[ { "speaker": "Speaker 1", "text": "All righty, guys. We are here live at the tokenization tower with Ryan Rasmusen, head of research at Bitwise, following the meteoric rise of both the Bitwise and 21 shares ETF launches of" }, { "speaker": "Speaker 1", "text": "hype, notably other ETF uh products that they have doing a lot of work in the space. Ryan, welcome to the tower. Good to have you on the show again, man." }, { "speaker": "Speaker 1", "text": ">> Great to be here again." }, { "speaker": "Speaker 1", "text": ">> Big week for you guys." }, { "speaker": "Speaker 1", "text": ">> That's right. Yeah, exciting week." }, { "speaker": "Speaker 1", "text": ">> Yeah, man. It is. Um maybe just walk us through like the last week internally what what's been going on." }, { "speaker": "Speaker 2", "text": ">> Oh man. Uh well so much goes into the leadup to launching one of these ETFs." }, { "speaker": "Speaker 2", "text": "You're working with regulators, you're working with market makers, you're working out all the operational nuances of of seeding the funds, etc. But really once it goes live, you see what all that" }, { "speaker": "Speaker 2", "text": "work leads up to. And there's been tremendous uh adoption and response to the launch of these hyperlquid ETFs, right? And of course the price going up has has a function of to do with that" }, { "speaker": "Speaker 2", "text": "and caused by that. But nonetheless, we're seeing tons of demand obviously for these things. The largest hype ETF in the in the world. So really excited about that." }, { "speaker": "Speaker 1", "text": ">> Yeah, man. I mean, it's it it seems like you guys caught a lot of other issuers asleep at the wheel on this one. Like what happened there? Was it a regulatory thing? Was it a knowledge of the market" }, { "speaker": "Speaker 1", "text": "thing? Is it just like being in the know? like like why was it just two issuers that that got this done seemingly at the same time and now Gayscale's you know kind of trying to catch up and a couple others usually" }, { "speaker": "Speaker 1", "text": "like the bigger names let's call it Black Rockck or some of these larger ones maybe they wouldn't dip their toes into smaller assets like what what happened here >> yeah I it's a good question there's" }, { "speaker": "Speaker 2", "text": "always trade-offs here in terms of what assets ETF issuers want to focus on right and when you have crypto specialists like Bitwise it's easier to survey the space know which assets have" }, { "speaker": "Speaker 2", "text": "strong narratives strong fundamentals and that we think are going to be long- term term valuable ETFs to have in the space. Other asset managers maybe don't focus solely on crypto are also using" }, { "speaker": "Speaker 2", "text": "their resources to file ETFs or or build funds in other areas of financial markets. And so from that perspective, I think crypto specialists like Bitwise have an edge. That's why you don't see" }, { "speaker": "Speaker 2", "text": "larger asset managers necessarily dipping their toes here. the regulatory elements of it do play a role but you know you file for these things months and months in advance and then it sets" }, { "speaker": "Speaker 2", "text": "off these sequence of events and and meetings with regulators etc and so it's not like it's you know it's publicly known that there has been filings for these uh and then it all kind of plays" }, { "speaker": "Speaker 2", "text": "out from from there but I think as crypto asset managers and crypto specialists like we we pay so much attention to what's going on in the market we have 200 people at Bitwise who spend all day every day looking at" }, { "speaker": "Speaker 2", "text": "crypto markets we have onchain solutions public funds etc and we talk to investors and we've seen the demand for Hyperlquid both onchain and from speaking with investors build up for" }, { "speaker": "Speaker 2", "text": "months now and we're really happy to have you know the world's largest Hyperlid ETF now out there staking natively in house and and some other cool features as well that maybe we'll" }, { "speaker": "Speaker 1", "text": "talk about." }, { "speaker": "Speaker 1", "text": ">> Yeah, I saw that. I saw there's like there's wallet trackers going crazy right now about the purchases of Hype and the staking and so we're going to get into that. We're gonna get into the" }, { "speaker": "Speaker 1", "text": "thesis, but I think there's still a bit of confusion on how these things work." }, { "speaker": "Speaker 1", "text": "Even just, you know, from the top level with Bitcoin, people kind of assume that the ETF, $1 into the ETF is the equivalent of $1 of buying power on hype, but it's not always that straightforward and simple. Maybe you" }, { "speaker": "Speaker 1", "text": "could just kind of unpack like the the flow here, like like educate us on how the flows work. People come in on their brokerage account, they buy the ETF, they buy is it HY, what's the ticker?" }, { "speaker": "Speaker 1", "text": ">> Bhype. BHP. Yep." }, { "speaker": "Speaker 1", "text": ">> BHYP. They buy that, right? Let's say they buy 100 grand of that. What happens then in the in the kind of back end to to get that um that cash or that, you know, uh asset into Hype and then" }, { "speaker": "Speaker 1", "text": "staking it? Like is it just one to one?" }, { "speaker": "Speaker 2", "text": "Walk us through like how these flows kind of work." }, { "speaker": "Speaker 2", "text": ">> Yeah. So, for the most part, it's one to one. Now, now when you go into your brokerage account and say you want to buy $100,000 worth of an ETF, you you can be you're buying it on the secondary" }, { "speaker": "Speaker 2", "text": "market, right? Someone else who's looking to sell $100,000 that ETF is selling to you for the most part. And when there's more demand than there is supply or vice versa, that's when you" }, { "speaker": "Speaker 2", "text": "start to get these these market makers involved and these authorized participants who actually go and take in the capital. They go and give it to the ETF issuer. The ETF issuer creates new" }, { "speaker": "Speaker 2", "text": "shares of the ETF to give to the market makers. and they go and sell those on the secondary market. So there is this kind of sequential process that happens but you can think of it more broadly as" }, { "speaker": "Speaker 2", "text": "a dollar in to a beehive ETF is going to go to buying hyperlquid and then those assets are staked and we stake inhouse uh at Bitwise and you know of course that helps investors realize more of the" }, { "speaker": "Speaker 2", "text": "overall rewards because they're not paying a third party staking provider some fee etc. But a dollar in a dollar into hyperlquid is really the best way to think about it." }, { "speaker": "Speaker 1", "text": ">> Okay. And I haven't looked, you know, into the whole prospectus and everything, but is the is the kind of memorandum here that you guys are operating with on a daily basis in terms" }, { "speaker": "Speaker 1", "text": "of like equalizing the ETF, so if you have, you know, however many inflows versus outflows you you guys are settling at the end of each day to make it kind of even." }, { "speaker": "Speaker 2", "text": ">> Yeah, exactly. So, so ETFs have intraday liquidity, meaning that they they are trading all day, every day, as opposed to like mutual funds, which uh strike a nav at the beginning and end of of each" }, { "speaker": "Speaker 2", "text": "day. And so, the thing about this is that our team is working with the market makers and what's called authorized participants and trading desks to facilitate this capital flow all day so" }, { "speaker": "Speaker 2", "text": "that the market price you pay for the the hyperlquid ETF reflects the underlying NAV of the fund. And the nav is just the net asset value of the underlying hype assets themselves. And" }, { "speaker": "Speaker 2", "text": "that's a flow that's going on all day throughout the trading day. And then of course the end of the day, uh, you strike an end of day nav, which is what it opens up at the the following day." }, { "speaker": "Speaker 1", "text": "And you kind of just move throughout the trading week like that. Well, >> you know, I asked that because hype's been especially strong during the US trading hours as of the last week or so." }, { "speaker": "Speaker 1", "text": "like especially strong and then kind of like dwindling a bit overnight and then each morning it seems like there's this you know persistent flow." }, { "speaker": "Speaker 1", "text": ">> Yeah. Yeah. So, to get into the thesis a bit, Matt, um, your CIO at Bitwise put out a tweet basically saying that everything clicks for allocators when they understand that the entire MMO of" }, { "speaker": "Speaker 1", "text": "Hyperlid is to make a bunch of money on trading fees, take that 99% of those fees, and go back and buy the underlying, right? And I quote tweeted that yesterday and put out a a clip" }, { "speaker": "Speaker 1", "text": "about it and was basically saying like the incentives are so aligned here. It's very simple. If you are an ETF issuer, you're your MO is the get AUM. You want to be selling your products to clients" }, { "speaker": "Speaker 1", "text": "and who are going to believe in these products and want to hold these products. Hyperlquid is a very easy sell because of all the features that it has." }, { "speaker": "Speaker 1", "text": "And so the incentives are aligned for Bitwise to go and kind of talk about Hype to their institutional network because it just makes sense compared to a lot of L1's other assets. Now, we" }, { "speaker": "Speaker 1", "text": "don't need to get into the comparison game here, but talk to us about the appetite for allocators who have a traditional lens on investing. When they hear about Hyperlid and the, you know," }, { "speaker": "Speaker 1", "text": "over a billion dollars or so of of free cash flows each year going back to buy the asset, they hear the story like what is that light bulb moment kind of more in detail look like?" }, { "speaker": "Speaker 2", "text": ">> Yeah. Well, I mean, it really is a light bulb moment. When you think about traditional allocators, you really have to separate Bitcoin from other crypto assets because they understand the" }, { "speaker": "Speaker 2", "text": "narrative for Bitcoin is digital gold." }, { "speaker": "Speaker 2", "text": "It's this digital store value that serves the same purpose. And and two things are true. One, they've accepted that gold doesn't generate cash flow." }, { "speaker": "Speaker 2", "text": "And so, they don't need to get over this fact that Bitcoin doesn't. They can accept that it's an analogy, a digital version of gold. And two, not allocators allocate to gold. And so, naturally," }, { "speaker": "Speaker 2", "text": "they're not going to allocate to Bitcoin. You just have to accept that not everyone is going to invest in Bitcoin just like everyone doesn't invest in gold. Now going to the other crypto assets once you get beyond" }, { "speaker": "Speaker 2", "text": "Bitcoin with allocators then they want to know okay if these aren't like digital gold what's the selling proposition what why does it have value right and then you start talking about" }, { "speaker": "Speaker 2", "text": "cash flow and it's been difficult you know particularly in bare markets but for a lot of crypto assets in general it's been difficult to justify the valuation with the level of revenue that" }, { "speaker": "Speaker 2", "text": "they generate right the level of fees that they generate hyperlquid it's such an obvious story and these investors ers allocate to stocks. They understand that okay, you want to generate cash flow." }, { "speaker": "Speaker 2", "text": "That cash flow acrews to shareholders." }, { "speaker": "Speaker 2", "text": "You explain what happens with hyperlquid, right? Generates fees on all this trading activity. Those fees are used to burn to buy and burn hype tokens. As a hype investor, that feels a" }, { "speaker": "Speaker 2", "text": "lot like a stock buyback. It's just programmatic. And when you stack that up against traditional equities, it's a relatively high buyback, right? It's it's a larger buyback program than most" }, { "speaker": "Speaker 2", "text": "of the companies in the S&P 500. I think the average buyback is something like 2% in the S&P 500 and it's something like 5% when you do the math on Hyperlid at least. So from that perspective, it" }, { "speaker": "Speaker 2", "text": "becomes an easier sell. And our goal is to provide the best menu of investment options for our investors and then help them through that journey into which products they want to allocate to. And" }, { "speaker": "Speaker 2", "text": "they all have different mandates of what they can, can't invest in, should, shouldn't invest in. they have different uh goals in terms of risk uh risk you know adjusted returns and ratios and" }, { "speaker": "Speaker 2", "text": "things like that and so our goal is to help them on that journey and we think hyperlquid is a uh a really important piece of that broader menu of options for them to choose from." }, { "speaker": "Speaker 1", "text": ">> Yeah. Yeah. And so then let's get into kind of that conversation. I assume the question is all right bull case bare case what are my tail risks here? What am I what do I need to understand to" }, { "speaker": "Speaker 1", "text": "understand what I'm investing in? Could you maybe just provide us what the what the like the bull case is here? What you see as like the um like the opportunity and the TAM and then similarly the bare" }, { "speaker": "Speaker 1", "text": "case. What is the risks that you are educating investors on? What are the tail risks? What are the things that they should understand before looking into uh hype as a as an asset? I love" }, { "speaker": "Speaker 2", "text": "that you asked that question because what I feel like a lot of the crypto industry doesn't necessarily accept or crypto natives don't accept is that investors have to look at both the" }, { "speaker": "Speaker 2", "text": "upside and the downside, right? Yes, there's potential for high returns in crypto, but that comes with certain risks. And so, we do educate on both of those things. The way that conversation" }, { "speaker": "Speaker 2", "text": "goes is I think we first zoom out when we talk about what's happening and the long-term trajectory for crypto. You have the largest you have the largest regulators in the world. You have the" }, { "speaker": "Speaker 2", "text": "largest asset managers in the world." }, { "speaker": "Speaker 2", "text": "Larry Frink, CEO of the largest asset manager, Paul Atkins, the most important financial regulator in the world." }, { "speaker": "Speaker 2", "text": "They're saying all assets are going to be on blockchains in the future. And they're not talking about 20 years from now. They're talking about 3 years from now. You see the regulation making its" }, { "speaker": "Speaker 2", "text": "way through the SEC with project crypto and other initiatives where they're laying the groundwork. You see asset managers actively tokenizing funds and building out the infrastructure to do" }, { "speaker": "Speaker 2", "text": "that. You see the NASDAQ uh working with Kraken for tokenized stocks. to see the New York Stock Exchange working on their own tokenized stock initiatives. Okay, so the big picture is assets are moving" }, { "speaker": "Speaker 2", "text": "on chain." }, { "speaker": "Speaker 2", "text": ">> How big is that market? It's it's literally in the hundreds of trillions, right? So the next question is where are they moving on chain? One of the natural places they're going to go right now" }, { "speaker": "Speaker 2", "text": "that's that is to the most efficient and the best technology. And Hyperlid is is up there with the best of them. They're extremely fast, extremely low cost. They do this this trading extremely well of" }, { "speaker": "Speaker 2", "text": "derivatives and spot. They're rolling out really interesting features, right?" }, { "speaker": "Speaker 2", "text": "Like they just rolled out the ability to to launch permissionless prediction markets. Okay. Well, prediction markets is a huge market that traditional investors are hearing about all the" }, { "speaker": "Speaker 2", "text": "time. Every single day they turn on CNBC, it's sponsored by Koshi. They they see a Wall Street Journal piece on prediction mark on poly market, etc. And so you start to talk about all these" }, { "speaker": "Speaker 2", "text": "mega trends of stable coins, tokenization, prediction markets. you talk about the infrastructure it's going to be on and Hyperlid is just at the top of that conversation every single time" }, { "speaker": "Speaker 2", "text": "and I think that's that's how the educational journey starts and when you paint that picture for them it makes it much easier to make an allocation because you actually have tangible" }, { "speaker": "Speaker 2", "text": "points to reference not only on regulation institutional adoption but on the fees that Hyperlid is already generating before this transition takes place and I think the nail in the coffin" }, { "speaker": "Speaker 2", "text": "there on the on the conversation point with these investors is It's not just crypto assets. Yeah. The Wall Street Journal, Bloomberg, other major financial publications are quoting the" }, { "speaker": "Speaker 2", "text": "price of oil that trades on Hyperlid on the weekends, right? The S&P 500 just licensed its index to trade perpetual futures on Hyperlid that trade 24/7 365." }, { "speaker": "Speaker 2", "text": "So, you can actually see this playing out in real time. If you're an investor, they're paying attention to so many other things in the world. Our job is to show them this is happening and help" }, { "speaker": "Speaker 1", "text": "them understand how to get exposure to it. Okay, so that's super bullish and I, you know, trust me, I've been I was buying hyped the first day. I am beyond elated [clears throat] at this" }, { "speaker": "Speaker 1", "text": "conversation, but like what are we missing here? Is there a regulatory risk? Is there a competition risk? Is there a DeFi exploit risk? Is there a security risk? What are what are the" }, { "speaker": "Speaker 1", "text": "what what does that conversation look like when it comes to Ryan? This sounds amazing. I mean, look, this thing is printing money. It's still kind of underknown, underallocated. Even within" }, { "speaker": "Speaker 1", "text": "the crypto native landscape, there's a lot of people that are sidelined because they just thought it was another perpex, too expensive, whatever. Let alone the rest of the macro environment, global" }, { "speaker": "Speaker 1", "text": "macro. What am I missing here? Why is this why is this not so obvious?" }, { "speaker": "Speaker 2", "text": ">> So, yes, there are risks and we talk about those and you brought up some really, really good ones that investors should know about and that we educate on. Regulatory risk continues to be one" }, { "speaker": "Speaker 2", "text": "of the larger risks facing cris crypto." }, { "speaker": "Speaker 2", "text": "It's been derisked significantly with the current administration, but there's reasons that the Clarity Act are so important. For instance, and why we need the SEC to finalize its Project Crypto" }, { "speaker": "Speaker 2", "text": "agenda and push those things through is because you need this stuff set in stone in order for the next administration to not come and easily reverse it. or you need it set in stone so that traditional" }, { "speaker": "Speaker 2", "text": "institutions actually feel comfortable allocating billions of dollars, investing tens or hundreds of millions of dollars in this infrastructure for the long term. You've already started to" }, { "speaker": "Speaker 2", "text": "see this play out for instance with stable coins. Post Genius Act, we've seen so many traditional institutions start investing a lot of money in stable coins, right? You've seen SoFi just uh" }, { "speaker": "Speaker 2", "text": "launched a stable coin for its I think 15 million uh users of its app, right?" }, { "speaker": "Speaker 2", "text": "And you've seen time and time again developments in the stable coin front." }, { "speaker": "Speaker 2", "text": "Mastercard spending over a billion dollars, Stripe spending over a billion dollars on stable coin infrastructure acquisitions. They only did that after the Genius Act passed because they were" }, { "speaker": "Speaker 2", "text": "comfortable that there is now legislation in place that's not just easy for the next administration to reverse with an executive order for uh you know a new SEC to come in reverse." }, { "speaker": "Speaker 2", "text": "Okay. So when it comes to Hyperlid, the natural question is are assets going to move onchain? Are traditional institutions actually going to be interacting with these blockchains? then" }, { "speaker": "Speaker 2", "text": "how are they going to do it and what's the DeFi privacy issue looking like?" }, { "speaker": "Speaker 2", "text": "What about KYC, AML? There's all these questions and so you need legislation in place in order for these institutions to feel comfortable knowing the rules of the road and to actually invest and move" }, { "speaker": "Speaker 2", "text": "take these steps forward. So the regulatory risk is there, but we need to get legislation in place to derisk it even further. That's like the first risk out there. And I don't think that the" }, { "speaker": "Speaker 2", "text": "Clarity Act, if it doesn't pass in the next seven weeks or 8 weeks before the summer recess, that's not the end all beall, right? There will be chances to pass in the future, but we really would" }, { "speaker": "Speaker 2", "text": "love to see it pass, of course, uh, in the next two months, before the midterms, before the summer recess." }, { "speaker": "Speaker 2", "text": "Okay. Another risk, you mentioned this as well, there's smart contract risk, right? There is technical risk associated with moving your business onto this new technology, right? These" }, { "speaker": "Speaker 2", "text": "blockchains, they ask about quantum risks when we talk about investors, and we talk to institutions about moving on chain, right? Those are real risks too and so we help them understand those" }, { "speaker": "Speaker 2", "text": "risks and and then there is competition risk. I mean you you said that as well and I think that's very very true right we've seen time and time again new L1s disrupt the existing L1 space" }, { "speaker": "Speaker 2", "text": ">> especially in perexes >> especially in perex >> consistent iteration >> right people are talking about already that oh there's hyperlid uh uh disruptors right lighter etc and so" }, { "speaker": "Speaker 2", "text": ">> you saw Salana disrupt Ethereum you've seen hyperl kind of disrupt Salana right and so there's some competition risk now this is why when we talk to investors we talk a lot about position sizing right" }, { "speaker": "Speaker 2", "text": "don't put all your eggs in one basket." }, { "speaker": "Speaker 2", "text": "Most traditional investors wouldn't do that in the equities world. They wouldn't do that in the alternative assets world and so they shouldn't do that in the crypto world. We're big fans" }, { "speaker": "Speaker 2", "text": "at Bitwise of indexing or buying a basket of crypto assets to play a specific theme. So, okay, you want to invest in the growth of stable coins." }, { "speaker": "Speaker 2", "text": "You want to invest in tokenization, every asset in the world being tokenized, you should buy a a basket that represents that theme. And we're happy to help them build those assets or" }, { "speaker": "Speaker 2", "text": "run model portfolios for them. We have index funds as well that do that for them. But a lot of investors want to take those positions and add satellite uh positions on top of that. Maybe" }, { "speaker": "Speaker 2", "text": "they're maybe they want broad exposure, but they want to be oversized or uh overweight hyperlquids. Then they'll add a hyperlquid ETF on top of that. And we help mold the way they're thinking about" }, { "speaker": "Speaker 2", "text": "and you know educate on the way they're thinking about how to build a comprehensive crypto portfolio. So, it's risks, it's rewards, it's about having broad exposure, but also making sure" }, { "speaker": "Speaker 2", "text": "you're exposed to the right themes and that you're going about it in a smart way." }, { "speaker": "Speaker 1", "text": ">> Amazing. So, just this week, we saw the Hyperlquid Strategies Treasury Company, Ticker Purr, came out and announced that they had like a weekly update on their financials. They sold about $120 million" }, { "speaker": "Speaker 1", "text": "of of their or they issued about $120 million of of their of their own stock." }, { "speaker": "Speaker 1", "text": "Sold it uh raised a bunch of cash off that I think $40 million of cash. Bought uh about a 1 million hype I believe in the last week or so. And so they raised their cash uh by about 40 million. It's" }, { "speaker": "Speaker 1", "text": "about 150 million of cash now. And uh they have I think 22 23 million hype under uh this this treasury company one of the only treasury companies in the entire market that is like timed things" }, { "speaker": "Speaker 1", "text": "somewhat well and also picked the right asset. Um when it comes to the growth of the treasury companies in Hyperlid specifically with PER, how does how does PER affect the investment thesis for" }, { "speaker": "Speaker 1", "text": "Hyperlid as an asset? Uh obviously they're just trying to continue to accumulate this thing. They're they're sitting at about 1.19x uh mnav. So they are able to continue to hit that ATM to" }, { "speaker": "Speaker 1", "text": "buy more hype. Um in in your mind, is this kind of like negligible? Is it is it important? How do you think about uh hype liquid strategies contributing to continued growth of hype?" }, { "speaker": "Speaker 2", "text": ">> Yes. Well, love the ticker by the way." }, { "speaker": "Speaker 2", "text": "It's just it's just a fun sounding ticker. Uh it's not it's not negligible." }, { "speaker": "Speaker 2", "text": "It is important I think on for for one it's a simple supply and demand story right you have more demand coming into an asset than there is new supply or supply issuance then you're going to" }, { "speaker": "Speaker 2", "text": "drive price up that's just simple economics and so when you have the ETFs buying hype on the open market when you have the hyperlquid systematically buying hype on the open market and" }, { "speaker": "Speaker 2", "text": "burning it via the fees generated from using the platform and when then you have companies like hyperlquid strategies raising cash and using that to buy hype on the open market. All of" }, { "speaker": "Speaker 2", "text": "those things are the demand side of the equation. And when you stack those up against supply, that's when you can start to realize, okay, where's this thing going? And you can explain why the" }, { "speaker": "Speaker 2", "text": "price has done so well over the past week, right? Beyond demand on hype itself, I think it's really important to have these companies in these spaces, whether it's, you know, Bit and Ethereum" }, { "speaker": "Speaker 2", "text": "or whether it's Hyperlquid Strategies and Hyperlid that are building around the space, right? or or or uh you just had um Joe Schalom on, right? And they're also doing the same thing for" }, { "speaker": "Speaker 2", "text": ">> championing the Yeah, >> you're champing adoption. You're investing in the infrastructure around the space. You're using the protocols, right? Like you're using DeFi, you're helping to uh boost liquidity and boost" }, { "speaker": "Speaker 2", "text": "the brand name around these things and you're buying the asset and you're holding it or you're staking it, etc." }, { "speaker": "Speaker 2", "text": "Like those are all important things. It also provides investors who maybe have mandates to only invest in public equities. It provides them a way to gain exposure to these new technologies and" }, { "speaker": "Speaker 2", "text": "these cryptonnative systems through public equities. Right? So we work with for instance endowments, foundations etc. Some endowments or some foundations have mandates that they cannot invest in" }, { "speaker": "Speaker 2", "text": "commodities. They simply cannot invest in commodities or single asset commodities right they can't buy a gold ETF they can't buy a bitcoin ETF. They can't buy a hyperlquid ETF. They" }, { "speaker": "Speaker 2", "text": "certainly can't invest in crypto assets directly because of operational nuances etc. But what they can do because they're allow their policies enable them to uh invest in public equities and" }, { "speaker": "Speaker 2", "text": "because operationally they're set up to invest in public equities, they can go buy a hyperlquid strategies company, right? And they can have that exposure and then any alpha hyperlquid strategies" }, { "speaker": "Speaker 2", "text": "can generate on top of the underlying price exposure to hyperlquid is a plus for those investors, right? And so I think it's really important to have these companies in the ecosystem" }, { "speaker": "Speaker 2", "text": "bringing awareness, bringing demand and and bringing liquidity into into the ecosystems. And so I love to see what Hyperlid strategies uh is doing. And if I had to guess, we're going to see more" }, { "speaker": "Speaker 1", "text": "Hyperlquid Dats pop up." }, { "speaker": "Speaker 1", "text": ">> Amazing. And and I agree. I mean, they've executed quite well from a top down perspective. Have done well. I have, you know, a goodiz bag in perb and been very very bullish on shams. I" }, { "speaker": "Speaker 1", "text": "always have to do a disclosure here. Um and and so when we're thinking about um some some of the circumstances of events that have happened and kind of like the order, one of the things that happened" }, { "speaker": "Speaker 1", "text": "like about a month ago was this Circle Coinbase USDC deal with Hyperlid, which is another demand driver that that we haven't quite touched on yet. One of the things that we heard from uh the leading" }, { "speaker": "Speaker 1", "text": "liquid staking provider kinetic on the on the uh hyper core and hyperbm team was hyperlquid does not pay for anything externally market makers they don't pay for integrations they don't pay for all" }, { "speaker": "Speaker 1", "text": "any of the stuff that a typical kind of L1 would and in some sense has slowed them down they've you know it's been harder to to do certain things it's been harder to get certain things done but" }, { "speaker": "Speaker 1", "text": "they have these different teams now the trade XYZ team has kind of came in as its own external team but part of the team Jake Travinsky in DC has now kind of stepped into his own kind of team and" }, { "speaker": "Speaker 1", "text": "so you got all these little like teams within the team but of course you know the claim to flame or the claim to fame is like 11 12 people on the team. Now, with that being said, this Coinbase and" }, { "speaker": "Speaker 1", "text": "Circle deal was specifically unique because in most cases, Circle and Coinbase like to strike deals where the revenue split is heavily favored to them for the liquidity, for the native" }, { "speaker": "Speaker 1", "text": "issuance, for all the Lindy effect that these companies bring. In Hyperlid's case, it's actually quite the opposite." }, { "speaker": "Speaker 1", "text": "Most of the revenue I think to the extent of like 90 something plus percent of the USDC that is about 5 a half billion now I think on hyperlquid on hyper core will actually be given to the" }, { "speaker": "Speaker 1", "text": "assistance fund and used for buybacks." }, { "speaker": "Speaker 1", "text": "How how did this specific event >> change your view on the regulatory uh risk on the revenue risk on kind of hype liquid's dominance? What did you think after this happened? Look, there are" }, { "speaker": "Speaker 2", "text": "certain moments in a a journey of let's just call it even though it's not a company because it's an easy uh you know it's an easy mental model to use. There are certain elements or certain events" }, { "speaker": "Speaker 2", "text": "that happen where you're like oh okay this is like it's happening now like this is a step change in how their business operates. They've shown that they are powerful in this ecosystem that" }, { "speaker": "Speaker 2", "text": "their brand name holds a lot of value and I think this was a moment where you saw that happen. I mean I think you're absolutely right. Typically, you don't see these types of deals where the the" }, { "speaker": "Speaker 2", "text": "issuers, whether it's Circle or Coinbase, whether it's distributor, have less economic capture of the deal, right? But in Hyperlquid's case, to your point, this just grew their revenue" }, { "speaker": "Speaker 2", "text": "significantly. But I think it also bolsters adoption of USDC, right? And that's why you would see Coinbase, who has incentive to do that, and Circle, who has incentive to do that, want to do" }, { "speaker": "Speaker 2", "text": "this deal, right? They want to grow USDC into the world's largest regulated stable coin. And if you're looking at ecosystems like hyperlquid where tons of trading activity is happening whether" }, { "speaker": "Speaker 2", "text": "it's per now spot prediction markets are headed that way it makes sense to want to make your stable coin the staple of that ecosystem right if they could have gone back in time and done that for" }, { "speaker": "Speaker 2", "text": "salana they would have done that right and so I think that's the reason why they would do something like this overall it's going to drive a lot of demand into the USDC stable coin that" }, { "speaker": "Speaker 2", "text": "will grow over time more liquidity uh more dominance across different blockchains more supply more revenue etc. And so it makes sense for them to do it. It's a great boost for Hyperlid," }, { "speaker": "Speaker 2", "text": "right? And and I think when you think about to your point of regulation, like where is this thing headed? The ability for Hyperlid to say, \"Look, we have the world's largest regulated onshore" }, { "speaker": "Speaker 2", "text": "US-based stable coin uh as like our, you know, preferred partner, if you will, uh, for lack of a better term, and it's dominating what the stable coin usage is on top of this platform.\" That's a great" }, { "speaker": "Speaker 2", "text": "point to make to regulators when you're working with them, uh, or or or showing them what your business looks like. So, it's a win-win in my opinion. Of course, it's a win for Hyperloop, but I think" }, { "speaker": "Speaker 1", "text": "it's a win for Coinbase and Circle as well." }, { "speaker": "Speaker 1", "text": ">> Yeah. Yeah. Well, I think it contributes to this vision of being kind of like this house of all finance and being able to have that regulatory, you know, arm, right, with with these two players. It" }, { "speaker": "Speaker 1", "text": "brings a lot of a lot of firepower in DC and also a lot of credibility and legitimacy and then perhaps up to the tune of 125 $150 million of annualized revenue from the treasury bills" }, { "speaker": "Speaker 1", "text": "underlying the USDC on the blockchain." }, { "speaker": "Speaker 1", "text": "You know that is rate dependent but you know that is another another boost to the assistance fund. when when you're looking at like the TAM here, right?" }, { "speaker": "Speaker 1", "text": "People often compare Hyperlquid to Binance, Bybit, some of these other exchanges, but then you've got like the larger view of the NYC, the CME, uh NASDAQ, and these guys are not going to" }, { "speaker": "Speaker 1", "text": "go down easy and they're not friendly opponents, right?" }, { "speaker": "Speaker 1", "text": ">> Talk to us about how you see Hyperlquid's progression from like a crypto exchange to comparing to Binance." }, { "speaker": "Speaker 1", "text": "I think they hit like 17 18% of OI on Hyperlquid comparatively to Binance I believe. Don't quote me, but like we're we're taking a much bigger swing here." }, { "speaker": "Speaker 1", "text": "Those guys aren't going to back down easy. What is your mental model for maybe how that could play out, what that comparable looks like and that evolution?" }, { "speaker": "Speaker 2", "text": ">> Uh yeah. So, so I think that the the TAM of what crypto is going after is insanely massive. It's literally measured in the tens of trillions, if not larger. And I think the the surface" }, { "speaker": "Speaker 2", "text": "area that crypto has scratched is tiny, right? So overall the market for for that these these markets are going off to is huge. The penetration of those markets is minimal. It's going to grow" }, { "speaker": "Speaker 2", "text": "significantly over time. So it's important definitely to look at hyperlquid share within what we already have as as the per market, right? And you you referenced the stat against Binance in terms of OI and I think" }, { "speaker": "Speaker 2", "text": "that's the right number uh as well, right? And that's impressive because it's a relatively new system. Binance has been around for a very long time and it's starting to build and hit all-time" }, { "speaker": "Speaker 2", "text": "highs once over and over and over again in terms of its share of that per market. But Hyperlid's also growing its spot volume business, right? It's it's getting into prediction markets. It's" }, { "speaker": "Speaker 2", "text": "probably going to launch other products, right? We're only at HIP 4. Who knows what HIP 5, HI 6, HIP 7, HIP 20 brings, right? All of these things will help them address these other huge markets" }, { "speaker": "Speaker 2", "text": "that crypto in general is going after." }, { "speaker": "Speaker 2", "text": "The reason why I think it's important to think about the overall size of the market that crypto is going after is because you will see crypto's share of the market grow and then hyperlquid" }, { "speaker": "Speaker 2", "text": "share within the the breakdown against Binance or other other firms also grow and I think that's net positive for Hyperlid. Look, we're so early in in the journey of these things. There's a" }, { "speaker": "Speaker 2", "text": "reason that you can have an ecosystem like Hyperlid, which is relatively new compared to other blockchains and other L1s, do so well and grow into the 10th largest crypto asset in a matter of" }, { "speaker": "Speaker 2", "text": "years because this is just such an early space. It's really hard to look 20 years out and say who the winners and who the losers are going to be. It's easy to say, I think this company's going to be" }, { "speaker": "Speaker 2", "text": "or I think this ecosystem is going to be a winner. But what we tell investors is that having broad exposure to the space is a safer bet than choosing individual winners or losers. And that is true if" }, { "speaker": "Speaker 2", "text": "you would have gone back and invested in the internet in the late 90s, early 2000s, right? Do you want Google or do you want Pets.com? You probably could have just bought a basket and had both" }, { "speaker": "Speaker 1", "text": "and you would have done just fine." }, { "speaker": "Speaker 1", "text": ">> Yeah. Um, one of the questions that gets kind of thrown around with regards to uh this point here is what is the actual market cap of hype? And there's like conflating numbers. If you look at coin" }, { "speaker": "Speaker 1", "text": "coin gecko or if you ask somebody else when your investors are looking at >> the PTE ratio of this thing, I think it maybe is around 50 you could say right now depending on the numbers. what what" }, { "speaker": "Speaker 1", "text": "is the like like what market cap numbers do you guys go off of or like what is the because there's this kind of issue right for the audience where there's these unlocks but effectively the" }, { "speaker": "Speaker 1", "text": "unlocks are uh only to the team because there's no uh VCs and so we kind of have this trust in the team that they're not going to unload on the market and so and then you've got the assistance fund" }, { "speaker": "Speaker 1", "text": "which is also like there's no rules around what can be done with that but but it's it's almost like Satoshi's wallet where it's never been touched and it will just only been added to and" }, { "speaker": "Speaker 1", "text": "never been withdrawn from. What is the right way to think about the the market cap structure from a circulating market cap and an FTV market cap for hyperlquid? How do you explain this like" }, { "speaker": "Speaker 2", "text": "situation to your investors?" }, { "speaker": "Speaker 2", "text": ">> Yeah. So, so the things you noted are are really good things when you talk about risks as opposed to your bullcase and things that you use to level out your bullcase. So, I think it's" }, { "speaker": "Speaker 2", "text": "important to think about these things." }, { "speaker": "Speaker 2", "text": "To be completely honest, people who are buying the hyperlquid ETF, if you're if you're a financial adviser or you're an investor that that spends most of their time in TRDF, you're not thinking about" }, { "speaker": "Speaker 2", "text": "these these differences between like like FDV and float adjusted market cap etc. Like they're just not there yet." }, { "speaker": "Speaker 2", "text": "They're not calculating pees on hyperlquid. They see this thing that is hitting escape velocity. Of course, price help leads helps lead the narrative and they want to have some exposure to these mega trends of stable" }, { "speaker": "Speaker 2", "text": "coins, tokenization, prediction markets, etc. They're not really that focused on pees today, right? They think, okay, these are huge markets that are going to grow over the next decade. Let me invest" }, { "speaker": "Speaker 2", "text": "in them now like early stage tech, right? Rather than uh you know, trying to figure out where does it fit, you know, amongst like the PE of the other companies in the S&P 500." }, { "speaker": "Speaker 1", "text": ">> So, they're like somewhat somewhat price insensitive investors at this current point." }, { "speaker": "Speaker 2", "text": ">> Yeah. I mean, institutional investors for the most part are long-term oriented and they're systematic, right?" }, { "speaker": "Speaker 2", "text": "They're of course those that are trying to trade in and out of these markets and stuff. When they think about making crypto allocations, they really are betting on crypto as a theme, crypto as" }, { "speaker": "Speaker 2", "text": "a trend. It's a small portion of their portfolio. They don't really have time to get into the nuances of like FTV versus like circulating supply and unlocks. It's just not something to" }, { "speaker": "Speaker 2", "text": "think about. Their thought process is, am I hearing that every asset in the world is going to be tokenized? Am I hearing that the Wall Street Journal and Bloomberg is quoting the price of oil" }, { "speaker": "Speaker 2", "text": "and that the S&P 500 just licensed index for Hyperl, etc.? Yes. Okay, great." }, { "speaker": "Speaker 2", "text": "Where is that all happening? Oh, it's happening on Hyperlook right now. Great." }, { "speaker": "Speaker 2", "text": "I should probably have some exposure to that in case these things are true. I should minimize the impact of my portfolio if they're not true. And that's why they balance their their" }, { "speaker": "Speaker 2", "text": "position sizing. And it's not 50% of their portfolio. It's not 20% of their portfolio. In most cases, when we talk to investors, crypto is anywhere [snorts] from 2 to 5% of their portfolio. And they split that across" }, { "speaker": "Speaker 2", "text": "many different crypto assets. Now, of course, there are investors, uh, financial advisors, wealth, who have zero crypto, and there are some that have 10 or 15 or 20% crypto, but most of" }, { "speaker": "Speaker 2", "text": "it balances in like the 2 to 5% range, and it's split across several different crypto assets, and they just want broad exposure to these mega trends, and hyperlquid is one of the things that" }, { "speaker": "Speaker 1", "text": "gives them broad exposure, but there are many other things as well." }, { "speaker": "Speaker 1", "text": ">> That is extremely extremely bullish." }, { "speaker": "Speaker 1", "text": "That is extremely bullish. So just to kind of close us out here, I is your is your take here that then hype as an asset continues to be undervalued currently and that there's a price" }, { "speaker": "Speaker 1", "text": "appreciation that is, you know, yet to be had directionally like how do you how do you reconcile all of this into a directional thesis?" }, { "speaker": "Speaker 2", "text": ">> Yeah. So, there's a lot of crypto assets out there, and for most of crypto's history, it's been difficult to align the the growth of this ecosystem with the value that's passed on to token" }, { "speaker": "Speaker 2", "text": "holders. Hyperlid is one of those new newer crypto assets in this kind of post Gendler, postbiden regulatory world that's figured out how to do that in a remarkable way. So yes, do I think if" }, { "speaker": "Speaker 2", "text": "we're correct that every asset in the world is going to be tokenized that stable coins are going to go to three five plus trillion dollars in the next five years. uh if you think that capital" }, { "speaker": "Speaker 2", "text": "markets in general are going to be riskone, then yes, I think there's room for hyperlquid to grow, its share of the market's going to grow and the market in total is going to grow, those are both" }, { "speaker": "Speaker 2", "text": "kind of bullish tailwinds, right? We believe the regulatory environment is going to be more supportive of crypto than less supportive of crypto going forward. That bodess well for hyperlquid" }, { "speaker": "Speaker 2", "text": "and other crypto assets. Yes, incumbents are going to fight it, but I think that happens with all new technologies. And when you have an innovative technology like crypto, like blockchains, like" }, { "speaker": "Speaker 2", "text": "hyperlquid, those fight through th those break through kind of the walls that incumbents and regulators put up. We've seen it happen time and time again. It's not new to crypto. It's not going to" }, { "speaker": "Speaker 2", "text": "stop crypto. And so I think that escape velocity to us is going to happen. And just making sure that you have exposure to these mega trends is what we tell investors that they want to have because" }, { "speaker": "Speaker 2", "text": "you don't want everyone to have been saying that these things are going to happen and then have to look your client in the eye five years from now when stable coins are 5 trillion or when you" }, { "speaker": "Speaker 2", "text": "know tokenized assets are 10 trillion and say oh yeah I heard about that but I decided I didn't want to have exposure to that." }, { "speaker": "Speaker 1", "text": ">> Yeah. Wow. I mean guys I mean we have some of the largest allocators in the world uh buying buying what we've been preaching for over a year here. Ryan, thank you for your time. Thanks for" }, { "speaker": "Speaker 1", "text": "joining us. Uh, congratulations on the successful launch." }, { "speaker": "Speaker 1", "text": ">> Yep, great to be here in the tokenization tower. We'd love to come back sometime. Thanks to Bitwise, thanks to 21 shares for bringing this asset into the institutional allocator's" }, { "speaker": "Speaker 1", "text": "hands." } ]