Ethereum or of Solana or whatever. It's very hard to build Ethereum. It's very hard to build a Solana. But almost certainly the way that blockchains work in 20 years will not be the way that they work today. And almost certainly there's going to be

new ideas and new fresh blood that comes into the space that reinvigorates our ideas about how this technology can work. So that's my full-throated endorsement of the concept of venture capital. That being said, there are bad VCs. There are pump and dumpers. There are all those things. There are short-term capital. And those things I do think are bad. But they're also a distraction from the main thing that we should be focused on as an industry, in my opinion. I completely agree. And I will just caveat and add that oftentimes on Twitter you get very populous takes that will be successful because, you know, 99% of the investing public are not VCs and 99% of the investing public generally just wants things to go up and go up more and go up for the stuff they hold.

And so, you know, I think it's very easy to come up with very populous takes that are not always entirely rooted in, you know, objective reality. Yeah. I have also I do feel like sometimes I get a little too responsive to Twitter but you know

when these things blow up and I see like other VCs talking about I'm like okay I feel like I have to say something but maybe I should just maybe I should learn to shut up more often now you got to dive in head first you got to do the opposite

instead of shutting up you know I mean look I did that with Iggy Azalea and she told me what did she say she said men like you never get women or something like that I don't know aren't you married

You're married, right? I guess, correct. Okay, so, Biggie's wrong. Biggie. No, but I thought it was funny. But it's another, like, micro example of, like, the lesson in Twitter is don't engage.

Think about this way. Mother holders got some content out of buying mother, which is that big you're so invested in making sure mother never gets shit on on Twitter. That's right. That's the utility. Another never loses.

Her holder, they got that. They got that fight. they got the dog Yeah Anyway Cool That's a wrap Thanks everybody

And we'll be back in a couple weeks