This episode reveals a critical shift in the market: as traditional fintech giants like Klarna adopt stablecoins and crypto infrastructure, crypto-native investors must become better generalists to identify where true value will accrue.
Show Kick-off: Market Cycles and The Power of AI
- The hosts open with a discussion on how market conditions directly impact podcast engagement—numbers going up or down drives interest, while flat markets lead to stalls. Santi explains his recent return to writing blog posts, driven by a desire to bring more intellectual rigor to crypto's value capture models. He highlights how AI tools like ChatGPT have dramatically accelerated his writing process, transforming a multi-day effort into a few hours. The conversation touches on how custom-trained AI models, like a "Santi brain" or "Yano voice," are already being used to replicate personal communication styles for professional tasks, showcasing AI's immediate practical applications.
Klarna's Stablecoin Launch: A Fintech Giant Enters Crypto
- Klarna, an AI-powered neobank with 114 million customers and an $11 billion valuation, announced the launch of its own stablecoin, Klarna USD, on Tempo, a payments blockchain developed by Stripe and Paradigm. Founder Sebastian Siemiatkowski, previously a vocal crypto skeptic, acknowledged his shift in perspective, stating, "We were wrong on crypto and on Bitcoin. Must rethink your priors."
- Initial Use Case: Klarna plans to first use the stablecoin for internal treasury operations to create a more efficient global banking infrastructure.
- Strategic Analysis: Rob notes that while Klarna's announcement focuses on cross-border payments—a new market for them—the more significant long-term play is integrating stablecoins into their core merchant services. By offering instant settlement and potential yield to its 800,000 merchants, Klarna can create powerful incentives for stablecoin adoption at the point of sale.
- Market Impact: Rob views this as "one of 50 or a hundred of these types of announcements" expected from fintechs and banks over the next 18 months. These firms are realizing that blockchain rails allow them to capture more of the economic value chain.
The Great Valuation Debate: Fintech vs. Crypto Protocols
- Santi initiates a critical discussion comparing the valuations of established fintech companies to crypto protocols. He points out that Klarna, with over 100 million users, trades at a 3-5x price-to-sales multiple, while protocols like Ethereum and Solana trade at 200x and 80x, respectively. This raises a fundamental question for investors about where to allocate capital for the best risk-adjusted returns.
- Investor's Dilemma: "Would you rather own Klarna? Would you rather own Affirm? Would you rather own Solana or Monad?" Santi asks, questioning the sustainability of current L1 valuations compared to businesses that are now leveraging the same technology to enhance their existing, massive user bases.
- The Evolving Investor: Rob argues this signals a market inversion. Previously, generalist investors failed in crypto because they lacked technical understanding. Now, crypto investors must become better generalists. Rob states, "They need to understand how AI is changing the world. They need to understand what is happening in fintech. And if you're not an investor that has that ability, then you're going to miss out."
- Santi's Thesis Shift: Santi reveals he is rewriting his investment thesis, moving away from infrastructure bets—which he believes are overfunded—and toward "deployers" of the technology. He sees more value in acquiring traditional businesses and integrating crypto rails to improve efficiency and capture value directly.
The Prediction Market Wars: Distribution is King
- The prediction market landscape is heating up with a major strategic move from Robinhood. Robinhood announced a joint venture with Susquehanna (SIG), one of the world's largest market makers, to launch its own CFTC-licensed exchange and clearing house for prediction markets.
- Strategic Pivot: Previously, over 60% of volume on Kalshi, a CFTC-regulated prediction market, came from Robinhood users. This new venture suggests Robinhood is bringing that flow in-house to capture the full revenue stream, demonstrating that owning customer distribution remains the ultimate advantage.
- Competitive Landscape: This move intensifies the battle between Kalshi and Polymarket. While Kalshi pursued a white-label, infrastructure-focused model, Polymarket has focused on building a powerful consumer brand. Rob notes that this development validates Polymarket's strategy of owning the user relationship directly.
- Actionable Insight: For investors, this highlights the vulnerability of infrastructure-only plays that rely on partners for distribution. The ability for large platforms like Robinhood, DraftKings, and FanDuel to vertically integrate poses a significant threat to standalone infrastructure providers.
On-Chain Equity Perpetuals Gain Traction
- Hyperliquid's launch of stock perpetuals (perps)—derivative contracts for traditional equities like NVIDIA, Google, and Tesla—is showing early signs of significant product-market fit. The platform recently processed $537 million in daily volume for these products, with a project called Trade XYZ leading the charge.
- Technical Challenge: Rob explains the primary challenge for on-chain equity perps is managing risk during off-market hours, particularly over weekends. Market makers cannot easily hedge their exposure when traditional markets are closed.
- Hyperliquid's Model: Hyperliquid addresses this by limiting price movements during off-market hours based on the maximum leverage available. For example, with 10x leverage, the price cannot move more than 10% from its Friday closing price over the weekend.
- Investor Takeaway: While the rapid volume growth is promising, investors should monitor how these systems handle risk during volatile off-market periods. The ability to solve the weekend hedging problem remains a critical hurdle for the long-term viability and scalability of on-chain equity derivatives.
Coinbase Acquires Vector: A Cautionary Tale for Token Holders
- Coinbase acquired Vector, a trading platform built by the team behind the Solana NFT marketplace Tensor. The deal sparked controversy and raised critical questions about the rights of token holders in M&A scenarios.
- The Deal's Structure: Coinbase acquired only the Vector platform and team. The Tensor Foundation, which governs the Tensor NFT marketplace and the TNSR token, remains independent. This means the team receives a significant payout from Coinbase, while TNSR token holders receive nothing from the acquisition of a product their token was meant to have economic exposure to.
- Incentive Misalignment: Jason frames the core issue: "Everyone acted rationally... but there's clearly a loser, which is the [token] holder." The incident exposes a fundamental misalignment between a project's team, its equity investors, and its token holders.
- Strategic Implication: This case serves as a stark reminder for investors to scrutinize token governance and understand what rights, if any, a token confers regarding a project's underlying assets or intellectual property. Without clear legal and economic alignment, token holders risk being left with nothing when a team pivots or is acquired.
The Berachain Funding Controversy
- A report revealed that a funding round for Berachain included a side deal with a Brevan Howard affiliate, Nova Digital. The deal allegedly included a clause allowing the affiliate to be reimbursed if the BERA token failed to trade above a certain price post-launch.
- Key Issues: The controversy centers on two points:
- Other investors in the round, including co-lead Framework Ventures, were reportedly not made aware of these preferential terms, potentially violating Most Favored Nation (MFN) clauses.
- The structure effectively gave the Brevan Howard affiliate a "free option" with limited downside, which was not disclosed to the broader market.
- Call for Transparency: Rob highlights that this situation underscores the need for greater disclosure in crypto, especially for deals that have implications for public token markets. In traditional finance, such a clause would require SEC disclosure, but the crypto market's opacity allows these arrangements to remain hidden.
This episode underscores the accelerating convergence of crypto and traditional finance, forcing a re-evaluation of crypto-native valuations and strategies. Investors and researchers must now analyze crypto assets not in isolation but against their fintech counterparts, focusing on which entities—centralized or decentralized—are best positioned to capture long-term value from blockchain adoption.
