CoinFund's Playbook for a Crypto Supercycle | Jake Brukhman & Seth Ginns

Seth Ginns

I think a big thing that the Fed is focused on, a big thing that will impact global economies just in the next year, forget like five years out, is the productivity gains and the disinflationary impact from AI. I think it's going to come way faster than people realize. And that's kind of why the Fed like that could drive the super cycle. Because if you're the Fed and you're saying, look, last decade we couldn't get any inflation despite QE and zero rates, the most productivity generating technology in generations coming in an accelerating way over the next year or two, is your bias going to be that we could get into an inflationary environment again really quickly and you need to be tight on rates? Or is it going to be, man, we could have a big disinflationary dynamic coming into play really quickly, and we need to keep liquidity out there.

Jason Yanowitz

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All right, everyone, welcome back to Empire. We will miss Santi today. I think he's skiing or something like that. But either way, we have better replacements for Santa today. We've got Jake Bruckman, who's been on the show before, CEO, co founder, managing partner at Coin fund, and then lucky to be joined by Seth Gins, also from Coin fund managing partner.

So, Seth, welcome to the show. Jake, welcome back. Thanks. Hey, thanks. Thanks for having us.

Yeah, Jake, I actually thought a primer on coin fund, which we really don't do these primers much, would be helpful here, because I was at this thing at Seth. Where were we? Penn blockchain thing. And we were at this event, and he was telling us about the liquid fund. I was like, I didn't even realize coin fund had this huge liquid fund, and I was talking to David, just talking to different people at Coinfund.

I don't think people. People know coin fund for being very early. I think you guys launched, if I remember, Brooklyn 2015, even pre Ico era, very early. Coming up on your ten year anniversary, I don't think people realize the extent to which coin fund has become this, like, behemoth of a crypto fund. I would say.

So maybe, Jake, you can give us the lay of the land at Coin fund right now. Totally. Well, I think it depends how you define crypto funds, but by some definitions, we would probably be, like, the first crypto fund in the United States. There's definitely people in the market making investments in crypto in mid 2015, whatever. But I don't know if they were, like, a ton of fully crypto dedicated.

What about blockchain cap? Blockchain cap, that's. Yeah, they were. They were quite. They were quite early as well.

When I think of, like, you guys, Pantera, blockchain cap. Those are who I think I had a bitcoin fund. Yeah. In 2013. Well, in any case, we are.

Jake Brukhman

We work quite early, and I think the way in which we had differentiated at that point in 2014, 2015, was me basically growing up with bitcoin between 2011 to 2015, and then asking the question, what other applications are there for blockchains and blockchain technology and decentralization technology?

If you went back and read the coin fund white paper, there weren't even. There wasn't even a concept of smart contracts in that white paper, because everything was just in terms of cryptocurrency. And the idea was, let's duplicate what bitcoin did, and if we need a new application, we've come such a huge, long way. I started coin fund. Our track record begins July 1, 2015.

Officially going to be nine years and a couple months here. That's pretty crazy. We started with a team of just, like, two people like me and my original co founder, like Alex Bulkin. We've now grown to a firm of about 30 people. About 20 or so of them are in New York.

I'm down here with our head of platform, Jenna Pilgrim, in Miami. Co founder, managing partner Alex Felix is in Boston with another person on our investment team. We have a few people here and there.

The lay of the Land of Coin fund is we have three sort of investment programs. One is seed, one is venture, and one is liquid. I tend to spend most of my time on the early stage seed program, and that's where we're investing out of a $158 million fund, which we announced last summer during ECC. And you have Mister Ginz, who runs our liquid program, and David Pakman, who's not here with us today, is our head of venture, looking at series A and b opportunities in the 320 or so million dollar fund as well. So that's kind of the lay of the land.

Seth Ginns

And, yeah, one of the things I'll quickly throw out in there, like, what's different about coin fund is you have this awesome. So Jake, engineer, super early in the space, saw the development of the ethereum ecosystem out in Brooklyn. We need to find a way to support this. And then you look at the other managing partners going across the firm. So David, who Jake mentioned he was at Venrock, like, top traditional venture for over a decade.

He led Venrock's partnership with Coin fund back in 2018. So very early to crypto as well. Alex, who Jake mentioned was private equity and joined Jake early on. I was 18 years public equities investing and got into crypto in 2012. And then Chris Perkins was co head of futures prime brokerage at Citigroup.

The CFTC was his regulator. He's on the global markets advisory committee at the CFTC. So you have this, you know, long, long time crypto investor as well. So you have this great, like, crossover blend between traditional finance perspectives and, uh, and really crypto native perspectives. Yeah, I remember.

Jason Yanowitz

I remember when you guys hired Pac Man. I was like, man, like kind of web two legend coming over to join coin fund. And then Chris was in our office a couple of weeks ago. I was like, wow. Like, I didn't even know about Chris.

Like, this is kind of a cheat code to have him in house. And then we, we met, and I was like, man, I got a stacked team over there. So, yeah, it's pretty cool to see. By the way, to David's credit, it's not that he just got into crypto in 2018 with the coinfund investment. He was doing crypto.

Jake Brukhman

He's looking at crypto companies years before that. He is actually mining. Yeah. So he did. We did dapper together, but even before that, David was, I think in like, 2016, he was mining ether, like with his son and stuff.

And David is an engineer by background, that's why. One of the reasons. And then Evan on the research team. Jenna. Yeah.

Jason Yanowitz

Stack team over there. So, okay, so seed fund is what, 158 million? You said ventures 300. Did you say 320? Jake?

I heard Chris Dixon from Andreessen talking on a podcast the other day about there's kind of two different strategies in venture. There's kind of like truffle. I'm gonna botch this, but like, heat seeking and truffle hunting, I think it was, which I think he needs maybe to improve that slightly, but, uh, uh. Because it's not fully obvious what. What the strategies are when you say it like that.

But heat seeking is like, you're basically trying to win the big deals that everyone's chasing. There's in crypto, this might be Monad, it might be bear chain, it might be Eigen layer. It's like everybody wants to lead the Eigen layer round. Everybody wants to lead the Monad round. Like, let's pitch and get this, you know, be able to lead the billion dollar round, because we know at some point they're launching a token that's going to be 50 billion or something.

So, yes, billion dollar valuation is high, but 50,000,000,001 day. So that's like, I think what Chris would call heat seeking. And the other is truffle hunting, which is like, I'm pretty sure what he means by this is like, you know, you're kind of in the forge, like, scavenging, and you're trying to find these things before, like, that nobody else can find in the world, and you're trying to find those. What is the. I guess if you had to identify the strategy of coin fund, like, which bucket do you fall into?

Jake Brukhman

Yeah, I don't know which of those we fall into, but I'll just tell you. I actually had a tweet thread on this where I asked myself that question and then gave the four things that we look for. And it's basically, the idea is to be early technical, long term, and. Right. So I think technical means that, like, I, as an early stage investor, I'm very interested in the bottom up understanding of technology.

I'm not necessarily going to be as deep as some of the experts who are building the thing, et cetera, but I have at least a functional understanding about, like, what the tech that's being used there is. Why is it good? Why is it competitive with other technologies? What are, like, the threats to it long term? What are the advantages to it long term?

And historically, like, we've been early. Right. So we. I mean, for various reasons, one. One reason was just like, happenstance.

Got to see crypto, like, much earlier than most people learned about bitcoin in 2011. But other reasons were, like, being early to the deFi space and really seeing the potential of smart contracts and creating new types of public goods, new types of, you know, finance protocols, cutting out the middleman, etcetera. Or another area that we often had gotten a lot of credit for being early in was nfts. It's the idea of, like, putting digital collectibles on chain. And when I saw the very, very first ones of these, which I believe was in mid 2016 or so, I saw rare pepes on the counterparty blockchain, I was like, man, it's just a matter of time before, you know, people purpose this for, you know, for art more broadly.

And that actually happened in February of 2021. And we had this giant inflection, and the NFT space kind of reached a GMV the size of the global art market for a while. Now that market is consolidating, and there's, you know, there's some maturing that it needs to do. But like, AI and what web three intersecting, that's yet another example of how we were early to particular trends. We made our first AI, web three investment, really, at the end of 2020, early 2021, which is world coin.

We did one in March of 22, which was Jensen AI, which had a nice confirmation last summer when they raised a $43 million round from Andreessen. And now in 2024, if you had gone to East Denver, you know, every other presentation at East Denver is really about, like, the intersection of AI and web three. So that's being early is just using your insight to turn it into foresight, using your technical skills to understand what might become really prescient down the road. Long term means we want to be investing in things that produce a return on kind of a venture horizon, like five to ten years, I guess, in crypto, and not really indexing on those things that are flashes in the pan, like meme coins, things that could reach high valuation short term, but don't have a fundamental business like medium term. We really want to build real value over the long term and write just means being correct about the teams, the technologies, the strategies, the approaches that get these people to market and turn these projects into a success.

And we've had a pretty good track record of being right. So there's this. Do you know Regan or Reagan Boseman at Ladis? Of course, yeah, absolutely. Okay, so I don't know him, but I saw this tweet.

Jason Yanowitz

It says it is that he put out or she. I don't know who Reagan is. But in March, that said, it is widely accepted that the way to make money in VC is to be contrarian and. Right. This is absolutely false.

In crypto, venture. All that matters is your ability to front run the narrative. And obviously that's hyperbolic and posted to get the Twitter algorithm going. But I do think that there's this interesting dynamic where, and it's one of the reasons, actually, I think a lot of web two investors get wrecked doing crypto venture is because the main difference in the dynamic is in web two venture, there's a zero to one moment. There's the liquidity event, which is comes at maybe Series E, F, G, whatever, several years in the company.

It's an IPO or an acquisition. And it is, you're right in your bet or you're wrong in your bet. You either make a bunch of money or you don't. And that's why you hear this typical thing of maybe you bet on 20 companies and only one makes it, but it returns the fund. That's the traditional venture in crypto.

It's very different, right? You get that liquidity event oftentimes around the series a marker, maybe series b, but series oftentimes in year two or year three or something. So I think what Reagan's really saying here is like, the reason it doesn't matter if you're right long term is if you can just get. If you can kind of front run the next, the narrative that's going to be here in 18 to 24 months, you're going to make a lot of money. What are your thoughts?

Jake Brukhman

Well, that also assumes that you're exiting maybe around that time. And what I'm kind of saying is, we don't necessarily want to exit at that time. We want to have a horizon that is a longer term view on the actual underlying business, or network or scheme, or whatever it is to be a successful business. Long term, I disagree. I think that you can have the liquidity event around series a button.

There's plenty of examples where you had that liquidity event and then the token then just peters out and depreciates over the long term. And that's because founders were never really able to find product, market fit, or build a real business. And so one of the north stars of Coin fund is selecting teams that are building real things, and not just indexing on kind of token economics, which, by the way, I'm not saying that you couldn't make money doing that. And I'm not saying that there aren't investors who have that as part of their strategy. I'm just saying that from an early stage coin fund venture perspective, we want to be picking these long horizon, fundamentally valuable things.

Jason Yanowitz

How do you guys, go ahead, Seth. What I was going to say on that is when we think about once the tokens are liquid, because that's the monetization opportunity. Theres that saying that in the short term, markets are voting machine, in the long term, theyre a weighing machine, and theres nothing new under the sun. The fundamental analysis that were doing on liquid tokens in crypto, it rhymes with the fundamental analysis that I was doing in the equities world for 18 years. And when you think about the amount of trading that happens in crypto, and by trading, I just mean how many hours a week the crypto markets are open.

Seth Ginns

It's like five times. It's over five times what the traditional equities markets are open. So you're essentially having these dynamics play out in hyperspeed, right. They're playing out at like five x the speed. And that's not entirely true because obviously, like projects off to ship stuff and you'll have like a founder start to lose interest or move on.

But it's also like, because these are 24/7 markets, it takes that much more out of the teams, and you need teams that are that much more hyper focused, and because it's like permissionless and global, it's that much more competitive. So I think you kind of can line that up and say, like, you're just playing this forward at like almost five x the speed. And what we find is what, when you, when you find the teams that are amazing, teams that have real fundamental dynamics at play, the real fundamental momentum, those are the names that might go down with everything else, and they might go down a lot with everything else when you come into a drawdown. But then they're the tokens and projects that regain their highs and go to new highs even faster because they have real tangible progress, because they're really doing important things, I think in the end, the short term trading ends up being a lot of noise, and that gets washed out when you look over the medium to long term. And that's our focus on the venture side.

And that's our focus on the liquid side. I want to add one other thing, Jason, if that's okay, which is that I do think that there are key differences between building a crypto venture portfolio in a regular traditional VC portfolio. And I think that is because this is a different asset class. It is an asset class that, to your point, is more liquid and has liquidity events sooner. And I think the result of that is that whereas in a traditional portfolio, the wisdom, which is there's 25 companies and 23 of them go to zero and go out of business.

Jake Brukhman

And then, like, one gets acquired and one returns the fund, approximately. That is not the case in a crypto portfolio because of these assets. These assets aren't all zero to one. I mean, there are, of course, some opportunities in crypto. They're very like, traditional equity opportunities that are zero to one.

But when there's tokens involved, there's an opportunity to have, like, a middle outcome where it's like 0.5. Right. And so what you, so one key difference is that you actually see, you have more risk management capabilities in this portfolio over time, and you actually see a lower attrition rate because some capital can be recovered because of liquidity. And that's one difference. And then the other difference is that mathematically, you can actually build bigger portfolios in crypto and do better.

That is not the case in traditional venture. Because in traditional venture, if you take your 25 company portfolio to like a 75 company portfolio or something like that, right? And what happens is you push down the average position size, and then that small percent of the fund that will return. The fund can't return the fund because the position size is now smaller. But in crypto, because it's not binary and it doesn't have the same distribution, you can actually increase the diversification and then do better.

On average, like, up to a point, you can model this.

Jason Yanowitz

I want to understand that better. So in venture, I'm making up these numbers, but like, yeah, 20 person, 20 company portfolio, two of them exit. One's an acquisition, one's an IPO, the IPO returns the fund, or something like that. That's the model making that up. In crypto venture, if you have 20 portfolio companies, how many will you make money on?

Jake Brukhman

Well, this is what I'm saying is, in a crypto portfolio, then, instead of doing 25 companies, and you would do maybe like 40 or 50, right. And out of those, you'll have a lower attrition rate, so fewer of those will go to zero as compared to the traditional venture portfolio. And so you'll make a kind of a better return. And then you can argue in crypto that kind of, the more companies that you get, like, the more, the more probability there is of getting that unicorn lottery ticket, really partially because of the liquidity profile of the asset. So you get this, like, simultaneous lower attrition, better risk management, and higher opportunity for, like, the upside across, more opportunities that ultimately will probably result in crypto VC outperforming traditional VC and hedge funds and many other asset classes.

Jason Yanowitz

How do you decide when to sell? Because I imagine this is a tough. So let's say a traditional company, web two company goes public, there's this understanding. It's like, look, you've been supporting us for ten years, I totally get it. You guys are taking chips off the table.

Mutual respect here. I get it. If you guys invest in a company and then they launch their token and it's two years into the business, they're like, what the hell, guys? We just began our relationship. So how do you make that decision?

Jake Brukhman

Well, I just want to say, again, on the venture side, we do take a long term view and we're not very likely to actually sell something at the point of liquidity. I think back to balancer, which was a Defi ammo project we did in 2019. And balancer is actually one of those opportunities where, yeah, they did have like an equity kind of component, but the purpose of the equity was just to convert the investors into token. And the key asset of this network is token driven, and the value accrues in the token. And what happens was in the summer of 2020, they had their token launch and we actually went more long, even though we were early stage, quote unquote, equity investors there, and we took a ten year view to say, look, when Defi matures, amms are going to be key infrastructure serving trading based on DeFi.

Now it's 2024, it's four years later. That has not quite happened yet. Right? Defi is. Has not gone mainstream.

You know, your friends and your friends, moms and parents and grandmas, like, they're not using Defi yet. So there's still, you know, a leg to go in the product market fit and maturity of the defi space. So we're going long here. But if there was a, I don't know, some kind of systemic failure, like someone realized, like Vitalik published the post and said, by the way, all Amm curves are horrifying and they don't work. And here's the reason why.

And this is attackable, and it's all going to go to zero. There's more of an opportunity to control for risk in this setup. And I'd also say that's not a one off. That's actually something that we do quite often, adding to tokens, continuing to support teams in a variety of ways on chain as the tokens start to trade. So we're usually thinking about greater engagement as they go liquid, not monetizing the moment they get liquid.

Jason Yanowitz

How do you think about using one fund for the value of another fund. So maybe as an example here, I would imagine the venture side could actually win more deals. If you're like, look, we've got this liquid book where we can actually come provide liquidity on your protocol. However, providing liquidity on the protocol might decrease the return of the liquid fund in which you have outside investors. So how do you make those kind of decisions?

Seth Ginns

So for a situation like that, it would be the same fund that would provide liquidity. So we have different sets of investors across each of our funds. And there isn't a dynamic where we would want a totally separate fund engaging for the benefit of one of our venture funds, one of our earlier funds. But within a fund, that's absolutely a benefit. And just from the knowledge that we have across coin fund, we have a trading team that's a result of having a whole liquid discipline.

And I think we have one of the best trading teams out there. We have all of the right connectivity. We do it all in a really institutional way. So it's something that we can do easily. It's an expertise that we can bring to the table, and there's a lot of that.

If, Jake, you want to talk about our portfolio growth team and the support that we give portfolio companies, it really ties into all of these different disciplines that we have at coin fund. But that would be a conflict if we had one fund supporting another fund directly. And we absolutely avoid that. I would say, in my experience on the venture side, there have been times when we had gotten venture deals in part because we had a liquid fund. However, that's not because they necessarily wanted the liquid fund to, you know, trade their token or something that.

Jake Brukhman

But it's rather the knowledge and expertise and like analysis of like macro crap crypto markets and macro markets in general. And it's sometimes it's like expertise on things like treasury management, that really helps kind of the venture view opportunities to also take advantage of the fact that we have a liquid fund without actually using liquid funds, funds capital. And that's been powerful, just kind of the network effect. And the knowledge that accumulates, the multidisciplinary knowledge that accumulates when you have a venture discipline. And a liquid discipline could be powerful in crypto, because.

Right. Those assets are like the bread and butter of like, what people are building. I'll give you another great. Oh, go ahead. I was just going to like, I listening to this.

Jason Yanowitz

I know a lot about the venture side of coin fund, and we got teed up with the liquid side. I know you've got this big liquid book. But can you just tell us more about the liquid book? Is it long? Only long short.

Are you putting on hundreds of positions at a time? Is it very concentrated bets? Is it swing trading? Are you making hundreds of trades a day? Give us the lay of the land on what your guys strategy is.

Seth Ginns

Yeah, so just talking about liquid investments in general at coin fund we take a fundamental approach. So think of it as the type of underwriting that we would do on the venture side, but doing it for liquid tokens. And then you have the benefit of being able to sell out of those if it turns out that something changes with fundamentals and go into higher conviction liquid names at that new point in time. So it's really a part of the firm that looks a lot like traditional equities investing, but doing it in liquid crypto tokens and with a very fundamental focus. What do you mean by fundamental focus here?

So, looking at revenue generation, looking at activity, right, if they don't have revenue yet, thinking about valuation, coming up with price targets, using a catalyst rich, developing a catalyst rich path to get to that price target. These are all things that are just the basic blocking and tackling of equities investing. And it's funny, four years ago when I joined Coin fund, we would be having conversations with investors about, are there even fundamentals in crypto tokens? How can you do fundamental investing? And I think that's totally non controversial today.

People know you can go to token terminal, you can pull up a dune dashboard, you can track what's happening with fundamentals. There's a really interesting dynamic that's starting to happen. So we've seen this continued evolution of markets where again, four years ago investors were saying, are there even fundamentals to crypto tokens? Aren't they all just about narratives and people, people buying the token until it stops working and then selling it? Kind of getting into that, the front, running the narrative thesis that you were talking about a little earlier.

Now we're finding you used to be able to generate alpha by finding inflections in on chain fundamentals before they were priced into the tokens. Now we're finding those inflections in on chain activity. Those get priced in in real time. But you're starting to see a dynamic where you have to combine what's happening in the protocol in real time with what the team has talked about on more qualitative catalysts. Like they've been out talking about how they're going to do their v three upgrade.

Right. Well, here we are now only a few months from it, and we're starting to see an inflection in v two activity, and you kind of pull together this mosaic. And again, it's exactly the same way that you do fundamental equities investing, but with the advantage of having direct access. It would be like having every company publish their daily p and l, right? So you're kind of seeing the same dynamic in real time, but then you're still, like, that would be priced inefficiently.

If I told you, like, Amazon's p and l is published daily, like, you know, 0.72 citadel, all these guys would be pricing that in immediately. Right? So you need to then understand the end markets that they're in. You need to understand what catalysts are coming up. You need to have your own view about how important those catalysts are going to be to meld that with what you're actually seeing on chain in order to come up with where.

Where it's likely to trade over the next 912 months.

Jason Yanowitz

Oh, man. That's really interesting. Seth, I need to bring you into some of the product conversations that blockworks research that we're having. So, actually, maybe we'll do this live. So one of the conversations that we're having at blockworks research inside of our product, which actually coin fund was an Evan specifically, is very, very, very early supporter of that, and I appreciate that a lot is this question of fundamentals, because there are two conversations we had here.

I think. One is you can put as much fundamentals into this industry as you want. Things still do trade on these narratives, even though we have the belief, and it sounds like you guys have the belief, that fundamentals will get more and more important still narrative driven. But the other thing is, there's no consensus around what fundamentals matter. And fundamentals is kind of a made up thing, in a sense, until everyone agrees that this is the fundamental that matters, and then fundamentals quickly flip to becoming one of the most important things in the industry.

You can see this in equities markets. Theres maybe three to five metrics that everyone cares about more than anything else. What do you think those metrics are going to be in crypto? Its funny. In equities, it always depends on the industry youre looking at.

Seth Ginns

It could be EBITDA. It could be like, if you're looking at like an unconventional EMP in the energy space, it could be the net asset value, right? The way that the market thinks about the value of their assets. And by the way, it could also be like an industry where everyone looks at some of the parts, right? There are a few industries where some of the parts is really important.

If it's like super high growth tech, it could be a revenue multiple, right? So revenue is all that matters. No one cares about the fact that they're not profitable. If it's a more mature company, could be like free cash flow yield. So there are all types of dynamics that are used for different industries.

The key is understanding, so industry wise, the key is understanding how all of the other investors are thinking about valuing those companies. So like EV to EBITDA is usually important where it's a growth industry. But you have balance sheet at play, right? If balance sheet is at play and they're continuing to like, they're generating cash flow, they're leveraging up their balance sheet. EBT, EBITda usually ends up being the way that people think about valuation.

Again, if it's high growth tech and at this point, no one cares about profitability because it's just like a battleground to get your, like to plant your flag, well, then it's about a revenue multiple. So, and then it's really interesting if you look at like a few specific names, like back when I was at Jenison, we owned Amazon back in the early days. And the analyst, I wasn't the analyst for, but the analyst back in 2011, 2012, I remember talking to an analyst, another firm, and they were like, there's no way I could ever own Amazon. I just don't get the valuation. They're not profitable.

Doesn't make any sense. And our analyst was saying, you know what, im going to put Walmarts net margin on Amazons revenue. Im going to give it a higher multiple because theyre growing faster. And guess what? It got us to have a big position in the name.

Absolutely killed it. But for all the wrong reasons because it was never retail that actually drove profitability. It was AWS, it was the ad platform. But again, so you think about ETH. What were the fundamentals on ETH back when people were buying it?

2017. 2018, right. It was just that there was a lot of activity, right, it was showing product market fit for fundraising. Great, right? But like there was no 1559, right?

There was no like merge yet. In fact, like we weren't even having, like we were still going through other scaling iterations of ETH, right? But there was a view that at some point this activity is going to translate into something that we can actually draw a solid line into valuation for. And that's, that's where we are now with e.

Jason Yanowitz

How do you, how do you value? Because I don't even think the industry understands something like an l one. Like half the people like token terminals talking about like the p and l of ETH, like revenue and profitability of like, Solana. And I'm like, that makes no sense. Like, these things are commodities we can't even agree.

Like, like in my mind. Ethan Sol these are just, these are commodities. So you're not like, what's the revenue of wheat today? Or what's the, you know, and the global capital markets, we're not like, what's the revenue of oil? You're probably like, you don't, oh, there's this.

Jake Brukhman

You don't supply, you don't pay transaction fees to bushels of wheat either, right? Like the thing about, the thing about digital assets is that they combine, like their design space is much wider and more rich than traditional sort of securities or instruments. And so you get these hybrids which are like some people say ETH is money, right? So ETH is money. Yes.

It's also a commodity. Yes. And it's also something that generates revenue at the same time. So what do you call that? I mean, ETH is in a really interesting spot because stores of value tend to get much higher valuations, right?

Seth Ginns

Like golds overall value. Golds overall market cap is way higher than any individual equity, right? Its like 15 trillion, something like that. So if you think about like the addressable market for something like bitcoin, when bitcoin is just like digital gold, you could argue it's gold's market cap, right? And then gold's market cap is going to continue to go up as, as we see the dollar devalued and other currencies devalued.

But when you, and by the way, like as bitcoin gets more utility, maybe that will start to affect the ability to value it that way. Same thing with ETH. ETH has this, like, this dissonance. Where is it going to be valued like a tech stock because of the activity that it has? Or is, is that activity through one it thousand 559 and the lower emissions from, from going to proof of stake because you have contraction of supply when activity is picking up.

Is ETH going to have this like ultrasound money valuation or is it going to have a valuation that's more based on tech fundamentals and looked at like a tech stock, like a growth equity? I think were going to see how the market ends up balancing those two dynamics, but theyre wildly divergent from a valuation perspective because the biggest tech stock is what, like 3 trillion, right. And then you have gold, which does nothing. Right. Its just a store of value at 15 trillion plus.

But for base layers broadly, right now, we really just track activity. Activity as measured by primarily TVL, but also looking at daily active users transaction count. What you want to see is activity, because activity has to be a precursor to monetization. And then the view is there are going to be plenty of ways to monetize. And by the way, as we get regulatory clarity, and we think we're on the path toward regulatory normalization, that's going to allow for much clearer ways of passing value along to token holders and driving valuation analysis.

Jason Yanowitz

Let's say you have a thesis on something. Do you spread that thesis, that bet across? Let me get more concrete here. So let's say you really like move. You're like move programming language.

Good language. Okay, maybe we can make some venture bets on that side. But maybe, Seth, you and your team says move is going to be this big thing that everyone's like. Maybe activity comes to an l, one that's using move. Okay, so maybe venture side invests in like movement labs or something.

And then you guys put on a trade for, I guess there'd be sui and Aptos would be the two you'd look at. Do you kind of like bet the farm on one of those, or do you spread them across two? Well, first of all, there's definitely like a synergy in the research process, right? Because the technical due diligence for move or any other area of the technology is the same across venture and liquid. But in terms.

Jake Brukhman

Seth, do you want to talk about putting on positions? Yeah, I mean, again, we're one firm that's doing research on areas that we think are exciting. That to me is like the power of coin. Fun is the fact that we're having all these conversations, whether it's in our morning meeting, whether it's investment committee, whether it's in our working groups, and we're talking to all of these teams, the teams that are super early stage, the teams that are already liquid, by pulling together that view.

Seth Ginns

If we're looking at liquid investments, well, yeah, we're limited to the names that are already liquid. And then you're looking at what their activity is. You're looking at what you think is going to come down the road, what their likely BD opportunities are. And then on the early stage side, we might be making an investment that's much earlier stage, that might be either within an ecosystem of one of the base layers that's already out in liquid, or it could be a challenger to them. We're really creating this, I'd say this set of ten to 15 really well informed researchers in crypto that span liquid markets and venture markets.

We're all bringing our own perspectives, biases, areas that we're excited about, areas that we're less excited about, and then that kind of works its way into each of the funds based on what the investable universe is, based on what time horizons we're looking at, and where the opportunity sets are. One recent one was across protocol. Right, Seth? So we're doing, like, a lot of research on intense basic bridging. Yeah.

Jake Brukhman

Hart was in our office in New York last week. Me and him, we had this, like, whiteboarding session. We were, like, really deep into how, basically, like, intense based bridging works. And it's really fascinating. It seems to be one of those approaches that approaches optimality, almost.

Right. Because in the sense of, like, having a low latency bridge, I think you can't really do better than a relayer network. And in terms of costs, heart has laid out ways in which they are optimizing the costs of the network. And there's also free market competition that is, optimizing the fees for the customer. So you get this sort of best of both worlds lowest latency and most free market optimized costs protocol.

And this protocol only has a liquid token. Right. So it's something that I believe, Seth, we're looking at in the liquid fund. That's something that we're thinking about holding in a venture way in the early stage fund as well. Oh, so you could buy that fund, or you could buy it in both funds, basically, yeah.

And it's a little bit of a unique opportunity because it's one of those protocols that only has a liquid token. That's actually not the case most of the time. Most of the time, we see something that has kind of an equity component and a token component. Well, like AI and crypto, another area where we just did a lot of research on defining what the opportunity set was going to be on the liquid side. Right now, it's two things, really.

Seth Ginns

It's proof of humanity with Worldcoin, and then a lot of it is some form of a compute network. So we were limited. We saw that this was a huge opportunity early, but we were limited on the liquid side, on how we could engage and found names that we really like on the liquid side. And then on the venture side, we're seeing more and more subverticals within AI and crypto really start to have teams come together and interesting paths to protocol launches and monetization emerge.

Jason Yanowitz

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Jake Brukhman

One thing that we've been in a multi year process on is essentially like Ethereum, scalability and interoperability. Right? Like, if you rewind, if you want Jake back to, you know, 20, 2013, thinking about the future of blockchains, you know, he would say, I think there's going to be thousands or even millions of blockchains in the long term, and they're all going to be interoperating together in a very seamless fashion. Right. And that there's a lot of people back in 2013 who were like, not on that page.

They were like, no, no, no. There's only going to be one blockchain and it's going to be bitcoin, and you don't really need anything else. And I think my view pretty clearly sort of won out over time. And we do see like thousands and even tens of thousands of blockchains in the market. And we see a ton of roll ups on Ethereum, and we see a lot of interoperability technology that's connecting them together.

Now, what's now where we're at with that is I think we've figured out a number of technologies that have dramatically scaled Ethereum already. Like, if you want fast, cheap, high throughput roll ups and stuff like that, you have that today. What we're still kind of bad at is the interoperability part. There's a lot of bridges, there's message passing protocols, but I don't think we've achieved the long term state of the art of this, which is essentially abstraction. It's like when you are a smart contract developer, you just kind of write your solidity and then you just deploy it to all of the EVm.

And no matter which EVM network you're on, you're going to be able to interact with the smart contracts. Another way of thinking is you're turning the Ethereum highly segmented market of roll ups into something that really, to the developer, feels like a monolithic chain. At the end of the day, I think that's happening this year. We're seeing a lot of interoperability technology make progress. There's layer zero, there's hyperlane, there's others.

They're doing very compelling things. And the reason that that's related to across protocol is I think that these relayer networks are finding a lot of applications in things like bridging in things like interoperability networks. These are all related concepts that ultimately will create this like, very optimal layer that at the end of the day just makes blockchains really easy to use for developers. Abstracts, kind of the backend, abstracts, fees, abstracts, accounts. And then we're in a world where basically we have the web two experience, but with all of the advantages of web three, decentralization, permissionlessness, trustlessness, efficiency, lower counterparty risks, things like that.

So that's one area that we have been investing in and have been looking at and is moving very, very quickly. That's one thing. And then the other thing that I like to mention, and especially this year, is that 2024 is really the first year where blockchain is truly converging with the. With the traditional world. It's sort of funny to say because blockchain started in 2009 as 2024.

It's been like 15 years, but really, like the, we're so early and the adoption is just starting now. And like, historically, if you look at kind of crypto investors, there's been these two ends of the spectrum. There's been crypto investors who have taken a very like trad approach, and they're like discounting digital assets and saying, this is not real and this is not really going to go anywhere. And that has turned out to be very incorrect. And you have these, the other end of the spectrum saying, like, everything has to be decentralized.

Everything is like a crypto anarchist approach, or it will fail. And that has turned out to be fairly incorrect as well. And I think where Coin fund has done a good job is being realist about the fact that this is a technology. And for the technology to succeed, it has to converge with the existing world, like digital assets and blockchains. They have to deal with governments and regulators and the SEC and the incumbents and competition from those types of folks.

And that's what's actually happening this year. Like, we got the bitcoin ETF on Jan ten. We have heard Larry Fink say these are all stepping stones on the way to tokenization. We've had our portfolio company superstate launch their tokenization products. We're seeing a ton of RWA projects in the market.

And what's happening is that the more traditional people get access to blockchain technology through these traditional tokenization processes, the more our life becomes easier, because now Google is running ads for bitcoin ETF's. Huh. I wonder how that happened. Could it be that Blackrock called up Google and used their influence to democratize their ad process? And so we're going to see much more of that in different areas.

Like the more traditional people are holding digital assets, the more it becomes in their interest to get them installed. And we're going to see more adoption faster starting this year. I didn't even thought of the fact that, yeah, now you can just run Google Ads for these bitcoin ETF's. I'm like, we've been trying to do that. Like if we ran a Google Ad that was like, bitcoin conference shut down for months.

Jason Yanowitz

Right, exactly. And then it just takes the others. An investment product that you can. Okay, but you can't buy a ticket to this conference. Okay, okay.

Sorry, Seth, what were you saying? No, I was going to say kind of adjacent to that. When you look at the avenues for mainstream engagement. I remember after ECC last year, everyone was like, awesome, another great conference for infrastructure. But where are the applications?

Seth Ginns

And it was like, well, we're leaving them. We're saying the tech stack is more mature than it's ever been. And what does a more mature tech stack means? It means you can put traditional web two developers out there, they can more easily develop applications and you can actually like, start throwing that spaghetti at the wall and seeing which applications are actually going to get mainstream adoption. It started, I think, in September, October when I was out at 2049.

We were seeing in Singapore, we were seeing a lot of mainstream web two developers come into to Hong Kong, come down to Singapore with the view that like, now it was okay for them to come and develop in web three. It was kind of the green light. And we've had continued progress there. We now have a lot of talk of getting a bitcoin and an ETH spotty TF launched in Hong Kong imminently, which I think is going to be another big catalyst there. And then when we think about baseball.

So Coinbase is based 110 plus million KYC users. Another great avenue for bringing mainstream users across into more crypto native applications and then even the ton ecosystem. You have 900 million monthly active users, 200 million daily. A great resource for driving crossover engagement between the Telegram app. Those were the stats for Telegram, and driving more penetration for the ton blockchain itself.

Jason Yanowitz

There's actually maybe a good transition into this other topic I want to talk to you guys about, which is just market cycle. Yeah, just market cycle. And Jake, you've seen more cycles than most, so I'd be curious, maybe the first question here is like, how will this cycle look different than others and specifically related to this idea of the four year cycle. Well, this is a very interesting question because this is one this is like the one cycle where I'm actually seeing a lot of disagreement and like bifurcation of views on how we'll go. So for some reason you're saying you.

Didn'T listen to the Suzu super cycle idea last time?

Jake Brukhman

Well, I kind of had the thought that, well, first of all, when did the bull market start? I think a lot of people would say it started in November, or maybe some people would start counting on January 10 when the bitcoin ETF gets, if you look at the technical charts, it's probably like November. And then I had this idea, I'm not sure why exactly, but I had this thought that maybe it would be like a twelve month shorter bull cycle this time. And I was on a, I was on a spaces with Kathy Wood where she was talking about compressed cycle this time around. And then I did a Twitter poll and a lot of my followers on Twitter, like more than 60% of them, I think, said, you know, this is going to be a twelve, not an 18 or 24 month cycle.

But then I was talking to, like, other people. And other people are like, well, hold on. Like, what's the best analogy to this year? This is an election year. The last election year was 2020.

It kind of came after a two year bear market, just like, just like this year. And then what happened is it started to go up in 2020 and then mostly sideways. And then the real inflection happened in February of 2021, which I like to remember as the time when NFTs went on Saturday Night Live. So maybe there's an analogy to this election year where we're kind of like, also, you know, seem to be going a little bit sideways now, then there's some election uncertainty. And then once we get through that, maybe like we inflect in 2025.

But I don't know, the best person on this call to asset is really. Seth, what do you think? Seth? Well, if only trying to time these markets here. Exactly.

Seth Ginns

Now, look, I, for me, base case is looking at prior cycles. Cycles. And prior cycles would say you have a good year the year before the having, which happened last year, you have a good year the year of the halving, and then you have a blow off, like massive year the year after the having. Right? That's kind of like history repeats.

But the interesting thing is those having cycles have always lined up with macro cycles. And I think from a macro liquidity perspective, it's really unlikely. So real yields spiking up in November of 21 was what killed the cycle. And I think it's really unlikely sitting here today with the Fed saying in a bunch of different ways that they don't want real yields to go any higher, they want real yields to come down. I think there's an interesting setup where you combine the fact that real yields are probably not going to spike higher.

Again, the fact that we're on the path toward regulatory normalization. And that's something that happens once in the lifecycle of crypto, right? Actually having the definition of a regulatory regime over the next two, three years, and then add into the fact that everyone has PTSD, right? Everyone is like, oh my gosh, we're at. Is this the peak?

Jake Brukhman

Right? Do I need to sell everything? Right? Like you're going to have this great wall of worry where every step up there are going to be a lot of people who want to sell on the view that, like, that's been too much too fast. But then you have these immense flows coming from the ETF world that are only just starting to kick off, right?

Seth Ginns

You have a bunch of financial advisory houses that have only just started to put on the ETF's. They put a bunch of restrictions like, you need 10 million net worth, liquid net worth to be able to buy them. And that's all going to ease over time. And as that's easing, you're also going to have advisors saying, well, I put a half a percent of my clients assets in. Now, I'm comfortable putting a point, putting a point and a half.

So I think there's actually the ingredients here for this to be an extended cycle. There's enough skepticism for sure. And you have that regulatory dynamic, the flows dynamic, and the macro dynamic liquidity. So I think there are a lot of really intriguing ingredients for an extended cycle. But say like base case, we have through next year still looking good.

But there's a really compelling case for that extended cycle coming together.

Jason Yanowitz

So Chris Berniske tweeted his little crystal ball says October 2025 is kind of equivalent to November 2021. Thoughts on that? But again, November. November 21, I would define November 21 as that was the moment that Powell said inflation is transitory and then shifted that to, no, it's not transitory, and we're going to start raising rates. So think about when he was saying inflation is transitory.

It. But inflation was accelerating up. That was max negative real yields. Real yields are nominal yields minus inflation. So you had nominal yields at zero and inflation accelerating up, that gave you max negative real yields.

Seth Ginns

So the moment that he pivoted and said, no, we're actually going to have to fight inflation. That was when real yields started moving higher and then they ended up spiking higher. So I look at that, that analogy, and it's like, it's analogous when, when you're working from a positioning, temporal positioning after the having, but it's like night and day versus real yields, at least as far as things look now. I mean, we haven't even done the first cut.

Jake Brukhman

November 21 is the peak of the last bull, right? That's what you're saying? November 2021 was the first breakpoint Solana in Lisbon when nobody could lose money if they, if they tried, and then. Everyone could, and then we all lost. A lot of money.

Jason Yanowitz

Yeah. Yeah, right. But, no, like, the, the real yield environment, at least as it looks today, is totally different now. Gosh, if we're, if we're at, like, 500k bitcoin, a million bitcoin, and inflation is accelerating wildly and we have a new regime, we have a new government in place, and they're like, look like we need to start in fighting inflation again. And they start, like, maybe that does create the same setup, but that's not what things look like right now.

Do you think there'll be a time in the next, like, so how does this then impact your strategy on the liquid book? Because let's say you're retail, let's say inside of Jason's head, there's a thought that, okay, I've seen a couple of these cycles before. Maybe it makes sense. Historically, I've just never sold my. I've just been like, I'm never selling my bitcoin or ETH.

That's just a ridiculous thing to sell it. And I'm like, maybe you try to time it, and maybe that's a fool's game, but maybe you try to time it a little bit so that you don't have to experience these nasty 90% drawdowns. But you're saying. But you're saying. You're saying that now because of the nasty drawdown that we went through in 22.

The nasty drawdown in 2020. In 22 and in 18 and 19. Yeah, exactly. So, so that's like, that PTSD that I was talking about where it's like, everyone is now so conditioned, like, maybe I will sell some, right? Maybe I will, like, try to, like, take some of that off the table so that I don't have to.

Seth Ginns

Like, I went through that pain in 18. I went through that pain in 22. Like, maybe. And. And that's what.

That's what actually creates that wall of worry, right? That creates the. I mean, one of my. One of my really good friends, my mentor. I remember in late 16, early 17, at one point, he was like, man, like, bitcoin's actually come back.

I'm going to sell, right? And, like, he sold the maximum amount that he could withdraw from. From Coinbase at the time. I think it was like 25,000 or something, right? So he sold that and he withdrew it.

And then the next day, his account was back up to the same amount, pre withdrawal from the day before. And he was like, all right, I'm going to sell again, and, like, withdraw it and did the same thing the next day. And then he was like, shit, I need to be buying, not selling, right? And he. He put it all back in.

And that's kind of. That's the wall of worry in, like, a really, like, tangible example, right? It's people selling. It keeps going up, and then those people coming back in and realizing, no, I shouldn't be selling, I should be buying. That's what creates that continued climb in the market.

It's when you. You don't have exuberance, you have fear. And that fear is what's causing people to sell prematurely. So, again, like, we're still far off from that. I know we're so far off from that.

Jason Yanowitz

I would agree with that. What I'm trying to get at is this question of, will this cycle look the same or different? And in my mind, there's, like, the same would be, like, big blow off top in 2025, basically. Like, some ridiculous, like, newcomers can't even fathom what this thing looks like. Some ridiculous blow off top in 2025, followed by, like, a pretty nasty drawdown in 26 into, like, you know, just peak apathy in 2027.

That's, like, if this falls all the last cycles in your mind, Seth, do we. Do we get that really nasty drawdown? Like. Or is there. Or is there a chance that we just.

We're out of this four year cycle period? So. So my base case is, is that we get that, right? Because I think in crypto in particular, history repeats. Which, by the way, like, we.

Seth Ginns

We should spend a minute on what December 2020 would say about the current setup right now. Because December 2020 was when we went through 20,000, and when we decisively broke 20,000, we went to 40k in three weeks. Right? We doubled in three weeks. So I like thinking about historical experiences in crypto.

I think it's really important. And that would definitely say, like, be prepared for a blow off. Move higher in the back half of 25 and then downside. But you always want to think about what the counter could be. What are the emerging cases?

And without a doubt, the emerging case with regulatory normalization, with liquidity dynamics that look different today. And with all of these new investors that can come in through the ETF, there's a growing case that this could actually be the super cycle. In fact, I'd say if it weren't for pal raising rates aggressively, now, we had inflation, right? So he felt he had to take action. But if it weren't for pal raising rates aggressively, I think we would have actually had that super cycle play out.

And that wasn't crypto specific. Right. That wasn't a crypto driven cycle, but in some ways it was. Right? Because why was crypto going up so much?

Because real yields were so negative. So I keep coming back to, like, this macro question and what's happening with liquidity, what's happening with real yields? It's the same thing for unprofitable tech stocks. It's the same thing for the mag seven, except for maybe the ones that are most closely tied to direct AI participation. So kind of a non answer, but, like, I think.

Yeah, like that you, you always want to think about liquid markets in, like, a probabilistic way, right? Like, because we, we don't predict the future. Right. You're, you're kind of thinking about what are the probabilities of different outcomes playing out? And I would say base case is like, that cycle has been consistent.

Obviously, the n isn't that big, but that cycle has been consistent. So you're going to assume that that cycle continues, but at the same time, there are all of these compelling reasons to say maybe it doesn't. Right. And we're going to be, like, hyper vigilant around the potential for it to, to not play out the same way that, that it has in the past. Yeah.

Jason Yanowitz

Jake, maybe we can move on to the next topic in a sec, but just to round up this conversation on the cycle, like, any, any other thoughts on just like, how, how this looks the same and, or different and these four years, you know, four year cycles and what you, what you plan on doing personally and. Yeah, I guess. Any thoughts on that? Yeah, I mean, I think this is going to be different in the sense that it will. Like, I believe this is going to be the biggest sort of bull cycle we've had in crypto.

Jake Brukhman

And part of the reason is just natural growth. More and more and more people are sort of onboarding to the space world. Coin is doing eight to 10 million signups annual run rate. Right now, obviously, bitcoin is enjoying tokenization, ETF's convergence with the traditional world, as we've discussed. And so I think that's not to be underestimated.

I think we're going to be more mainstream than we've ever gone. What am I doing personally? I'm not trading meme coins and spreading my capital across many different tiny things. I'm actually, I think most of my pa is concentrated in something like eleven positions that are high conviction, long term oriented, and larger. And of course, some of those are bitcoin ether and so forth.

That's what I'm doing. I'm not trading meme coins this cycle. But by the way, one thing that I would point out, if you think about that regulatory normalization, we're all talking about the potential for that to drive things higher on a secular basis. Think about your DCF model and you have your discount rate. Well, when you start to get regulatory normalization, when you get a regulatory regime, what does that mean?

Seth Ginns

The space becomes lower risk as an investment. So that means that the discount rate that you would use for the space is going down. So that's like a one time step up in valuations across the space. And that's like an interesting way. Like, I don't use DC's, I'm a growth investor.

But it's an interesting, like, traditional financial way of thinking about what a regulatory regime, what diversified end markets, what more convergence with traditional finance, how all of that flows into actually justifying higher valuations for the space and lower volatility over time. Yeah, maybe we can pivot to talking about AI and crypto a little bit more. So, jake, you, when I think about people who have been calling for AI, the kind of convergence of AI and crypto there's earlier than anyone else, there's a few names, three to five names that come to mind, right? Folks like ilya from nier, other people. And you're one of those.

Jason Yanowitz

We've gone from, at least personally in my head, being like, oh, we're slapping these two things together now. This is ridiculous, too. It is now one of the AI and crypto is now one of the five big themes of permissionless this year. So I have completely turned on that all say, and I'm looking at some really interesting stuff. And now more and more empire content is AI.

I'm like, wow. All right, so this is, this is how it happens. I'd be curious to get your kind of lay of the land. I know I think, Seth, you mentioned proof of humanity. And one other thing.

What is the, like, if you were talking to someone who maybe didn't know too much about crypto and didn't know too much about AI, how would you lay out, like, why these two. Why we need these two things to come together and, like, how these two worlds will converge? Well, imagine that you, I guess, like, the thorough experiment is like, imagine if you let AI just be developed by big tech, which is kind of the default path. What does that world look like? It looks like a world where all the models are proprietary and monetized to the satisfaction of those companies.

Jake Brukhman

It looks like a world where GPU and other compute supply is totally constrained and bottlenecked by companies like Nvidia, meta, OpenAI, and are not really, like, accessible to anybody else. It looks like a world where there's some really irresponsible regulation or legislation passed around licensing, which I think, in effect, makes the models, like, more opaque, not as transparent as you'd want them to be for safety reasons. It's a world where data provenance is not really taken into account. And these big techs are, you know, profiting from training models out of, you know, of copyrighted material, and, you know, kind of originators and creators aren't getting compensated fairly and on and on and on. So I think, like, you know, not.

You don't need specifically web three to solve that problem, but it feels like Web three is the best technology to solve that problem today. And so what is. What does that intersection look like, at least from Coinfund's perspective? Well, there's this pipeline that creates AI products. It's basically the talent, the data, the compute, and the productization of AI models.

And I think what web three adds to that picture is that it democratizes and opens every single one of those stages in the pipeline. So, for example, we now have decentralized networks today that are serving GPU capacity for things like training and inference of models. And in fact, there are real AI apps like web two. AI apps today are running on decentralized web three, compute, which is really, really cool. We have.

Why should a scientist have to work at Google if they have an idea for a new model framework and they need some compute in order to test it out? Why can't we have models that are, like, crowdfunded and owned by token holders that rival the state of the art models like GPT four or five, as it's about to come out? And then finally, the safety issue for me is paramount. I think that if you want AI to be safe, then absolutely the wrong approach is to say only a few proprietary, closed, opaque things can develop AI. The correct approach is to make it transparent.

Like if I were the president or whatever and I could issue an executive order, my executive order would be that whenever OpenAI creates a new model, they have to open source the weights because that's going to be like the best way to actually get transparency into, you know, into play and to actually know that what OpenAI is creating is not, is not dangerous. And when OpenAI says that, or other, you know, AI companies for that matter, when they say like, we're gonna solve a safety problem internally, what they're really saying is that like, you know, ten, 5100 people are gonna be working on this problem and we know, right, they're. Really saying we're going to put our own San Francisco bias on whatever, right, on whatever this algorithm should be. It's just so clear that llms, for example, in the long term have to be localized because they have to take into account local language, local culture, local biases. Right.

And you know, it just, it's not realistic to have these like monolithic amms that are trained in San Francisco and then applied and sort of thrust upon the rest of the world. That's just not how the world is going to work. It's not realistic. And that's what web three enables, is a world where that whole pipeline can be used in a democratic manner. Do you think it's.

Jason Yanowitz

Tell me if I'm stretching the comparison too far here, which I very well might be, but do you think it's fair to say people used to think you were mentioning there used to only be one chain. It was all going to get built on bitcoin. And then Jake and Coinfund had this idea that there'd be thousands of chains. And now that thesis has played out and there's thousands of chains now I feel like you talk to folks in AI land and they're like, all AI is going to be controlled by three or four people. There's the Microsoft AI, Alibaba AI, Apple AI, google AI.

Jake Brukhman

That's it. To me, it's starting to become just hearing you and talking to other folks smarter than I am, it feels increasingly obvious that there will ultimately be thousands and probably millions and tens of millions of AI's as well. Of these. Yeah, I guess localized llms like you called them. Is that a.

Jason Yanowitz

Maybe? I'm trying to draw the comparison too far, but what do you think of that? I think it's inevitable. There's this great, like, if you know Jan Lecun, who's the head of AI over at Meta, he has a recent episode on Lex Friedman, and he has this great quote. I'll read it to you now.

Jake Brukhman

It says, the french government will not accept that the digital diet of all of their citizens will be controlled by three companies in the west coast of the US. That is just not acceptable. It's a danger to democracy, regardless of how well intentioned those companies are. And it's also a danger to local culture, to values, into language. Right.

So I just, I. And the fact that, like, coupled with the fact that we actually see in the market real innovation, and, in fact, most innovation really happening in open source. Now, the big tech companies, they still control, like, right at this moment, they still control a lot of the compute and they kind of have the power to create the biggest foundation models. But the secondary waves of innovation, of how to compress those models, how to make them more efficient, how to fine tune them in tractable ways, how to put them on commodity hardware, how to put them on quantum computers, a lot of those innovations are happening out in open source. And I think that there's a point where once we source enough compute in web three, once we start to do crowdfunding of training, we're going to see an inflection point where we're going to actually surpass proprietary tech.

Jason Yanowitz

Will you? So AI has impacted white collar more than people thought it impact blue collar. Like Andrew Yang and stuff was like, blue collar's going away AI, but really it's impacted white collar more than blue collar, I'd say. Have you thought about how your job could ultimately be replaced? I guess Seth and Jake, I mean.

Jake Brukhman

Listen, I play around with a lot of, like, state of the art AI most recently that's been generating music on Suno AI, which is really cool, crazy experience. Amazing. So. Yeah. Yeah.

And I get the distinct sense that, you know, at least for a while, these are going to be tools that augment what we do. You know, I think there might come a point where there's agi. I don't think we're, like, anywhere close to that right now. And if you actually listen to Jan Lecun on Lex, he goes into some really compelling reasons, like why we're not really that close. And that's someone that you should, like, listen to on this topic.

Seth Ginns

It's interesting. I think there's some really, there's some really, when I think about liquid markets and the ability of AI to take over liquid portfolio manager roles. There are some really interesting nuances that one has to think through, basically, like it's kind of the biases and the foibles of humans that create the market, right. Imperfect information that creates the mispricings and how that kind of feeds into, like if there is an answer out there and a whole bunch of different AI bots are able to come to that answer, then what does that mean for liquid markets that they just like, price in to perfection? What's happening today?

Immediately, there's always going to be the room for multiple market participants. So it's something that I spend a lot of time thinking about. But it's a very non trivial dynamic how AI interacts with marketing, pricing. But there is a really interesting, when you talk about Jake and you're talking about AI augmenting, I think, a big thing that the Fed is focused on, a big thing that will impact global economies just in the next year, forget like five years out is the productivity gains and the disinflationary impact from AI. I think it's going to come way faster than people realize.

That's kind of why the Fed like that could drive the super cycle. Because if you're the Fed and you're saying, look, last decade we couldn't get any inflation despite QE and zero rates, and now we're going to have like potentially the most productivity generating. I mean, Jamie Dimon today was saying this is as important as the steam engine, right? Like the most productivity generating technology in generations coming in an accelerating way over the next year or two. Is your bias going to be that we could get into an inflationary environment again really quickly and you need to be tight on rates?

Or is it going to be, man, we could have a big disinflationary dynamic coming into play really quickly, and we need to keep liquidity out there, keep things, financial conditions loose. Like, I think that's probably going to be the way that the fed thinks about it. By the way, it's so cool watching everything get dark outside while we're talking.

Jake Brukhman

It is cool. It is cool. I'm in, I'm in San Francisco today, so you can see a little bit of it. That's cool. Seth, I think you have a good face for the future of the super cycle.

Jason Yanowitz

I think Seth gins super psycho guy. This is the first podcast I've heard. Super psycho. I like it. I like it when this happens, I'm gonna be like, Seth told me.

Yeah, with AI, actually, it was Ilya from Nier who I was, and then rune from maker. I was talking to him about Das, about this, and then Ilya on another podcast a couple months ago about, like, this idea of, for me, at least at blockworks, like, I really do think that having, like, an AI COO internally would be incredible for the company and for. For all companies. And I'm just kind of waiting for someone to build this where, you know, it'd be up to the founder, to the exec team or whatever to, like, do you want to opt in or do you not want to opt in? But if you opted in, like, imagine something that sucks in all the slack.

Conversations around the company, every email around the company, and someone, before they go to someone, can basically say, hey, look, I'm trying to do x. Like, should I do? You know, it's. It's. I don't.

I just think that there's something. I could see it being a very cool b two b thing. Jake, Seth, I know our time. This has been awesome, guys. I appreciate it a lot more that we could have discussed, a lot more that we wanted to discuss.

So we'll have to have you guys on again soon, and. Yeah, we'll see you. Jake, I think you're already scheduled to speak at permissionless maybe, or Seth, you are. I can't remember which one of you guys, but as always, we'll get the coin. Fun folks involved, so look forward to.

Seth Ginns

Thanks so much for having us. All right, thanks, Jason.

Jake Brukhman

All right, thanks, Jason.

CoinFund's Playbook for a Crypto Supercycle | Jake Brukhman & Seth Ginns

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1: Introduction to CoinFund

2: Technical Strategies and Market Insights

3: Regulatory and Economic Implications

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