This episode unpacks the evolving crypto landscape, from the resurgence of "Internet Capital Markets" with platforms like Believe, to the competitive dynamics of trading apps and the ongoing debate surrounding Ethereum's fundamental value proposition.
Market Overview and Passive Inflows
- The discussion begins with an observation of renewed market exuberance, with Bitcoin testing all-time highs again, a stark contrast to recent doom and gloom.
- Bacio highlights significant passive flows into Solana (SOL), driven by validators and companies acquiring validators, thereby purchasing SOL on the open market. He notes, "There are a lot of um passive flows going into Solana some way or another."
- Hyperliquid is mentioned as having a consistent buyer via its assistance fund. Bitcoin also sees inflows from strategies like corporate treasury acquisitions (e.g., Metaplanet, a Japanese listed company).
- While linear token unlocks continue, there's a counter-trend of projects buying back their own tokens (e.g., Hyperliquid, Radium, Jupiter) and new institutional buyers entering the market.
- Ryan adds that allocator surveys indicate a targeting of summer for deploying capital into liquid token funds and venture funds, suggesting positive momentum. He emphasizes AI as the dominant macro factor, viewing the regulatory environment as increasingly favorable for capital inflow into crypto.
The Tariff Scare and Market Reversal
- Ryan attributes a recent market dip and quick recovery to uncertainty around potential US tariff policies, which initially prompted a risk-off sentiment.
- He notes a "180" reversal as market expectations shifted towards more targeted and lower tariffs, leading to a rapid rebound. Ryan states, "Trump scared the market... and then almost 180 right and it's it's looking that people are getting the the approach on tariffs that they want."
- This rapid pivot is compared to the market reaction during COVID, where initial shutdowns were followed by government stimulus, requiring quick adaptation to new information.
The Rise of Internet Capital Markets and Believe App
- The conversation shifts to "Internet Capital Markets," a narrative about tech startups launching tokens on-chain, which gained traction earlier in the year, particularly with AI-related tokens like Jelly. Internet Capital Markets refers to the concept of using blockchain technology and tokenization for capital formation for early-stage ventures, often outside traditional venture capital structures.
- Believe app, founded by Ben Pasternak (previously of clout.me), is highlighted as a new launchpad focusing on Web2 startup founders launching tokens for their ideas on Solana. This is presented as a more curated approach compared to permissionless platforms.
- The discussion touches on whether pump.fun (a platform allowing anyone to easily launch a token on Solana, often associated with meme coins) "fumbled the ball," creating an opening for Believe.
- Ryan suggests permissionless listings have limitations for legitimate builders due to reputational concerns associated with platforms known for speculative activity. He sees Believe's curation layer as a "critical wedge."
- Bacio offers a counterpoint, arguing that uncurated, permissionless launchpads cater to a larger market for "random [stuff]" and that first iterations of crypto products are often "dog [shit]" and co-opted by speculative actors before more sustainable models emerge. He clarifies, "The general idea that you can just launch tokens to fund raise or like to get capital allocation onto your idea makes sense... Will it happen on believe? Probably not because the first iteration is always dog [shit]."
- Strategic Implication for Crypto AI Investors: The emergence of platforms like Believe signals a maturing attempt at token-based fundraising for early-stage tech ideas. AI researchers and founders might explore these as alternative capital formation avenues, while investors should scrutinize the quality and long-term viability of projects launching this way, beyond initial hype.
Builder Quality and Web2 Influence
- Ryan observes a shift in crypto: "Crypto has legitimate builders who like have head on their shoulders, who are commercially oriented, who are non ideological." He believes this Web2 orientation is crucial for market success and differentiates the current environment from past cycles dominated by ideological, maximalist decentralization.
- The Believe founder's Web2 background is seen as potentially increasing the platform's probability of success.
- Danny emphasizes the need for Believe to iterate quickly based on user feedback to maintain traction, as the "trenches" (active traders) demand rapid feature deployment.
- Bacio reiterates his view that legitimate builders take time to engage with new platforms, suggesting that a more refined version of Internet Capital Markets, perhaps by Believe or a competitor, could emerge in 3-6 months.
Supply Side Challenges for Internet Capital Markets
- Ryan questions if there will be enough interesting new Web2 indie developers to sustain interest in platforms like Believe, given that many indie devs struggle to monetize. He sees Believe targeting an underserved niche where traditional venture capital might not be a fit for smaller funding rounds.
- Bacio expresses skepticism about attracting high-quality, non-ideological developers to crypto long-term, suggesting crypto historically appeals to a niche focused on decentralization or privacy. He argues top developers often prefer traditional tech roles or funding, though this might change as the financial incentives in crypto become more apparent.
- Ryan counters that this is a backward-looking view, noting an increasing trend of Web2 people exploring Solana, realizing they can issue a token without necessarily building their entire app on-chain. "You probably just need to issue the token... and I think the Salana folks are embracing that reality."
- Danny views Believe as a necessary step in bridging Web2 founders to on-chain token launches, even if the long-term regulatory framework for these tokens (e.g., conversion to equity) remains a question.
- Actionable Insight: The success of Internet Capital Markets hinges on attracting quality Web2 founders. Investors should monitor the caliber of projects launching and the platforms' ability to provide genuine value beyond speculative trading. The regulatory evolution around these tokenized pre-equity/idea-stage assets is a key factor to watch.
The Competitive Landscape of Trading Apps
- The discussion moves to trading apps and bots, noting their significant activity and revenue generation, with Axiom recently capturing over 50% of trading bot volume on Solana. Trading bots/apps are tools, often integrated with platforms like Telegram, that allow users to execute trades on decentralized exchanges with features like sniping, copy trading, and faster execution.
- Axiom's success is attributed to combining popular features like Solana meme coin trading with Hyperliquid perpetuals trading. Hyperliquid is a decentralized order book perpetual futures exchange.
- The question of high fee rates on these apps is raised, with Danny noting Axiom has a slightly compressed net take rate due to referral schemes and a leveling system.
- Bacio anticipates fee compression as competition increases, possibly from established players like Jupiter launching more user-friendly mobile apps or wallets integrating these features. He believes the next iteration is mobile trading apps, stating, "I think the next iteration is trading apps mobile."
- Ryan suggests the end-game for these apps is to become wallets, integrating various services to own the user relationship. He notes, "The end state I what you want is integrations and state and that becomes your moat."
- The panel agrees that current trading apps cater to a "prosumer" market, requiring advanced tools, and that desktop often comes first, followed by mobile to capture the full user experience.
- Strategic Consideration: The evolution of trading apps towards integrated mobile experiences and "DeFi super apps" could significantly alter user interaction with crypto markets. AI projects with tokens should consider how their communities access and trade these assets, and whether direct integrations or partnerships with leading trading apps/wallets are beneficial.
Ethereum: Revenue, Narratives, and Valuation Debates
- The conversation pivots to Ethereum (ETH), its valuation, and the ongoing community debate about focusing on revenue versus other narratives. Bacio shares a satirical tweet criticizing common ETH valuation arguments.
- Bacio acknowledges that while revenue is important, traditional markets are also speculative and narrative-driven, cautioning against a purely revenue-based valuation approach in crypto.
- Ryan emphasizes that while trailing revenue multiples aren't the sole valuation metric, understanding financials is crucial. He argues that Blockworks analysts try to educate the market on these basics, even if it reduces their alpha. "We would actually be better off if they kept misunderstanding them because that's the opportunity for alpha."
- Ryan, after listening extensively to ETH-related podcasts and official communications, notes the conspicuous absence of the word "revenue" in discussions about telling Wall Street Ethereum's story. He perceives a continued focus on technical aspects (L2s, blobs, censorship resistance) without addressing financial performance. L2s (Layer 2s) are scaling solutions built on top of a base blockchain (Layer 1) like Ethereum to improve transaction speed and reduce costs. Blobs refer to a data storage solution introduced in Ethereum's Dencun upgrade, designed to lower data availability costs for L2s.
- He concludes that the Ethereum leadership "still just don't get it" regarding the need to generate revenue to sustain valuations, viewing ETH as a mission-driven, not economically-driven, organization.
- Danny draws an analogy to a declassified CIA guide on sabotaging organizations, humorously suggesting some of Ethereum's past decision-making processes and narrative focuses (e.g., overemphasis on caution, committee-driven decisions, reopening settled debates) inadvertently mirrored these tactics.
- Investor Insight: The ongoing debate within the Ethereum community about its economic model and value accrual mechanisms presents both risks and opportunities. Investors should monitor shifts in the Ethereum Foundation's strategy and whether a greater emphasis on revenue generation and clear value propositions for ETH emerges.
Conclusion: Evolving Market Structures and the Imperative of Economic Viability
The crypto market is rapidly evolving with new capital formation models like Internet Capital Markets and increasingly sophisticated trading infrastructure, yet fundamental debates on value accrual, particularly for established players like Ethereum, persist, underscoring the growing need for economic sustainability alongside technological innovation. Crypto AI investors and researchers should track these evolving market structures for funding and liquidity, while critically assessing the economic underpinnings of platforms and protocols.
