Building the Perfect Crypto Portfolio | Avi Felman & Roshun Patel

Avi Felman

That I think that we've crossed the Rubicon. I don't necessarily believe in the idea of cycles anymore. I think that the market participant and the way that bitcoin trades is going to be radically different from the past. Why did bitcoin cycles happen? Because retail, what they tend to do in small ticket investors and people that aren't professional investors, what they tend to do is they tend to fomo in and they tend to fomo out.

And institutional investors do this, too. And so the composition of people in bitcoin has changed. And so I think what we probably get is we get a new dynamic that is going to look a lot more like gold than bitcoin of 2017 or 2021. Hey, everyone, if you have been listening to Empire, you know that Santi and I are fed up with unaffordable fees and frustrating transaction speeds that make the on chain experience basically unusable. So the arbitrum team reached out and they showed us the platform.

Jason Yanowitz

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All right, what's up, everyone? We got Asante and then we got Avi. And we've eliminated Jonah from this. We're doing a trading in macro. And where are we at in the market conversation?

But Jonah has been eliminated and in his place. We have. We have Roe. He's been liquidated. He's been liquidated.

Yeah, we've got Roe. Rosa legend. Been in space for a while. I was at Genesis for a while. Deeply understands the credit and trading space, and now he's on the venture side at hack.

So, Avi, Ro, welcome to show guys. Thank you. I already missed Jonah. We can bring him on another time like a special guest. But Ro's great.

Avi Felman

Love you too, Ro. Yeah. Hopefully I don't disappoint you, Avi. Yeah. Thank you, as always.

Jason Yanowitz

So, Avi, your markets dumped and you left San tropez, huh? Yeah, immediately. I couldn't afford it anymore, actually. I will say it's, like, amazing. Still, no matter where you travel in this world, no matter how expensive anything is, New York, just when you come back, it's, like, still the most expensive place in the world.

Santiago Roel Santos

Not really. Santi's like, oh, really? Like, I'll one up you. Definitely talking out of experience. It is definitely not like Dubai is.

I was just there for dug in 2049. Like, real estate prices in Dubai are, like, the same or more expensive in London. Of course, all Russians have moved there, but, like, there's a reason, like, real estate services are not. Not cheap at all there. Nor are they in Singapore, Hong Kong and Paris.

London. Monaco. Yeah, I mean, I'm not talking real estate realist because, I mean, in real estate, I don't want to compete with places like Monaco. That's crazy, the stuff that goes on there. But in terms of, you know, going out, getting food, buying anything from a store, it's staying in hotels.

Avi Felman

New York is still crazy expensive. We're in Santo perfect for two weeks. Got a two bedroom villa, like $500 a night. So let me get this right. You left Santrope.

Santiago Roel Santos

The markets are doing their thing. I heard you say that you're incredibly bearish. You have been bearish for a while. When did this bearishness permeate into your system? Because Soros has been shorting the market for the last twelve years and lost, like, a couple billion bucks on it.

So, you know, at what point did you start becoming bearish? You can track it on the pod in my public statements, but basically, after we failed to break seventy three k three times and ETF inflow started going down, stablecoin market cap stopped going up. When I say incredibly bearish, I'm not talking about 25k, I'm not talking about 15k. I'm just talking about, hey, it's very reasonable and possible that we can trade 52, and it's very possible that alts go down 70, 80%. And so far, that's actually happened in a lot of cases.

Avi Felman

I mean, a lot of alts are down 50% since I first started talking about this. And I just always go back to my base case, which is, do you know what made you money? Do you understand why you made the money that you did? And if I look at the market, why did we make the money that we did? Why did everything go up?

Why were things so amazing? It's because of the ETF trade. That was it. That was the key. And so now that the ETF trade is closed, we have the ETF, the inflows have slowed down.

We're starting to get outflows. There's no edge in predicting that those flows are going to come back. There's no, oh, you know, I figured it out. In exactly four weeks, these are going to come back. So my view, whenever the trade is over is you just step back, you de risk, and you just watch.

And so that's my take right now is I have no way of telling you whether this is going to go to 70k or fifty k first, but I'm leaning towards 50 because the trade is over. So, conversely, let me ask you a question. The ETF, you know, at what point do you, did that straight? Did that trade commence? Uh, and when you're tracking flows, because on the timeline, I don't know.

Santiago Roel Santos

I've asked this question, multiple people, like, who was actually predicting we would be all time highs, uh, and rates unchanged at like five and a half, no rate cuts, and then we're all time highs. Like, you're saying that is all part of ETF trade. A what? Like, a lot of people in timeline were skeptical of the ETF. It happened.

But, like, at what point were you bullish going into this setup? And, like, how are you tracking flows and where are they coming from? I mean, flows, you can publish them on chain, or, sorry, not, they're published every day. So you can just look at, not. Just for the ETF, just like generally, right?

Not just ETF, just like in general. Crypto flows. Yeah, crypto flows. It's pretty simple. You can just look at stablecoin market cap.

Avi Felman

I think that's a. And it's flatlined for a bit. Now hasn't, hasn't been going up. And then on the ETF, I mean, I think that's what's been driving the market more than anything else. So you just look at the inflows and outflows into the ETF's themselves.

And I agree with you that there were a lot of different opinions on whether the ETF would happen or not. But the overwhelming consensus, starting at about 30 to 35k, was that it was very likely that the ETF was going to be approved in January. I didn't bottom tick this, I didn't buy 25k, but by the time we broke above 30, we were trading 35. I think that was, we ended up getting quite long at my previous fund and we managed to capture a substantial portion of the rally. Now, when I look at the market, it doesn't really matter.

When I got, let's say I missed the entire rally. Let's say you're a trader, you're out there, you missed the entire rally because you didn't believe the ETF was coming.

That's passed. It doesn't really matter. The reality is that the market went up in anticipation of that trade. So the aggregate amount of people in the market said, we think the ETF is going to get approved, so therefore we're going to bet on it. And then you got that run up to about 50k betting on the ETF approval.

Then the ETF gets approved and you get a ton of outflows from GBTC that are somewhat offset by the inflows. And so everybody sells off. It goes from 50k back down, back down to four. And then what ends up happening is that the inflows surprised everybody to the upside. We started getting a ton of inflows into this market from brokerages.

People were flooding into the ETF's and that caused everyone to re rate again and say, oh, wait a second, maybe these inflows will continue for an extended period of time. Everybody got back in the market, the inflow started helping and that pushed us to all time highs. Now, what I'm saying is that dynamic has changed and we're just not seeing those inflows anymore. And so if you're a trader and you're trying to trade this on a one, two, three month time horizon, then it makes sense to de risk a little bit. Now, do I think that we're done?

That the cycle's over? That we're never going to get to 100k? That we're never going to get to 150? No, of course not. But I'm a trader at the end of the day and if I can avoid a 40% drawdown and an 80% drawdown in oats, I'm going to do my best to do that.

Right. Fair. I don't want to be caught. Yeah. Ro, you're trafficking, I guess mostly now in privates, I guess with hack.

Santiago Roel Santos

How are you guys thinking about it? Just in general? Yes. I've seen you on a bunch of rounds. We've co invested together.

So it doesn't seem like you guys are slowing down the pace of deployment. You're obviously trafficking earlier stage where as we were talking earlier, the rounds are not getting really out of whack. I think the rounds that are getting really out of whack are like jump from like 200 FTV to like two to 3 billion, like a month apart and you're like, did the tech just become incredibly better? But yeah. How are you guys thinking about it?

Ro Shun Patel

Yeah, no, for sure. And also just to be clear, we're still pretty active on the liquid side. So can touch on Avi's point first, just real quick disclaimer here is views are my own and should be only for informational purposes, not relied upon as legal, business, investment or tax advice. All right, now that that's out of. The way, how happy is your lawyer right now?

Super happy. He's going to roll. Plus one to Avi. Me and Yado, we're all. Yeah, yeah.

It goes for everyone. As far as with Avi saying, I actually, I don't necessarily disagree with it at all in the sense that like 50 after a run up like this is completely reasonable. I kind of think about this stuff from, especially now from a more zoomed out view here in the sense of risk reward from a 100k sort of bellwether for bitcoin. So if you're looking at 63, you're risking, I don't know, 23 to make 37 here. If you get down to 40, it's even better.

Maybe risking five to ten to make 60. That feels pretty good. So if you're a type of trader that can de risk now and then also have the wherewithal to load it up at 50 or 45 or whatever, sure, go for it. But if youre not going to have the confidence to buy over there or be on top of it enough to do it, I dont really see a reason to go crazy right now. That being said, having cash at least 1020 percent of liquid portfolio I think makes sense for the scenario that Avi described.

And the market is chopping and its not really painting higher lows per se. Definitely pretty cautious there. Thats just what I'd say on obvious front, like totally agree there. Yeah. And then on the private side.

Yeah, it's pretty much what you said there, Santi. Like pre seed seed is there's still some good stuff there and like the markups aren't ridiculous. And I've mentioned this before publicly. I think when you look back at 21 22, the sort of most regrettable kind of things you could have done is probably just doing like these larger growth stage rounds that are kind of like BC sort of deals but are still pre launch or pre tg, pre product even. That's where you can get into a lot of trouble.

So exercising caution on the later stage here I think definitely makes sense. But keeping the eyes wide open on the earlier stage. So that's kind of the approach here, I'd say. And, you know, there's still ways to structure good later stage ish deals, but at the end of the day, you really have to be careful here for sure. Yeah.

Santiago Roel Santos

Question for both of you guys. I mean you can always make money in any market regime environment, even though we're chopping, there's certain narratives that catch, you know, you know, good and bad. Right. Is there anything that you guys are paying attention to both on the long and short side? Stuff that you really like?

Something you definitely wouldn't touch, you know, deep end memes defi different ecosystems. Yeah, I can go first. I mean, well, one, I think shorting, if you're para trading ish like. Sure, but generally averse to doing that. Cash is kind of a short position in many ways, but yeah, I mean, if we wanted to start on the short side, I think there's some stuff this summer where you have a lot of supply coming into the market.

Ro Shun Patel

I won't necessarily name specific names, but the low circulating, high float kind of stuff, eventually there's a component of gravity here and you have to tread waters very carefully there. And a lot of these places are trying to push back, vesting through a variety of different structured deals. So that's kind of indicative of telling you where they think that this stuff could go on the deep inside of things. Just on that point, are you looking at recent launches and how they've traded? And most of them have just really just been down only some recent launches.

Although others you could think of Ondo, Pif Xi, even some of these low flow float kind of things that have done pretty well since their token is launched, but yeah, maybe more recently. Smaller though, but if you look at the larger ones, which tells you, like, how's the market going to absorb eigen layers, exactly, of the world, which are billions and billions of unlock? Like, arbitrum went from two to one. Yeah. And the ETH chart looks terrible.

Yeah. Because I'm an investor, so, yeah, each. Chart, when you price it against bitcoin, looks pretty, pretty awful. Um, but yeah, that thing looks like it's begging to go lower. We'll see.

Kind of where it finds the floor. But, yeah, like that short side, it's. It's really just this float stuff, I would say, like, that's. That's really where you. You can get into a lot of trouble, kind of longing some stuff, and then just get absolutely trucked in the order book over time.

So alongside, like, I think there's some catalyst driven stuff that could be interesting. Like, for example, like, I mean, this one's been talked about quite a lot and there's some positioning here that you have to be aware of, but something like maker where like, there's a clear sort of very telegraphed thing that they're doing that hasn't been done yet. I think crypto markets, like generally, yeah, there's some degree of pricing it in, but really, like, the day the announcement happens, like, that's when people actually, most people really realize what's going on and it's kind of a late follower mechanic there. So, like, catalyst driven things where there's fundamental changes to either even like token supply splits or, or what the token does, you can argue something like Jitto Buffalo has tweeted, very hinting at getting into some other business lines that could drive some narrative outside of just being a solid validator.

Similar things to that. Honestly, I don't hate Ethereum as well. Maybe that's a contrarian take as far as downside versus upside risk goes, because, look, there's going to be an Ethereum ETF and Avi just talked about this whole bitcoin ETF thing. It's unquestionable to me. If you think Larry Fink is a one trick pony here, that's just wrong.

It's a question of really when, not if. So, I think you could start positioning into that for sure, and it's been battered down and hated, but I think the narrative that ETH has today is even better than two to three months ago, because people think that there's this hot new thing that works flawlessly all the time, and then reality comes in and strikes. And at the end of the day on l one, you can always pay for finality and it's worth something and it has some windy effects. So I don't hate Ethereum, honestly. Yeah, maybe I'll get a lot of shit for that.

Jason Yanowitz

But what say you on Ethereum? Okay, so I don't hate Ethereum at all right now. I think that it's actually just from a price action standpoint, the fact that the market has sold off so aggressively and Ethereum has managed to stay up and actually climb and keep pace with BTC, that's a very good sign. I think that the market has generally been extremely under allocated. I gave my bearish Ethereum pitch a few weeks ago.

Avi Felman

I think I've been pretty unconstructive on Ethereum just based on the way that Solana has really captured a lot of the mind share away. But I think at this point sentiment and allocation is so bad for Ethereum that we're heading into a good time for Ethereum to recapture mind share and then prove that out with price action. I think that Solana metaphorically and physically hit its limits when stopped working. And I think that made people realize that this thing isn't infallible, which it seemed for quite some time. It's like, oh wow, Ethereum doesn't really have downtime in the same way that Solana has downtime.

And I do think that in the. Past it wasn't technically downtime as before. It was just a spam issue which was now resolved. Transactions are landing. But your point is broadly taken.

Ro Shun Patel

It was just. I want to clarify, it wasn't downtime. Yeah, not specifically downtime, but I think the issue that I've had with Ethereum for a very long time is that I think that the fragmentation into all these different l two s makes it difficult to have a coalesced community. I mean, you have people that are more interested in optimism, that are more interested in arbitrum, that are more interested in base, that are, you had the matic fanatics for a while. That seems to have completely disappeared now.

Avi Felman

But basically what I'm trying to say is that when you have a fragmented community that all in theory are part of one, but in practice are competitive, that is bad for token price and it's bad also for usage. Because what you get is you just get a bunch of different protocols, a bunch of different apps building on a bunch of different protocols that are effectively the same, that are just carbon copies of each other. Do you really need specific applications for base, for specific applications for arbitrary specific applications, for optimism? I think it just dilutes Ethereum, whereas Solana captures everything because it's just one. And I am seeing that still play out.

So I don't actually know how that resolves. I'd be curious to get your take on this, Santi. Are you? But at least from a sentiment standpoint, Ethereum is in a good position to get reallocation. I disagree.

Santiago Roel Santos

I think the ETF, it's the next one, right? So you could expect similar price action. To your point. It's telegraph it's coming. There's six different or plus applications for the ETF.

It's going to happen probably sometime this year. And the question perhaps more nuance is, okay, you're saying we chop. Both of you seem to think like we're probably. Maybe we chop for a couple months. You know, there's been pretty significant price action.

Um, it always serves to have some cash, you know, to go shopping for ethereum specifically. So if you're constructive, ethereum around certain catalysts like the ETF, do you hold spot ETH or do you go along some of the l two s, like Arb op or know starkware or some of the other ones, but primarily the big ones, like arbitrum. Optimism, like the relative valuation of like ETH relative to an l two. Are you long that short? That, like, how do you think that trades?

Avi Felman

I'm personally short it.

Jason Yanowitz

As in you. Think you think ETH will outperform the l two s? I don't know if ETH will outperform the l two s in an absolute sense, but in a risk adjusted sense, in a liquidity sense, for sure. I mean, you might have ETH up 50% and maybe arwatrum's up 75% in that same time period, but I'd still rather just buy more ETH. I completely agree.

Avi Felman

I think there are just too many idiosyncratic issues with l two s. You just don't know where the activity is going to actually flow. You can make your bets on arbitrum and optimism and starkware and cksync if they launch their token in a reasonable amount of time. But I don't think that if you're bullish on ethereum, you buy these things carte blanche. You have to really have a specific thesis and be bullish around that specific product.

You can't just say, hey, I'm bullish on ETH, therefore I will buy all of these l two s because I think there's a very reasonable chance that, you know, the supply side overwhelms them, that they don't actually capture user volume. So I'm just. If you're bullish on ETH, the way that I would play it, if you really want beta, is you buy nfts. I mean, what about something like Coinbase with base? And, you know, they're making a bunch of money through sequencing fees.

Santiago Roel Santos

I believe now they're going to publish earnings on May 2 or third. I mean, the stock's a huge run up, but nonetheless, I'm curious. Yeah, I don't hate that either.

Ro Shun Patel

If you land on the fact that you're constructively bullish ETH or something, you have ETF, whatever reason, you get to it, and then you figure out some amount of capital you want to put towards that. I would go like at least something like 80%, maybe a little lower, maybe a little higher into ETH itself. And then you can do some nfts, some meme coins, coinbase, whatever, for the tail end there. But you want to be right. You want to make money.

If ethereum does what you think it does, and you can get really tied up if you have that view, and then you go express it in l two s or something random, and then get run over by an event you hadn't foreseen, or an unlock or a holder behaving erratically because the liquidity is just way worse. So that's my take on it. And I think Coinbase falls into that for sure. Yeah. Avi, I want to go back to your current state.

Santiago Roel Santos

What would invalidate your overall bearishness? This idea that we're going to chop for a while. Are there some things that you're looking at that might make you turn? Yeah, two specific things. I want to see stablecoin market cap start going up again.

Avi Felman

I want to see real inflows. I want to see genuine inflows into the ETF and an understanding of why they're coming in. So, for example, one way that this could be invalidated is, let's say we get 300 $400 million of inflows into the ETF, and it's coinciding with these issuers telling us that they're ramping up their marketing efforts and they're targeting new types of clients, which you can call these people up, you can look at their press releases, you can look at what they're saying on Twitter, you can try to figure this stuff out. So if something materially changes in terms of inflows, and I understand why, then that would invalidate my thesis. The other thing that could invalidate my thesis, not around BTC, but around Ethereum.

For example, I mean, yeah, if we start getting activity on Ethereum, go through the roof. If we start getting. If it's very clear to me that there's front running of an ETF on ETH, which is probably ETH BTC going to 0.55, maybe we need to hop on that train and start punting ETH. Or if there are real breakthrough applications that aren't just meme coins going up that are actually generating real users in a meaningful. In a meaningful way and real revenue for a variety of different protocols, then that could catalyze a run in itself.

You know, just a few things that I'm always looking at to be invalidated because look, at the end of the day, I'm bullish on the space. I wouldn't be here if I wasn't. So I'm always looking for reasons to be bullish. It's generally hard to find me. There's a bullish bias.

There's inherently a bullish bias. For me to be a bear. It's actually a pretty high bar for the most part. What do you think about Ro? I want to give you a chance to just think about.

Santiago Roel Santos

Respond to that as well. Well, yeah, I think those are really reasonable signals to look for. I also will kind of throw one out of left field here. In early December to February. We chopped for about.

Ro Shun Patel

I was looking at it about 70 days in the 40k range. Currently our 60k range chop, including the 59 six is about 57 days. One way to play this thing with volumes getting crushed is just by at the money straddles. Like go long volume into the next two to three weeks. You could be upside down sign.

I do feel like the sense of some potential energy brewing. Something's going to happen and that's kind of a way to play some sort of move in either direction. So I don't hate that way. But if you're really looking for something to do while you wait for this shop, because maybe it can be boring. I don't hate the.

At the money implied volume here for bitcoin. I'll just throw that in there as like, maybe the response. Yeah, you also don't have to do anything. Yeah, that's the other way.

Avi Felman

There's no crazy. Yeah, I just, you know, throwing it up there. Always have to be looking for a trade. You always have. We all just go to centro pay and just want to go.

Jason Yanowitz

Yeah, take me to centro pay off it. Look, I'm down, guys. Let's go. It's offseason. It's cheap.

Ro Shun Patel

Yeah, dude, I will say when you're bored and like the last thing you do is go long ball like that. That's really the great thing. Ro, how do you square this idea that you're, that you don't love the l two trade, but then hack is maybe making some investments in like, you know, eclipse or movement or monad. Like those are, I mean, some of those are like evm l two s, right? So they're parallelized or the bring and move to the.

Jason Yanowitz

To ethereum. But like, yeah. How do you kind of square those two ideas together? Well, I want to be granular about it. If you're bullish, eats going into like an ETTF catalyst, like this cycle, whatever, and it's going to go up and you want to express that view, I think eats a very clean way to do it.

Ro Shun Patel

Like hack, this is a ten year venture fund cycle here, and the price matters a lot. So on that element and scale at the right price, empirically, you've seen these things do really well. It's kind of hard to, to ignore that. So that, that's, it's just different time. Frame at this point alone.

Santiago Roel Santos

Like, I've asked this question a number of times and I've actually looked at data, like, across all my investments. If you would have done an infrastructure deal or pretty much any investment, sub 50 million fully diluted, it's generally positive. Ev, you're taking duration, risk. Maybe your hands are tied. Sometimes that's a good thing that you can't actually, you know.

Yeah, but, uh, it's, uh, it typically, it's really hard to outperform like east and bitcoin over the long term. But generally speaking, like, it's all very price like, driven, which is the new ones you talk about. It's very different if you're investing Monad 3 billion versus 100 million. Yeah, wildly different. And the question I'm maybe, Avi, not as appropriate for you because I think you tend to traffic more on liquids, but, like, if you were to, you have a portfolio, you can draw it from scratch today.

What would your relative allocation be across? Just stuff, Solana, you could buy anything. And I want to understand the ratio of liquids to privates, like how much you carve out. How do you play that? How do you think about, like, timing?

Ro Shun Patel

That's a really tough question without putting numbers into it, because I might mess up adding up to 100. Well, maybe I can a little bit. We'll help you, don't worry. Yeah, yeah.

Okay. Well, I think, you know, it really depends on your propensity. Like, what are we talking about here? Are we talking about, like, great question. You both heard?

Yeah. Professional money management. And you have size. It's not like, so, like, you know, maybe. I don't know.

Santiago Roel Santos

I think the answer changes on the margin, but just let's assume it's just 100. Yeah. Let's say you're money manager and you have some degree of valuing liquidity. So at minimum, I would go at least just start with, like, keep 50% liquid, of which you're going to want to have a cash position. You can earn decent yield doing stuff like base, whatever, fire into, like 50, 40k if you get there or something like that.

Ro Shun Patel

That's good. So let's say of the 50% cash position, of the 50% liquid, 20% cash, then the rest you can buy a smattering of solana, ethereum, bitcoin, coinbase. On the private side, then I would split it up. So that's like, kind of anything in. Particular in the ratio of, like, ETH to solve, particularly ETH to sold BTC, like what ratio?

I mean, if you don't want to mess it up, I would go something like probably even split across them if you want. It's kind of like when you do wealth fund or these robo advisors. If you want a little more risk. I would go heavier. Solana, to be honest, there's more upside there.

Just sort it by market cap. Right. If you want a more middle of the road bag, go. Bitcoin. Ethereum.

I actually don't hate. If I had to pick one, if you had to put a gun to my head, I would probably go a little overweight. Ethan. Then bitcoin, then Solana. If I had to pick one of the constructions.

And I think a lot of that comes from what Avi was talking about earlier, which is just positioning Ethan general hatred towards the thing and how awful the EBTC chart looks. I'm expecting to be wrong on that chart, but not to be able to find the floor just being like, it looks pretty bad right now. Let's just start. So that's that on the private side, does that make sense? On liquid?

Yeah, yeah. On the private side, I think you have two main things that you could do here. It's like there's the infrastructure, there's the l one's kind of things, or Alt l one s. Then there's more of the application layer. People building things on application on l one s in existing block space.

And the latter tends to be more like pre seed seed stuff. And the former, at least now is more like growth, although there are some newer ones coming out. But a lot of the big rounds kind of got done. It does pain me a little bit that applications just empirically accrue less value than the l one s because they are so cool and I love taking calls with them. But depending on the size here, let's say size is not a constraint.

Like you're not moving a billion dollars here, or something smaller. If you can get applications at the right price, I'm talking sub 20, sub 15, even going 20, 30% going of that 50%, let's say 40%, 30% into applications on promising ecosystems that are coming out relevant in this cycle, which would probably be like Vera chain, you can argue, maybe Monad, depending on how that comes out. And then maybe someones that are moving to their own l two or roll up that are promising and have users something like a hyper liquid or whatever it might be. Those things at the right price early would make sense, and then the rest I would focus on infra plays. Like l one s.

You have to be dicey there because you have to be careful because a lot of them have been marked up a lot. But look, like if you're thinking on the long term and thinking about the relative value of salon and ethereum versus these things, like even some of these pricier rounds, or even where these things open liquid, you can earmark that for like, day one tea whops into things that just list. Hopefully maybe you get lucky. Maybe some of these things list when bitcoin's trading at 50, like, yeah, you're looking good. Day one, potentially there and then that's kind of how I do it.

And then, yeah, that's pretty it. Maybe you could do like 1% into meme coins. Maybe I should throw that in there. Yeah, yeah. Avi, before I go to you, ro, on this point, just a little bit of nuance.

Santiago Roel Santos

You're speaking from like a fund that has like a ten year investment horizon you're comfortable taking, duration, risk. You're kind of playing. If you're investing in a private round today feels like you're probably going to catch a next cycle kind of thing. Is that the general thesis? Yeah, that's from someone that doesn't feel like they need any degree of liquidity, for whatever reason, over the next, like seven years.

Ro Shun Patel

I would say if you value liquidity a lot, just change that initial ratio, make it 70% liquid, 30%, and then up the cash position a little bit because of the volatility. So that's kind of how I think about it, generally, it's for, yeah, if. You'Re okay with the duration, ave over to you. Yeah, I think so. Just to preface this, I still do a little bit of angel investing, and so I do think about how to put this into the portfolio.

Avi Felman

The way that I would allocate liquids right now is I would focus heavily on making sure that you have cash to buy if things really fall out. So I'd probably be somewhere between 30% to 40% cash. But if you're allocating and you want to just say, okay, I'm in crypto, then the way that I would do it, especially if you're looking for, you know, to hold and not trade over the next year, two years, three years, if you just want to set and forget portfolio, what I would do is I would probably have it something like 30% btc, you know, 30%, you know, 20% ETH, 30% sol, and then basically anything else that you find valuable on the application side. I probably wouldn't choose any other l one s or l two s to put in that basket, but anything that you think is a good product or you've done research into that you really like, I would allocate to the application layer across these types, because I do think that if you're going to bet on crypto, you have to make the bet that applications are going to be winners in the future. The whole meme coin game cannot last that much longer.

This cannot last another year, another two years, another five years. There will always be meme coins that will do well, and there will always be meme coins that will make. That will make you money. But if we don't have applications and your investments and crypto are probably not worth anything anyway. So I think it's important to have to have some allocation to this.

To this sector. If you're a set and forget kind of person, if you're just a, hey, I want to allocate to crypto. I do think that right now, allocating allocating to privates is tough just because you have to be a very talented investor. Like, you know, you have to be a rower Asante to get access to these good deals right now. Otherwise, you're not gonna.

Santiago Roel Santos

In the other angels category. Yeah, notable angels.

Avi Felman

I mean, realistically, I just don't think it's at this point in the cycle. I just don't think it's reasonable to assume that unless you already have a brand and unless you've already been a good angel, that you're gonna get any allocation, any good deal. So there's probably a ton of adverse selection to people that are trying to angel right now that aren't able to provide a ton of value to these projects. I mean, even if you are able to provide a ton of value, if you haven't in the past and you don't have that reputation, you're very difficult to get in. Right?

So I think for your average investor and even for your average vc fund, it probably doesn't make a ton of sense to be doing a ton of venture right now. All right, I mentioned them in the pre roll. Now I'm going to bring them up again. It's arbitrum. Dante and I are really fed up with these high fees, and we're really excited to have teamed up with Arbitrum for the next couple of months on Empire as the leading Ethereum scaling solution.

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Santiago Roel Santos

What about. It's an excellent kind of analysis from both of you guys. Really insightful. We've had the Solana auction multiple rounds. Second one, close yesterday, I heard the discount was very, very, a fraction of what it was in the first one.

How do you interpret that? And I think it was, like, widely oversubscribed. I have two insights in it. I read into that and say most funds are probably underexposed to Seoul and are kind of waking up. There is obviously, it has had issues, but I think most funds are very much ethereum centric.

Still are the vast majority. Now, there's been a huge price up in Solana, but funds are kind of trying to catch up to the trade, and they're taking, arguably, you look at that and you say, why don't you just long sole. I mean, isn't that, like, a strong signal that the market, like, if it's seven x over subscribe, it's pushing it up, like you're willing to invest. The vesting is like multiple years, four or five years. Isn't that, like, a clear signal that you can take and anyone can look at and say, well, in many ways, you think about flows.

You have a lot of dry powder from a bunch of crypto funds. When I didn't get at the auction. Is that something that you look at and say, okay, well, maybe there's something here. Not to the. Not to the extent of, like, an ETF approval and the magnitude of the flows, but also, it's a fraction of the size of bitcoin.

Avi Felman

I do think a lot of that, just understanding how funds operate, a lot of it is the idea that, one, you can hedge it, if need be, at a future date, and, two, that the yield looks amazing because you're buying at a discount. Right. Just using simple numbers. If Sol is giving you 7%, but you're buying it at 50 and it's trading at 150, you're getting 21% on your dollar. Right?

Ro Shun Patel

Yeah. And so the yield looks really good from that perspective, whenever you buy something that you could stake at a stake at a discount. So what I would say is it's probably 70%, what you said, and 30%. It's actually. It's a good trade.

Avi Felman

Like, it's a good. Even if you.

Santiago Roel Santos

Someone outbid, like, someone. Hunter, what was the vest on the first. So the first price was. And the vest was, like, four years or something? Or five.

Ro Shun Patel

Yeah. I will add, like, the one thing you have to keep in mind here as well, is if you're a natural soul holder and have had a bunch for a while and you're in, like, the long term territory, or maybe you're in a jury system, doesn't even have taxes. It makes a lot of sense to just sell it and rotate into the liquid or into the. Into the illiquid kind of thing. And I think a lot of that was, a lot of that.

A chunk of that flow is definitely recycled, so that's not necessarily net new buyers. So you have to be careful about that component. Good point. And the other is, I mean, I was looking at, I think maybe it was figure some of these places where they have, like, a Solana investment opportunity, like, just smacked on their front page. And a lot of this flow is like people writing a good memo, reeling in some lp's, collecting some carry spv style stuff, where the actual people that did the pitch and, like, were making a little bit on it.

It's relatively risk free to them. So that's the second thing you have to be aware of. So those things could dampen the, hey, this is like a no brainer, like, good demand situation. That being said, I do think it's less than 50. Like, it's probably less than 50% of the flows that kind of fall into either the two categories there.

So on net, it's probably fine, but there are things that you have to double click into to make sure that you don't think of this as just pure. Like, hey, all this is coming in to buy this thing. And, yeah, the last price, if the rumors are right, because, to be clear, was not in it. It seems pretty aggressive, like, within single digit percent of where we got liquidated. Wicks to that was not the case in the.

Santiago Roel Santos

In the. Yeah, that was the point that I was trying to make. It's like, um, around. It's impossible to time these markets. I'm not one.

You guys are more sophisticated in that front. I do. I do pay attention when I see kind of this type of exuberance, right, where, you know, the amount of capital and the terms matter a lot, and if you're taking something that has over a year lockup, there should be a certain degree of discount. And I understand Sol is like, you know, different than, you know, you know, application or whatever type of investment. Just by sheer market cap, the discount should be tighter.

But still, like, you know, I, you know, last cycle, like, we saw a lot of funds that had no interest in crypto come in late by stuff like FTX, and which is no diligence. Like, let's just go. Like, I want exposure. You have now Jane street has over 5% of all the Coinbase stock. The 13 f is also misleading road to your point, because they might be doing a whole bunch of other stuff on the back end.

Ro Shun Patel

Yeah, that's like when Renaissance owns 5%. Exactly. You can't just look at that and say, oh, they're incredibly bullish. Coinbase maybe, like shorting it or whatever, you know, it's just difficult to just make simple analysis. But nonetheless, I'm curious, more of a general question around the timing of the cycle.

Santiago Roel Santos

Like both of you, sort of near term bearish, still constructive. Long term. It feels like there's not been an invalidation of a bull market. You have drawdowns in a bull market. It's normal.

Any bull market has had that. I'm curious if there's anything else that you guys are paying attention to in terms of how long this cycle lasts, in terms of flows, in terms of inflation, and the market's ability to absorb that applications, how are you guys feeling about generally 2024? I would add, on top of that question, one thing that would be interesting to hear is both your guys take on comparing where we're at today in this cycle, the last cycle, is this the beginning of 2021? Are we in 2020? Where are we relative to last cycle?

Avi Felman

I'm a cycle denier, personally. Yeah, I was going to say something like that. Elaborate, please. I think that we've crossed the rubicon. I don't necessarily believe in the idea of cycles anymore.

I think that the market participant and the way that bitcoin trades is going to be radically different from the past, in large part because of the ETF, but also because it's now so large, it's a genuine macro asset. And so I don't think that we'll get those same 80% drawdowns. Ten x 20 x 30 x ups. I think that it's much more likely that we get muted drawdowns. And when I say muted, maybe 40%, 50%, and then slow climbs back higher with shorter parabolic runs on a march to the right over the course of the next ten years.

That's my take. I think that bitcoin volatility is going to dampen, because think about this. Why did bitcoin cycles happen? Because retail, what they tend to do, and small ticket investors and people that aren't professional investors, what they tend to do is they tend to fomo in and they tend to fomo out, and institutional investors do this, too. That's why we're not going to lose sight of, yes, there will be periods of massive expansion and then big collapse, but it's going to be muted because institutional investors tend to move more slowly and allocate on longer term time horizons.

And that is the now shifting holder base of BTC away from your fast money speculators to people that are allocating as part of a portfolio. When I say institutional investors, I don't necessarily just mean the hedge funds of the world. It's a mindset. Your person that lives in Iowa that is buying bitcoin through their Fidelity 401K is much less likely to trade that than somebody in 2017 who's 22 years old and trying to hit 100 x. The composition of people in bitcoin has changed.

I think what we probably get is we get a new dynamic that is going to look a lot more like gold than bitcoin of 2017 or 2021. Yeah, I'll add to that. I largely agree with a lot of what you said there. You look at previous commodities, particularly oil and gold, after the existence of a futures market, and then in turn spot ETF market, the volatility just naturally dampens over time. And part of that, it's like a maturity thing.

Ro Shun Patel

So you have structural differences cycle to cycle. And everyone likes to say, maybe this time is different, whatever, but in this case, the ETF is a big structural difference and how that plays out is. Going to be different. And I think when you think about cycle tops or really what you're really asking is when do I sell or de risk to save myself from a 60% drawdown and then rotate back? I think if you try to pick that point right now, and if it's in November of this year, if it's in March of the year after, whatever, it's really hard to do that.

There are better ways to do it, which is you can just look at the same things each day. And then when the things give you the signals that you want to de risk, then that's when you can call a cycle. And one of the main things to look at, I think there is, there's this interesting, it's like Junglebeat relet app. Some kid made this. I don't know, we can maybe link it or whatever, but it's a very good sentiment indicator with like App Store rankings and things like that.

And it's. And you remember November of the last cycle when Disney and Nike and all these brands are saying wag me and friend on Twitter. And when you feel like the reach of celebrity. Yeah, that thing, it's pretty good. You go down to the bottom.

There's like, this is really all the way at the bottom. There's a really good. This thing. Yeah, this thing is really interesting. So I like this indicator quite a lot, though.

Those are the kinds of things you can look for if you're thinking about how to do it. Actually nailed the kind of 70k thing too this year, which is interesting. Those are the kinds of things I look for when you're thinking about how to de risk. But yeah, I can't say with a straight face like, hey, March of next year is going to be the top for x, y and z macro reason and my expectations of the fed. All this stuff changes and you have to be just, I think, hyper aware in the moment.

Jason Yanowitz

Ro, how do you think about. So the last cycle can largely be credited to credit, I think whether it's like, I mean, Genesis book got fricking insane, obviously. You could say Luna and Terra was like a version of credit. I heard you talking about that on another podcast. You know, Blockfi Celsius, it was a very credit driven cycle.

I think in 2021, market basically boomed in 2020, and then credit led the rest of the cycle, I would argue. So right now we're not seeing that. You're seeing a lot of, I think, pent up demand for credit, but the supply has not come in to fill that demand. So what's your expectation for how credit evolved and drives this cycle? Yeah, so one thing I'll start with is I think humans will always try to price a yield for a credit risk.

Ro Shun Patel

It's a natural thing that you always perennially do. So to that end, credit will come back in some form over another, and it's starting to in its early stages. I think it'll just be done in a lot smarter way. There used to be this significant element of trust in crypto credit markets, which is, it's sort of ironic relative to what crypto actually is, but things just happen. And there was like, hey, like locked.

If you want to lend against locked warrants and random things like that, that isn't really liquidatable. Good collateral. People did it, obviously, like the grayscale thing was a big part of that. I think now there's just generally more awareness around what is good collateral and how you can liquidate it. We even saw it over this weekend with Renzo ETH deep quite a lot.

Some of this stuff is pretty illiquid and so you have to be really careful, I think, like stuff like what? Some take for example, something like morpho. What they're doing is kind of cool, where they're like, hey, you can isolate this risk for lending pools into these specific sort of vaults and with managers of risks that do the thing and you as a lender can choose which one you want to be exposed to, and it's sort of segregates this whole thing out into these sort of silos where one can be more risky than the other, but there's no contagion risk between the two. And I think generally, smart contracts help facilitate that structure of credit markets. The problem you had before was that all this stuff was bundled into one net pool of contagion prone credit.

So I think the future is more calculated. It has better collateral, of course, but also more isolated collateral and less contagion risk, and more on chain versus off chain, and less lending against locked warrants or saps or anything like that. And I think that's the healthy sort of rebuilding of the credit market that will occur. But it's going to take some time and it's going to be slow. And.

Yeah, like, a lot of people, I think, GCR tweeted this. He's seen a lot of people get burned by just looking for one thing in life, which is yield. Right? So, like, there's this element, like crypto is volatile innately. And if you're bullish, thing like owning spot is already a form of return, quite a lot.

Like, you don't need to complicate it by earning maybe, like, an incremental yield on your bitcoin for taking some crazy risk on some bitcoin. L two with the trust assumption. You don't understand. So there's been that shift. But I do think what I said before, it's going to rebuild in a healthier way in more isolated, smart, contract enabled functions to reduce contagion risk and come back in a better form.

Jason Yanowitz

Do you guys think that revenue fundamentals in Defi will matter, the cycle or. No, there's a lot of, like, maker revenue charts floating around Twitter, like makers capturing, I think, 40% of the fees in Defi right now. Like, will these matter at all this cycle or no? I mean, yeah, go ahead, Avi. I think they will.

Avi Felman

I mean, you already see it with Maker, right? It has outperformed a lot of defi just by virtue of actually being. Being a good product. I think that it's unfortunately dwarfed by the gains that you got from meme coins, but it's proven out that people do actually care about good products. And I think that moving forward, what we need to see is we need to see gains in other non productive areas go down, and then you'll start to see the market care a little bit more about things like revenue, things like good products, because they're going to have to put their money somewhere, and it's a matter of when they're.

The reason that it, quote unquote, doesn't matter is because if you can hit a ten x on meme coin, then you're going to do that instead. But as that starts to dry up, which I think it will over the next year, this is going to start to matter a lot more. When you say non productive, this reminds me a lot of Charlie Munger, who was critical of games. When you say games, are you talking about like meme coin trading games or just gaming in general? And how do you make the distinction between what is productive and what is not productive to the crypto economy?

I would say if it's solely based on. Other than BTC, if it's solely based on greater fool and there's no. There's no actual product there, other than community. Community is obviously very important. But the way that I would just say it is, if there's no other product than community, then it's an unproductive asset.

So I'm thinking of your shibas, your dojas, your, you know, Pepe's, Pep Picasso's. Anything that is sold in Sotheby's, for that matter. Productive. Yeah. Entertainment value is not productive.

I think. Look, you know me, I do punt meme coins. I do buy these things. I'm not saying that they're not going to. That they're not going to go up, in fact.

Santiago Roel Santos

No, no, no. They can go down. I mean, the question whether they go up or down is irrelevant to whether they're productive or not. But I think that I do. The way that I would describe it is I don't think that crypto can survive if it's comprised of solely, you know, entertainment value.

Avi Felman

I think it actually needs to be in order to grow past where it does today. It needs productive assets like maker to really push through. I think that there's just an upper ceiling that we're probably close to in terms of non productive asset. I mean, $100 billion worth of value, 200 billion. I don't think there's a trillion dollars here in terms of productive value that can be created by the market.

Ro Shun Patel

Yeah. To that end, avi, actually, I think there's been a pretty promising sort of cultural shift in the way I've seen tokenomics get constructed, especially at the earlier stage here. I think part of it comes from the fact that Uniswap has put out this proposal for potential fee switch. How that plays out, regardless that's out there and then DyDX moved to this app chain model, which is quite promising. You're starting to see more, I think places just be less scared of not doing just a pure governance token and wishy washy figuring it out later.

They're willing to take the risk and actually drive value to the token and I think it matters less. Honestly, at the earlier stage, no one cares. Keep it governance, whatever, it's fine. You're not making huge revenues. But it is really interesting to see when things get big like maker, like uniswap and like Dydx, they're making that shift.

And I think that's the promising part on the fundamental side of things. And I think over time, objectively that will matter. And I don't think meme coins necessarily need to die to make that happen. They can exist tangentially.

Maybe you could capture some flows to meme coins that, but I do see that trend formulating right now and I think that's promising. On the fundamental side, I think the original question was maybe more related to like indicators and signals. Sure, yeah. So for like mature stage things that are thinking about putting their token into a more valuable value accruing state, like I do think like, yeah, looking at some of these, how much fees are paying and like what reasonable split could go between the token versus like, you know, fees to LP's or other participants on the platform? Like that stuff I think is quite relevant and less people look at that, but I think they also.

I think it's a mistake to look at it when something is in its nascent. See, it has to be more mature to flick this on. No one cares if you're making 100, 200k. It's got to be big. The other things I look at is ethy a lot discount to spot.

That could be quite an interesting trade coming up. It's pretty deep and I think that's a function of sentiment and ETF doubts. I mean, historically the GBTC trade, you could have bought bitcoin at like nine k in the bear or something like that. I forgot what it was. Best trade ever.

Yeah. And bitcoin has done this whole thing and like Ethereum is going to let you do it again in also the same products like Ethy versus GBTC. Like, I heard Solana too. That's pretty discount as well. Yeah, there was a big premium discount.

The thing is that one's pretty thin, I think, like as far as float goes. So kind of see, so ethy discount is definitely one. I panic less on big exchange flows. I think those get like kind of a lot of hype on Twitter. Like, oh, like big wallet moves x to y.

Sometimes it's fine for majors, I think it matters less for smaller market cap coins. Like, yeah, there could be something there. But for majors, I think, yeah, that's super short term and a little bit, I think, overhyped relative to what kind of signal and actionable insight it gives you. And then obviously there's the usual ones. Basis is probably still the most important one historically.

And moving forward, there's like never a day where I'm not looking at funding rates. Yeah, funding rates for me are the most important. And then like, also like stablecoin yields in money markets like Aave and compound maker. Yeah, yeah. If that goes at hand, you just know people going really long and just.

Santiago Roel Santos

And where those flows are going also. Yeah, that's underappreciated for sure. The latter. Yeah. I'm curious.

I mean, Ron or you gotta go in a bit. But like what? I'm good. I'm good. Okay, what do you guys think?

The market, or just general market participants are getting really wrong or have gotten really wrong, particularly as of late? I have one.

Ro Shun Patel

Okay, I'll go first. I think this is going to be controversial. I think bitcoin defi, that's the one that they've gotten wrong. And I think there's this narrative that OG bitcoin holders are going to wake up out of the villas of Saint Tropez and start using defi because they can canonically do it at the end of the day. When you think about these things, one is if you have block times for whatever bitcoin l two, you're building and they're faster than ten minutes, there's some trust assumption in there at minimum.

And some of these l two s look no different than ethereum for what ethereum is to bitcoin as this bitcoin l two is. It's just branded in a way that it makes it seem adjacent to bitcoin. If you do have ten minute block times, there are generally less trust assumptions. But still something there. Like maybe it's an off chain index or something that's computing smart contract code and no one asked for Defi.

But ten minutes and slower and more painful to use before. This is not like I don't think this is unlocking new bitcoin og holder liquidity. And I think you have the same pool of bridge pro PvP capital sloshing around in these bitcoin areas. And I think that's apparently controversial because a lot of people think, and I get the positive side, which is like look at ETH two s versus ETH. But I generally agree most of the pitches have seen from these people trying to build an l two on bitcoin.

Santiago Roel Santos

I'm like, you fundamentally don't understand the bitcoin holder yet again. So like, if you look at like defi summer, peak defi summer, you had like badger, you had TBTC, like WBTC. Like people could bridge over to Ethereum. The core majority of bitcoin holders are like, no fucking way I'm gonna bridge my stuff over to this shitty ecosystem with smart contract risk. But ironically, they ended up depositing a lot of their stack in things that blew up.

Like blockfi. Yeah, exactly. So I kind of like, I see the aggregate size of blockfi and the deposits that they were able to gather as kind of a good proxy. Not just blockfi, but like voice like some of the other players, because ultimately a lot of bitcoin holders were just more comfortable or just wanted to capture some yield. To your point, it just at some point gets at you.

I'm not seeing the entire market. But um. So I do think like uh, there's some technical debt of it, like stuff like stacks and stuff like that. I think new designs, I mean, obviously buy is because I've invested in two. But I do agree with you the nuances most designs are just because you hear a lot of teams saying, well, look at the l one, l two stuff.

Like most people are punting in optimism. They don't even have fraud proofs today. Even off chain labs disclose some vulnerabilities in the, in the fraud proofs that are in beta. Like without fraud proofs, it's a multi seq. There's just a huge amount of risk.

And people are saying, oh, you know, that's going to be the same bitcoin. I agree with you, that's likely not going to be the case. They're probably overstating the market size at least. Yeah. And for now, a lot of these things look like, hey, stick your bitcoin in this little box, lock it up for 30, 60, 90 days and get this other little thing.

Ro Shun Patel

That's not what bitcoin ogs want. They don't really, they just, they want like protection, purchasing power and inflationary long term stuff. They don't want to put their bitcoin against some random token in an amm on, but feel comfortable about it because it's all running on bitcoin. And I do think the existence of blockfi or stuff like that where yeah, on one hand they did go into that, but the fact they blew up doesn't really, I don't think, help the case here. That part happened too.

Yeah, I'm not necessarily super like net bearish on it. I think the hype relative to reality needs to be tempered, if that makes sense. Yeah, I think that's a reasonable take. I think the one area where I'd probably disagree is I do think bitcoin nfts have lasting staying power just because of the permanency. I agree with that too, but I.

Avi Felman

Agree with you on bitcoin defi I think for me, and I'm very curious to hear everybody else's take on this, because this is somewhat loosely held, but I haven't found any good arguments against it. I'm pretty bearish on the idea of restaking. I know everybody gets super excited about it and everyone gets up in arms, but I just don't see where the demand side is really going to come from to justify the crazy valuations that people have assigned to these types of products. And so all of the hype around these renzos of the world and Eigen layers, and I don't see how they justify the valuations that they have based on the expected demand for the ETH that's restaked. And so I think we're going to have a reckoning where all these things are probably down 80% over the next year.

Santiago Roel Santos

To your point. I agree with you. I think it's unproductive.

That was my question around how do you define productive applications, productive use of capital, because people are like Eigen layer is sort of the saving face grace of Ethereum. This cycle, it sort of like has reignited all this interest. People look at TBL and deposits in Eigen layer. It's like, so what? Okay, you're going to take, it's like all financial engineering, but what's the actual productive use case of it?

Some designs, like I get like ethos, which is trying to like lower the security cost to spin up an app chain using restake teeth. Like, okay, like I get the like shared security model, like allocating that perhaps more efficiently, like principle. But I do agree with you. That's different than I think, the whole other component, which is just like restaking and it's just yield on yield on yield on yield. And it's sort of, we know how that ends.

I mean, it's from, in my mind, I think meme coins are far, vastly more productive from an onboarding perspective, from an attention perspective. Arguably, yeah. Like, regulatory stuff. Like, people are critical of the industry, like, on the margin. But I think they are more productive in that sense than restaking.

Ro Shun Patel

Like, oh, I think I got to. Take the other side of that one. Like, if you're. Yeah, what's the productivity of restate, like, like, the product ten times, like, recursive leverage. The productivity is that if you're an operator or you're a founder today and you want to go start something, like, you the.

Jason Yanowitz

I don't know, ro, I saw you guys invested in alignment or, like, aligned or whatever is called, like, they're roam. Yeah.

Santiago Roel Santos

I'm not there distinction between Eigen and, like, everything else that is now on top of Eigen, like, doing the nth recursive leverage on your ETH, that. Like, there's a lever, there's two sides. This. There's the leverage. Okay, so today there's like 10 billion Reese restaked on Eigen layer or whatever it is, 15 billion.

Jason Yanowitz

I don't know the actual number. I think you guys, like Avi makes a great point. There are not enough AVss in the world that need that 10 billion. So what's going to end up happening is, like, the Eigen layer needs to keep incentivizing people to do this restaking, and it's. There aren't enough, like, AVss to basically, like, capture that 10 billion.

But, I mean, I think that the thesis is that there will be, because, like, if you're a founder, you're an operator or whatever, and you need. You want to get that security from. From ethereum. Like, the easiest and the best way to do that today is to go through is to just create an AV's on Eigen layer. So there's, like, the yield piling on top of each other side of this.

But then there's the, like, it does bring some productivity to the industry because it's the best. Or maybe. Maybe not the best. No, I'm not disagreeing. The shared security.

Santiago Roel Santos

I think shared security is a novel construct. I just said that especially for, like, something like cosmos. Like, look at ETH. Like. Yes.

Not just ETH as a collateral. I think, generally speaking, shared security brings a lot. It's a big unlock. I think it uses some security issues. But.

Yeah, no, it's. I'm not arguing that. I'm just arguing the recursive leverage restaking that is going nowhere and adding more. Fragility to the system on liquid resake tokens. I could see about the fragility and iterative contract risk.

Ro Shun Patel

You're taking there. I think the broader thing here is that crypto go to markets just generally even re staking space, but also deepening and some other areas, they tend to be very supply side focused out the gate. And then there's a big question of where the demand is and whether it comes in or not and how deeply it comes in. In the case of eigen layer, I do think right now, like, yeah, there's a lot of supply in there, but I think the market will naturally find some equilibrium here. When you log in and the ABS start coming out and you're earning like a very incremental yield to native staking, it's not necessarily worth it for the slashing risk.

So capital should logically outflow. And then maybe that equilibrium point is 5 billion, maybe it's 200 million, where the premium on the interest rate you're earning for providing these Abs's where you do have some degree of slashing risk is actually priced correctly. And it'll take some time to find that. But I think for now, for sure, it's way too supply side driven. So that's my thing there, I'd say.

Santiago Roel Santos

I definitely agree with that. That's a really good point. Yeah. And my initial statement was just articulating that right now it's way too high and that I'm probably closer to your 1 billion, like that 1 billion number than I am to a 5 billion or definitely, definitely to a 10 billion. Right.

Avi Felman

I just think that what we've seen is that we, historically, this type of architecture hasn't actually been taken up in a particularly ineffective manner. So while in theory it is productive in practice. Did you build a product for nobody? And that remains to be seen.

Santiago Roel Santos

Good point. We got to end this on a higher. On a better note.

Avi Felman

Well, you know, if world war three breaks out, bitcoin's probably going to. Don't know about that. Gold. Gold is going to the moon. But I'm not sure if bitcoin is.

Bitcoin is for sure going to the moon in world war three scenario, no question. So every day we inch closer to that, and every day we inch closer to 150k BTC. Avi ro, let's end on this. Give me your price predictions. End of cycle, not financial advice, etcetera, for end of cycle, bitcoin, ETH and Solana.

Yeah. No, there is no cycle anymore. And there's no cycle. Yeah. Didn't you listen to the damn podcast?

Give me. Give me a year. Give me a year. 1212 months. Yeah.

Jason Yanowitz

One year from now.

Avi Felman

I think one year from now, we're trading at. We're probably trading at 85k after a run up to after. After a run up past 100. Okay, what about Ethan? Sol.

ETH is probably at five, maybe like four and a half k. Five k soul is probably at 400, it's my guess. Okay, Roe, how do you do? Yeah, so I. I'm back now.

Ro Shun Patel

Were you asking for price protections 1212 months from now? Yeah, prices. We're gonna have you guys. We're gonna have you guys in a year from now, so. Yeah.

What's so much for now, April? Okay. I think bitcoin is probably over 100k for sure. I think eats definitely above five k. Emphasis on.

I think this is not financial advice. I really get scared of the price predictions. And Solana is above two. I think they all break their previous highs and then buy some margin. Yeah, that's kind of my take.

I also will add on a more positive note, like, twelve months out is fine, but on the long term, you really can't lose against the governments inflating their currencies. So, yeah, that's ten k, long term bitcoin, probably 200, 250, maybe like 700.

Jason Yanowitz

Gents. Good pod. Appreciate you guys coming. Great. That was a blast.

Avi Felman

Really fun. Yeah, yeah. Chatting with you guys, everyone. Jason here. Thank you so much for watching today's episode.

Jason Yanowitz

Wanted to take a quick second to thank today's title sponsor, arbitrum. We know you are tired of on chain experiences that have have unaffordable fees and frustrating transaction speeds, and that's why we partnered with Arbitrum. You can experience frictionless trades, lightning speed, and lag free transactions, all for pennies per transaction. Explore Arbitrum's expanding ecosystem at portal Arbitrum IO. That's portal arbitrum IO.

See you for the next episode.

Building the Perfect Crypto Portfolio | Avi Felman & Roshun Patel

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1: Market Dynamics

2: Investor Behavior

3: Strategic Portfolio Management

4: Predictions and Projections

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