SPEAKER_03: 0:00

Hey, hey, hey, welcome to this week's episode of Blockhead's Blockcast. I'm your host, Takatoshi Shibayama. I'm also the head of APAC for Ledger. I aim to uncover the creative, intelligent, and radical minds who are shaping the crypto industry today. I'm as crypto curious as anybody that's tuning into this show. We're doing this together, guys. Let's go. Welcome back to another episode of License to Shield, the offshoot of the broadcast normal series where we discuss the weekly recaps of what is happening in the juicy world of crypto, the markets, and anything that comes to our minds. Before we start, everything we say here is not investment advice, business advice, relationship advice, or friendship advice. I'm Takatoshi Shibayama, the integral active host of crypto, and I have here with me Lisa J.Y. Tan, CEO of Economics Design. Nikhil Joshi, COO of Mergo, a co-founding entity of Cardano, and Valentin Fournier, research analyst at Blockhead's research arm, VRN. Welcome to the show, guys. Thanks for having us.

SPEAKER_01: 1:07

Thanks for having us.

SPEAKER_03: 1:08

So, I mean, from this year, I got to say, there's been a massive M&A activity that's going on in crypto. I mean, this year alone, if I look at the, I'll say, top four that's reached a billion dollars in acquisition, I would say Coinbase, acquisition of Deribit, It was 2.9 billion. Kraken acquisition of NinjaTrader, 1.5 billion. Ripple buying Pinroad, 1.25 billion. Stripe buying Bridge, 1 billion. What is going on? And today we heard that Coinbase is joining the S&P 500. This market is just catapulting crypto into another dimension. What do you think of this, Nikhil?

SPEAKER_00: 1:50

let's start off by looking at those numbers they are huge it just highlights how much money these crypto players have to go on this shopping spree i think the timing of the shopping spree is interesting we're hearing a lot of announcements coming out one after the other in short succession i think it points to a convergence of crypto and tradfi i guess cracking with ninja trader is crypto going to buy back into the traditional space Coinbase and Durabit, slightly different moving into derivative space, but it points to a couple of things. I guess there was an expectation, I guess, a while back that TradFi would come and gobble up crypto. This is proving it's going in the other direction. The other part is a consolidation where firms are looking for different revenue streams. And that consolidation points to a vertical as opposed to a horizontal that I think, again, was the conception a couple of years back of how things would play out. I think the last thing that comes to mind here is Bitcoin. Clearly, there's a softening of the regulatory position in the US, but regulatory pressures exist nevertheless. And so players are converging around those who are firmly within those regulatory parameters and have said from the outset that they are happy to play within those parameters. So all of that points to a certain maturation, which is has its positives and negatives. Positives, I think it's a good sell for the industry overall. Negative, it probably means that it won't be so volatile after a while, and maybe we don't have so many of the quote-unquote interesting situations that we've seen play out in recent years. And even Hanamoka

SPEAKER_03: 3:29

is looking to list in the US. I think the regulatory landscape is kind of changing in the US and paving the way for more and more of these crypto companies to grow bigger in the US, doing a lot of SPACs, as you can see, with the Cantifice Gerald subsidiary being acquired by Tether and SoftBank, 21 Capital. You know, all these things are kind of pointing to a, even a larger and larger representation of crypto in the public space. Lisa, do you think this is kind of like sustainable? I mean, do you think this is just big boys playing in the kind of, you know, field, not much room for the little guys? Or do you think, you know, this is temporary, it's just Trump's four years and then maybe, you know, unwind itself? What's your view on

SPEAKER_01: 4:12

this? Yeah, that's a very interesting perspective because, TradFi has been dominating the financial markets for the last half a century. And right now, the whole point of crypto is to redesign and rebuild what financial institutions could look like. And it has taken a good 15 years to really build the building blocks and foundations of where we are today. I believe this will continue. And I think what I'm curious to see is that as this continues, as crypto matures, are we going to fall into the trap of traditional finance has right now with strong regulations or very, very strict rules of who can access what and who can't? Or are we going to have our own chance or opportunity to define what the financial system could look like? All this purchasing of companies is great. It's great consolidation, which means huge alignment between all these different entities. But if we're falling back to how structured traditional finance is, I wonder what that looks like for the space overall because the whole point of crypto is to allow for anyone for the unbanked to be banked for anyone to be able to trust smart contracts these crypto companies right now are replicating a lot of what trapfire is doing and i'm curious to see what evolution could look like we shouldn't just bring the past mistakes into a better technology but we should improve that as well

SPEAKER_03: 5:31

yeah i totally agree look i mean you know i think these business models are things that normal people can understand, right? You can understand what a crypto exchange is. You can understand what a payments company is. You can understand what a crypto prime brokerage business is. All these kind of businesses are, as you mentioned, replicated from the traditional finance space into crypto. But as you mentioned also, that there's a lot of stuff underneath the hood of all these titans in the industry that are building crypto. stuff that's a lot more difficult for people to understand. A lot of technology built for providing financial services for the people that are unbanked, etc. And those don't really kind of bubble up to the surface. And all we hear is about these big companies doing acquisitions, getting listed, all that, which is kind of like a two-dimensional phase at the moment, I feel like in crypto, because, you know, these big companies are ready to get listed, ready to sell themselves because they've been working at it for like maybe the past, you know, eight, nine years, you know, they have, VC backers that they want to get out. It's understandable, right? It's a maturity of the market. And these guys have equity. Crypto companies, on the other hand, have tokens, but no equity, right? The stuff that we're talking about, the DeFi and all that stuff, they don't really issue equity. They have tokens. So, you know, they won't be listed on NASDAQ or any of these exchanges. They won't be acquired by anybody generally because it's just tokens. There's really not much to kind of trade with. So are we going to see like a clear divergence going forward in this industry? That's

SPEAKER_01: 7:00

a very good point, and I'm glad you brought up token as an alternative exit strategy because it's one of the main reasons why a lot of people have tokens in the first place. If you look at just the traction of M&As going on, we're seeing a lot of M&As right now, as we are speaking about, but the amount of launches, the amount of IPOs have decreased over the past few years. To be fair, during COVID, everyone was doing IPOs, and there was a huge backlog of IPOs. Usually, IPOs are not a big news on Mondays. But during COVID, every Monday is just filled with IPOs and SPACs. That caused a lot of backlog to be cleared. And we're seeing less right now, which means it's also harder. As you mentioned, there are a lot of acquisitions going on as well to inflate the value so that you can list it at a better price. I wonder how sustainable this is. At the same time, this is for every business, right? Whether you exit as a token, you exit as an equity, it's all about having real revenue streams. And the exit via IPO, it's a bit more stringent. There are a lot of corporate governors in place, for example. Absolutely.

SPEAKER_03: 8:12

And, you know, there's also before you go into kind of launch pads, because you kind of teased a little bit where we want to go next. But the other point that I did want to talk about just a little bit is around these Bitcoin companies. So there's listed companies buying Bitcoin. I mean, obviously, MicroStrategy is the main one. The Bananas is April 2021, if I remember correctly. But now you have like 21 Capital. There was another company that Blockhead wrote about today about Mr. David Bailey Nakamoto doing a SPAC and then launching with a$710 million of Bitcoin treasury. I mean, there's going to be more and more of these kind of mimickers of these type of businesses, which I don't really understand why there's a need for these companies to... Now, I understand they need to be holding treasury in Bitcoin. That I can understand in replace of fiat currencies in order to protect their treasury. But at the same time, there are companies like 21 Capital. It's going to go out there and just buy Bitcoin. That's all they do. At least MicroStrategy... has like a business. I think it was a software consulting business or something like that. I think they've made next to no money on that business. But at least there is a side business or a main business that they run. But, you know, in the case of like these Bitcoin companies that are launching these days, their main business is just buying Bitcoin. It's almost the same as ETF. But I wonder if it's just kind of like to pump the bags to people. I mean, I know most retailers love it because it just pumps the bag. But I just don't really understand why a listed company is going to be in the market just to buy people.

SPEAKER_00: 9:42

Yeah, look, for me, it's the analogy in a bricks and mortar sense is essentially a holding company that holds real estate, which isn't necessarily being used. Over time, there's an assumption that it will go up in value. Let's ignore financial inflation for a second and assume the property does go up in real terms. And as long as they're borrowing at a rate that's cheaper than the value of that property going up, then they're making money. What I don't understand is when's the end game? because at some point they've got to have the asset I think will stabilize and then they can't keep borrowing against that. So what does the model turn into after that? I just want to stretch this back to the previous point, which is in a way, whether they fail or succeed, if I zoom back out to 20,000 feet, this is all good narrative. for our general purposes. So Lisa's earlier point about is this just going to be the same activity but with a different asset class and is that good or bad? From my point of view, I think it's good for now because it keeps the headlines, it keeps the attention on crypto. And while we may be able to differentiate a token versus, you know, a meme coin versus something more substantial, shall we say, or something that we think has inherent utility with something that doesn't, most of the world can't and they'll just not know the difference between web3 crypto blockchain bitcoin and so as long as this isn't grabbing headlines that's a good thing and i'm not suggesting there's no substance here and it's all just marketing but it is part of the selling process in my mind that these are all stepping stones to getting broader acceptance cultural acceptance and then for people to buy it buy in university commerce right people don't understand money but people still use it. And I think that's the road to success.

SPEAKER_01: 11:24

Very, very good point from both of you. So there are two points I want to bring over here. The first one is partners of Bitcoin. And the second is different financialization of Bitcoin. So I think companies are buying Bitcoin and people invest in these companies. It's something that I don't understand because you can just buy Bitcoin and put it in your own wallet. However, the first point is that companies are buying Bitcoin potentially because of the hardness of money. Right now, if we look at the US Treasury bonds or just USD in general, it's entering a very interesting new phase where people are looking at deploying into alternative assets. The bonds of Germany, Italy, UK, Japan, and a few other big countries in the last couple of days, have been on an upward trend. At least minimum 2% increase of the bond market. And people are looking at other alternative assets than US. The point of Bitcoin initially was to be an alternative asset to USD. So companies holding it as an alternative asset makes a lot of sense, just as Douglas mentioned. The second thing is the financialization of Bitcoin. There are a lot of projects coming up right now. And one of these big projects that's very, very, very heavily funded by big, strong players is HEMI. Hemi, short for Hemisphere. They basically use Bitcoin as the partners of Bitcoin with EVM, and they're building a lot of DeFi-related products, institutional-grade products, using Bitcoin as the main currency instead of Ethereum. So that's going to be interesting because companies, as Nikhil mentioned, you're just collecting assets right now, and you can financialize them later when the tools are out. And I think there's a stronger bet that you can start earning based on the Bitcoin that you're owning. And as a regular person, a regular grandma on the street, they will not be able to know how to monetize their Bitcoin. So I think that's the bet that they're playing. And I'm interested to see how this unfolds.

SPEAKER_03: 13:15

Yeah, absolutely. I think one of the episodes I had was Lombard, which is basically a state ETH version of Bitcoin. So they're trying to build like a synthetic version of a Bitcoin so that you can stake Bitcoin at the same time, reuse a synthetic version of it to do other things, collateralize it for lending, use as collateral for derivative is trading. There's a lot of things that, you know, I think in the DeFi world that we're all kind of experimenting with. And I think, you know, we'll see more and more of these type of products come out, even in the traditional world. I don't think it's going to be a direct replica of what we're doing in DeFi. But, you know, I think already Cantor, Fitzgerald is wanting new Bitcoin financing. I think they already announced it with like$2 billion of balance sheet that they're looking to deploy via Copper and Anchorage, which I think was a huge message to the market that they're going to be in this market. You can already see it with 21 Capital as they financed it as well. You know, I think this is going to grow much bigger and very exciting to see. Let's go back to that kind of thing that you were teasing about, about Launchpad, because I think what you wanted to discuss about, Lisa, is this Believe app. I don't really know anything about it, but share us what this Believe app is.

SPEAKER_01: 14:21

So I'll give you a quick TLDR of Believe. Believe is Solana-based, and I heard about it about 10-ish days ago. It's becoming very popular on Twitter right now. It's basically a new variation of Launchpad. All you have to do is have an idea, and then you tweet this idea to, I think, at Launchpad or Launchcoin, and the project will mint the token for you. Then what it does is similar to Launchpad, people buy in, community buys in, and then it trades up to 100 mil, no, 100k, I think. It trades up to 100k once it hits via bonding cost, and once it hits that, it graduates to a DEX on Solana, and people can trade more. the owner, the creator, receives fees, and the fees will then be used to fund projects. So really, this is just a different idea of Launchpad. Launchpads have grown quite significantly. The first one is, if you think of ICO, kind of it's just a deck, an idea, people fund it via tokens, and then you create the idea, you launch your project, you launch your tokens. Then that was very unsustainable, so we started to create a proper Launchpad. So You have launchpads where it's community-based. You have an idea. Community buys in early. They get tokens at a discounted price. You use the fun to build projects. In last year, we've seen the movement towards AI launchpads where it's meme-based. You have virtuals leading it. You have Luna. You have Pump Fund that helps to launch memes and launch projects. And now we're moving to this AI small cap launchpads like Belief where what they want to do is launchpads, half launchpads, previously worked is that as soon as you deploy a contract, you make money. With Believe, what they want to do is if you find consensus or you are early into figuring out which projects are launching, then you get a bonus for finding these projects early. So that's a little bit of a high level understanding of

SPEAKER_03: 16:09

how belief works. You said the launch pads are growing. So, you know, obviously there's been multiple versions of this ICO, whether it be normal crypto projects to meme coins. I still see this kind of internet capital markets kind of growing in the future. I mean, I don't know if it's a good thing or a bad thing. I mean, there's nothing to kind of really regulate this kind of stuff, especially on these launch pads. You know, Nikhil, you're much closer to the kind of ecosystem plays here. So What do you think about these kind of rollouts with all these launchpads and people kind of looking at these ideas and, well, retail investors being able to do what VCs are doing but try to do it themselves?

SPEAKER_00: 16:49

I quite like the experimentation that happens in this space. And this is probably variations on a theme, as Lisa described. But past the experimentation, I start to have reservations. I know projects who are looking to secure funding would love this type of setup because it removes the need to go sending cold pitch decks or cold calls to investors or trying to get past the high bars set by VCs in particular. The problem is, and I can see that this worked quite well with things like creator economy, plays into the idea of community. It obviously has some democratization, but I actually think those three are quite dangerous words or sometimes used perhaps disingenuously. So I think creator economy really is just a euphemism for the currency of attention. So as we've seen with meme coins and recent months, you know, you have these spikes and troughs in nanoseconds because the attention has moved on. And so both on the raising side and the investing side, it just comes with that risk. You don't know how much you can raise. You don't know who you're going to raise from. You don't know what you're investing in and so forth. I guess that could apply in many cases. But if you couple that then with community, I think is sometimes used in this space, like the word compliance was used in banking anywhere between 08 and 2013. It was like using like a Jedi mind trick. If anyone came up to you and questioned something, you just have to throw the word compliance in their face and they immediately backed away. And in a similar way, you use the word community here and it's a move you just can't protect against. And I just think democratization... The euphemism for that is just exit liquidity, right? I like the idea of experimentation. I'm sure that certain projects will no doubt do very well off the back of something like that, just because there's almost no barriers to being able to move forward. But I think on the opposite side of the fence, i.e. the investor side, there's going to be a lot of people who are burnt partly because they don't have the savviness, either in financial and economic terms, or indeed in crypto terms. What are they getting into? I'm a little bit skeptical, but I will cross my fingers that I'm pleasantly surprised.

SPEAKER_01: 18:49

Nicole, I absolutely agree with you. You spoke a lot of words out of my head. I completely agree with you because it's all about the economy of attention. The whole model of how launchpacks or specifically beliefs work is that the token issuance is automated, liquidity is injected. Belief, I believe, I know, gives 10k to every project that they believe Then there's an active community that follows, that gets incubated and follows this project, really getting the attention of people. Then you launch the token and you drive token momentum and movement. And then the community ranks these popular projects. And it's all about attention. Whoever gets the most attention, gets the higher ranking, gets more funding. There is a lot of talk about this positive flywheel, where it creates momentum, it trades more, it gets to launch, and then it all upwards momentum. But it's all attention-based. Just take a look at Luna from Virgils. It's all about gamifying attention and people are not really interested in the project. They know that every tweet, every time you get Luna to interact with your tweet or you interact with Luna's tweet, you get some tokens. But the key point is not about getting tokens. The key point is where is value coming from? If it's all just free tokens, free money just being issued without any value being created and generated, This is just a very long-term Ponzi scam or just snake oil salesman selling you nothing. So it's all about making sure that there's value being created. They're trying to do that by making sure that there's a community first and there's attention before it graduates to a bigger DAX and it trades more. But the risk is that you create token, you get funded, there's no utility because there's no product being built yet. There's no PMF, and then it dies away. I guess one positive side of this is that they're focusing on small cap projects, like your 20 to 50 mil projects. So it's much smaller cap. You don't need big basic money coming in. They're usually consumer facing, and maybe that could help change things. But you're just focusing instead of hundreds of millions in market cap, just much smaller cap, focusing on solving very specific issues, creating the right communities, to bootstrap this problem and solution. And then maybe that could be a better way to show transparency, to prevent rot, to have a strong social following that is very passionate about this specific small issue.

SPEAKER_03: 21:04

Yeah, I think well said. And I think that generally, you know, if you're a crypto startup and you raise 20 million from your seed round, you know, there's no really incentive to really launch a product, continue the business, you know, grow the ecosystem. And I think having these kind of milestone based approaches makes sense to me because, you know, before there was no accountability of any sort. You could just launch something and then run away with it. I mean, that was pretty prominent in 2017. I don't know how much of it is still ongoing today, but. Now, we haven't really seen these kind of milestones in proper fashion, especially, you know, these launchpads can self-regulate in that way to make sure that the projects are doing what they're supposed to be doing, i.e. building out MVPs and pushing out products, making sure that there's a product market fit, you have a community, et cetera. And all these things usually come before getting your 20 million raise, right? So I'm trying to look at this in a positive space because I've seen so much garbage in this industry way too much and you know i do want to see some things actually kind of work out now i just want to introduce a little market section for the listeners because valentine is the research analyst for brn which is part of blockhead he has something he wants to share

SPEAKER_02: 22:21

hi everyone the markets right now are kind of on fire and they're um Two big reasons why. The first one is that history was made when New Hampshire became the first U.S. state to hold Bitcoin as part of its reserve. And second, regulators have given banks and asset managers their green light to dive deeper into crypto, and that is fueling major momentum. Since then, Bitcoin is up 25%, Ethereum saw a 70% surge, and Solana climbed 40% over two weeks. This rally isn't just about regulation. Big money is flooding in, especially from institutions and corporations, which are currently loading up on crypto. This buying is happening at a breakneck pace. MicroStrategy, for example, is snapping about like 1.5 billion USD worth of Bitcoin every single week, which is huge, but obviously cannot last eternally. So we have to watch for that. when the pace will come down and the market will eventually dip. And another thing to watch for as everyone is waiting for an alt season is that even though Bitcoin is rising, the dominance has been going down of 3%. And this means that altcoins are both stealing the spotlight and are in the ideal scenario where the global market gap is still growing, Bitcoin is leading the market, and the rotation of capital from Bitcoin to altcoins is not even there yet. As to where we currently stand, we think that the market is still going to go up and we are still heavily positioned on digital assets with a clear overweight toward altcoins that we see outperforming in the coming weeks.

SPEAKER_03: 23:58

Awesome. So I guess, Nikhil, your ADA bag is pumped a little bit. Always. And it's moving towards the alt season. Obviously, ETH pumped quite a lot because of that upgrade. Valentin, what do you think the macro headwinds can potentially be? Because, you know, there's been a temporary lift on the tariffs. And I think that kind of like led the leeway to kind of all these things going up. But like, I still think there is a lingering macro headwind potentially coming. What's your view on that?

SPEAKER_02: 24:26

The current deal between the US and China for example, is only a 90-day pause. And it is the same for many other countries that the US are still negotiating with. And now that the pressure is not felt by the market anymore, a negative news could break the momentum and generate the new dip. This is the biggest macro headwind that I see right now because inflation is going down. The ratings are positive. And the last one that came out yesterday is also showing a reducing inflation, which is a Good for the market, especially Alcon bikes.

SPEAKER_03: 24:54

So, yeah, definitely. There's going to be a little bit of choppy. It's never a one way street to five hundred thousand dollars for Bitcoin or a million. Who knows? We're all in a rocky ship and that's how it will be. Macro headwind still lingers. So be careful out there. And this was your episode for the week. Thank you, guys. And for all the listeners that are listening, if you like what you hear. Give BlockCast a like and a subscribe on Spotify and Apple Podcasts. And for all your juicy Web3 news, keep updated on Blockhead.co. You can also catch Valentine's Daily View on the markets on VRN. Catch you all in the next episode.