The panel offers a sophisticated justification for institutional DeFi, yet it ultimately frames decentralization as a mere cost-benefit calculation for the financial elite. It is a high-signal conversation that perfectly captures the transition from radical innovation to corporate-grade risk management.
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🟢 LIVE From The Tower: Cathie Wood Debrief, WH x BTC Reserve?!, Chainlink CBO & 21Shares CIO JoinAdded:
[music] [music] [music] [music] [music] [music] [music] >> We'll see you around the timeline.
Feels good to be back.
>> [music] >> I think the Rollup is one of the most premier media brands in crypto, and Andy and Robbie are great [music] experts at everything they talk about, and it's my favorite podcast. Adding it to my library as we speak. Potentially multi-chain deployments. We are at Def Connect [music] Day 1 here at the Nasdaq from space.
>> [music] [music] [music] [music] [music] [music] [music] [music] [music] [music] >> JPMorgan, BlackRock, DTCC, Fidelity, the entire thing was just institutions. It's just It's next level. This industry is going to the next level, and guys, I I don't know what else to say.
I'm bullish.
HE SAID IT. HE FINALLY said it. I'm so bullish. And he's bullish, I'm bullish, we're bullish.
>> [music] [music] [music] [music] [music] [music] [music] [music] >> The [music] Rollup is headed to the top.
If we're not already at the top, we're going to the top.
>> The Rollup is my favorite. From all walks of life, all over the world, all over this industry, come together for the Rollup.
>> [music] [music] [music] [music] [music] >> Survive, zoom out. Institutions aren't coming, they're simply [music] here.
They control the major >> [music] [music] [music] >> Survive, zoom out. Institutions aren't coming, they're simply [music] here.
They control the major crypto, guys. Get right. Let's go.
>> [music] >> Survive, zoom out. Institutions aren't coming, they're simply here. [music] They control the major crypto, guys. Get right. Let's go.
>> [music] >> Welcome to the nest. See you on the show.
Bada bing, bada boom.
>> There we are. Welcome to the Tokenization TOWER, LADIES AND GENTLEMEN. WE ARE SO BACK.
We are live from the financial capital of the world. I'm here with Robert Claypool.
>> Wow, full name talk. The full on Post Kathy Wood, we're coming out with a whole new energy. We're going full name.
Andy's got a shirt >> ever?
>> buttoned unbuttoned. We're feeling We're feeling good. We got the full >> Happy Tuesday, man. view of New York City behind the Tokenization Tower.
Shout out to Plume, baby. Shout out to Plume, bringing on-chain asset management. We had the deputy CEO of the CSOP on last week. Big Hong Kong asset manager Big Hong Kong energy.
Big Big Hong Kong energy.
>> Let's get into it. Let's get Let's get into today's topics, man. We're live from the Tokenization Tower. Let's give some love to everybody who's in the tower, everyone who's pushing the tower forward.
Ladies and gentlemen, we got Markets and Weather live and Chainlink CBO and 21Shares CIO joining the show today. Lovely lovely day in New York, I tell you that much.
It is It is a beautiful beautiful day.
It is not a bullish day necessarily. I am holding on for dear life with uranium, and I hope to be continuing to hold on for dear life. We are right there with you with uh on a bit of a pullback.
>> with crypto as well. We'll get into the market prices a little bit later, but I mean, tons of news to go through. Yeah.
I mean, macro news, too. Uh we got a lot of earnings calls this week. Stocks are going to be in for a whirl. And uh and then with the UAE leaving OPEC today, shook some things up in the uh in the oil market. Um pretty pretty incredible what's happening. The Iran war chugging along, and uh we're just monitoring the situation.
Indeed, we are. Ladies and gentlemen, let's get to the Markets and Weather. We got a ton of news that we want to crank through today. Before we do, let me tell you about Frax, our leading stablecoin partner, building the future for on-chain money, open, stable, borderless. For more information, start using the future of digital money, visit frax.finance.
Guys, it is a beautiful 63° in the tower today. Feels like 63. It's sunny. It's definitely springtime. At this point, I would confidently say that trench coat season is over. Shout out to everybody wearing a trench coat, man. Got to Got to let them have it. Got to let them have it, ladies and gentlemen. RIP to the official trench coat sponsor. Uh see you again next year.
Yeah.
Our lovely weather is presented by relay.link, with the best cross-chain swaps in the market. Use relay.link to swap your tokens cross-chain now. Let's get into the markets. It is um you know, one could say it is a little bit bipolar out there.
Uh Bitcoin 75.8, Ethereum 22.75, Solana 83, Chainlink around that nine 9.2 mark, near 1.3. Feels like a lot of this hasn't changed since we even started looking at these, Rob. I feel like it's been constantly at these prices for quite a while. Um It's been choppy. They're uh I mean, they went I remember I mean, Bitcoin was hanging around the mid-60s mark, Yeah.
>> 68 or so.
Uh pushed up to the 75 mark, and I remember uh we were having a conversation about uh you know, once we once we went 75, 77, uh that felt great, but people aren't satisfied with 77 for too long anymore, right?
Yeah, like they It was best thing to be at 75 what, 2 weeks ago? And now it's like now we're pulling back a bit, and and people are kind of scared.
Yeah, it does seem that way. Um obviously, a lot of this feels very macro correlated. Ceasefire didn't happen. Yeah. 60-day timeline is up tomorrow, I believe. Really? I believe so, but obviously these things get get pushed back here, there, everywhere. So, we'll see. Equities, meanwhile, absolutely ripping. Um stocks at all-time highs, QQQ at all-time highs, Nvidia at all-time highs. Oil, uh actually was pushing quite a bit up as we as we talked about with them leaving OPEC, the UAE.
>> Yeah.
>> Supposedly that's going to allow them to produce a lot more oil.
>> Right.
>> However, the issue is that well, if the oil can't leave Iran, then well, it's not really good for anything if the straits close. Let's get into the news.
Uh we've got uh a ton of a ton of different news today. We're coming off the Kathy Wood episode. We'll debrief about that as well. Before we do, let me tell you about NEAR, the blockchain designed for AI-native [screaming] applications and autonomous agents.
Start developing today at near.org near.ai >> recently upgrade to Iron Claw, which I'm excited to dig into as well. Believe they tightened up some of the security measures and uh I mean, look, Illia is just continuing to ship. It's pretty incredible to see. So, yeah, big shout-out to our official AI partner in NEAR.
Yeah. I mean, look, this is an interesting podcast timing release.
Um you know, like obviously this Stani Aave situation has been evolving, right? And it's been rapidly evolving.
And GSR dropped this podcast, I think a couple days ago. And so now we're going to listen in to what DeFi's biggest challenges um which is kind of a bit a bit of a funny timing, but let's hear what Stani has to say.
It's uh biggest challenge, tokenization.
The biggest challenge, tokenization. I mean, I think the biggest challenge is going to be whether or not we can stay safe out here.
Well, yes, the tokenization piece. What do you tokenize? What is the value proposition? What is the right product?
I think a lot of uh institutions, banks, asset managers that are focusing on enabling uh crypto custody, uh crypto trading is uh are doing low-hanging fruits, and I think that provides uh enormous amount of assets.
>> Low-hanging fruits. Um same for fintechs.
Um I think the challenge is to figure out the tokenization part. Like, how do you tokenize? What you mentioned Frank earlier, like, wouldn't it be nice that we have this environment where you have crypto equities, private, you know, credits, um all this value infrastructure um in the same environment, and you can just choose what you want to hold in your portfolio, borrow against um uh and how do we get there, right? So, this is a really big problem because you have to create uh some sort of uh uh catalyst um in the RWA space. And and I think that's the sort of like a challenge that everyone is trying to figure out. No one has a particularly um uh clear answer to that. And I think we're going to see a lot of uh attempts uh on tokenization. Um some of them will grow a little bit, someone won't, but there's going to be one or two examples which will move the needle.
Yeah, I mean, So, I'm going to I'm going to agree with Stani um aside from the hack, which seems to be getting cleared up. Uh hopefully we don't get another $300 million hack. We've shown resiliency in recovering from there.
Some implementation steps to take place, but seems like the money is uh committed. Uh so, we will get a resolution, a positive resolution here.
Aside from the security of these things and preventing, you know, something like this from happening again. I I do agree that tokenization is the first step in unlocking what we've talked about as the NEAR Finance thesis. Yeah.
You know, tokenization is what ultimately takes all these off-chain assets on-chain. Uh it's what allows a new asset class to be deposited into DeFi. And ultimately that this is what I think we believe is going to re-rate a lot of these DeFi protocols is unlocking new asset classes. I believe this can people speculative and non-speculative assets can take equities, can take treasuries, can take all these RWAs, private credit, all these things, as long as they're secure, and I'm of the mind that these institutions coming into the space provide extra due diligence and extra compliance manpower to ultimately protect these these deposits further.
And so, yeah, I I do believe that institutional tokenization is the catalyst uh that is going to unlock net new asset classes uh for DeFi.
We got New type saying, "I remember Andy's top blast uranium speech in the past."
Thank you. Thank you, New type. I'm glad only you knew. If only you knew the mental derangement suffered from top blasting in size, um New type. Perhaps you do. Perhaps you do know what that feels like. You know, sometimes we all we all know that feels like. Polymarket building their own L1.
This proves that Polygon has always been a psyop. I don't care how many times people try to shill Polygon as an active chain, lol. New type is coming in hot today, my boy. My boy. Polymarket is building in their own chain, though.
Supposedly at least. So.
Yeah, that's what that's what we've heard.
Yep. Circle Ventures acquires Aave to strengthen their DeFi infrastructure.
They confirm the strategic purchase of Aave tokens to support the long-term development of decentralized financial infra.
This acquisition is a primary component of the DeFi United Initiative.
Uh interesting.
So, I don't really know how Circle buying Aave is all that part of this DeFi United Initiative other than like DeFi United, let's not let Aave's token go down a lot.
Look, they've already surprised the market by how much they've gotten out of this initiative. I think they're well beyond their goal.
And I saw Mike Dudas tweet. He was like, "Man, I'm going to start, yeah, Dudas United uh and uh put my public key out there and uh you know, start start a GoFundMe."
Now, look, I think the Aave team's been under a lot of fire, and I think there's nothing wrong with this. I think it's awesome to see, you know, teams coming together.
I I don't really know what this "Hey, we're buying Aave" really means, though.
I think it means that they bought some Aave. And I also think that this is Circle Ventures, as I understand it.
It's not Circle Primary. Um I think they're just they're just taking a claim. I I also don't think this has a lot to do with DeFi United. They're claiming that. Maybe they're trying to save PR, save some face, uh claiming that, you know, they're they're coming in to support the situation. I tend to think like Look, they see Aave at less than $100 per token. Um they could be looking at this as as a potential value play, assuming that the DeFi United campaign to to resolve the situation goes well, um and they still have tons of integrations, um and they're they're going to be coming out of this just fine. I could see how Aave, which is down from uh almost was it $350?
Um in not that long ago, last summer or so, less than a year ago, um I could see how they're looking at this as a potential liquid token play. Uh they see Aave in some deep value territory. They figure, "Look, we'll pick up some tokens. Maybe it maybe it pays off." I mean, it just signals that they're going to be, you know, a believer that they're going to figure it out and that the protocol is not over and that they're going to support uh their bags. And obviously, there's a lot of that USDC that is kind of, you know, still frozen there, and they want to be an active force in getting that unfrozen, help their users out. So. Let's Let's move on from Circle Aave. Uh it's a definitely a definitely a good little uh move by Circle, but nothing really else to add here on on Aave. Um Aave price kind of hovering still pretty low, but uh holding the lows, which I think is important. The fact that that the broad market also held up and held the lows during all this was really important for for the ETH holders. Let's move on here. This next one, I saw Andy put this in our in our curators' chat this morning. I've never seen a poster like this. I mean, this was insane. So, Rob and I both grew up in Florida. Rob's probably more of a Heat fan, but the Magic was the closest team. Magic fan?
OG Dwight Howard days? Dude, it I am I'm all on the Magic. If if the Magic win this series, that means that there might be a chance for me to catch a game when I'm back in Florida.
>> Okay. I have for sure re-flooring it.
Hopefully the Tampa Bay Lightning win is uh let's watch this video, sound on.
This guy absolutely eggplanted this other dude right in the face, full launch. Should've been an and-one.
Oh my goodness.
>> [cheering] >> Wow.
Let that play again. Bro, bro, this is insane.
>> [cheering] >> Sound of the ball, bro.
>> [cheering] >> Dude.
Bro.
And then you had um Ja Morant celebrating through.
>> goodness. Dude.
Insane.
Insane poster, man.
Me- seed versus the number one seed.
>> Wow.
>> And you absolutely got to love to see it. Detroit Pistons might be the worst number one seed I have ever seen in the NBA. They are ass.
They are ass, dude. Cade Cunningham was like eight turnovers yesterday or something. They're so bad. I hope the Magic win.
I saw this other tweet that was like the Magic are like the worst best team I've ever seen. They play they have no plays. They literally just run like like scrimmage ball. They just look at match-ups, try to isolate somebody, and yeah, I mean, they're just they're up 3-1 against the number one seed. If they win this, that would be unreal. That's insane. And then I know on the west side, uh Denver's down or they were down 3-1. They were still favorites to win the series when they were down 3-1. Now they're down 3-2. I think that's against um uh was it Utah? Uh no, against the Timberwolves.
>> the Timberwolves, yeah.
>> And the Timberwolves lost two of their biggest players as well. Yeah. So, pretty dude, that was just that is just like insane. I was watching this live and I WAS LIKE, "YO!" I WAS TEXTING the boys like, "Yo, Magic are up. Magic are up." Like, they're about to win. He got he gathered two steps and lifted off on that guy. And the guy was caught flat-footed. He just he Yeah. Cooper Flag, rookie of the year, guy's an absolute unit as well. I don't think anyone's going to be able to take down Shai and the Thunder. Let's move on here from our lovely our lovely Orlando Magic. Into tomorrow, we have one of the most anticipated token launches of the year, of the cycle, Mega ETH TGE. Play the damn video. Let's see what Mega team cooked up for us. This brand first chain. Then Robbie will tell you guys about what we got for you on Friday. And guys, let us know in in the chat what you thought about that dunk.
If you could do [music] that.
>> [music] >> Yo, some anime [ __ ] Yeah, this video's very on brand here from Yo.
Didn't expect nothing less, but it's it's so kaleidoscope of a video here with some bubblegum pop music. Let's go.
>> [music] >> Yo.
9 10 Just getting started.
Wow.
Feel like I just went to a Tokyo and back.
Take me back to the underground basement [music] karaoke bars, screaming with Rob and our lovely guy on the team, Niro.
Beyond 10 lemon sours, man. What a what a video that was. That soundtrack. I mean, how could you not be bullish?
Let's look at the poly market here. I believe it's about 95% chance, Rob, that the Mega ETH TGE is over 800 million.
>> While you're pulling this up, let me tell you guys about what we got on Friday.
On Friday, I'm going to be going live with the entire Mega ETH ecosystem.
All of the applications planning on launching with the TGE on Thursday. We're going to be following up TGE fresh on Friday with the entire ecosystem. I think we're going to get somewhere like seven or eight or nine builders of the top apps in the Mega ETH ecosystem joining us live. You guys will hear about the top opportunities, top apps on Mega ETH fresh off of the launch. So, definitely check it out.
We'll be live at our usual time.
Tune in 1:00 p.m. Eastern. And uh you guys will have everything uh told, brought to you guys straight from uh the Mega ETH founders.
>> [laughter] >> What do you got What do you got over there for us, Rob?
>> to be over 800 million by uh one day after launch the Mega FTV.
Uh it is it is 88% over a bill.
And [snorts] 61% over 1.5 bill. If you guys remember the Fluffles, I am a Fluffle holder.
I contributed one ETH at about three grand per ETH into the Fluffle. I have the soulbound NFT. Fluffles will get 25,000 tokens on TGE. This thing launches at a bill. I'm going to hit for a 6x on that thing. If it if it launches and hits into two bill, be a 12x. Straight to El Salvador. Yes, sir. Let's get it. Let's go, Mega. Come on, Shuyal. Let's go, Namek. Let's pump this thing. All right, Fluffles are uh Fluffles are going to be in business, Rob. I'll tell you that.
>> Let's go. Fluffles are in business. Love to hear it.
>> Let's rip it, baby girl.
>> Let's rip it. Let's rip IT, BABY GIRL.
ALL RIGHT. LET'S let's all calm down here, all right? The market's in the gutter, Rob. Let's all slow down.
>> excited about this trip to El Salvador.
Why don't you tell the people what you what you're going to be doing down there? Going out on a Bitcoin beach to find Na- Naib Bukele and propose to him to be the official sponsor of the roll-up.
Going to go to the office and be like Hola, como esta?
Don't don't be a necesito un poco mas dinero, por favor. Ahora, necesito mas para mi television.
All right. Let's get it, homie, man.
Necesito mas Bitcoin out here. Exactly.
>> [snorts] >> And the somberness returns.
>> DeFi United is issued a technical plan from the Aave side to restore the rETH backing after the April 18th bridge exploit.
>> have to be somber here. Look, we've got 300 million in Kumbaya payments from the DeFi DeFi ecosystem at large. This was an entire community rally. The the pure essence of Kumbaya came together around Aave Yes. and helped to bring this thing back to life. It would have been rough.
Stani would have had to sell his mansion. That is not the case. And so, we're we're excited. Ultimately, Aave's doing good work. They didn't get hacked.
Let's be clear. It was LayerZero that got exploited, if we're being honest about things. Kelp Kelp DAO didn't really help in the matter, except for 2,000 ETH that they helped to commit. Um but overall, uh the entire community was able to provide the ETH to effectively like um you know, libertarian bailout.
Yep.
Yep. And so, the effective positions on Aave will be cleared through temporary temporary oracle adjustments enabling controlled liquidations on Aave and Compound.
Uh they should recover approximately 13,000 ETH and 16,776 ETH, respectively.
And then once complete, the rETH backing will be fully restored. Markets will be stabilized. Users will be able to withdraw their funds, and normal operations will resume with all temporary changes reverted.
That would be the best-case outcome, guys. We will continue to monitor the rETH situation without harping on it too much. Let's get into what happened today and why my uranium bag is down 4%, which I'm not too happy about. Today, the UAE comes out and says that they're going to leave OPEC and OPEC Plus effective May 1st, 2026. Following its exit, the UAE will continue to act responsibly, bringing additional production to market in a gradual and measured manner, aligning with demand and market conditions. As we said earlier in the show, guys, if the strait is not open and the US blockade persists, does not really matter if the UAE produces a ton more oil because that oil cannot leave.
However, as being part of the OPEC and OPEC Plus, they are restricted in the amount of oil that they can create. So, in a perfect world, this would allow the oil price to go down significantly and for more oil to be produced. This is crazy. The entire geopolitical energy grid is changing as a result of a fat orange man pressing a big red button. I mean, this is just There are consequences to your accident. It's There are consequences to your actions, Mr. Mr. GGT.
And here we are, us uranium holders, paying the price.
Oh, man. I um I wonder if they can they can move the oil over land from Dubai or UAE through Oman.
What if they can do just do a >> it on a camel. Just two two barrels and just Put it >> [laughter] >> Put it on a take it on a train. They got trains in Oman. For sure. For sure.
>> Um and just take it right that right out through the Arabian Sea. Put it on a tanker out there. Uh, I should put through another another another flotation device. Uh, no, I think look, this is part of this bigger geopolitical reorganization.
You're breaking apart an oil cartel.
And ultimately, this is more free marketism.
Uh, this is positive. This will um you know, ultimately have effects that extend beyond the extensiveness of the war. Uh This is the end of the petrodollar, which I think is the most conclusive result of this departure from OPEC from the UAE.
Uh, once the dollar is no longer backed by the full faith and confidence of the Saudi Arabian oil pipelines I I think it's pretty important that we find other reserves. We we find other ways to maintain the value of the US dollar.
Sure.
>> And this is why you're seeing nationalistic policies all over the world. You're seeing the UAE leave this this you know, international cabal, take matters into their own hands.
You see the reshoring of manufacturing in the US. This is happening in China.
You see things in Japan, in the EU. All of this is hey, we've got to fend for ourselves. We're no longer trusting or have confidence in our our friends, our neighbors, in our international pacts.
And so, we're going to see a multipolar world where everyone's going to be very hands-on their own their own stuff if you will.
Uh Obviously, this is >> We got a couple comments for you Rob. I don't know if you want to hear them.
Let's hear them.
One says bring out a ton. That was our that that is the best comment.
>> hear I mean how why wouldn't I want to hear that? Let's bring out a ton. The other comment is you mean the Jews attacking Iran. And then the other comment after was bring out a ton and I thought that was that was pretty comical. That's ill-timed comment. What What a sound effect from our boy. But no, no, we do not mean the Jews attacking Iran. We are a religious sensitive show. We do not talk about these types of religious warfare. But we do talk about is data centers being transformed from Bitcoin mining facilities.
>> aren't even attacking Iran. They're attacking Lebanon. So, it's a moot moot point right there. Tell us more about Galaxy's data center, Andy. Cryp- crypto NFT, we will bring out a ton. We can do that. Don't Don't you worry. All right.
Not a long time ago, Galaxy was a Bitcoin mine. Today, Helios is an operational AI data center. First data hall was delivered to CoreWeave at Helios, Galaxy's data center campus in West Texas. Um, and they literally took down this entire Bitcoin mine, pivoted into a AI data center. This is a sign of the times. Let's play the video and watch the evolution.
>> [music] [music] >> I love this. Look at this massive undertaking go get underway.
>> We're going to see a lot more of this.
While we're seeing this, I think it's also important to point out >> [music] >> Elon's SpaceX IPO at 7 and a half trillion is tied to data centers in space and a Mars colony of a million people.
Wow.
This is what's going to happen on Mars.
With what's going to be robots. It's going to be humanoid robots that are developing these data centers.
Wow.
Wait, you said SpaceX is going to IPO at 7.5 trillion?
>> Yes.
What?
Who's buying that?
Oh my gosh.
>> USVC, I think is the name of Naval's new fund.
Oh my god. So, whoever's buying >> Retail's about to get absolutely cooked on.
Yeah. So bad.
All right guys, we got Johann E the chief business officer of Chainlink. If you are a Chainlink Marine watching, guys send us a message. Let us know what you want to talk to Johann about.
He's a friend of the show now and we'll be a great segment following this um the state of affairs in in DeFi, right? I mean, considering everything that's happened with the broader market and with KelpDAO Rob and everything in between.
>> I mean, obviously, you know, it's important to understand what decentralization really means when we have one of one DVNs, you know, backing some of this infrastructure. And and so, I think you know, Chainlink given they've got tentacles in several different facets, I'm curious how they're able to maintain decentralization but still scale at at such an efficiency.
But yeah, I I I think we're going to dig into decentralization in this regard, talk about security standards.
Essentially, how do we protect DeFi from going through something like this in the future? I agree, man. Let's do it. Let's bring Johann up and let's get the show on the road, ladies and gentlemen.
Ladies and gentlemen, let's get this show on the road, Rob.
Let's get this market bouncing back up, please. Please.
>> Yeah, we're not going to we're not going to expect Johann to do that, but I think I think ultimately we can help protect against a lot of these things. Yeah, these these these rate limited white listed compliant DeFi futures that were absolutely barreling towards.
>> we we want to maintain like censorship resistance but have proper risk controls. So, it's like >> course. I don't want to be rate limited, right? If I'm trying to take these things out. But some things are obvious.
>> worry, man. You're not going to get rate limited, buddy. You know, your your three ETH bridge there is not going to get rate limited. You're going to be all right. All right, man.
Oh my goodness. At least I'm on chain.
This guy's got uranium off chain. Buy uranium on Tezos if you're going to buy uranium. Don't worry, buddy. Your four ETH is not going to get it.
>> [laughter] >> Let's get Johann up, all right, man.
Let's have some fun with Johann. Let's get serious. Johann, how are you, man?
Good to see you. Hey, I'm very good.
Good to see you folks. Yes, I assume very busy as well in last week to 10 days given all that's happened.
Yeah, it's been two very busy low sleep weeks, but you know, we're used to it at this point.
It's been yeah, it's been productive.
You know, we we we've heard Sergey, he likes to say um you know, it's not 363 days that your infrastructure can work.
It's the other two days where it really gets tested. That's where you know, the men separate from the boys if you will.
We had an incident, you know, a couple weeks ago.
Pieces are starting to get picked up now thanks to Aave, you know, putting together this DeFi United Collective.
But kind of take us take us through from the beginning, right? These things obviously weren't decentralized. That's how North Korea was able to spoof the RPCs and trick them into you know, ultimately collapsing.
Take us through where some of these things fell short. What can we do to prevent this from ever happening again in the future?
Yeah, absolutely. Look, um there is a long answer and there is a short answer, okay? The long answer, which I'll go over quickly We've got time.
is the space a few years ago used to be all about security. So, if you remember in 2019 everyone was talking about how decentralized is the system. How secure is the system? Every time I would go on a call with a DeFi protocol and I would have to discuss price feeds with them, they would ask me how secure is it? How decentralized is it? And you know, people actually cared about that stuff.
I think the space stopped caring for some reason. I think one of the key reasons actually is we had for a long time less hacks.
And people stopped caring about security as much. So, the narrative shifted from how decentralized is it to how cheap, how fast is the system. And you can look at that by just looking at the chains or the L1s or the VC investments we've seen in the recent years, they've all been around projects which offer fast, cheap transactions for instance, for L1s, right? So I think all of these hacks need to be a wake-up call for the space to go back to our roots. Our roots are in crypto, a hack is catastrophic for two reasons.
You cannot revert the hack. Every transaction is immutable. And we are a DeFi space, meaning everything is composable. If an asset has an issue every single system that uses this asset gets affected by it, right? It's like a domino falling.
So, hacks in DeFi are catastrophic. We can't afford security failures. Now to go back to what's the root of this issue. I think you have two principles in security. One is security by default.
The other one is configurable security.
Let me explain on that. If you use a Chainlink product today, whether you're using price feeds or you're using cross-chain or you're using proof of reserve, anything you have decentralization by default, meaning every single cross-chain, like every single bridge we launch has a minimum of 16 node operators, independent node operators, security reviewed, distributed all over the world, all making money from running their nodes, meaning they're incentivized to run their nodes and provide a very high level of security.
The other model is do-it-yourself security.
The do-it-yourself security, which is the one that, you know, really was at the core of that, is the infra provider putting all the liability of the security on their users.
What does this mean? It means every single smart contract developer now needs to become a security expert at bridges.
They need to know how to compose a decentralized oracle network.
They need to have monitoring. They need to basically become a devops expert, all right?
When you use this type of model at scale, mess-ups are going to happen.
So, I think the long story is we need to go back to our roots in terms of security.
And as an infra provider in this space, my conviction is you need to offer default security. The system you offer needs to be secured by default. It shouldn't be up to the users, to the smart contract developers, to secure their own system. It's like you went to DeFi developers and you told them, "Run your own nodes in order to be on this blockchain, and if you mess up running the node, you know, the production will go down."
It makes no sense, right? That's not the standards we should be setting. Yeah.
So, yeah.
Yeah. Um when it comes to the actual kind of uh you know, what happened here, I think we can kind of understand and agree that there was some miscalculated uh risk parametrization setups. There were some miscalculated risk assessment across lending markets, across node signatures, across um security parameters. Like there was just like some miscalculations at large.
Um what do you think this really means, right? Because we've been hearing that, "Oh, this is going to slow down the institutional flow." I think JP Morgan even came out and said, "Hey, this is going to slow down the institutional flow."
From my perspective, I don't think it's going to slow down the institutional flow much. I think it's going to really cause a slightly uptick in distrust in the more resale side, right? I think that people on the resale side are probably a bit more concerned about where they're putting their money, what assets they're holding, what looping strategies they're doing, what smart contracts they're exposed to. But my take on the institutional side is that this is probably just going to make a much more of a narrow thought process from their side as to who they're working with, as to what they're allocating into.
I actually think that this is not going to affect the adoption at all. I think it still continues to accelerate. How How do you Do you agree with that? Like how do you think about, you know, put put yourself in the shoes of one of these institutional allocators. How do you react to this? How do you respond to this? What would you anticipate is the kind of result of what's happened from that adoption perspective?
Yeah, it's a great question. Look, I have to tell you, for institutionals and um you know, tradfi, they were already looking at security very deeply every time they integrate a new blockchain system.
So, they're already doing all these, they're already reviewing the security of every single infra they use, and of the security of the protocols where their tokenized assets also get used, all right? So, I actually don't think it's going to slow them down too much because a lot of these folks have realized how much security does matter for a very long time. And actually, from the Chainlink side, the folks who've been asking us the most about security have been tradfi institutions. That's also why we've been so successful in this space. If you look at institutions today, we're probably the only provider on cross-chain and on oracles that actually work with.
And the reason for that is that they have an extremely high bar in terms of security, and Chainlink was only one that can fulfill this high bar, right? So, I don't think it changes much for them. I think it changes for our space because our space again you know, has not cared as much about security for a little while, or at least, you know, many folks have cared. Aave has cared a ton about security, just to be clear. Aave has been on one of the very few DeFi protocols in the last 7 years to go through, you know, all the ups and downs of of our space without any issues.
But unfortunately, in general, I think retail, I think folks need to care more around the security and need to be asking more questions. So, it needs to be a whole ecosystem-driven approach thing. I think that's where things are going to slow down more, not on the tradfi side. I agree, but you you made a big claim there, right? With regards to kind of Chainlink and CCIP. Could you explain technically why this is not Like could you just back up that claim? Why is this not possible on Chainlink? Like, you know, your your brain when you see these things think that it could happen to anyone, right? And you know, then you hear people come out and then kind of say, "No, you know, this couldn't happen to us." Like could you just back that up? What about CCIP or what about what you guys have from the node architecture perspective or just from the kind of broad technical setup would cause this to be effectively impossible?
Sure. So, here in the setup you had only one node that needed to be corrupted in order for the issue to happen, right? So, that's what happened. You had one actor that needed to be corrupted, and then the whole hack happened, right?
With Chainlink, the smallest network we have on CCIP is 16 nodes.
And these 16 nodes are not run by Chainlink. They are run by different entities.
Some of those are staking providers like Figment. Some of those are telco companies like Deutsche Telekom, Swisscom, etc. So, you have a huge variety of node operators. You need to hack at least, you know, 11 of them to be able to create this issue which just happened here. So, it's 11x more expensive and harder to do, right? Um so, yeah, I think I think that's one of the big claims why we can say we're decentralized by default and secure by default.
Okay.
Yeah. And And this was always the true spirit of what we were building here.
Um I think even, you know, we knew internally that one of one, whatever you want to call that, multisigs, verifier networks, whatever you want to call them, one of one doesn't work. You know, the law is the power law such that, you know, you have more economic nodes in the network, it becomes harder and harder to corrupt more of them. The entire system becomes more secure.
Johann, I want to I want to circle back to something that you said about kind of the way in which these hacks have progressed over the last few years. You mentioned, you know, kind of leading up before 2026, we had less hacks.
Um I I remember we had one, you know, massive Bybit hack. Um but other than that, it felt like on-chain things were relatively calm.
Clearly, it you know, things weren't calm because we had figured it out, right? It feels like even back then, things were more rudimentary than they are now.
And so, what what changed? Why did we have less hacks back then and more hacks now? What What was it about the system back then that, you know, we we weren't getting hacked?
I think DeFi is way more complex. I think that's one key answer.
So, we have a lot more variables now.
Cross-chain wasn't a thing only 2 or 3 years ago, all right?
Um so, back then, the main issue when I started in this space was um DeFi oracle hacks, right? So, actually, back in the day in 2018 and 19, well, 19, sorry, mainly, you had a lot of oracle hacks. So, basically, the way teams run oracles was they were running their own oracle, and it was also centralized, right? So, if the oracle was corrupted, um all the money was gone directly, right? So, you had multiple hacks like that. bZx, Synthetix had a big issue like that back in the day, all right?
So, that was solved through Chainlink, right? So, today, 80% of the space is using our price feeds. Uh we basically solved the oracle hacks.
The next big thing which happened recently has been um cross-chain complexity getting introduced. And if you look at the hacks with cross-chain, you've had the first hack in 2021 with Wormhole, which was, I believe, $300 or so.
Um you've had Ronin, you've had Poly something. I'm not going to say the wrong name. I have two different Polys, so I don't want to to blame the wrong one. But you've had that $2 billion in cross-chain hacks, right?
I think one of the key reasons, frankly, is a lot of the infra running these bridges is not decentralized. It's centralized, right? So, the issue we solved with oracles, Chainlink is still solving it on cross-chain.
Our market share has been going up non-stop for the last few months. And, you know, the way I like to think about it is every user we add to the cross-chain network for CCIP is a user we protect, basically.
But there are still a lot of protocols that are not using Chainlink and are using centralized things. Like the next thing I'm seeing on Twitter now is, "If If a two out of two, it's secure." So, I've seen this uh thing. Don't worry, guys. We moved all the one one of one to two out of two. Dude, I was shocked, man. When when these teams started announcing the pausing of their different OFTs and things, I was I was just I was the amount of two of twos it was just like it was as it was as bad as the amount of one of ones.
I I can tell you one thing. Um we were in a better spot in terms of security knowledge across the space in 2019 than we are today.
Because in 2019, if you came out and you said I'm securing billions of dollars through two out of two, you would get killed. Yeah.
>> Honestly. Like >> [laughter] >> So, so I'm I'm quite sad to see that. Um you know, it does motivate me and the team to work way harder to let people know two out of two is not okay. Two out of three is not okay, either, by the way.
You need more. You need more. And the more you add, the more exponential the cost becomes to hack you.
But, you know, we do need to do to be doing this work because really it's sad to see how how people misunderstand security today in our space. Yeah, but I think it's also, as you were saying, now there's this kind of cross-chain complexity added. But, what that enabled was like effectively the next iteration of this DeFi LEGO composability, right?
We we got this very intricate protocol layering across chains as well that was like very favorable from a user perspective as far as earning yield, farming points, doing different types of kind of campaign structures. How how do you think about kind of like the double-edged sword here for the composability argument? And as it pertains specifically to how protocols should be thinking about the types of collateral assets, the types of assets that they're using in their protocol, how do you kind of think about this kind of two-sided sword here? And and what that kind of risk mental framework will probably look like going forward?
I think there are two parts. One is risk mitigation. The second one is threat mitigation. So, let me let me start with the first one.
With risk mitigation, I think a lot of the risk managers creators needs and we're working with many of them on this, by the way. So, they're extremely smart at financial engineering, um you know, how to ensure an asset is fully backed, how to ensure the liquidity, the volume of the asset, etc. What what they have um what a lot of them are working on now is how do assets off-chain risk, cross-chain risk, Oracle risk, etc. So, that's one thing we're working with a lot of them on. Um with Llamarisk, for instance, we're releasing risk Oracles with them and we're working on that on off-chain stuff today with them to make sure this stuff like the curation gets better and better on all the stuff they secure. We're doing the same work with creators on things like Morpheus, right? So, I think the risk management has to be upgraded and that's happening quickly to the you know, to take into account things like cross-chain, etc. The second thing is we need more circuit breakers.
We need more rate limiting in the space.
We need ways to There is a word for that. Um I'm sorry, it's a bit late here. My English gets worse and worse throughout the day.
>> Yeah, after a couple glasses of wine.
[laughter] Yeah. Don't worry, man. I I feel you.
How to how to stop um uh the contagion of a toxic asset, basically. So, as soon as you have an asset an asset that becomes toxic, how do you cut it? How do you ensure it doesn't go throughout the system and break everything? And that's what you do with circuit breakers, with um rate limiting, all right? So, I think that has to be implemented more across the space. We have rate limiting on CCIP by default. That's one thing we we've enabled for our users to have. I think we probably want to start having more circuit breakers on the DeFi side, also, in the future. And Johann, how how do we This is kind of a you know, maybe a second part to this to the same question. You know, composability is one of the primary benefits of DeFi. We can layer these things on and but we want to layer the reward. We don't want to layer the risk.
You know, cross-chain helps us do that.
Um another big value proposition of the space as a whole is censorship resistance.
Once we start thinking about circuit breakers, risk controls and and you know, slowing down, freezing, stopping certain parts of the system, you know, obviously if we can do that and we don't have any false positives, right? We you know, always stop the toxic behavior, but we don't prevent any normal behavior, that's ideal.
How do we balance the value propositions of censorship resistance, composability with proper risk controls and we so that we don't get in the way of some of the key value propositions that that DeFi is here to serve?
Yeah, absolutely. I mean, look, composability is something um like it's a killer use case of our space, but it needs to be good composability.
You shouldn't mix bad with good, for instance. Otherwise, like let me give you an example, right? The subprime crisis was a big part mixing bad loans with good loans, all right?
That wasn't good composability. That was toxic composability. Right. So, in the same way you do want to limit that type of stuff. I think risk management will allow us to have the good kind of composability you want, meaning good assets interacting with other good assets, right? Secure assets interacting with other secure assets.
And the second one is if you look at freezing assets, for instance, look at USDT. USDT is hyper hyper useful. Everyone uses USDT in DeFi.
Everyone uses it for transactions.
They are able to freeze transactions, right? It hasn't prevented anyone from using them. It's still as useful for the average DeFi user.
So, I I don't think um being able to freeze assets, being able to have circuit breakers is um is contrary to having composable DeFi. I think it actually improves it because it makes good assets even better by being able to leverage them more and by being able to protect them more by not mixing them with bad assets. You see? Yeah.
I think we had a a question here from one of our lovely audience members about the trade-off about the Chainlink node architecture with 16 nodes. You know, what is the trade-off with speed from something like a one of one or a two to two as you add more nodes? If you need a 11 of 16 signatures, do you limit speed?
Um really you're looking to solve for speed and security. How do you how do you think about this trade-off?
Yeah, it's a great question. By the way, we have 16 as the minimum. We have many chains where we have way more. Um Just an aside here. So, speed is actually not a concern here.
The most limiting factor on cross-chain is chain finality.
Meaning you don't want to have the cross-chain transaction go through before you have finality on the source chain. Otherwise, you could get a reorg, which allows a hacker to steal money. A good example, actually, there was a reorg, I think, today the coin was Litecoin, which, you know, in this exact scenario, if there was a cross-chain protocol using Litecoin without waiting for finality, this reorg could have stolen a lot of money, all right?
So, um it's not a limiting factor on speeds.
It can be a limiting factor on costs, but also, frankly, the costs are very comparable to what you have on other cross-chain systems that are way more centralized than CCIP, right? Yeah.
And the good thing with CCIP, which no one talks about, is is the node operators need to make money.
All right? Like they need to be incentivized to run a security business.
So, for us, the node operators we have on the Chainlink network, many of them, they make 70% of their business revenue through Chainlink. They care about Chainlink a ton. So, they're able to have upsec people and DevOps people working on security, you know, 24/7, basically. Like if they have an alert at 3:00 a.m., they will wake up, right? They need to care. A lot of these cross-chain systems out there, if they're decentralized, which is a big if, because I actually don't know if any of them is decentralized. Most of them are, you know, running all the nodes with the project itself running the nodes. But if they're decentralized, the node operators are not even making any money, which means they don't care about running the node, right? Would you put five people on a node operation if you're making 3K on that thing a whole month or like for a month? Of course not, right? It doesn't pay the bills.
So, that's another key thing to take into account and that's why the cost can be higher sometimes, because you do need to pay for the node operations, to pay for the security.
Got it.
Okay. And then when it comes to some of the actual certifications, right? So, Chainlink's got this SOC SOC 2 type 2 for CCIP and for data feeds, as well as the only Oracle with SOC 2 type 2 and type 1, plus ISO 27001.
What does this mean for the industry? Is this a stamp of approval that other cross-chain protocols and Oracles are going to be required to also obtain? Is this a Is it a uh something that the institutional side comes in very handy from risk management and understanding of what kind of team that they're working with. Is it something that looks good on paper? Like how do you how do you describe the importance of these certifications? And perhaps do you anticipate this kind of trend towards auditability certifications as a you know, a meaningful stepping stone for the industry?
Yeah, I think it's pretty critical.
It does take a long time to get this stuff. It takes 1 to 3 years and a lot of efforts.
Um >> [snorts] >> Look, it's a requirement on the traditional finance side, right? So, they do care about security, they do care about auditability. Um I think at some point the space has to go beyond the trust me, bro in terms of security.
And I think these certificates are really critical in that regard. So, yeah, super important and I think it's uh you know, it just solidifies why we're working with so many of these traditional finance players. It's because we do fulfill their security requirements.
Yeah.
And you know, as as this industry is progressing, we've gone through multiple iterations. You know, we kind of started out it was all about, you know, how are you securing your private keys if you're multi-sig and the the things have kind of progressed since there. You know, now we're getting into the security guarantees of the node architecture.
I remember Andy and I had multiple conversations as we were digging into blockchain architecture about economic security, about cryptographic security and how, you know, it felt like ZK was going to be the saving grace because people were unfamiliar with economic security and how, you know, you can just kind of uh if you have enough money, you can exploit the network. But if you have cryptographic guarantees, then these things are much much more secure.
How important are the differences between like an economic security guarantee versus a cryptographic one?
And ultimately, are there still steps that we can take? Is it just about adding more nodes to the system? Or are there scientific cryptographic steps that we can take to further secure these systems?
Um Look, the the pillar of security in this space is really more nodes and more decentralization, right? And that's how Bitcoin works and that's how Ethereum works. It's uh economic incentives and decentralization. I think that's enough if you do it right. Um A cryptographic security with >> [clears throat] >> things like ZK for crashing doesn't scale that much because you need a new circuit for every chain you integrate.
So, basically if you wanted a ZK bridge you know, adding one chain every time would take months to years depending on how difficult the chain is. And keep in mind with non-EVMs, difficulty goes way beyond, right? So, look, from my point of view, the proved points for our space are decentralization and economics that make sense to incentivize node operators to behave well and to care about their security, right?
And from there, obviously, we're always researching more redundancy, more security, you know, how do you add more nodes? One of the key features we'll have with uh our new CCIP release will be the ability for token issuers to run their own node as another add-on on top of our current security, right?
So, the core should always be decentralization and token economics that make sense. And on top of that, you can add more and more, but you need the core foundation. And to me, that core foundation is the best one.
Mhm. And and how much are, you know, the institutions that are tokenizing these assets and looking to deploy on chain, how much are they looking at, you know, some of the certifications that we talked about earlier, the the SOC 2, the ISO, um versus, you know, the node architecture? Are they looking at one and not the other? Are they looking at the entire thing? What is most important from a security standard to the financial institutions with trillions of assets looking to access the on-chain financial ecosystem?
Yeah, that's that's a great question.
Look, they're looking at both. As the system needs to be end-to-end resilient, you're only as weak as your weakest part. That's uh you know, famous saying in the security community and that's very very true in DeFi, by the way, where everything is connected. You're only as weak as your weakest asset, basically. So, um that's that's the way uh TradFi looks at our space. They look at the whole security end-to-end. And frankly, that's the way anyone who's serious about security should do it.
Yeah.
Johan, I'm curious about um this kind of next release that you talk about with CCIP. What is what is driving this release that you feel is a necessary technical upgrade than what currently exists? What are the key upgrades here that solve an unfinished problem in the current version?
We'll be discussing more on it. Um I would say it's more adapting to the complexity of our space. Meaning our space has more and more chains, more and more requirements. Now that TradFi is entering the space, things are, you know, new requirements are coming in that uh are different from DeFi. So, Sure. Yeah, it's really resolving the problems of tomorrow way more than resolving the problem of today, if you want.
>> Yeah. Got it. And I think I might have asked you this when we were in Khan and and and and I asked you about kind of where the Chainlink brand may sit in 5 years. But I'm curious where you think the DeFi ecosystem sits in 5 years given this kind of growth of rate limits, growth of uh compliant DeFi. Where do you where do you see the broader DeFi landscape sitting in 5 years or so as a result of what we've kind of seen? What what is kind of that vision here? And then we'll uh we'll close this out here.
I think you'd have um two DeFi spaces. I I do think you'd need to have one space that's very adapted to tokenize assets, meaning on par with our security requirements, meaning rate limiting, meaning ability to freeze asset, meaning ability to have KYC/AML with your counterparty, etc. And probably you'll have another DeFi space which is way more, you know, wild west like the one we have today and probably like the one we had way before in 2019, also.
Um but really, that's the beauty of our space, by the way. That's the beauty of our space is you have options. You have the option to go full TradFi, full institutional KYC, AML, risk limiting, etc. And you have the ability to build whatever you want. And no one can limit you or tell you what to do, right? So, that's what I think the future looks like. Yeah.
>> Last thing from me, Johan, actually from Link Toad General H Barry himself, one of the lovely community members. Can you give us any light into the monetization structure for prediction markets? Fees on volume? Question mark?
We're we're working on that with our partners. Look, the way we work with many of these folks is we go after the market and monetization is being worked on in parallel, right?
So, right now, if you look at prediction markets, we are getting adopted by, you know, a huge chunk of the space.
Uh we'll be diverging more kind of info just like we did with derivative DEXes, for instance. If you go back to the way we worked with GMX back in the day with rev share, etc. So, the infos will come as we as we progress in our adoption efforts.
Um last one from my my side, Johan.
Um on the Kelp DAO incident, you know, and and and I realize Chainlink is a larger organization. You know, you speak for yourself, may not, you know, represent the opinions of the of the organization as a whole. But Arbitrum DAO, you know, was able to uh essentially rescue 30,000 ETH.
Um they did this by, you know, you know, leveraging their single sequencer. Their security council chose uh to to recoup these funds.
Do you think this was the right decision kind of factoring in what we know about decentralization?
You know, you've been here for a long time. What what the spirit of the industry is, um but also recognizing, you know, what what's at stake. Do you think Arbitrum DAO, you know, made the right decision and and why?
I mean, absolutely. I I think the why speaks for itself, right? Like uh they basically took back uh North Korea money. So, you know, less uh Okay, I want to make a joke here, but that's >> [laughter] >> let's imagine to whatever they're investing in over there. Right. Look, I think frankly, that's another beauty of this space.
I think they did the right choice. For all the people who think they didn't do the right choice, go use another chain. Like, you know, that's uh you have the option. That's that's why blockchain is so good because you have the option to do whatever you want. So, for the people who don't agree, take your money somewhere else. Up to you. Yeah, it's a free free market, permissionless. Johan, thank thanks so much for for joining us today. An absolute pleasure. Um you know, you've obviously got a vantage point on so many things in going on in the space because Chainlink is so plugged in, you know, over overall in the space. Um and then obviously great insight on the Kelp DAO incident and and uh you know, the resolution efforts from Aave.
Uh appreciate you coming on the show and spending some time with us.
Thank you. It's great to see you guys.
Thank you. Have a great day.
>> Busy times, man. Well, let's get back to it, all right?
>> Very busy.
>> [screaming] >> All right, buddy.
See you, Johan.
All righty.
Uh that is Kelp DAO. It is hopefully getting resolved as as of this week. I mean, it it seems like Aave's going to put it together, get there, um, you know, get this reserve strategy dialed, and it's seemingly looking like there's a very technical and material process to kind of finalize what's been done.
I think the Chainlink team has quite a bit to do on managing the liquidation side of things, just making sure that that goes smooth from the way that Aave's planning to unwind this. I think we'll hear more from Aave in the coming days, specifically about that. So, um, yeah, we have a couple of things that we did not get to go through that I think we ought to. I think one of them is actually CCIP related, if I'm not mistaken. Uh, we ended there on the Galaxy Digital pivot to the, uh, AI warehouse from the Bitcoin mining facility. And I think I think the the next one is actually what we just talked about, which is Chainlink. So, Chainlink promotes CCIP as a cross-chain standard, um, and we just had Johann about the, uh, on about that. Now, we'll talk about this US Strategic Bitcoin Reserve, which I am hard fading. I >> this a nothingburger. I'm curious >> think it even happens, so let's >> Let's >> I didn't listen >> Let's get to the video.
>> clip. And our friend Sam Sam Ka here Oh, yeah.
>> is, uh, is in the suit >> In the suit right next to Patrick McWit.
>> Yeah, let's play the video. Um, cuz I'm I'm I'm curious how how this has been developing.
Yeah, let's hear.
Overall, the president signed the, uh, Strategic Bitcoin Reserve executive order last year, uh, and we've gone to work and and figuring out exactly the the, uh, machinations necessary and and legal, uh, interpretations that we need to, uh, to get that right and solidify that and protect the digital assets, but specifically Bitcoin that we have on the government balance sheet. So, uh, in the the next few weeks, uh, we'll be making a big announcement. I think we have a bit of a breakthrough there.
Um, and, uh, obviously that needs to be followed up with legislation. Senator Lummis's Bitcoin Act over in the house, Representative Baggett has talked about the ARMA, um, Act that he has put together. So, uh, we need to to codify it, but, uh, in the meantime, uh, we do believe we're going to be able to take a a big step forward, uh, from the executive branch side of the next few weeks.
>> That's huge news. So, on Overall, the president signed the, uh, Strategic Bitcoin Reserve executive order last year, uh, and we've gone to work and and figuring out exactly the the, uh, machinations necessary and and legal, uh, interpretations that we need to, uh, to get that right and solidify that and protect I think you're probably you're probably accurate with your your nothingburger, uh, point there. But he is saying, "Look, you know, there there was multiple obstacles to getting this done." He's describing a breakthrough. It feels like they're going to announce something.
What kind of effect that has still remains to be seen, but strategic Bitcoin Reserve if anything, it feels bullish, cuz they get off zero, right? If it's not if it's some sort of reserve, if it's not just, "Hey, you know, we're going to like, uh, confiscate this Bitcoin and we're going to put it into a stockpile and we're not going to sell it."
That's great, you're not selling it. But if they're buying net new Bitcoin on the market, OTC, buying it from somewhere, they get off zero that way, and they have a they lay out some sort of plan as to how they could continue to accrue more.
We'll see. Then it Yeah, I mean, Enrique says, "Yeah, they need to leave that Bitcoin fund alone and just get clarity to the finish line." I agree. I I'm ready to just see clarity get done.
I mean, we we've stopped talking about it on the show because we're just like tired of it. And so, I I don't know. I don't think this is going to be anything that big. I don't think it's going to end up being, you know, huge, but yet to be seen. Rob, I'm going to get our next guest set up on board, pass it to you, and then you'll pass it back to me. I'll see you in a second, buddy.
>> Yeah, see you soon.
Um, remains to be seen. We'll see about the, uh, the Strategic Bitcoin Reserve there.
If they make an announcement, they get off zero, I could see it making some waves. Uh, really depends on how much they're going to be allocating. Our friends at Chainlink, you just heard from Johann. Let's see what they've got coming out of CCIP.
Let's play the clip.
Let's see.
Chainlink, you're long past the experimental [music] phase of cross-chain.
Billions in value, institutional capital, >> [music] >> real-world assets, all moving between chains every day.
Hm. So, the question isn't whether cross-chain [music] works, it's what happens when it doesn't.
When everything depends on a single point of failure and it fails.
Chainlink was built on a different [music] standard, decentralized networks, independent node operators, built-in circuit breakers, [music] a system designed for when 99% is not enough, because your assets [music] deserve more than hope and promises, and a single point of failure is one too many.
Chainlink CCIP, trillions in value enabled, secure and uncompromised, Yeah, there you have it.
>> decentralized.
>> And so, you know, obviously Chainlink is looking at this as an opportunity, which they should be.
Um, LayerZero's chose, uh, one of one DVNs in production. Uh, Chainlink is saying, "Look, built-in circuit breakers, independent node operators, decentralization by default."
Uh, ultimately, this is this is the way that it should be. And so, you know, there's going to be uh, some fallout, I think, from from LayerZero. Uh, I believe I was on the show a few days ago we were talking about Kelp DAO, um, and how, you know, right now you're starting to see some of these bridges come back online. A lot of those one of one OFTs, a lot of those DFNs, they got, uh, the DVNs, excuse me. Those DVNs got paused, right? Anyone with a one of one or two of two of two, uh, was paused over the last couple of weeks. Those are starting to get turned back on, but believe I believe a lot of back of the back door conversations are happening now where, you know, these guys are going to turn this on begrudgingly in order to, you know, kind of open open for business, but these guys don't want to rely on one of one DVN architecture anymore.
Maybe the initial step is, "Hey, we're going to upgrade to something more secure from LayerZero," but I'd imagine there's there's some several conversations about moving off of LayerZero altogether. And so, here you have Chainlink CCIP, which is essentially an alternative uh, that could serve, uh, a lot of that market that is looking to move, uh, from their DVN network structure into something that CCIP offers.
Uh, and you heard about the value proposition you know, when 99% isn't enough. You don't want your protocol's TVL to look like the the life of a turkey, right? 99 days and then zero.
Uh, ultimately, you need you need security and protection all the time.
Uh, and so, that's what, uh, Chainlink and CCIP are are giving.
I see Andy still getting set up behind the scenes with our guest. The guy's coming in hot with a suit on, guys.
Uh, believe they're going to be chatting 21 shares. Lots to go over there. Uh, let's see what we've got up next on our new segment.
Uh, we'll move off of Chainlink here.
We'll get, uh, we'll get the next piece of information here.
Um, okay. I think that was that was a bit That was that was last of it. But obviously, you know, there's quite a bit, uh, happening out there. We talked about Elon's SpaceX package, talked about the UAE, brought you guys, uh, exactly what you needed, uh, here. So, um, we're just going to quick take a quick standby break. Don't go anywhere.
And, uh, we'll be right back with, uh, let's see, Eric Birchell, I believe.
Eric Birchell, uh, of 21 shares, I believe, is, uh, is who we're we're coming at you guys, uh, with today. So, don't go anywhere.
We'll be right back, and, uh, we'll see you guys soon, uh, with Andy and Eric live from the nest, the tokenization tower, in just a bit. We'll see you soon.
17 seven 17 seven All righty, guys, we are live here in the tokenization tower presented by our friends at Plume. Let's give them some love, man. We have got Adrian and Jay Fitz. Good to see you. Welcome to the tower, Adrian, the chief investment officer at 21 shares. Adrian, good to see you in the city, man. How's the city treating you? Man, it's been amazing.
Weather's fantastic. I'm having a great time. and thanks for having me as well.
>> first time here in the Empire State Building, so it's good to have you. I just took some photos of the view, being a little tourist, but yeah, it's a stunning office. You can be lucky. Thank you, man. Thank you, man. Well, hey, it is an interesting time in the industry right now. That is for sure. We're going to talk We're going to talk high level on the markets, kind of how you're thinking about this, how your firm is thinking about this. Before we do, Adrian, you've got an interesting background prior to joining 21 Shares. Maybe you just kind of tell us a bit about your foray into being a portfolio manager and and an investor and kind of how that all came about. How I ended up in crypto, basically. I mean, yeah, my background is more traditional, I would say.
So, I worked in mergers and acquisitions, like in investment banking, management consulting, but also corporate M&A.
But always been close to markets and always had, yeah, a massive passion for investing. Specifically crypto, because it's always been the most fascinating one. For me, it's kind of like the perfect combination of real technology and finance and investing.
And therefore, yeah, I kind of Yeah, I actually bumped into crypto 2013 because of a colleague um from from university.
And yeah, back then uh I I thought there there could be an amazing investment pitch. So, I actually asked my stepdad for some money. It took a while until he finally wired me a thousand bucks.
I invested and 2 weeks later, the market dropped like 70-80%, [laughter] so and I sold at the bottom. Yeah. Um but I was hooked. I was hooked on Bitcoin, kind of lost interest, but then 2016 I when Ethereum came up, um I was back into crypto. Back then did it more out from kind of like passion aside from my corporate job. Um but then 5 years ago I thought it was the perfect opportunity to make it, yeah, a full-time job, pay my bills.
And that's how I joined 21 Shares. Ever since been a wild ride.
>> Great, man. We just had Cathie Wood on the show and we were talking about kind of how her and her firm at ARK Invest is thinking about the space. And she laid out this kind of big four asset thesis, which is obviously Bitcoin, Ethereum, Solana. And then she put in Hyperliquid in there and she she kind of spoke about these being her her kind of big three plus maybe Hyperliquid. And that with her ETFs, her firm, this was kind of how they were thinking about the space currently as far as like investable DeFi platforms is kind of what she called them. Um you know, when we're thinking about the space holistically, we've kind of started to get sectors, you know, in the space, right? You've kind of got this Bitcoin as this digital gold and everything else thesis or you've got Bitcoin smart contract platforms and everything else at the institutional level.
In the dealings with institutional allocators, with higher net worth clients, what are they truly looking for for from exposure to digital assets? Is it just a little bit of extra beta on their portfolio? Is there just like generally curious, your spectrum of interactions with institutions, high net worth who are coming into the space and just kind of what they think, what the education is required? Just kind of give us a bit of a sense of like what that looks like.
>> [snorts] >> There's a lot to unpack, I would say, yeah. So, first of all, I think I would agree with Cathie Wood.
I think we're very much aligned on that point.
And it comes down it's the first step is the classification.
I think there's still a bit of a misconception. They see crypto assets as kind of like one asset like one asset.
But of course, there are different sectors, different value propositions and even just the nature of the projects are widely different.
And that's where the education starts.
And I think you laid it out perfectly.
We always position Bitcoin as kind of like the monetary anchor of the entire asset class. So, of course, it acts more as a digital commodity, a digital gold.
Um then Ethereum, Solana really act as those, yeah, platforms for innovation, really the base layer for a lot of things that build on top of it.
And then you have all the structural trends, all the innovation, decentralized finance, stablecoins, tokenization, um that build on top of the innovation layer, how how we like to call it, all the different applications, all the different projects. Um when we speak to, yeah, traditional investors, that's kind of the first thing they need to understand that those are different assets, different value propositions. Um what they always want is they want to see how to value crypto assets. And of course, you got to start with Bitcoin, but Bitcoin is the most challenging one because it doesn't generate any yields. And therefore, to put like a traditional valuation framework on top of it is is quite challenging. Um however, the story of Bitcoin, kind of like this narrative of a scarce asset, is much easier to tell.
Right. Um Ethereum, Solana or something like Hyperliquid, those are actually really compelling cases once they start to understand it, because once again, you have the staking yield and this could act all the transaction fees that are being accrued, they act as some sort of cash flow and then it becomes much more of a um yeah, valuation that you can put on top of it. And that's what they what they like to hear.
So, Cathie also came in and said her firm's base case for Bitcoin by 2030 is 730,000 and her bull case is 1.5 million.
That's ballsy.
That's a bold claim. I mean, we can talk about timing, but I think in the long run I would agree with that with that price target. If it's going to be in 2030 or 2035 or 2040, remains to be seen. But I think what she actually want to get to is just the long-term investment case for Bitcoin.
And it does take a bit more patience because it is about monetary debasement, devaluation of of fiat currency and this is not going to happen overnight. Um but eventually it will materialize. Yeah.
And recently I don't I don't know if you've seen the Etherealized team put out this productive money thesis for Ethereum. Um and and they were actually saying that Ethereum might go to 250,000 based on the backing of this productive money thesis. You're smiling here. I'm not sure how much ETH you hold.
I found that to be uh very aggressive and very very obviously long-term thinking with this idea of this asset that has a a different consensus mechanism than Bitcoin and potentially a longer-term solution to the security problem that is superior to Bitcoin.
Do you Do you guys care much about the dynamics of the consensus designs, the security dilemmas between a proof-of-work network, a proof-of-stake network? Do you guys Do you guys think like more about kind of how how Bitcoin may solve its problem of being not not not valued high enough to be worth mining, thus a large drop in hash rate, a large drop in mining pools, thus a much less secure network? Like Like do you guys apply this framework of thought to also reach any sort of similar conclusions with regards to ETH being potentially a better investment long-term than Bitcoin or do you find these types of takes to be um very kind of like small-minded and kind of narrow rather than just understanding that all of the institutional flow is really coming to Bitcoin and that Ethereum's just kind of gaining that ground?
That's a tough one. You're putting me on the spot. I mean, it sounds like I have to choose a camp.
200k? 250, babe.
>> 250, that's so aggressive. That's so aggressive. I thought Tom Lee is already like at the highest in regards to ETH price predictions, but 250k is I mean, what would the market cap look like? I mean, out of this world. 50 trillion, okay. I think it might take a while. I understand where they're coming from. Of course, you have kind of it being, as you said, productive money, but it also has some sort of store of value attributes because in regards to smart contract platforms, it is the most decentralized. So, you could make that case. Is it going to rival Bitcoin? Pah, it's hard to quantify that. I think it comes down to more of a philosophical question.
I love all crypto assets, but nonetheless um always Bitcoin first and I don't think Ethereum will flip Bitcoin anytime soon.
When it comes to the research itself, of course, we we take that into account as well. I mean, we talk to traditional investors. Usually we don't have to go that deep into the technicals. Of course, we we we we we try to explain the difference between proof-of-work, proof-of-stake, what it means in regards to decentralization, security. What they actually care about is just the yield, the staking yield. That's what they're most interested in.
But usually those conversations are very high level and that's something that, yeah, we from the research team uh look into internally and also kind of have fun conversations just like this.
>> Yeah, yeah. You know, on a similar train of thought then is is this quantum subject something that Absolutely.
>> larger institutional allocators or high net worths are asking you guys about like hey, you know, I want to allocate a couple million bucks to Bitcoin, but I'm hearing about this quantum issue. Like is this something that I should pay attention to? I guess like what I'm trying to get at is people are saying that there's a bit of a narrative headwind here on the quantum side when it comes to it being prohibitive for these larger allocators. It's getting in their way. It how accurate is that? Is it something that they're really concerned about?
It comes up quite a bit, I would say.
I don't I don't know if it kind of stops them from allocating, but the question yeah, it pops up quite quite often, especially in this bear market. Which is kind of a bear market phenomenon. Of course, narratives like this they they they they they usually are a bit more aggressive and fueled during bad price performance, but nonetheless, they always ask about quantum computing.
And I think we should take it seriously and I think the the the crypto community does take it seriously as well. I mean, we've seen a lot of proposals and and conversations within the Bitcoin developer community with BIP 360 and 361.
Agree or don't agree, I'm just happy that something's going on and the discussions are starting. And the same for Ethereum and and and Solana. This this needs to be tackled in the long run, but we don't see it as a immediate risk.
You met Eli, our global head of research as well.
Our team they did kind of like a also a very deep dive research report that we're going to release shortly where we kind of interviewed a bunch of different experts from the field just to understand and grasp how how imminent and yeah, how how big of a threat it is.
Sure.
>> I think the takeaway is still yes, we need to take it seriously, but it's not going to happen overnight.
>> Sure.
So, it was quite funny actually when the kind of four-year cycle timing was happening in October-ish last year, September, a lot of larger, you know, people call them suits, people call them institutional allocators were saying that it was dead.
In hindsight, it looks like the four-year cycle is on. You guys put a 2026 kind of outlook and report out stating that, you know, looking at ETF flows, you know, one could infer that this typical kind of classical expectation that a lot of the investors in the space have kind of come to either grow to hate or to love or to both is is likely not going to play out. And [snorts] I think the way to think about it properly is that it's just going to be accelerated slightly. I think people right now think it's going to be accelerated drastically such that we go from to new highs like directly from here for example by summer, fall, but the way I'm more so thinking about it is that it's going to be accelerated by a matter of 100 days or so or a quarter or a quarter and a half, which by those numbers would put us around new all-time highs sometime middle of next year. Sometime around June or July of 2027. Bottoming sometime sooner than, you know, Q4, more like end of Q2, early Q3 that, you know, in the next couple months. But no one has a consensus around this right now.
That's what makes a market. Yeah. I'm curious, are you still standing by your take that that it that that the cycle is broken and maybe you could just illuminate how nuanced you guys are in thinking about that.
I would say it is nuanced, but in regards to that prediction, I would give us five out of 10. Okay. Because just looking at price action, it perfectly matches the four-year cycle. It's almost unbelievable.
It's a simulation. No matter if you have institutional adoptions, big asset manager, the price action looks the same, which is crazy.
I think where we are right and that's kind of like where the nuances kick in is of course the market structure is different and that structural demand from the institutional side is something we haven't seen before. So, I would totally agree with you.
The cycle still needs to play out to perfectly match it, but of course, just comparing it to the to previous cycles, a lot has changed as well and this could kind of imply that we might see yeah, a a a different scenario in the future. Yeah, for for example, stablecoin supply has made new all-time highs, which has never happened any previous bear market. Absolutely. And And just the same with the ETF flows cuz they they are very constructive actually. I mean, despite prices being down 50% in the US, I mean ETF Bitcoin holdings, so they were only down like 5%. So, it clearly shows that some of those traditional investors, they're much more patient and they they hold through this volatility right now.
And in Europe even more striking since the all-time high in October, we actually seen almost a billion in net new assets. So, we see continuous new new flows coming in and that shows a bit that they're starting to behave a bit more anti-cyclical, which is quite good.
Yeah, and then on the on the Europe versus the US versus Asian front, I'm curious how you're thinking about the regulatory climate as it affects the demand to invest. Obviously, I mean, we've made a rule on the show. We're just not talking about the Clarity Act anymore.
>> Oh, that's good. Until until it's passed, we just I mean, I mean, it's just I think it's overblown anyways. I think it's really important in the long run, but I don't see it as a massive catalyst that will bring us out of the the bear market. But let's close that topic. On the European side then, what is the what are the more important innovative regulation you know, proceedings and developments that have been happening? Is there anything that you're particularly privy to or that kind of your European client client set are paying attention to as as potentially kind of like a green light to invest or is it is is it in a similar spot? Is it in a different spot than the States? How how how how do these two continents kind of you know Yeah, of course in in in Europe, we kind of had the markets in crypto asset legislation, MiCA, Yeah. which kind of puts a regulatory framework around crypto assets in in the EU and it's being implemented right now.
The good thing is from the 21 Shares side, it doesn't really change much for us. Of course, it legitimizes the underlying asset class, but ETPs in Europe, they have been around for almost eight years now since 2018. So, the regulatory clarity in regards to those traditional vehicles has been has been quite clear. Yeah.
I think what stands out is maybe the UK because in the UK for a long time, we had a ban on on retail and that has been lifted end of last year. So, the FCA actually lifted the retail ban, which is good to see and I think it comes with a bit of pressure to the banks because they've seen that a lot of potential client money actually flows out to I don't know, crypto exchanges.
And of course, they want to make sure to internalize all of that money and therefore the FCA finally got more comfortable and lifted the FCA the the retail ban and therefore we also have ETNs listed there.
I think other than that in terms of regulatory what's maybe interesting is UCITS. Sure.
Cuz um for instance, in Europe, you don't have crypto ETFs. You don't have a Bitcoin ETF because in the EU, ETFs they're under UCITS regulation and what that means basically is to have an ETF, you need to fulfill a certain amount of diversification criteria and of course, that's not possible on a single asset. That's why you also don't have gold ETFs in Europe.
They're also called ETCs or ETPs. Mhm.
And it's the same for for Bitcoin.
Nonetheless, within some of those UCITS funds, you can now have kind of like those bigger diversified funds. You can now have up to 20% Bitcoin crypto allocation as well.
So, we see more crypto flowing into those more traditional vehicles as well, which is quite good. And that obviously unlocks a lot of potential institutional flows. And are you seeing more activity and interest on the passive ETP or ETCC or ETF side? Like how how what's the split in passive versus active products because in the in the traditional world active products were very popular, but struggled from a fees perspective being quite prohibitively high and we're just now seeing some inception of more actively managed crypto ETFs at least here in the States. What's the kind of spread between passive and active products and do you do you kind of have any take on how this uh, you know, uh, market share changes in the coming year, too.
That's a very good question. Um, I mean, active ETFs, they I I would say they're taking off just recently, right? Over the last couple of years, you see, um, the Yeah, JP Morgan, PIMCO, all coming out with their actively managed ETFs, um, and they're gaining much more traction.
>> Yeah.
>> Um, in Europe, it's quite interesting. I would say the majority almost everything is still in passive vehicles. Uh, you do have so-called AMCs, actively managed certificates, um, but they never gained much traction. So, if you look at the landscape, I would say almost everything is in still in passive, uh, ETFs or ETPs. And would you expect that to continue then?
>> Potentially. Potentially. Um, what's also interesting, the first product we actually launched was a basket. So, it was the top five crypto assets, um, by market cap. Cuz we always thought, um, investors, they might want to get diversified exposure.
But it's actually not been the case until now. Um, traditional investors, they they they want to pick single trackers. They want to pick single assets, which is quite fascinating. That might change in the future, uh, but for now, they're clearly on on on picking their own, uh, bets.
Um, when it comes to active, I think eventually it will come through and we will see more actively managed, uh, ETFs, um, and they will be, uh, more successful, as well. Yeah. Yeah, because I think like investors want to kind of turn their brain off and allow a manager to allocate to a basket of assets, you know, you know, based on the, you know, whether it's a risk-on or risk-off type of market, you know, you can think to allocate to If you're just thinking about like the big three or big four, you can think about, you know, allocating in a different fashion based on the market condition. But I can understand that, you know, look, I just want to own Bitcoin. I just want to own ETH and, you know, that's it.
>> I think once they get a bit more comfortable, um, I'm pretty sure they're going to pick some some actively managed ETFs, as well. Uh, but I think for now, they they they're still at step one.
But it will come. It was the same with hedge funds. It took a while until that, uh, took off, uh, but eventually, people want to want to want to bet on people's performance.
>> Sure. Sure. Sure. Yeah, and the reason that I ask about some of the regulatory side in Europe and in, uh, the states and just kind of how I'm thinking about it is, we've recently seen in DeFi, specifically on chain, quite a bit of, um, like attacks and exploits and just kind of really insane insane, you know, situations unfolding. And JP Morgan came out, you know, ironically, you know, like a couple days after this, uh, recent Kelp DAO exploit and said, "Look, this is slowing the institutional adoption of crypto." But my my current, you know, way of thinking is I don't think it's really slowing the institutional adoption of crypto. These guys are coming in, allocating to ETFs, tokenizing their kind of non-speculative assets, anything from T-bills to funds, etc. And they're bringing it on chain and they're launching ETFs. I found that it was And I've kind of thought it's more of the retail people that are kind of becoming much more disoriented with the state of this DeFi ecosystem that they've come to know and love. And so, I just wanted to ask like, have you been fielding questions about that as of late in the past couple weeks? Like, "Hey, I saw this exploit." Or, "Hey, I saw this hack. Like, what happened? Should I be worried? Should I pull my money out?
What's kind of the state of that of that?" Yeah. I mean, we didn't get too many questions. Of course, we were prepared internally, kind of like providing sales notes and everything just to make sure if the question arises that we can answer them. But from the traditional side, they I wouldn't say they weren't concerned, but maybe they didn't even know that that hack happened.
>> of what I thought, too. Yeah. Yeah.
Yeah. Yeah. Yeah. It's really like that.
But I agree with you. I mean, it's, uh, of course, it's unfortunate with with with the recent hacks and even on my side, when was the last time you used, uh, DeFi?
I mean, I I use it all the time to like send our team payroll and to do like, you know, field customer, uh, you know, client payments, all sorts of stuff. But like, you know, using DeFi all the time, it's been, you know, it's it's progressed slowly downwards over years. Especially compared to the old crazy times, I would say, where you were just like Were you around then? Yeah, absolutely. I mean, uh, I was around during the Wonderland and Ohm Town days.
It was it was it was fun. It was definitely fun.
Uh, but I think those times are over.
Sure. And by the end of the day, I look at the bright side of things. Um, it kind of ex- it exposes the the the vulnerabilities of of, uh, those projects, as well, in my opinion, and make them more robust in the long run. Okay. And if you want to become a bit more institutional ready, I think that's the the the the right way to go. Yeah. But it's just interesting to see that some of those, yeah, even the the communication around DeFi, some of them go from decentralized finance to like on-chain finance and stuff like that.
Um, but I think what DeFi really shows is just how capital efficient those protocols can be. And I think that's where, yeah, traditional asset managers look very very closely and see how they can use some of those concepts to integrate it into their operating model.
Just like a hyper liquid, for instance.
I think I I do think it's the best example. Yeah. So, so, zooming out from like the internal ecosystem on a more of a of a macro view here, folks are a little bit concerned with the lack of performance from the crypto market off the lows.
Stocks going to all-time highs. Yeah.
Um, this AI trade, this AI bottleneck trade, anything that is a part of this AI supply chain getting absolutely repriced extremely high, extremely fast.
Honestly, the entire global stock market looks and feels like a 2017 BitMEX chart. It's it's it's insane, right? And so, from the macro perspective, you know, thinking about the SpaceX IPO, this OpenAI IPO, this Anthropic IPO, the these large-scale liquidity events coming to the global market, how how are you thinking about the duration of this AI trade right now? Um, and thinking about like these big events this year. People are saying that the stock market can't handle it. People are saying that it can and these are going to be huge huge winners. How do you think about this like this AI bottleneck trade right now and this kind of how long this mini mania can last? Well, that's a that's a good question.
Everyone wants to know, right?
>> AI bubble or not, absolutely, absolutely. I think it's hard to tell. I think even here in the AI craze, I take a lot of comparison to maybe the altcoin market. Um, I would say maybe there's a bit of a hype and too much euphoria, but I do believe you you're going to have some companies that that will continue to outperform. And I think there's still a lot of good bets to to to make. I think it's it might be too early to call the top >> Yeah. when it comes to that.
>> Well, if the if the IPOs haven't launched yet, then it's kind of like a pre-token project where the sky's the limit, right?
>> Yeah, absolutely. Absolutely.
>> been kind of formulating an idea that if these IPOs do kind of come through in Q3, maybe in Q4, but I think that would be probably the max attention on that trade and also the max, um, not pain, but like max lack of attention and apathy on the crypto trade.
And it's been like this before, I would say. I I do believe kind of like the the the entire AI narrative took a bit away from just, uh, yeah, the the the re- retail investing scale in the crypto space. People just got so excited about AI and that's where they put their money. Um, I think I'm quite happy when all of those IPOs are over and maybe the AI market cools down a little bit, maybe people are flocking back to to the to to the crypto market.
>> And I've spoken to several investors about this and they've said that, you know, quite a few of these early investors into this AI trade are also similar early crypto investors. So, I think there's like a thesis here that's going to start to look at like a reshuffling of flows from that AI trade back into Well, you know, those investors aren't just going to be like happy that they're going to be like, "All right, what are we going to do next?" And I think if crypto is in, you know, a semi-depressed state, I think that could be a really nice setup for Q3, Q4, Q1 next year as that, you know, trade kind of, uh, completes, right? I almost I almost think of of these IPOs as like the completion of that trade. From there on, it's a whole 'nother investment thesis on it. Um, but until then, it feels like all energy, all focus is there. You know, OpenAI is going to drop one model, Anthropic is going to do this. It's just >> Like on a weekly basis. It's absolutely nuts what's going on right now. But I agree with you and then you're going to have some some some quality projects that might look undervalued, um, on a relative basis. And potentially, we're going to see that capital rotation back to some quality project in the crypto space.
>> Yeah. Yeah. I'm curious how much you guys in the research, right? I obviously spoke to Ali about it, you know, a bit more in depth, but there's kind of growing you need to have a business.
What is your on-chain business model?
What is your token model? Are you doing buybacks? What is your revenue? You need to have clear, transparent financial modeling for the public. You need to have, you know, these things starting to look more like equity structures with investor relations and quarterly calls and these like live streams that are happening and these these types of things, right? Like the space just generally maturing to look more like, um, the equity market. And I think a lot of this is driven by when you own equity specifically, you get some sort of wealth effect in terms of you know that, you know, there there's a fiduciary duty to the shareholders and that doesn't really exist in the token market currently. I'm just curious your kind of more broad view on how that how you anticipate the token model evolving in the token market evolving and how much attention you pay to this because perhaps it's just a bear market phenomenon. Everyone is upset about their their assets and so they're kind of pointing fingers or perhaps this is like the start of a new era for the crypto market.
>> Yeah. I mean, we always said fundamentals do matter also in crypto. I mean, let's look at the previous old coin season. They've largely been liquidity events, right? Especially during COVID, we we had so much money laying around. We were just throwing at random projects and they all went up.
Um, and I think those times might be over because as you said, like investors, they take a much closer look and they want to understand, okay, are they actually revenue? Are they actually cash flow being generated? And I think that truly matters. I think it's becoming much more of an equity analyst approach where they want to see, okay, the business model and the tokenomics behind that. Um, even on the retail side, I think we're we're we're calling the BS a lot of times.
>> Yeah, of course.
>> And we want to see some some some real use cases or some real revenue models.
It's a show me the money market right now more than it's ever been. Yeah, which is a good thing. And I mean, look at some of those uh, you could even make the case that some of the the the the bigger projects, if you look at the fundamentals, they have maybe have like eight active users. Um, but still billions in market cap. Is that justified? Of course, there's not enough to liquidity to price it correctly, but those are some of the questions that we got to ask ourselves.
>> Right.
>> And I think that's where we really truly want to see, okay, some true developer activity, some thoughtful tokenomics, uh, revenue models, actual projects being built and solving uh, real-time use cases. We like to see that.
>> as the 20 kind of 17 cycle was led by Ethereum's emergence in the ICO craze, as the 2020 and 2021 cycle was led by the alternate L1 kind of new chain craze, then the 23, 24, 25 cycle was kind of L2s and a a variety of infrastructure, kind of like blockchain infrastructure. Perhaps it's this next cycle where the the leading assets are those that look like a business, right?
And that those kind of lead the the market out. Yeah, absolutely.
Absolutely. And I think especially when it comes to the application, some of them might be more equity-like and I don't necessarily think it's a it's it's a bad thing.
>> Yeah. Um, I think it makes sense. It's much more appealing to traditional investors.
Um, and that's how I kind of like how you drive flows.
>> Yeah. Yeah. Adrian, just kind of closing out with 21 shares at the forefront of a lot of this ETF and ETP growth as well as working with a lot of these larger scale clients, onboarding, you know, new investors into the space through your products. What what is the focus for you guys throughout the rest of this year?
Obviously, it's kind of like a build year, right? It's kind of get your feet under you, be prepared for the next wave from a systems perspective, a personnel perspective. How do you kind of think about maximizing this time in the market, which is quite a bit more calm than perhaps what you're used to to to reap the, you know, the outsized outsized benefits of the upcoming bull? Yeah. Yeah. I mean, that's a good thing at 21 shares.
Um, and I think we're really proud in regards to our track record. This is not our first bear market. Uh, we've been around for almost eight years. So, we've gone through bears and bulls and usually we know how to handle them as well. And I think that's that's what sets us apart compared to some of our competitors and that's why we feel pretty much prepared.
Um, the good thing I would say compared to previous cycles is the interest is truly here. We're not fighting for existence anymore or for actual meetings.
Um, they really they truly are trying to understand, okay, how should we handle and deal with crypto assets? How should we allocate? How should we size them within a multi-asset portfolio? And in regards to media or traditional investors, private banking, we get so many requests and it all leads back to to to to education. I think that's really really important. We had a lot of unlocks in regards to regulatory clarity, in regards to institutional uh, railways, um, but I think the education is the last missing piece for, yeah, some of those big allocators to invest in crypto. Beautiful. But we obviously we are product issuer. Yeah. We're going to come out with uh, more products. Uh, we're here to provide access to make it very simple for for for traditional investors to uh, get access to this asset class and therefore, of course, we're going to come out with more innovative uh, products and are here to spread the gospel of crypto. Awesome. Ladies and gentlemen, that is Adrian Jae Fiedler, CIO of 21 shares. That also wraps our show for today. You're watching The Rollup, the home of convergence between digital assets and finance, guys. It is Tuesday, April 28th live from the Empire State Building. We will be back live tomorrow at 12:30 p.m. Eastern. If you're watching on YouTube, we see your comments as well as on X. Shoot us a like, shoot us a subscribe. We'll see you tomorrow at the tokenization tower, ladies and gentlemen. Thanks for being here. Thank you, Adrian. Thank you.
>> [cheering] [music] [music] [music] [music]
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