[ { "i": 0, "speaker": "Speaker 1", "text": "All right, welcome to the Risk Reversal podcast. I'm Dan Nathan. Special podcast for you here. This is something that we have not done in a while. A lot of our folks now are crypto curious. I know" }, { "i": 1, "speaker": "Speaker 1", "text": "enough to be conversant on a podcast, but not really enough to create a good investment strategy there. So, I brought a couple guys that I've been hearing a lot about the product, the company that" }, { "i": 2, "speaker": "Speaker 1", "text": "they built, what their mission is, and I just kind of want to get it all laid out here. But, I have David Shamus. He is the CEO of Hyperliquid Strategies, and I have Jerry Neufcube. He is the COO at" }, { "i": 3, "speaker": "Speaker 1", "text": "Hyperliquid. Guys, thanks for being here." }, { "i": 4, "speaker": "Speaker 2", "text": ">> Great to be here." }, { "i": 5, "speaker": "Speaker 1", "text": ">> Thanks for having us." }, { "i": 6, "speaker": "Speaker 1", "text": ">> All right. So, really quickly, I didn't know a thing about perpetuals. I didn't know a thing about Hyperliquid until last year, a friend of mine, really smart young guy, Evan" }, { "i": 7, "speaker": "Speaker 1", "text": "Carvanus, started talking me about your products and and basically the platform and the company that was set up to kind of perpetuate this whole We're calling it DeFi? We're calling it" }, { "i": 8, "speaker": "Speaker 1", "text": "DeFi?" }, { "i": 9, "speaker": "Speaker 1", "text": ">> Sure >> Yeah, DeFi. Okay. And he doesn't like TradFi. So, he's a DeFi guy. All right." }, { "i": 10, "speaker": "Speaker 1", "text": "And then, you know, I was at a dinner in January. This is really funny. And a really successful, good friend of mine, founder, multiple time founder, really smart guy." }, { "i": 11, "speaker": "Speaker 1", "text": "He said, all right, let's go around the table and let's name that one thing we're really excited about this year." }, { "i": 12, "speaker": "Speaker 1", "text": "And you know, I thought I was like, oh, you know, like, you know, my kids graduating college or this and that, whatever, that sort of thing. And >> [laughter] >> and and we like He's like, you go first." }, { "i": 13, "speaker": "Speaker 1", "text": "Or he goes, I'll go first. And he goes, perpetuals, you know, and I'm like, what what the hell, you know, I mean, that sort of thing. All right. So, that's the background on my knowledge about what" }, { "i": 14, "speaker": "Speaker 1", "text": "you guys do. David, you were on with Bob McGrew with Andrew Ross Sorkin last year, and Andrew said, talk to me like I'm a child explaining this thing. And if Andrew is wants you to talk to him" }, { "i": 15, "speaker": "Speaker 1", "text": "like a child, then talk to me like an infant infant. Okay. All right." }, { "i": 16, "speaker": "Speaker 1", "text": "[laughter] So, um, quick backgrounds and then let's get to the Hyperliquid, um, the company, the dad, the platform, all that sort of stuff." }, { "i": 17, "speaker": "Speaker 2", "text": ">> Perfect. All right, I'll start. David Shamus, CEO of Hyperliquid Strategies." }, { "i": 18, "speaker": "Speaker 2", "text": "I'm also the co-founder and CIO at Atlas Merchant Capital along with Bob McGrew, who you mentioned earlier. I've pretty much been doing financial services, private equity style investing my whole career. It's" }, { "i": 19, "speaker": "Speaker 2", "text": "the first time I've been the CEO of a public company, which is kind of fun." }, { "i": 20, "speaker": "Speaker 2", "text": "I started All right, I got my start in the mid-90s at Salomon Brothers, which doesn't exist anymore, sadly. Uh, also in financial services. So, I've kind of been a financial services geek my whole" }, { "i": 21, "speaker": "Speaker 1", "text": "career." }, { "i": 22, "speaker": "Speaker 3", "text": ">> Cool. And Jerry, what what are you up to here?" }, { "i": 23, "speaker": "Speaker 3", "text": ">> Can be very similar and and shorter introduction. I You know, Neil Colebourn, Jerry." }, { "i": 24, "speaker": "Speaker 3", "text": "Um, I'm based out of Hong Kong at the moment, joining the rest of the team in New York, hopefully soon." }, { "i": 25, "speaker": "Speaker 3", "text": "My background, similarly, is in traditional finance. Similarly, David and I started out at Salomon Brothers at the same time, way back when." }, { "i": 26, "speaker": "Speaker 3", "text": "Financial services investing for the last 25, 30 years. Uh, part of it here, part of it across Asia. So, we're both of tradfi guys. Tradfi guys." }, { "i": 27, "speaker": "Speaker 1", "text": ">> Better or worse." }, { "i": 28, "speaker": "Speaker 1", "text": ">> All right, so, traditional finance." }, { "i": 29, "speaker": "Speaker 1", "text": "That's me. I'll never be anything different, by the way. Um, >> That's a that's a crypto term, you know, tradfi." }, { "i": 30, "speaker": "Speaker 1", "text": ">> Yeah, I love it. I mean, all the kids today I mean, one of the reasons why I'm excited to have this conversation, I think a lot of folks, you know, they were trading, um, versus Bitcoin and ETH, and then they found all these shitcoins, and then it was into NFTs, and it felt like free internet money for a while, 2020, 2021. And then most people really kind of got burned, for all intents and purposes, right? And so, you know, the DeFi thing became, you know, like at one point we kept on hearing about the flippening, and Ethereum was going to do this cuz DeFi was going to be huge. And and maybe, as a tradfi guy, I haven't seen a whole heck of a lot of, you know, things that are being deployed right now. I hear about this institutional wall of money or whatever, and we can maybe get to that, and then stable coins that sort of thing but what is Hyperliquid how does it relate to the company that you're a CEO of that's Hyperliquid strategies and then we'll talk products and you know the mission and all that stuff." }, { "i": 31, "speaker": "Speaker 1", "text": ">> Yeah, let me give you the quick version of the story because I can do a slow version of the story." }, { "i": 32, "speaker": "Speaker 1", "text": "But the quick version is Hyperliquid is about three and a half years old. It is its own L1 blockchain with an exchange that sits on top of it. So a guy named Jeff Yan who is the founder in his early 30s now he's an American although he's currently based in Singapore built their own blockchain. So Bitcoin's a blockchain and Ethereum's a blockchain. This is a separate Hyperliquid blockchain and the idea is it is a blockchain built for exchanges to sit on top of it. So one of the people things people complain about all the time whether it's Ethereum or Solana or even Bitcoin is it's not designed for" }, { "i": 33, "speaker": "Speaker 1", "text": "was going to be huge. And and maybe, as a tradfi guy, I haven't seen a whole heck of a lot of, you know, things that are being deployed right now. I hear about this institutional wall of money" }, { "i": 34, "speaker": "Speaker 1", "text": "or whatever, and we can maybe get to that, and then stable coins that sort of thing but what is Hyperliquid how does it relate to the company that you're a CEO of that's Hyperliquid strategies" }, { "i": 35, "speaker": "Speaker 1", "text": "and then we'll talk products and you know the mission and all that stuff." }, { "i": 36, "speaker": "Speaker 2", "text": ">> Yeah, let me give you the quick version of the story because I can do a slow version of the story." }, { "i": 37, "speaker": "Speaker 2", "text": "But the quick version is Hyperliquid is about three and a half years old. It is its own L1 blockchain with an exchange that sits on top of it. So a guy named Jeff Yan who is the founder in his early" }, { "i": 38, "speaker": "Speaker 2", "text": "30s now he's an American although he's currently based in Singapore built their own blockchain. So Bitcoin's a blockchain and Ethereum's a blockchain. This is a separate Hyperliquid blockchain and the idea is it is" }, { "i": 39, "speaker": "Speaker 2", "text": "a blockchain built for exchanges to sit on top of it. So one of the people things people complain about all the time whether it's Ethereum or Solana or even Bitcoin is it's not designed for" }, { "i": 40, "speaker": "Speaker 2", "text": "lots of transactions in a short period of time the way exchanges function. I don't know how many transactions per second the New York Stock Exchange does but it does a lot." }, { "i": 41, "speaker": "Speaker 2", "text": "The Hyperliquid blockchain is built exactly for that and it can handle 200,000 transactions per second which is it's not even near that right now so there's lots of capacity." }, { "i": 42, "speaker": "Speaker 2", "text": "And the idea is the first exchange built on it that Jeff and his team built at Hyperliquid is for perps. You were talking about perps perpetual futures which we'll talk about in one second." }, { "i": 43, "speaker": "Speaker 2", "text": "But it's their own exchange they built for trading crypto in perp form on Hyperliquid. But the key is and this is where it gets interesting and exciting real quickly." }, { "i": 44, "speaker": "Speaker 2", "text": "He built it so that other people can build their own exchanges on top of it for any kind of asset they want in perp form. So like a year ago when we first got into this this sounded like a wacky" }, { "i": 45, "speaker": "Speaker 2", "text": "idea that who's really going to do that interesting but come on." }, { "i": 46, "speaker": "Speaker 2", "text": "Last November we started seeing other exchanges the most the most successful one by far is called Trade XYZ. They're trading large US equities, Nvidia, Tesla, Microsoft, etc. They're" }, { "i": 47, "speaker": "Speaker 2", "text": "trading gold, they're trading silver, and few months ago, good timing from their point of view, they they they did oil." }, { "i": 48, "speaker": "Speaker 2", "text": "So, [clears throat] you know, when Donald Trump decided to start a war with an oil-rich country late on a Friday afternoon, there was a 48-hour period where the only place oil was trading was on Hyperliquid, which" }, { "i": 49, "speaker": "Speaker 2", "text": "was [clears throat] pretty interesting and pretty exciting. So, all these other kind of assets coming on board is what everyone's excited about right now. And the key is it's done by anyone in a" }, { "i": 50, "speaker": "Speaker 2", "text": "permissionless way. So, the three of us, let's just say we're all get really excited about this and we walk out of here and we say, \"Let's do an exchange for, I don't know, you know, uh" }, { "i": 51, "speaker": "Speaker 2", "text": "companies based in Cleveland. Maybe that's Maybe we think there's a there's a market for that.\" Um we can create our own perp exchange for companies based in Cleveland literally overnight. We don't need to" }, { "i": 52, "speaker": "Speaker 2", "text": "get their permission. We put it on We we we have to follow their rules for Hyperliquid, but now we have our own exchange, we're splitting revenues with Hyperliquid. And if Jeff was here, the" }, { "i": 53, "speaker": "Speaker 2", "text": "founder, Jeff Yan, what gets him really excited about all this is the idea that Hyperliquid is kind of like the AWS of on-chain trading. So, in other words, like, you know, everybody uses Amazon" }, { "i": 54, "speaker": "Speaker 2", "text": "Amazon Web Services for lots of stuff, but nobody talks about Amazon Web Services, they talk about whatever they built or they talk about what they're using it for." }, { "i": 55, "speaker": "Speaker 2", "text": "The backbone of it all is AWS, and that's kind of how he thinks about what Hyperliquid can be." }, { "i": 56, "speaker": "Speaker 1", "text": "As more and more assets come on chain." }, { "i": 57, "speaker": "Speaker 1", "text": ">> All right. What problem is it solving?" }, { "i": 58, "speaker": "Speaker 3", "text": ">> Jerry, what problem you We'll trade off here a little bit." }, { "i": 59, "speaker": "Speaker 3", "text": ">> [laughter] >> I guess initially um the problem was that decentralized exchange Hyperliquid is a decentralized exchange." }, { "i": 60, "speaker": "Speaker 3", "text": "And what that means is you never give up custody of your funds, which is great and that's one of these are the central tenets of Hyperliquid's approach because you know in the in the past" }, { "i": 61, "speaker": "Speaker 3", "text": "there's been many exchanges that where you've had issues with centralized control FTX etc. We don't have to go into the details but one of the one of the key the core parts of the vision for" }, { "i": 62, "speaker": "Speaker 3", "text": "Hyperliquid was to really develop a decentralized exchange where people were your keys, your funds etc." }, { "i": 63, "speaker": "Speaker 3", "text": "The problem with decentralized exchanges up until the point when Hyperliquid came along was they were slow and they didn't have a good UI UX. So where they came in was we're going to provide you the" }, { "i": 64, "speaker": "Speaker 3", "text": "experience that you want from a centralized exchange so it's fast and it's a good UI UX but you're not going to have to give up control of your funds. You don't have to trust us. So" }, { "i": 65, "speaker": "Speaker 3", "text": "that was the initial one of the key pain points in that people tended to focus on when they got their initial traction." }, { "i": 66, "speaker": "Speaker 3", "text": "And that really got them off the ground when you know when we were starting to get involved about a year ago when they saw very fast sort of revenue growth volumes were going up quarter on" }, { "i": 67, "speaker": "Speaker 3", "text": "quarter fees were going up the token had just been introduced and we should talk about that a little bit how that relates to all of this because that's also one of the key points why we" }, { "i": 68, "speaker": "Speaker 3", "text": "got attracted to this as an opportunity to form the dot for the Hyperliquid ecosystem." }, { "i": 69, "speaker": "Speaker 3", "text": "Not necessarily just to be another dot in the landscape or to provide access to the Hype token because we think it's a you know it's it's a token that's really interesting and people should own it." }, { "i": 70, "speaker": "Speaker 3", "text": "Fundamentally we talked about how we're sort of coming from the trad-fi background. What we saw was it's obviously not a company but it's a it's an ecosystem that to your point solves a" }, { "i": 71, "speaker": "Speaker 3", "text": "real pain point and because It solved that pain point it attracted real users that were really that were willing to pay money, fees. And those fees, because of the design, the another core sort of" }, { "i": 72, "speaker": "Speaker 3", "text": "part of the attractiveness, is design of what they call tokenomics. So, they introduced the Hype token. And it's it obviously, like other tokens in other ecosystems, has a function. You know," }, { "i": 73, "speaker": "Speaker 3", "text": "you can pay gas fees, you can have it plays a role in governance. But one of the most important parts is that 99% of protocol have say 97% say 99% of protocol uh fees are used to buy back the token." }, { "i": 74, "speaker": "Speaker 3", "text": "So, everything that gets generated users pay fees. Those fees then 99% come back to whoever holds the tokens, which is often also the people that are trading on it. So, it's a uh it's a it's a sort of closed-loop" }, { "i": 75, "speaker": "Speaker 3", "text": "system that has proven to be extremely valuable. And uh because of that, what you what we've seen over the last couple quarters is quarter-on-quarter growth in top line, quarter-on-quarter growth on" }, { "i": 76, "speaker": "Speaker 3", "text": "fees supporting the uh the Hype token as we go along. So, that was one of the reasons we got involved because it's a story that people are from a traditional finance perspective, they can wrap their arms around. So, we" }, { "i": 77, "speaker": "Speaker 3", "text": "talk about fundamental value as opposed to saying, \"Just trust me, this thing is going to go up for 10 years with 10%.\"" }, { "i": 78, "speaker": "Speaker 3", "text": "Yeah, um we can actually point to and we track on a daily basis how many users are on the platform, how many fees are they paying, how many uh how much is the buyback fund, which executes the buybacks of the" }, { "i": 79, "speaker": "Speaker 3", "text": "Hype tokens, which are then burned, which reduces the overall supply of Hype tokens." }, { "i": 80, "speaker": "Speaker 3", "text": "We can track all of this on a day-to-day basis, which is, you know, to your point is that the um is the transparency of the whole the whole system. Everything can be tracked. So," }, { "i": 81, "speaker": "Speaker 3", "text": "that's another big pain point that is being solved. So, that was the that sort of all comes together into why we came into being. We said, \"Is this a story that we can go out and we can\"" }, { "i": 82, "speaker": "Speaker 1", "text": "start telling to people like yourself." }, { "i": 83, "speaker": "Speaker 1", "text": ">> Yeah, I know and I want to get to that in the structures, but you mentioned, you know, your keys, you're you know, we've been hearing that for a while, but Coinbase now has a $50 million market cap" }, { "i": 84, "speaker": "Speaker 1", "text": "cap. Coinbase has, you know, a few it goes from 3 billion to 6 billion to down to 3 billion again. I mean, the volatility in the revenues, you know, but it's also a profitable company, but" }, { "i": 85, "speaker": "Speaker 1", "text": "this is a centralized, you know, exchange that is custody your digital assets. So, what's wrong with Coinbase the way you guys see it?" }, { "i": 86, "speaker": "Speaker 2", "text": ">> Yeah, look, I think there's nothing wrong per se. I think that we've all gotten used to centralized exchanges." }, { "i": 87, "speaker": "Speaker 2", "text": "200 years ago, if you were going to trade on the London Stock Exchange, you'd have a bag, and in your bag, you'd have a bunch of cash and you'd have a bunch of securities, paper, you'd go and you'd trade, and" }, { "i": 88, "speaker": "Speaker 2", "text": "then when you're done, you would leave with your cash, with your cash and your securities, and you never let anyone else hold your assets for you. And you might say, \"Well, isn't this better like\"" }, { "i": 89, "speaker": "Speaker 2", "text": "the way it works today? You don't have to worry about getting mugged on the street or whatever." }, { "i": 90, "speaker": "Speaker 2", "text": "Sort of yes, but the whole promise of crypto is that you don't have to give your assets to somebody to hold, that you should be able to hold those assets yourself all the time. And, you know, it" }, { "i": 91, "speaker": "Speaker 2", "text": "generally works well, but like FTX didn't work so well. I was on the board of MF Global, that didn't work so well." }, { "i": 92, "speaker": "Speaker 2", "text": "Like we forget about the crypto world, right? We've had plenty of problems in the traditional finance world going back many years with other people holding your assets. And, you know, crypto very" }, { "i": 93, "speaker": "Speaker 2", "text": "much came out of the 2008 financial crisis where a bunch of very smart people who understood cryptography very well said, you know, in the technology available to us today, we don't need to" }, { "i": 94, "speaker": "Speaker 2", "text": "let other people have access to our assets. But, the weird thing is, it became big, and the big ones were Coinbase and Binance and FTX, where you are giving up custody. So, again, that" }, { "i": 95, "speaker": "Speaker 2", "text": "might not be your cup of tea, but you can see why it might be someone else's cup of tea to, especially, you know, living in the US, you feel different, you're very relaxed about, you know, big" }, { "i": 96, "speaker": "Speaker 2", "text": "companies holding your assets. You know, if you live in Botswana, you might feel a little differently about that. And people with assets live in Botswana." }, { "i": 97, "speaker": "Speaker 3", "text": "It's also um control over what you're able to do with those assets once you start getting into the ecosystem. So, you know, when it comes to lending or borrowing, when you're on Coinbase, you have one" }, { "i": 98, "speaker": "Speaker 3", "text": "one intermediary that you're talking to." }, { "i": 99, "speaker": "Speaker 3", "text": "When you're in the Hyperliquid ecosystem, you know, anything goes. You can it's composable across different asset classes. You can decide to use your collateral one way or another. So," }, { "i": 100, "speaker": "Speaker 3", "text": "it's also but not necessarily having to trust someone, which you might be perfectly fine with. It's also just having the control to do what you want at the terms that you want to do it at." }, { "i": 101, "speaker": "Speaker 1", "text": ">> All right. So, when I hear anything goes, it brings me to regulation. Okay." }, { "i": 102, "speaker": "Speaker 1", "text": "So, one of the things, obviously, Coinbase is, you know, pretty well regulated and some of the other exchanges that you mentioned. How do you guys think about that? Because, again, this is a very This is It almost" }, { "i": 103, "speaker": "Speaker 1", "text": "seems like from a decentralized exchange standpoint, I've heard a lot about these over the years, and it was like aspirational, but they didn't they weren't drawing, you know, a lot of uh" }, { "i": 104, "speaker": "Speaker 1", "text": "liquidity, I guess, or a lot of interest. So, how is the regulatory structure or lack thereof like is it an impediment right now, or do you see clearer regulation, and that will help" }, { "i": 105, "speaker": "Speaker 2", "text": "the growth of the platform?" }, { "i": 106, "speaker": "Speaker 2", "text": ">> It's definitely not clear." }, { "i": 107, "speaker": "Speaker 2", "text": ">> And it's definitely an impediment. So, right now on Hyperliquid, you um you cannot trade if you're sitting in the United States or if you're sitting in Ontario. So, anyone listening to this right now, if you go" }, { "i": 108, "speaker": "Speaker 2", "text": "to app.Hyperliquid.xyz, that's the platform. It's on a It's just a website, is all it is. And if you're sitting in the US or in Ontario, Canada, you will see a big red bar on the top of" }, { "i": 109, "speaker": "Speaker 1", "text": "the screen. Yeah, that basically says >> to buy the when it was in the 30s. I'll tell you that. [laughter] >> But I couldn't cuz I'm >> You could have bought our You could have bought our stock." }, { "i": 110, "speaker": "Speaker 1", "text": ">> Well, all right." }, { "i": 111, "speaker": "Speaker 1", "text": "All right. We're going to get to that, okay? But like, yeah." }, { "i": 112, "speaker": "Speaker 2", "text": ">> But basically, the red bar says you can look, but you can't touch. Yeah." }, { "i": 113, "speaker": "Speaker 2", "text": "Anywhere else in the world, with a few exceptions, you can pretty much trade on there right now." }, { "i": 114, "speaker": "Speaker 2", "text": "Getting this to the US is definitely a tricky thing. The Clarity Act is moving forward right now, but, you know, sadly, we don't think that's going to bring perfect clarity to this question." }, { "i": 115, "speaker": "Speaker 2", "text": "There are two big issues. One, and we touched on this and we'll get into this, but you're trading perpetual futures as the biggest thing that trades on Hyperliquid, not spot, which is" }, { "i": 116, "speaker": "Speaker 2", "text": "different. It's a derivative, and it's a derivative that is not currently allowed in the United States." }, { "i": 117, "speaker": "Speaker 1", "text": ">> Has Coinbase, are they lobbying to get them or not?" }, { "i": 118, "speaker": "Speaker 2", "text": ">> Yeah, Coinbase, I think has They're sort of somewhat perpetual. I think they're like 5-year futures, which is, you know, more than most future contracts." }, { "i": 119, "speaker": "Speaker 1", "text": ">> turnover though? I mean, they're perpetual. They don't have, you know, an end date, that sort of thing. But are people trading them right now generally on a short-term basis?" }, { "i": 120, "speaker": "Speaker 2", "text": ">> Oh, yeah. Yeah. I mean, look, Binance, which is obviously the biggest crypto exchange in the world, I think the vast majority of volume on Binance are perps, not spot. Vast majority. And almost" }, { "i": 121, "speaker": "Speaker 2", "text": "not all Most of what is on Hyperliquid also is perps, not spot. It's a derivative." }, { "i": 122, "speaker": "Speaker 2", "text": "Should I explain what a perp is and how it works?" }, { "i": 123, "speaker": "Speaker 2", "text": ">> Please." }, { "i": 124, "speaker": "Speaker 2", "text": ">> Okay. So, perps were actually invented in the 90s by a guy by Bob Shiller, the Yale professor, who I took his class in the spring of 1995. And the idea is basically the derivative" }, { "i": 125, "speaker": "Speaker 2", "text": "that's a future contract where you don't have to keep rolling it over, cuz rolling over has costs, right? It has costs, it has just a lot of things you can avoid. And the way it works is if" }, { "i": 126, "speaker": "Speaker 2", "text": "you know anything about futures, you would say, \"Well, David, it sounds great that it's perpetual, but don't you have a problem with a futures price gets out of whack with the spot price?\" And with" }, { "i": 127, "speaker": "Speaker 2", "text": "a with a with a with a futures with an expiration date, what happens is on the expiration date, the spot price and the futures price will converge. And as you get close to it, it'll come closer along" }, { "i": 128, "speaker": "Speaker 2", "text": "How does a perpetual work?" }, { "i": 129, "speaker": "Speaker 2", "text": "With a perpetual, you have they introduce a concept called a funding rate." }, { "i": 130, "speaker": "Speaker 2", "text": "And the funding rate is basically calculated using the difference between the spot and the perp price. So, let me give an example. If Bitcoin right now is at 77,000, and if the perp price was 80, I'm making" }, { "i": 131, "speaker": "Speaker 2", "text": "up numbers, it's probably lower than that. So, that means the perp is higher than the spot. There would be a positive funding rate. So, what that means is if you go long the perp, you have to pay" }, { "i": 132, "speaker": "Speaker 2", "text": "that funding rate. So, not only you're buying above spot, you're also paying some price based on, you know, some APR that you're paying per year to be long." }, { "i": 133, "speaker": "Speaker 2", "text": "You Because it's a derivative, for every long there's a short, for every short there's a long, you're paying that to the guy who's short. So, someone who goes short is sitting there saying," }, { "i": 134, "speaker": "Speaker 2", "text": "Wow, spot Bitcoin is 77, the perp is trading at 80. Not only do I have that, but I'm also getting paid the funding rate.\" So, effectively, that funding rate is keeping you anchored to the spot. Now," }, { "i": 135, "speaker": "Speaker 2", "text": "and by the way, if the perp price goes below the spot price, >> Yeah." }, { "i": 136, "speaker": "Speaker 1", "text": ">> you now get paid to be long, and you have to pay to go short. So, I'm assuming that a lot of the trading behavior on the platform is arb. It's market makers and it's arbs cuz" }, { "i": 137, "speaker": "Speaker 1", "text": "they see this opportunity, and the demand is that what? Is it a leverage sort of thing? It like it or it's just access 24/7? Like Yeah. because it's because it's a derivative, because you" }, { "i": 138, "speaker": "Speaker 2", "text": "can you can put as much you know, there's you can leverage on Hyperliquid right now. You can leverage Bitcoin I think 40X. Different assets have different amounts of" }, { "i": 139, "speaker": "Speaker 2", "text": "leverage that are allowed." }, { "i": 140, "speaker": "Speaker 2", "text": "And it's 24/7. It's just a much more easily traded liquid contract than what we see in spot." }, { "i": 141, "speaker": "Speaker 3", "text": ">> And it's simple, right? If you compare to options, there's only options you have three, four, five different options, different different sort of price levels. Here there's one instrument, right? There's the Bitcoin perp, that's it." }, { "i": 142, "speaker": "Speaker 3", "text": ">> So liquidity is incredibly concentrated. Um so retail Yes, it there's a lot of uh uh sort of market making um volume, but also retail cuz it's a very simple and sort of elegant way to express an opinion in a leveraged way on where you think price is." }, { "i": 143, "speaker": "Speaker 3", "text": ">> So I mean, to your question on on regulation and what that all means, like one thing that we haven't really talked about is it's All of this it's incredibly early days, right? If you look at Hyperliquid on the one hand, you know, the numbers that again, going back to why we were interested, you know, provide access," }, { "i": 144, "speaker": "Speaker 3", "text": ">> it's a fundamentally attractive story, but also it's generating real numbers, right? So the numbers why people have started to pay attention is like last year it was more than 900 million in revenue, which is more or less equal to fees." }, { "i": 145, "speaker": "Speaker 3", "text": ">> Revenue is straight to the bottom line cuz it's 12 people. So they hardly have any expenses. That's why people started paying attention like, \"Wow, that's >> Just pause on that for a second. 12 people >> Yeah.\"" }, { "i": 146, "speaker": "Speaker 3", "text": ">> It's pretty amazing." }, { "i": 147, "speaker": "Speaker 2", "text": ">> Just pause on that for a second. 12 people >> Yeah." }, { "i": 148, "speaker": "Speaker 2", "text": ">> never taking any third-party capital with close to a billion dollars of earnings." }, { "i": 149, "speaker": "Speaker 1", "text": ">> It's pretty amazing." }, { "i": 150, "speaker": "Speaker 1", "text": ">> Okay, so let see So the exchange is uh conceived by a gentleman in Singapore." }, { "i": 151, "speaker": "Speaker 1", "text": "He's got 10 other people other people working with him. Okay, that's Hyperliquid and you guys are Hyperliquid Strategies. So let's let's put those two things together." }, { "i": 152, "speaker": "Speaker 2", "text": ">> So as of last summer when we did the deal um >> All right, explain the deal." }, { "i": 153, "speaker": "Speaker 2", "text": ">> [laughter] >> So we created a digital asset treasury company for the hype token. As Jerry talked about before, the hype token is bought back every day by Hyperliquid." }, { "i": 154, "speaker": "Speaker 2", "text": "So, it is like a proxy for equity in Hyperliquid." }, { "i": 155, "speaker": "Speaker 2", "text": "As of last summer, it was the only place the Hyperliquid token was traded was on Hyperliquid." }, { "i": 156, "speaker": "Speaker 2", "text": "As we discussed already, it's not available in the US. And it's really only available to real crypto savvy people, right? Like not only do you have to have a crypto wallet, you got to be comfortable using a decentralized exchange, you got to do it outside the United States. Like that's a lot of hurdles to buy something that you might think, you know, it goes up a little bit cuz you're you like the story, like any other, [clears throat] you know, like like a like any other thing you might invest in." }, { "i": 157, "speaker": "Speaker 2", "text": "There was a time when investing in Bitcoin was a tricky thing to figure out in the United States." }, { "i": 158, "speaker": "Speaker 2", "text": "thing you might invest in." }, { "i": 159, "speaker": "Speaker 2", "text": "There was a time when investing in Bitcoin was a tricky thing to figure out in the United States." }, { "i": 160, "speaker": "Speaker 2", "text": "Coinbase, we haven't really heard of them, they're kind of new. Doing it through a public entity like MicroStrategy that trades just like your, you know, Citigroup stock or your JP Morgan stock trades in your in your" }, { "i": 161, "speaker": "Speaker 2", "text": "brokerage account made a lot of sense when it's very easy for people. That's a little bit of where we were last summer with Hyperliquid. Putting it in a regular company made a lot of sense." }, { "i": 162, "speaker": "Speaker 2", "text": "It made access, particularly for US investors, a lot easier." }, { "i": 163, "speaker": "Speaker 1", "text": ">> All right. So, I'm assuming though you looked at some different protocols, some different, you know, strategies, that sort of thing. You know, that you could have done it that with." }, { "i": 164, "speaker": "Speaker 1", "text": "Why Hyperliquid? Like what stuck out to you guys? Do do you have a view about, you know, perpetual preferreds or like tokenization of equities, you know, that's like 24/7, you know, maybe some" }, { "i": 165, "speaker": "Speaker 1", "text": "regulatory capture, like a whole host of things. I'm just curious, like why this?" }, { "i": 166, "speaker": "Speaker 3", "text": ">> It's almost the other way around. Like the [clears throat] this one jumps out because, you know, we we are clearly coming at this not from being experts on digital assets per se. We're experts on" }, { "i": 167, "speaker": "Speaker 3", "text": "financial services. So, when we see something that, you know, walks and talks like a financial [clears throat] services again, not not to use the word company, but a system." }, { "i": 168, "speaker": "Speaker 3", "text": "Again, that we can analyze, we can understand the fundamental value without having to resort to just trust that this will be okay, but this is something where we can track it, we can measure" }, { "i": 169, "speaker": "Speaker 3", "text": "it, we can tell people about it, we can show how value is derived. That is a story that number one, we understood and we got excited about, but it's also a story that we believe uh traditional investors and traditional" }, { "i": 170, "speaker": "Speaker 3", "text": "financial institutions, as has happened over the last 12 months, as they learn more about okay, there's real money going around here, and we understand how this is done, we understand the" }, { "i": 171, "speaker": "Speaker 3", "text": "mechanics because this is just like any sort of financial services system that we otherwise look at. That's the attraction. So, did we look at a lot of other protocols? No, we didn't, but this" }, { "i": 172, "speaker": "Speaker 3", "text": "is the one that stood out because this is the language that we understand, and if we understand it, then other people will understand it, and if other people understand it, they get interested, and" }, { "i": 173, "speaker": "Speaker 3", "text": "what do they do? They can they can buy our shares, they can buy the hype [clears throat] token, or they can get involved, and we can help them get introduced to the ecosystem and make" }, { "i": 174, "speaker": "Speaker 3", "text": "talk about use cases, and those are the exciting conversations that we have. So, we've evolved from providing access to becoming a bridge for people into the ecosystem." }, { "i": 175, "speaker": "Speaker 1", "text": ">> All right, and so you guys going we'll get to the deal in a second, and then how US investors can participate. Hyperliquid there, right? That's the trading platform, Hyperliquid strategies here," }, { "i": 176, "speaker": "Speaker 1", "text": "okay? So, let's put those two dots together." }, { "i": 177, "speaker": "Speaker 2", "text": ">> Yeah, so fundamentally, we're a company that the way MicroStrategy is a company. Our main purpose is owning a lot of Hyperliquid tokens." }, { "i": 178, "speaker": "Speaker 2", "text": "When we started out, we owned something like 12 million, right? And now we're 12 and a half million, and now we're up to over 20 million." }, { "i": 179, "speaker": "Speaker 2", "text": ">> And that's been a combination of the money that came in the day we closed, the cash that we are >> So it's a reverse merger? You found >> a reverse merger into a small public" }, { "i": 180, "speaker": "Speaker 2", "text": "company that was called Sonnet BioTherapeutics." }, { "i": 181, "speaker": "Speaker 2", "text": "Uh so we reverse merged into that. We announced it in July, we closed in December. So for a period of time their stock was trading at a sort of wacky levels because it was a very tiny float." }, { "i": 182, "speaker": "Speaker 2", "text": "But once we closed in December, unlike a lot of these other deals, once we closed in December there was no big fall off, there was no big unregistered share nonsense. Like every share was fully" }, { "i": 183, "speaker": "Speaker 2", "text": "registered and there was none of that." }, { "i": 184, "speaker": "Speaker 1", "text": "We traded >> And the ticker >> TURR >> On Nasdaq?" }, { "i": 185, "speaker": "Speaker 1", "text": ">> On Nasdaq. TURR >> Okay. And so TURR is the um symbol or the ticker for the HYPE um listed on Nasdaq. Um how much capital did you raise in the reverse merger?" }, { "i": 186, "speaker": "Speaker 2", "text": ">> We the original deal was $888 million." }, { "i": 187, "speaker": "Speaker 2", "text": "Okay. Uh about 62% give or take of that was people contributing their HYPE tokens." }, { "i": 188, "speaker": "Speaker 2", "text": ">> And the rest was people contributing cash. So the day we closed as I said before we had a pile of tokens, we had a pile of cash. Since then we have been putting that cash to work by" }, { "i": 189, "speaker": "Speaker 2", "text": "buying more tokens based on where we trade, when the opportunities are available we might either buy back our stock if we're trading cheap or we might issue stock when we're trading at" }, { "i": 190, "speaker": "Speaker 2", "text": "you know higher levels. We've actually done since December we've done some of both which is kind of interesting." }, { "i": 191, "speaker": "Speaker 1", "text": ">> Okay. So as an investor, if I can't buy the HYPE token as we just talked about, you guys have 20 million of them. How many are there outstanding?" }, { "i": 192, "speaker": "Speaker 2", "text": ">> Uh about 477 million the way we think about it." }, { "i": 193, "speaker": "Speaker 1", "text": ">> So a lot. So we're >> And they're burning like how how how much burns" }, { "i": 194, "speaker": "Speaker 3", "text": ">> Uh it depends it cuz it fluctuates with daily daily trading volumes and fees." }, { "i": 195, "speaker": "Speaker 3", "text": "But on most days cuz there's two things that happen. On the one hand people tend to focus on the buyback which is great. But on the other hand you also have a validator system where" }, { "i": 196, "speaker": "Speaker 3", "text": "staking rewards are being issued." }, { "i": 197, "speaker": "Speaker 3", "text": "Typically, the amount being burned is larger than the amount being issued to the validators. So, on a net basis, it's probably 1% to 1.5% that gets burned a year. Um but um" }, { "i": 198, "speaker": "Speaker 3", "text": "yeah, those are those are the two things that happen in there." }, { "i": 199, "speaker": "Speaker 2", "text": ">> And remember, price matters, right? So, so the higher the price of the HYPE token for every dollar they generate in fees, that's less tokens they can burn." }, { "i": 200, "speaker": "Speaker 2", "text": "When the Hyperliquid token value goes down, they can burn more. And and the price is sort of the market's expectation of how much revenue they're going to have to burn tokens in the future." }, { "i": 201, "speaker": "Speaker 1", "text": ">> Right. And so, when you say revenues, we're talking about Hyperliquid over here. Okay. And then, if you're buying perp if you're buying Hyperliquid strategies, you have to have a belief," }, { "i": 202, "speaker": "Speaker 1", "text": "right, that Hyperliquid over here is going to actually you're going to be able to trade on it from the US, you're going to be like you know, there's going to be a regulatory infrastructure that" }, { "i": 203, "speaker": "Speaker 1", "text": "helps this take on the centralized exchanges. Is that correct?" }, { "i": 204, "speaker": "Speaker 2", "text": ">> Yeah, look, it's making a lot of money right now without trading in the US." }, { "i": 205, "speaker": "Speaker 2", "text": "Uh it's trading a fair amount of US uh you know, exposure without being available in the US." }, { "i": 206, "speaker": "Speaker 2", "text": ">> So, to me, you know, that's future upside, but it's not like a lot of the things I look at in my day job where, you know, all my god, the company's losing money, but if all these great" }, { "i": 207, "speaker": "Speaker 2", "text": "things happen in the future, it'll make a ton of money." }, { "i": 208, "speaker": "Speaker 2", "text": ">> Right." }, { "i": 209, "speaker": "Speaker 2", "text": ">> Like it's already making a ton of money." }, { "i": 210, "speaker": "Speaker 1", "text": "If a bunch of good things happen in the future, it'll make more money." }, { "i": 211, "speaker": "Speaker 1", "text": ">> So, how correlated is perp to Hyperliquid?" }, { "i": 212, "speaker": "Speaker 2", "text": ">> Very correlated. And uh highly correlated." }, { "i": 213, "speaker": "Speaker 3", "text": ">> 80% between 80% to 85%. We should make maybe just I I think I know what you're heading in into the before we get to where what we're excited about going forward, just to cover off the period" }, { "i": 214, "speaker": "Speaker 3", "text": "between December when we got listed with 888 million as our sort of our balance sheet to where we are today." }, { "i": 215, "speaker": "Speaker 3", "text": "We had 300 million in cash, which we did not all deploy on day one, right? We've been going at it at a measured, sort of disciplined and conservative way in deploying our cash to buy the Hyperliquid tokens or buy back our shares as we did a little bit in December." }, { "i": 216, "speaker": "Speaker 3", "text": "Fast forward to today, our market cap is about 1.6 billion, depending on where it trades this afternoon. So, we've seen a very substantial increase in our in our market cap, in our share price, in our in our multiple. And I think there's a couple couple of things that have happened. The The underlying thing that" }, { "i": 217, "speaker": "Speaker 3", "text": "has happened, which is what you're referring to, the belief going forward, the belief going forward that Hyperliquid token will increase. Well, that actually happened from December until May. Right? You What we saw was" }, { "i": 218, "speaker": "Speaker 3", "text": "when we got excited in about Hyperliquid, it was a very exciting proof of concept of trading crypto in perp form on a decentralized exchange. Since then, it has wound out and it has" }, { "i": 219, "speaker": "Speaker 3", "text": "when we got excited in about hypoliquid, it was a very exciting proof of concept of trading crypto in perp form on a decentralized exchange. Since then, it has winded out and it has" }, { "i": 220, "speaker": "Speaker 3", "text": "That's great enough itself, but you might do like this when when crypto sentiment is up, it's great, but when December is not such a great month, volumes are down, fees are down, buybacks are down and maybe the hype" }, { "i": 221, "speaker": "Speaker 3", "text": "token comes under pressure. You know, which what we saw a little bit in December." }, { "i": 222, "speaker": "Speaker 3", "text": "If you Since then, what we've seen is they started trading non-crypto assets as well." }, { "i": 223, "speaker": "Speaker 3", "text": "Prediction markets have come on, options have come on. So, what we've seen is a decoupling of hype, the token, from the rest of the digital assets. So, where Bitcoin is flat or below where we" }, { "i": 224, "speaker": "Speaker 3", "text": "were in December, same for ETH, same for SOL. Um the hype token is almost double from where we were when we started in December and we've performed on top of that cuz our multiple is up." }, { "i": 225, "speaker": "Speaker 1", "text": ">> correlation has broken down to Bitcoin, too, which I'm assuming is really important." }, { "i": 226, "speaker": "Speaker 3", "text": ">> And just to be clear, when we talk about market cap, uh I know there's different numbers circulating, uh but we have common shares and preferred shares." }, { "i": 227, "speaker": "Speaker 3", "text": "Preferred shares are essentially the same as common. It's just one shareholder that uh is sitting at a certain level. So, if you add common plus preferred times our share price is 1.6 billion. So, that's the right market" }, { "i": 228, "speaker": "Speaker 1", "text": "cap to look at." }, { "i": 229, "speaker": "Speaker 2", "text": ">> Are there other ETFs buying Hype?" }, { "i": 230, "speaker": "Speaker 2", "text": ">> Yes, there's a ETF called Hyperion DeFi, which is give or take, I don't know, 1/10 our size, maybe a little smaller." }, { "i": 231, "speaker": "Speaker 2", "text": "Um >> Does that matter? I mean, I'm just as good at it in different >> Yeah, there's another one who's even smaller than that, I think. So, we're by far the biggest. There are some ETFs" }, { "i": 232, "speaker": "Speaker 2", "text": "that have come online." }, { "i": 233, "speaker": "Speaker 2", "text": "Um they're small but growing. And by the way, that's all good from our point of view. Like, more people learning about Hype and focused on Hype, the better it is for us. But as far as ETFs go, we're" }, { "i": 234, "speaker": "Speaker 1", "text": "we're by far the biggest." }, { "i": 235, "speaker": "Speaker 1", "text": ">> Okay. And then, um just why would I buy token over an ETF? And we know that some of these, the way they're structured, it's not a great way to get exposure, I guess, right? And And you'll see these" }, { "i": 236, "speaker": "Speaker 1", "text": "things bang around uh below or above NAV, which obviously a ETF also does." }, { "i": 237, "speaker": "Speaker 2", "text": ">> Yeah, look, I would say the trade-off of our ETF versus an ETF, so we trade at a at the moment we trade at a premium to NAV, but about 12 or 13%, not a massive premium. We are fully our our our tokens" }, { "i": 238, "speaker": "Speaker 2", "text": "are fully staked." }, { "i": 239, "speaker": "Speaker 2", "text": ">> Um we're also generating revenues from other ways. We have we're we're we're a validator, as Jerry said before, we're earning revenue on that. We're working on other ways to generate more revenue" }, { "i": 240, "speaker": "Speaker 2", "text": "as well going forward. So, that will uh redound to our benefit. On the flip side, on the ETF side, I don't think ETFs are allowed to fully stake their their uh Hyperliquid tokens, so their tokens." }, { "i": 241, "speaker": "Speaker 2", "text": "So, I think they can go to 75% of the different rules. Some ETFs can go more, some can go less. But, you know, effectively, some of those tokens in an ETF are sort of sitting dead. They're" }, { "i": 242, "speaker": "Speaker 2", "text": "not being able to stake and generate revenue. So, like any person can look at the trade-off there and figure out what they like better. At the moment, we have a you know, a fair amount of volume in" }, { "i": 243, "speaker": "Speaker 2", "text": "our token and in our stock, so that is also a pro, but I, you know, it's not like an obvious one is so much better than the other right now. You know, different cup of tea." }, { "i": 244, "speaker": "Speaker 1", "text": ">> shares today. We're recording this, I want to say 3:00 this is on Tuesday. I mean, that seems like plenty of liquidity." }, { "i": 245, "speaker": "Speaker 1", "text": "What is the pitch? I just want to an institutional buyer, like what are they getting exposure to in their portfolio?" }, { "i": 246, "speaker": "Speaker 1", "text": "If they're thinking about it that way, like what do they see? I'm sure it's a lot easier to own a company that has a management that speaks to the street, that's regulated on, you know, again," }, { "i": 247, "speaker": "Speaker 1", "text": "the irony is it's regulated and it's on the NASDAQ, right? All that sort of thing. But as an investor, I guess institutional or retail, you're getting exposure to something that you guys" }, { "i": 248, "speaker": "Speaker 1", "text": "believe as former institutional bankers and you know, folks who invested in private equity, that sort of thing, you're getting exposure to something that you believe is going to be transformative in, I" }, { "i": 249, "speaker": "Speaker 1", "text": "guess, the, you know, the finance space going forward. Is that fair?" }, { "i": 250, "speaker": "Speaker 1", "text": ">> Well said." }, { "i": 251, "speaker": "Speaker 3", "text": ">> Yeah, yeah, yeah, that's that's >> interesting. We we actually had we had a bunch of meetings this morning and and one of the interesting perspectives that I hadn't thought about was it is a it's" }, { "i": 252, "speaker": "Speaker 3", "text": "an incredibly innovative market structure. So, beyond the fact that as we talked about many times before now that it's a you can understand it the fundamental value and everything, it is" }, { "i": 253, "speaker": "Speaker 3", "text": "a disruptive sort of type of setup and you know, maybe we we do know some investors that sort of see it as this nicely complements my portfolio cuz I'm exposed in other parts of the market structure. Really" }, { "i": 254, "speaker": "Speaker 3", "text": "interesting too when Wall Street, you know, we're talking to research analysts from all kinds of different angles." }, { "i": 255, "speaker": "Speaker 3", "text": "People come at it from financial institutions, from market structure. So, there's a lot of different ways that you can look at this and participate in this and be convinced that this is a a good" }, { "i": 256, "speaker": "Speaker 1", "text": "investment." }, { "i": 257, "speaker": "Speaker 1", "text": ">> What what are the risks to the structure? Primarily regulatory? Um like you guys I would assume would love to see Hyperliquid the ability to trade on the platform everywhere, right? Because" }, { "i": 258, "speaker": "Speaker 1", "text": "that's how you have this really profitable company that operates, you know what I mean? Um you know, in a a manner that you you guys are seeing or they are seeing revenue and profitability unlike anything on zero to a billion dollars, I'm assuming." }, { "i": 259, "speaker": "Speaker 2", "text": "to a billion dollars, I'm assuming." }, { "i": 260, "speaker": "Speaker 2", "text": "Look, but as far the biggest risk to Hyperliquid is someone comes along and builds a better mousetrap." }, { "i": 261, "speaker": "Speaker 2", "text": "You know, that happens all the time." }, { "i": 262, "speaker": "Speaker 2", "text": "Uh it's not so easy to like build a better mousetrap in the New York Stock Exchange and go compete in the New York Stock Exchange. That's hard. They have real like, you know, embedded uh a very" }, { "i": 263, "speaker": "Speaker 2", "text": "deep moat around them. Not so easy to just, you know, Hyperliquid, you know, we saw two competitors come up last year, something called Astor and something called Lighter." }, { "i": 264, "speaker": "Speaker 2", "text": "Which, you know, if we were sitting here in October and November of last year, you'd be saying, \"Oh my god, everyone says these guys are going to eat Hyperliquid's lunch.\" You know, CZ from" }, { "i": 265, "speaker": "Speaker 2", "text": "Binance, the founder of Binance, is the founder of Astor. Like, they're in real trouble. I think today Hyperliquid has proven to sort of be a lot better and those guys aren't looking nearly as" }, { "i": 266, "speaker": "Speaker 2", "text": "interesting as they did back then. But, you know, the better mousetrap risk is real risk." }, { "i": 267, "speaker": "Speaker 3", "text": "All right. And so, so just to add it in real quick is that it is still very, right? It's a very small world that we're talking about. We're not talking about you know, Robinhood with" }, { "i": 268, "speaker": "Speaker 3", "text": "29 million users or however many users they have. We're talking about the tens of thousands of users. So, the other thing is um what you want is for this to become accessible and used by more than" }, { "i": 269, "speaker": "Speaker 3", "text": "just crypto-native users." }, { "i": 270, "speaker": "Speaker 3", "text": "Right." }, { "i": 271, "speaker": "Speaker 3", "text": "Right, cuz that's a small pool at the moment. So, the flip side of looking at it is that it's still super early days and the more people get excited about it, institutional people looking" }, { "i": 272, "speaker": "Speaker 3", "text": "at this, it doesn't take a lot to move the number of users by multiples, but you need to get beyond crypto native users and start accessing other pools of users." }, { "i": 273, "speaker": "Speaker 1", "text": "And I'm assuming that's one of the functions that you guys serve, right?" }, { "i": 274, "speaker": "Speaker 1", "text": "Because Yeah." }, { "i": 275, "speaker": "Speaker 1", "text": ">> Yeah, we're thinking hard about >> Yeah, I want to end with this and I want to do this again, guys. I want to like as I learn more as [laughter] I learn as I learn more about it and part of it is" }, { "i": 276, "speaker": "Speaker 1", "text": "is like two of the smartest guys that I know other than you two now." }, { "i": 277, "speaker": "Speaker 1", "text": "Are really interested in the platform and they're interested in the product that trades on it and I guess what I'm most interested in because I'm just a dumb stock and options guy is like, you" }, { "i": 278, "speaker": "Speaker 1", "text": "know, the idea of equities being tokenized, the idea of all the reasons that you guys described why any risk asset that trades on these platforms relative to tradfi platforms, that sort" }, { "i": 279, "speaker": "Speaker 1", "text": "of thing." }, { "i": 280, "speaker": "Speaker 1", "text": "Why am I looking at SpaceX traded as a perpetual preferred, you know what I mean? That it's not listed yet." }, { "i": 281, "speaker": "Speaker 1", "text": "You know, the S1's out and it was trading before the S1 was out. Like, help me think about like why I should I'm going on Fast Money this afternoon and I want to say, you know, Hyperliquid" }, { "i": 282, "speaker": "Speaker 1", "text": "has SpaceX trading at $2 trillion and right now they're looking to raise at 1.75 or something like that. How is that instructive to me?" }, { "i": 283, "speaker": "Speaker 2", "text": "Well, look, let me there's two there's two parts to your question. Let me ask both of them. The second one first, SpaceX and other things, you know, once you have something in derivative form," }, { "i": 284, "speaker": "Speaker 2", "text": "you could anyone could you can bring anything online and the way as we talked about before, the key you need you need the perpetual price, but you also need that oracle price. What we refer to as spot" }, { "i": 285, "speaker": "Speaker 2", "text": "before Hyperliquid calls oracle, that's sort of the real price and that's what the funding rate is based on. So, you know, it's tricky for private companies. SpaceX is not yet public. I" }, { "i": 286, "speaker": "Speaker 2", "text": "think the idea is you can do something like that for a period of time leading up to the IPO." }, { "i": 287, "speaker": "Speaker 1", "text": "And OpenAI is trading and Anthropic, I'm assuming." }, { "i": 288, "speaker": "Speaker 2", "text": "That is, although that's on a different that's on Hyperliquid, but a different that's not dYdX, that's a different one. That's a lot harder, right? When you don't know there's an IPO coming at" }, { "i": 289, "speaker": "Speaker 2", "text": "a time certain, it's a lot trickier to have this thing just trading out there forever. But it does trade a lot a lot less liquidity than than a SpaceX." }, { "i": 290, "speaker": "Speaker 1", "text": "give me the example of Cerebrus. This one public, it's now I want to say a $50 billion market cap company that has like $500 million in revenue, right? This is going to be a lot of what we see this" }, { "i": 291, "speaker": "Speaker 1", "text": "year if we have the IPO with market heat up or whatever." }, { "i": 292, "speaker": "Speaker 1", "text": "Right. How um closely did it track pre-IPO?" }, { "i": 293, "speaker": "Speaker 2", "text": "I've tweeted about this, so you can see it. There's charts floating around that I put out there. But, you know, it started trading on Hyperliquid at the IPO range. It very quickly traded up." }, { "i": 294, "speaker": "Speaker 2", "text": "They raised the IPO range. It traded where it traded." }, { "i": 295, "speaker": "Speaker 1", "text": "And do you see a lot of activity as like because like on a day that you're seeing the pricing of an IPO, you guys know, you've done this before. They'll be like there could be like 35 indications," }, { "i": 296, "speaker": "Speaker 1", "text": "right? And it's moving all over the place. Generally, they don't move down much, but they keep moving up, right? On hot deals. Were you seeing a lot of activity on the platform?" }, { "i": 297, "speaker": "Speaker 2", "text": "There was a lot of them. Right now, there's, you know, 50 million the last I checked of open interest on SpaceX right now trading at a level, as you said, two trillion or whatever above the range" }, { "i": 298, "speaker": "Speaker 2", "text": "that they're talking about the IPO. For Cerebrus, it literally the IPO happened, it traded right up to the level it was trading at on Hyperliquid, and it's been basically around there since, and it's" }, { "i": 299, "speaker": "Speaker 2", "text": "been way above. So, Hyperliquid was a better predictor of where this would trade post-IPO than the investment banks were who priced the IPO." }, { "i": 300, "speaker": "Speaker 3", "text": ">> And pre-IPO, right? There was sort of pictures floating around of trading desks where people were looking at the the Hyperliquid price charts 20 minutes before it got priced. So, it's you know," }, { "i": 301, "speaker": "Speaker 3", "text": "I think it's been it's been really exciting to watch that. And to your to your point about tokenizing equities versus, you know, what we've seen on these what they call pre-IPO perps." }, { "i": 302, "speaker": "Speaker 3", "text": "Um tokenizing equities is super difficult, right? That's why we've seen the regulatory process being pretty slow in that regard because it's it's just complicated. Users need to be on board" }, { "i": 303, "speaker": "Speaker 3", "text": "Excuse me, issuers need to be on board and there's all kinds of structural things that you need to figure out. In this particular sort of short time frame pre-IPO perps is much easier, right? It" }, { "i": 304, "speaker": "Speaker 3", "text": "actually in general perps are much easier. For Perp, there's a Perp." }, { "i": 305, "speaker": "Speaker 3", "text": ">> Yeah, [clears throat] they didn't come to They didn't have to ask us for permission. They just did it and it's fine and it's fun to look and see it trade and it provides us definitely" }, { "i": 306, "speaker": "Speaker 3", "text": "provides us information over the weekend on where things are versus, you know, very short post market and pre-market windows." }, { "i": 307, "speaker": "Speaker 3", "text": ">> So any any kind of additional price information is helpful. There's a ton of research out there that has proven that across all these different asset classes whether it was oil or silver or now" }, { "i": 308, "speaker": "Speaker 3", "text": "pre-IPO perps, where it has traded over the weekend, how close was the opening versus the close over the weekend. Um there's a ton of research that has shown that it's an incredibly useful tool and," }, { "i": 309, "speaker": "Speaker 3", "text": "you know, people the more people start using it, the better tool it becomes." }, { "i": 310, "speaker": "Speaker 2", "text": ">> I want to beat a dead horse here cuz this is this is now the as we end this which I think we we are soon. This is the most important point we've made the whole day today which is" }, { "i": 311, "speaker": "Speaker 2", "text": "people are talking about tokenizing securities all the time and that's like a hot topic that Larry Fink talks about and Jamie Dimon and all that." }, { "i": 312, "speaker": "Speaker 2", "text": "But what does that actually mean, right?" }, { "i": 313, "speaker": "Speaker 2", "text": "To as Jerry said, to actually tokenize equity spot [snorts] equity for a regular company, the issuer has to get involved. You have to take a bunch of securities that we all know that trade" }, { "i": 314, "speaker": "Speaker 2", "text": "and put it in some sort of trust account. And the trust account goes up, the trust account goes down. It's really hard and really complicated to make that all work properly." }, { "i": 315, "speaker": "Speaker 2", "text": "In perp form, which is a derivative, as you said earlier, right? You have a long, you have a short, you have market makers keeping the middle of it. None of that's required. It's literally all" }, { "i": 316, "speaker": "Speaker 2", "text": "happening on chain. It's all happening as a derivative. Doesn't require any involvement from the company. You don't have to worry about trust accounts or anything like that. It's just And it And" }, { "i": 317, "speaker": "Speaker 2", "text": "And you can do real volume, as we've seen, uh real liquidity, and have real meaningful price discovery, whether it's over the weekend for already public company, or whether it's pre-IPO for a" }, { "i": 318, "speaker": "Speaker 2", "text": "for a SpaceX right now. And that's kind of the most important thing that we want want to people to take away from this whole thing." }, { "i": 319, "speaker": "Speaker 1", "text": ">> Well, I think it was great, guys. I mean, this is again, it's not a recommendation to buy or sell securities right here. Um I really appreciate though the transparency. It's like all" }, { "i": 320, "speaker": "Speaker 1", "text": "new to me. I think a lot of our listeners, a lot of our viewers are going to find it really interesting because a lot of stuff that they're interested that trades they can't have access to it right now," }, { "i": 321, "speaker": "Speaker 1", "text": "but if I guess they have a vision about like they share your vision, they can get exposure by buying your stock. Um so, we're going to continue to track all of it. To me, I'm just really curious" }, { "i": 322, "speaker": "Speaker 1", "text": "to see the volume that trades in the SpaceX and on the platform and maybe how correlated hype and your stock are to that. So, David, Jerry, thanks for being here, guys. Let's do it again soon." }, { "i": 323, "speaker": "Speaker 2", "text": ">> Thanks for having us. Awesome." } ]