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ROLLUP: Bitcoin Dominance Hits 66% | Circle IPO 10x | Robinhood Flips Coin? | Kalshi vs Polymarket
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- [00:00]
A
Foreign Nation to the Friday weekly roll up. My co host, ryantron Adams is out for the week, hanging out with his family, and we are tapping in Tom Schmidt from Dragonfly in to replace him. Tom, how you doing, my man?
- [00:16]
B
Good. Thanks for having me. I was just saying this is like a nice crossover app. Like, you came on the choppy block a couple weeks ago. Now I'm on Bankless now.
- [00:23]
A
Now you're here. Yeah. You know, the podcasts are just cycling through other podcasters. Eventually we'll have. They're all going to converge.
- [00:30]
B
Yeah.
- [00:30]
A
Honestly, everyone should just get one big podcast and we'll have one room. We'll see how it goes. Overall, before we get into the. The news of the week, which was a pretty light week, I'll call it. We have the call she raise. We have some markets to talk about. Nothing too big this week. So in order to kind of kick things off, I kind of want to get your vibe check about the state of crypto, because we are going from one half of the year to the other. It is June 26th at the time of recording, so we're finishing the first half. Entering the second half of the year, I remember general sentiment. I don't know what your market take was going into this year, but general consensus was rough first half of the year, frothy second half of the year, and I think that that has played out more or less to a T. Wondering what your take is?
- [01:14]
B
Yeah, I. I feel like whenever there's some macro chaos, some geopolitical chaos that is always taking the driver's seat and crypto is always sort of secondary and feels like, you know, this week we were kind of covering from a lot of the geopolitical craziness for the past couple of weeks, but, yeah, it's been quiet. I think permissionless was taking place in New York. A lot of people were in town talking about that. But also there's a lot of focus on equities. And I feel like, you know, we'll talk a little bit about that, which has been kind of bizarre. It feels like a very much a reversal of like 2020, when crypto is going crazy. And it feels like the equities market, everyone's like, looking and there's nothing, Nothing really going on.
- [01:51]
A
Yeah. Yeah. Zooming in on the bitcoin price. We are up 3% on the week to 107,500 and eth prices down 3% on the week. So a little bit. A little bit of divergence between the two majors, but overall, bitcoin I guess if we zoom out to the three month mark, we're up a pretty substantial amount. Coming up from $80,000 to almost $110,000. We did hit that $111,000 in May. So we are kind of ranging between this 110, $100,000. Are you bullish? Are you like eagerly waiting the breakthrough of new all time highs or are you more patient?
- [02:25]
B
I mean, how can you not be bullish? Like every week I feel like you read a headline that would have been totally unbelievable five years ago, let alone 10 years ago in just in terms of interest, traction, adoption in the space. Even now, I mean, we, you know, bemoan, oh, bitcoin's down to $100,000. Kind of insane. It was actually like a cz tweet from 2020 or maybe 2019, even joking about this fact that like, hey, in five years we'll be complaining about bitcoin dropping to $1,000 and here we are. Yeah.
- [02:57]
A
Now I don't want to pin you down to anything specific because I know that's just not how markets work, but I'm generally feeling that you are in the camp of bitcoin is currently edging and we are looking through an all time. We're looking for an all time high.
- [03:07]
B
Yeah, I think really the only thing that's going to stop this is some sort of bigger shift in, in, you know, monetary policy, some big, again, macro calamity. Maybe we get, you know, dollar strengthening later, half the year that could be really bad for the market. But right now it feels like there's really only tailwinds and, and so I really know what's going to kind of make us deviate from this path.
- [03:31]
A
Yeah, yeah, the, the total crypto market cap coming in at $3.4 trillion. So that's actually pretty still far away from its peak at 3.9 trillion. So like $300 billion off. But nonetheless, the bitcoin dominance story I feel like is the, the news of the week, at least in terms of the crypto markets side of things. Because we are just hitting new all time high, new all time high week after week. There's 1, 2, 3, 4, 5, 6, 7, maybe 8, depending on how good my counting is. Weeks straight of green candles on bitcoin dominance to a high that we have not yet seen since all the way back in December of 2020. So Bitcoin dominance is at 66%. When you see this, what do you think?
- [04:16]
B
That's weird. I would have pegged it more for like a 2019 all time high. But I guess 2020, there was also like, I mean, I guess it goes back to these. The stuff being very cyclical. Whenever it's over, you need to prepare yourself to be back and, and vice versa. And I think right now it's. Anytime there's grave dancing, which is kind of what we see, I think from, from, from Maxis on the rest of the space, in my mind, that just means there's more opportunity. And it looks different every time. I mean, even the market now looks different than 2021, looks different than 2017. But there is going to be a shift and I think things generally just don't move kind of monotonically like that. So, you know, if I had to bet a year from now, I think bitcoin dominance will be lower, but I don't know what the rest of the market's going to look like.
- [04:56]
A
Yeah, a year from now. I totally agree. And for an entire year, I think you could still slowly see this thing grind up. It's at 66%. It could go to 75%. There's nothing stopping it. And that gr. Rave dancing can just get louder from the bitcoiners, can just get louder and louder and louder and it'll be more annoying and people will capitulate even more. But when bitcoin dominance does turn over, it has never gone down slowly. It only goes down very, very fast.
- [05:23]
B
Yes, I think that that's right. I mean, there's always, I feel like the start of some new meta, which is ultimately going to drive down bitcoin dominance. And when there's a meta, that's the frothiness that we were kind of talking about. And so, yeah, I'm curious to see what that looks like again. Different every time, but it feels like there's. There's little green shoots popping up here and there.
- [05:42]
A
Yeah, yeah. That new meta that you talk about it, I'm going to call it a token issuance meta. The ICO mania in 2017 was what brought bitcoin dominance down from the high, high number of 96% down to the lowest it's ever been at 34%. That was the ICO Meta. The NFT Mania in 2021 also brought it down where it crept back up in that bear market up to 72% and brought it down to 40%. And then actually, interestingly, the meme coin mania only really, like, I'll, I'll call the peak of the meme coin mania starting in November of 2024, right before Donald Trump issued the Trump token. And with the issuance of the Trump token, the bitcoin dominance went from 61% down to 55%. So the meme coin mania did not really make a dent in overall bitcoin dominance. So that was not really the cycle that we were looking for.
- [06:33]
B
Yeah, I, I mean, I think that is true, which is people always, I remember when, when meme coins were going big, people talk about, oh, this is just everyone being tired of, of VC coins, people being tired of, of bitcoin and wanting like. Yeah, but in, in absolute terms, these are, you know, pretty small numbers. Right. This is kind of a weird little pocket of, of the industry. I think the NFT thing was, was interesting where like, again, that would not have been something I think you would have predicted in 2019 that like, you know, NPCs make a big dent yet. They did. And who knows, maybe something, you know, will make that happen this time around. Maybe it'll be, you know, tokenized equities or maybe perps will take a big dig in it.
- [07:12]
A
Yeah, yeah, yeah, yeah. In 2019. I remember me, Ryan, a lot of the ethereum crowd of people were just so bullish on Defi and things like Makerdao and Uniswap and we're going to democratize finance and you know, we got, we got that bull market that was Defi summer. That did not make a dent in bitcoin dominance. It was the NFT mania that made a dent in bitcoin dominance and that brought in the net new people. And then we were like, you look at our cool new financial toys and they're like, I want to collect the monkey jpeg. And we just, we had just no ability at all to predict that, that coming our way at all. And so I'm guessing whatever, whatever brings Bitcoin dominance from 70% back down to like 45% or wherever it goes is going to be something that like, no one actually sees coming.
- [07:55]
B
Yeah, I mean, it could be, you know, ICOs coming back and we're kind of seeing again, like into that. Yeah. You know, I don't think it's the, the worst idea in the, in the shape of capital formation.
- [08:07]
A
Well, you see, you're an ICO meta fan. Maybe you could talk about why, why you like ICOs.
- [08:11]
B
I don't know if I would say I'm a fan, but I don't hate it. I think hopefully we've, we've kind of learned some of the lessons from the 2017 ICO phase and I think there has been maybe just an exhaustion, I think, of market participants. And that's where I think a lot of the infighting and Twitter finger pointing is happening. Where, you know, traders and retail investors blame VCs and VCs blame projects and projects blame VCs again too. I don't know.
- [08:35]
A
I don't know.
- [08:35]
B
Everyone's blaming some VCs.
- [08:37]
A
It's really healthy.
- [08:38]
B
Yeah. But, you know, it's, it's okay. This is a byproduct of the current state of fundraising and capital formation. Then there's, there's appetite, I think, for more early stage interest. Also, frankly, the way projects are raising capital is just so much different than it was, you know, five years ago, where early stage teams need less capital, they're doing fewer private rounds. You can see that all kind of collapsing at some point where, hey, maybe we don't do a private round, or maybe we do one small private round and then a public sale. And that's kind of it. And I think that has been kind of the only maybe major trend line I've seen in private fundraising has been, hey, maybe we don't need, you know, $2 million to make a new blockchain. Maybe we need a lot less and a lot less time and we can kind of, you know, compress our capital needs and therefore open up to the public.
- [09:27]
A
Yeah, yeah. There was an era, maybe two years ago, three years ago, where the $1 billion raise or the monster raise was truly signal for retail investors. And now I think in more recent times that has flipped on its head where the very large gargantuan race has turned into anti signal. Whereas, like, oh, this, this is like a. I'm not going to name any VCs, but there are, there's a select cohort of VCs out there that I think are being branded by these as these like token shops. And they do these very large high valuation raises. And like, it's just early in the lifespan of said company. And so this said company is brand new, getting $1 billion valuation from like the same kind of cohort of VCs. And people are just like flagging that. And that is not, is the opposite of what the signal it used to be like two or three years ago, which, like, I think, I think is, is good at least it is a pendulum shift. And I think, you know, it can shift too far. I think as well. It can get too toxic, it can be too, too much of, like too much of a good thing. But that is kind of like what the current meta is, is like the large VC race is kind of being thrown up by, by the market at least the Twitter discourse. I'll say.
- [10:38]
B
Yeah, I think that's a good way of, of phrasing it. I think obviously VCs in my mind provide value beyond just the capital in. That's what I, you know, like to like to tell myself. And I think, you know, project products do say that about, about good VCs. I think there's also a lot of angst around the exchange listing meta. A large chunk of the projects going to exchanges and hey, maybe these aren't as positive signal as they used to be. Not everything is going to pump on a binance anymore. And so I think that all kind of creates this discontent that creates revolution and I think that's kind of what you're seeing right now.
- [11:13]
A
Yeah, yeah. The other thing that's happening alongside of that is like I can't remember what echo round it was or maybe it was the token sale on, on Sonar on the new platform. And then like a bunch of, you know, retail investors got access to be able to invest in this thing for the first time and it was like very clearly a lot of people's first exposure to VC investing. And I can't remember what to tweet, but there was like the realization that oh, this is actually very likely not going to work. And that is the game that VCs have always been doing. And retail thinks that like VCs just have this like staircase to heaven where every single project you know is a 10x100x every single time. But in reality like the odds are much slimmer and just retail haven't, they're just not exposed to the failures and, and now like Kobe's ICO platform is exposing like the actual failure rate of venture startups to retail investors. And that's a, that's a new experience for many in the, in the retail side of things.
- [12:11]
B
Yeah, I think, you know, there's a phenomenon of venture where you want sort of professional LPs who are institutional, who do a lot of venture, who write chunky checks and sort of can, can weather the storm and it's kind of seen it all aren't going to be extremely annoying when things go know well or things go poorly. And I think products have that same phenomenon where if things go poorly, like you actually kind of want a VC backing you who's seen it all and can kind of help you and is it going to be complaining. Whereas yes, I think retail can kind of feel like everything's going to go I Mean certainly the median venture fund does not do particularly well, but you know, the outliers obviously make up for the rest of it.
- [12:45]
A
Yeah. Let's turn our attention to the meme coin markets. Excuse me, the tradfi markets where we're looking at the circle price. It's actually come down from the all time highs that it set just last week of 297 ridiculous dollars. It is at the still ridiculous price of $210. So we had a decline in the circle price. Any, any commentary on, on the circle price action post ipo?
- [13:07]
B
I think this is like the most mispriced IPO I've seen in maybe my entire career. I mean I can't imagine another. I can't remember the last time an IPO pumped 10x off the listing. And the bizarre thing was like they were trying to IPO for the longest time. They were shopping this thing around. No one wanted to buy it and maybe they're just showing it to the wrong people. I don't actually know who's buying Circle stock. I think Robert Leshner suspects it's a lot of TikTok retail traders, which might be true, but it's really, it's. He, he claims he's seen tik toks of the people telling others to, to buy Circle stock.
- [13:40]
A
I cannot imagine Robert LESHNER Just scrolling TikTok.
- [13:42]
B
I, I can't either. He and he claims, oh the, the best TikToks make it onto Twitter. And I'm like, you can just say you have a TikTok account, Robert. Like it's okay. Yeah, it's a big app. But it does seem like there's this weird disconnect between this thing was such a dog in the private markets to now being such a public market darling. And now everyone is taking note and everyone's like oh maybe I should go public or maybe I should, you know, you know, do something in Stablecoin land. And so it's sort of like the signals are, you know, percolating through the rest of the market.
- [14:11]
A
Okay, so this might be cope but when people say this is a mispriced ICO and everyone's like oh I totally mid curved that I should have bought it on open. It's obviously everyone is saying that in hindsight, hindsight 20 20, but we understand the circle fundamentals and like with that the 31 IPO price aligns with that it was, it's like $150 million of yearly income. It's not, not great. $31 billion. There is already Like a me, a stablecoin premium baked into a company that has $150 million of yearly revenue being priced at $7 billion. There's already a premium there. So like in the sense when you say that it is mispriced, that is just objectively true in the sense that we can now look at the price of $300 that it hit and just say that that is what is true. But I also again I preface this saying this might be cope but like I don't know, I feel like it's justified at $31 and it's just not justified at 210.
- [15:07]
B
I don't disagree. I would not have bought it at open. I didn't buy it at open. I thought even five was crazy. I. But you know I, I think the market, you, you have to take signal from the market and the market is telling you something else. And maybe these people are totally irrational or maybe have a different view than I do. But I think as always, you know, markets are forward looking and I think when people look at Circle they see hey we have GDZAC passing the Senate, all these big fintechs, all these big Fortune 5000 getting into stable coins. Circle is clearly in the lead when it comes to sort of regulated, you know, stablecoin issuer in the, in the US and it's, there's really not many other ways to express that view in the equities markets. I mean there was a bit of a catch up trading in Coin because people realize Circle revenue but other than that like what else are you going to buy? And I think that that's a large part of the rally too.
- [16:00]
A
Yeah, this, it was the Circle price pump was just a very isolated rally when it go went from like it opened up at 30, immediately jumped to 70 and then just climbed to 130. And no other crypto equity mainly Coinbase was really moving at all. Coinbase actually kind of traded down. Even that has changed in the last just four days. Coin stock has gone from $254 to $375 in about nine days. That's a 50% increase in the last nine days. So coin is doing a catch up trade. I would say like there is a correlation to Circle here. I feel pretty confident in making that market call that it was because of the Circle price where people are like all right, Circle so goddamn frothy. Like where else can we get exposure? Oh, let's buy the company that has 50% of Circle's revenues. And so like my commentary before this was okay, there's a lot of private companies that are looking to go public downstream of the circle very positive IPO and then trading price action afterwards. Like as soon as something 10x is right after IPO, that's very signal, big signal that the public markets are ready. So like now people are like looking at Kraken and looking at Chainalysis of all things Fireblocks, all these private companies that could in theory IPO and they're like, okay, like that's the next one. There's going to be a next one. But when people were making these comments, I was like, look at the coin stock, look at the coin price. It's not going anywhere. It's actually just a stablecoin narrative. It's just about stablecoins. But that is now wrong over the last nine days because the coin price has hit new all time highs. And so if we zoom out all the way to the pico top of the 2021 bull market, when coin launched at like 375, I guess it did trade briefly higher up to 420, but it launched at $32075. We are at $375 right now. So we are matching one for one the price that coin listed at the top of the 2021 market. The thing that ended the bull market and now we are back here. Give me some commentary on just like the long term price action that you see in coin.
- [18:01]
B
Yeah, I mean I think you're right that again the private markets take signal from the public markets. They see Circle doing well, they see Coin doing well. And now you see all these sort of longer tail companies now looking to IPO kind of based on comps. Right. They're saying, well hey, if they can get this kind of price with this kind of multiple, maybe we can also get something pretty favorable. We'll see. I think Coinbase has been kind of a strange company on Wall street where some people look at it and it's just a total dog and they're like this thing. I remember even the narrative in 2019 was they need to shift away from exchange revenues and there's going to be fee compression and they need to be more of like a bank. And then that was like just totally obliterated. Right. In like 2021 where it's like oh yeah, maybe if there is no fee compression, maybe they have some sort of reg moat, maybe a little change this time around. I do think, you know, certainly some of the other trading platforms and certainly at the ETF launch you could argue has been cannibalistic to some of the revenues, but it's also so many strong tailwinds behind it. I don't know if I'm gonna jump the boat here, jump the gun here a little bit on, on Robinhood. But that's been the other kind of crazy all time high move, you know, from the past few weeks has been and you know, was it like 30, 40% of their revenue is also coming from, from crypto? So like.
- [19:15]
A
Oh really? I didn't know it was that much.
- [19:17]
B
Yeah, if you look at their last earnings report, it's very, very heavily crypto and it's a very weird segment of crypto. Like I think their number one or number two asset was like Doge. And, and so it's just, just a totally different type of user than probably users trading on, on, on, on Coinbase or you know, trading on Uniswap. And so you know, but again if you think about them as like a crypto beta play, I, I think that that's probably another, you know, sort of attractive position.
- [19:45]
A
Yeah. Are you saying. Okay, so the recent price action in Hood is just phenomenal. They also, like you said, got obliterated throughout like post when the interest rates started going higher and higher and higher in 22. They also. Hood Robinhood launched also in 2021, August of 2021. So pretty similar to Coinbase timing actually. And then you know, launched at $60 and just got obliterated. Went down below $10 for a very long time. Something like two years it stayed below $10 and then just in, let's see, when was it? About the start of 2024 it was $10 and it started creeping upwards to where it is now at $83. How much do you credit crypto as a part of this price increase, do you think? What the, the all time high that Hood is seeing and continually breaking on a week over week basis, is that downstream of crypto or is that more of. It's just like regular business, do you think?
- [20:37]
B
Hard to say. I mean again as a percentage it's, it's quite high. So if you think of hey, like that being a driving force then you know, I, I think it's like a, certainly a big part of it. I don't think weirdly that's been a big part of Robinhood's public story. Like if you think of all their new product announcements, it's actually been about trying to take their existing user base and upsell them and convert them and turn them into this more sort of long term financial Plan, which planner, which has been. Or your asset manager has been kind of their whole story the whole time, where it's like, hey, you, you come for the meme stock trading and you stay for the 401k and the. You know, I think maybe.
- [21:11]
A
Honestly.
- [21:12]
B
Yeah, it's definitely been, I think, I think a good move on their part. Interestingly, I saw some research recently that a lot of the Zoomers and the Alphas are not actually getting onto Robinhood. It's like they kind of captured this, like millennial cohort that I feel like I'm a part of. And they're aging with the platform, they're staying in Robinhood, but the youngs are not actually onboarding. And so maybe that's okay. Maybe you're getting people as a kind of agent of their peak earning years, but kind of maybe a little bit counter to kind of the public narrative for them.
- [21:41]
A
Yeah, that is counter to my understanding. I mean, I guess I could account for that in a couple reasons. Maybe Zoomers just don't have that money. That much money yet. Maybe they're just not in not investing because I can't imagine where they would go. Like, I don't see them opening up a td, TD Ameritrade or any other sort of trad brokerage. So if they're not going to Robinhood, I kind of think they're. My gut take is that they're not doing anything.
- [22:02]
B
Yeah, that's certainly possible. Maybe they're going on chain. Maybe they're, you know, I don't know, trading TikTok Meme coins. Yeah, whatever. And I just pulled up their Q1 earnings. So in Q1, 2025 or 2025, Robinhood made 252mil gross on. On cryptocurrencies out of 927mil gross for the quarter. So pretty substantial. I mean, they made. They made more in crypto than they did on options. They made five times more than they made on equities. And so, yeah, it's. It's a big part of the business.
- [22:35]
A
They have a pretty big announcement at ETHCC in Cannes. Is that is going on Monday. I'm going to that event. So actually they already gave me the embargo. It's very large announcement. It's pretty cool. I'm pretty stoked for it. So bankless Asian. You guys will see that in your podcast feed on Tuesday of next week. So stay. Hold your breath for that. One last thing before we move on. I don't know if you pay attention to this as much as I do or other people in the industry. But a growing number of people keep on showing me this Hood coin ratio. So yeah, we got the Bitcoin ether ratio but now we also have the hood coin ratio. So like there is also similarly, similarly valued. I don't know if this is the price. Yeah, this is the price over price, not valuation over valuation. But the valuation is both around roughly $75 billion. So people are in this like horse race between Coinbase and Hood. I don't know if you have an affiliation here, Tom, that you would like to share.
- [23:32]
B
I do not have an affiliation, I guess I, I don't know either individually or then maybe through an index fund or something. I, I don't know. I, I, I continue to be impressed frankly with, with Robinhood's product execution. I think when you get to a company of a certain age, there's a natural tendency to kind of fall off and I feel they keep shipping fresh new products. I mean even I think their prediction market stuff for the election and some of the newer stuff they've been doing, I mean just, just cutting edge for, you know, kind of a brokerage of their age.
- [24:01]
A
All right, we're going to get into the rest of the news of the week starting with call she's raised. They raise a bunch of money and Tom I think had the tweet of the week that we are going to talk about. I won't spoil that, but I thought it was pretty good. And then we're going to get into how you can get a mortgage with your crypto. So we're going to get to all of that and more. But first a message from some of these fantastic sponsors that makes this show possible. Uniswap is your gateway to a more efficient defi experience With Uniswap. Swapping and bridging across 13 chains is simple, fast and cost effective. Help helping you move value wherever, whenever. Thanks to deep liquidity on the Uniswap protocol, you'll enjoy minimal price impact on every trade. And now Uniswap V4 takes it even further. Swappers benefit from gas savings on multi hop swaps and eth trading pairs, while liquidity providers can create new pools at 99% lower costs. The best part, you don't have to do anything extra. Each trade is automatically routed through Uniswap X, V2, V3 and V4. So you get the most efficient swap without even thinking about it. Whether you're swapping, sending on, ramping off ramping or bridging. Uniswap's web app and wallet gives you the tools to unlock unlock DeFi's full potential on Ethereum, Base, Arbitrum, Unichain and more. Use Uniswap's web app and wallet for a more efficient way to use Defi. Binance is the world's number one crypto exchange. Over 275 million users already trust their world class security. Binance makes starting crypto as simple as it should be. Whether it's learning about crypto on Binance Academy or browsing hundreds of assets and viewing your newly created portfolio in a clear, easy to track dashboard, Binance helps you go at your own pace. For hardcore traders. Binance Pro opens up industry leading services for trading professionals with fully bespoke trading products along with a suite of white glove services for VIP and institutional clients. Need support 24. 7 customer service is on hand whenever you need it and with some of the lowest fees and deepest liquidity in the market, it's no surprise why over 275 million users trust Binance for everything. Crypto Download Binance today and get started in minutes. Binance is not available in certain countries including the United States. Check its terms for more information. Celo, the blockchain engineered for everyday payments has officially returned home to Ethereum as a blazing fast layer. Two built on the OP stack and Eigen da Celo delivers 1 second blocks subcent fees and fee abstraction so users can pay gas in USDT, USDC or any whitelisted ERC20 token. Add native bridging, Ethereum level security and ultra green money and you have a network purpose built for global Commerce. In just five years Celo has processed 730 million transactions for 12 million addresses. It's launching with a hundred partners and fresh defi firepower that makes Celo the on chain FX hub for borderless remittances and real world spend for builders. Distribution is baked in programs like Presentee grants, retroactive public goods funding. Celo Camp and Proof of Ship will put your mini app on Farcaster and Opera Mini pay tokenomics leveled up to the great Celo Habiting cuts inflation from 2% to 1% aligning the chain with its ambitious vision 2030 a trillion dollar on chain economy where region sustainability, cypherpunks and degens create prosperity for all. Follow Ello on X and start building@celo.org today. Kalshi the prediction market the polymarket Competitor announced their $185 million raise, their Series C raise which values Kalshi at $2 billion this raise this round even though to my understanding, I don't think Kalshi has anything to do with crypto. This was nonetheless invested in by a bunch of crypto VCs, including Paradigm Multicoin, and then also some people outside of crypto like Sequoia and some other VC firms that I am not familiar with. So this has just kind of rocketed around the trad media world because you have the non crypto prediction market, I think, fitting in with the non crypto media organizations. And so I think you're kind of seeing like a bifurcation of the Internet and people are picking allegiances here. Everything is getting tribal these days, like I alluded to. Tom, you have a spicy tweet. I don't want to get to that yet. I first want to kind of just get your take on a $2 billion valuation of a prediction market. I think everyone in crypto is generally bullish on prediction markets because that's kind of like our technology and so that feels like our turf. And we have this non crypto startup raising at a $2 billion valuation. What do you overall, what do you think about a $2 billion prediction market?
- [28:07]
B
I don't think there's anything crazy about $2 billion for a prediction market. I think 2 billion for Kalshi is a little nuts in my mind. I mean, you can see some of the metrics not particularly impressive in my mind. I think they also obviously face this competition issue. That's what I mentioned with Robinhood. I mean, certainly this partnership with Robinhood to do distribution and that's pretty attractive in terms of fees. But you have this platform risk. There's also ForecastX, which is another SIMI events platform that Robin who used for the election. Actually, they didn't use Kalshi. And you know, again, they. They're the one who ultimately has the end relationship with the user. I think polymarket has done a really good job of going direct to user, having their own brand. I mean, Shane, post their, you know, visitor numbers and, you know, they're putting up the same order of magnitude of visitor numbers as, you know, some of the biggest sites in the space. But I just don't really see that sort of affinity with Kalshi or Leo. See paid tweets from influencers versus actual organic interest. But full disclosure, Dragonfly is also an investor in Polymarket.
- [29:14]
A
Okay, okay. All right, one last question before we get into the tribal side of things. There are. What do you think about the crypto companies investing in a non crypto? So there's no actual firm like rules like crypto VCs can't invest in non crypto projects. There's no, there's no rules about that. But nonetheless is interesting to me that we have some crypto VCs investing in Polymarket's competitor. What's your gut take about that?
- [29:37]
B
Yeah, I, I mean I do maybe Kalshi has some deeper features in the product roadmap that I'm not privy to. They do or they did recently start to accept stablecoins, I believe. So maybe they see some of the opportunity in kind of the, you know, degen trading going on in crypto land and want some of it, but they still miss out on the core component. And I think that's something that does not get brought up enough, which is Polymarket is actually happening on chain. I mean granted, using this order book. But like the trades settle on chain. You can see the balances, you can see the trades. It's verifiable that they're using Uma for the Oracle. It's very cool and transparent and embodies so much of the Defi story. Whereas Kalshi has none of that. It's literally just an exchange that can take your stable coins if you want to send it to them.
- [30:21]
A
Yeah, I mean the main difference between Kalshi and Polymarket of course is that Kalshi is legal for United States citizens and entities and Polymarket is not. And so they're just like an offshore predictions market. Right. And so, you know, in theory it's possible to open up a vpn. I'm not recommending that, but that's technically possible if you're onshore. But to me it's maybe there's like a parallel here between like Circle and Tether where Circle is offshore and has more freedoms and. Excuse me, Tether is offshore and has more freedom. Circle is onshore and has more restrictions, but you get to have onshore customers. I feel like that's a fair comparison. What's your reaction?
- [31:00]
B
Yeah, I actually like that. I mean I was going to say I think, you know, maybe the comp was originally going to be Hood versus Coinbase, but I like the Tether Circle comparison a little bit more. I do think, you know, people under index on the amount of prediction market interest coming from outside the us I mean there's an, you know, for the longest time what Ladbrokes was like the largest prediction market for the US election, which is a UK based sports betting site. And so there is, you know, it is the biggest election in the, in the, in the, in the, in the world. And I think there are also just more and more events that people want to trade on. I mean, the New York mayoral election, Israel, Iran. It's just kind of the way people consume news now.
- [31:44]
A
Okay, Tom, I would like to get into the spicy side of things so you have freedom to take the. Take the muzzle off. This is a tweet that you tweeted out with some screenshots saying, never forget that Kalshi is a team of little rats. And there are some stories here that this one came out of pirate wires with the title of Kalshee paid influencers to target polymarket CEO after a FBI raid. And then there are some other screenshots that have, I believe, somebody from Polymarket in DMs with a influencer who has a bunch of followers to retweet the tweet of CEO Shane Coplin of Polymarket getting raided by the FBI right before the. The Trump Biden election. So maybe listeners might remember that, that the. The CEO of polymarket, Shane got raided. I think to this day, no one really knows why. And we have verified screenshots of somebody from the Kalshee team convincing a general influencer on Twitter to retweet the tweet saying, yo, this guy looks guilty. Which is unfortunate behavior. I would. I would call that. And so that leads Tom here to call the Kalshi team a bunch of. A bunch of rats. What's. Tell me how you really feel, Tom.
- [32:58]
B
Yeah, look, I'm. I'm all in favor of healthy product competition. I would say, you know, this is just kind of the public story that's available on Kalshi. There's a bunch of stuff below, you know, the tip of the iceberg that maybe not don't want to discuss on this podcast. But, yeah, I think. I mean, frankly, I just don't think they've been really been behaving as good actors in the space. This is, again, one story. The rest might come out in public, but I don't think it's okay to basically libel your competitors or to try to beat them on things that aren't just product. And so I think on the flip side, Shane has been an unbelievable builder. He's been building Polymarket for over five years, six years, even during the bear market when there's no volume. And he built it in a way that I think, again, embodies the spirit of crypto and the spirit of defi and what we're trying to do. I think there's many ways to take a shortcut, and instead he, you Know, I mean, if you look at the contracts, literally it's like derived from the Gnosis prediction market, you know, way back in like 2017. And so there's kind of this nice through line here. And I think it's also just an incredible utility for the world. It's crazy to me now that so many world events, we previously relied on pundits to give us our news and often they were wrong. And I think we kind of saw this with most recently the New York mayoral election, that this is just a way better, incentive aligned version of how people get news now. And so I'm very pro Polymarket and again, I just don't, I, yeah, I, I don't want to get too, too much into it, but I think we need to kind of let you know, do some self policing as an industry and you know, weed out the bad actors.
- [34:41]
A
Yeah, yeah, yeah. For those that don't remember, I remember Kalshi was operating in this very limited capacity because they were under a lawsuit from the CFTC that was really restricting their ability to just like operate as a startup at all. And then they won that lawsuit or something like this and that, that went, that restriction went away and they were finally open, able to open their doors like not too long before the election. And so they really advertised themselves as like the only legal place for United States citizens to, to bet on the outcome of the United States election. But they were just so late to the game because polymarket had already more or less like started to really crescendo in volumes ahead of the US election. So they were just very clearly coming from behind. And like, I, like, my first impressions of them was like, I mean, I kind of feel bad for them because the CFTC was really like not letting them off the leash and they were really hamstrung by the fact that polymarket was able to operate because they were targeting an international, international client base. And then so they had to do some like, kind of like, kind of mean tweets pointing at Polymarket. And I was like, okay, but I get it, they're an underdog. They need to like clamor for relevancy. And so I remember some of these mean tweets from the Kalshee team going out like, trying to, to fight for relevancy. I was like, okay, you know what? Like I get it. Like they kind of need it. But then the, the, the, the distastefulness also crescendoed as well. And they've kind of never really lost that. It's like more than worse. Than scrappiness. It's like kind of just like actual. Yeah. Distastefulness growing out of the Kalshi side of things. That's my, that's my account of history. And again, I won't ask you to comment anymore unless. Unless you're, unless you have something to say.
- [36:21]
B
Yeah, I, I think a good limits test is if there's anything that you're doing that you wouldn't want to come out in discovery or for everyone in public to see, probably shouldn't be doing it. And I think there's a lot of things going on at Kalsi that probably are in this bucket. So again, trying to send a mean tweet. Fine. To, you know, compete on product. But yeah, it didn't, didn't exactly stop.
- [36:40]
A
At the mean tweets. It just only got. Got worse from there. Yeah. And then. Yeah, I've also just heard rumors of Kalshi just operating very nefariously under the table, but nothing I can actually like substantiate. So. All right, let's get into I think what the crypto. Twitter's favorite news of the week. This came out of the U.S. director of Federal Housing. So he's appointee by Donald Trump, I believe, who tweeted out. After significant studying and keeping with Trump's vision to make the United States the crypto capital of the world today, I ordered the great Fannie Mae and Freddie Mac to prepare their businesses to count cryptocurrency as an asset for a mortgage. And so this is this individual who is ahead of the matters that are relevant for this to get the, the Fannie Mae and Freddie Mac which are in the kind of this like pseudo private public operated companies that just do mortgage. I can't really remember, I'm losing my 08 history. But they just managed the mortgage standards in the United States and they started to get heavily regulated post 08 crisis. And so they are being ordered to look into the possibility of allowing crypto assets to be leveraged as like valid liquid assets for people's mortgages. So the memes on crypto Twitter, of course, just went straight into the. The Big Short movie where people are looking at the. I can't remember the individual who called the Big Short, but the we have mortgage. What's his name?
- [38:05]
B
Michael Burry.
- [38:06]
A
Michael Burry. Thank you, Michael Burry. Realizing that there's a ton of mortgages in America that are totally collateralized with fart coin and S XP69000, which of course is not in the actual order, but like there was no general specific cryptocurrency that was labeled just like crypto can now be assets for mortgages. Tom, when you saw this news, what was your reaction?
- [38:27]
B
Yeah, I mean, maybe, maybe two initial reactions. One, it maybe verify this, because this is what I remembered. When The Bitcoin and ETH ETFs launched the DTCC, the depository trust and Clearing Commission marked both of those ETFs with 100 haircut for collateral in US brokerages. Meaning you can't actually borrow against these ETFs the same way you can for an S and P ETF or any, any, frankly any sort of equity or bond or anything else you would hold in your brokerage. These basically count as zero for collateral. And that hasn't changed. And so be extremely bizarre to me if you can count your crypto assets as collateral for your mortgage, but you can't count your crypto ETFs as collateral for you, for your margin alone, which.
- [39:13]
A
Is feel like, if anything, if we were taking the more like marginal steps forward, the ETFs would be the only thing that would be valid and even crypto on chain crypto would be considered not valid.
- [39:25]
B
You would think so. And they could do it with, you know, the stroke of a pen. Right? You just change the haircut and instead they haven't. And so I would love to see that change. I mean this goes with all these sort of weird accounting rules. You know, when there was the SEC staff bulletin around, you know, not being able to count crypto assets as assets on your, on your balance sheet, but only could only be liabilities, which stopped all these banks. And so I think there's a lot of weird plumbing in the original finance ecosystem that still is kind of keeping crypto back in some ways. And this being one of those. And two, I mean there are a number of startups that have kind of positioned themselves as, you know, we are the mortgage lending platform that accepts crypto as collateral. And I wonder what's going to happen to them now. I mean, maybe the answer is they move into more riskier versions of this or maybe they go target different GEOs or something. But it feels like in some ways this is kind of cannibalistic for, for those businesses.
- [40:19]
A
Yeah, yeah, yeah. I mean, so really what I'm understanding here is like Fannie Mae Ferdinac, they are the gatekeepers of what assets are legitimate or not legitimate for mortgages. And then after that, like once we open up the gates for things like Bitcoin ether, like perhaps even more long tail Crypto assets to be valid for mortgages. Then it kind of goes up to the free market of the banks. Like, all right, banks, what are you guys comfortable with? And so I guess this is where that kind of private public partnership around Freddie Mae and Freddie Mac comes in. Like the government says, like no crypto assets are illegitimate. And so even with this, maybe like, I don't know what Fannie Mae, Freddie Mac needs to even do in order to like make this a new rule. Maybe that's just like, like you said, like a stroke of the pen and we could just have this good news event show up on Twitter like next week. Maybe it's that simple. But even after that, then banks start to actually need to be like okay with it, which I think is a pretty large hurdle in of itself.
- [41:12]
B
Yeah, that's a good point. And I think we've, we've seen that even for just, you know, allowing clients to buy Bitcoin or not even the ETFs. And some banks immediately jumped on the opportunity and some have still been slow to sort of adopt. And so who knows what this going to look like for mortgage lenders. Maybe again there will just be a distribution along the risk curve. But I mean, hey, it's still a good step forward even if this is just the first, literally the very first baby step in this process.
- [41:38]
A
Yeah, yeah, yeah. Anyways, maybe one day we do have a financial crisis because we have mortgages collateralized by mortgage coins. Too much fart coin in the system. In the wild west of Defi, stability and innovation are everything. Which is why you should check out FRAX Finance, the protocol revolutionizing stablecoins DeFi and Rolex. The core of FRAX finance is Frax USD which is backed by BlackRock Institutional Biddle Fund. Frax designed Frax USD for best in class yields across Defi t bills and carry trade returns all in one. Just head to frax.com then stake it to earn some of the best yields in DeFi. Want even more? Bridge your Frax USD over to the fractal layer 2 for the same yield plus fractal points and explore fractals diverse layer 2 ecosystem with protocols like curve convex and more. All rewarding early adopters. FRAX isn't just a protocol. It's a digital nation powered by the FXS token and governed by its global community. Acquire f access through frax.com or your go to Dex stake it and help shape FRAX Nation's future. Ready to join the forefront of DeFi? Visit frax.com now to start earning with Frax USD and staked Frax USD. And for Bankless listeners, you can use frax.com r bankless when bridging to Fraxel for exclusive Fraxel perks and boosted rewards. Imagine if your checking account and Defi wallet finally spoke the same language. That's Mantle banking, an all in one fiat and crypto account. It lets you save, spend and invest all from one dashboard swipe for coffee, Stake me three yield or even use virtual cards for payments through Apple Pay So it feels web 2 simple yet stays web 3 sovereign for allocators. Meet mantle index for the S&P 500 of crypto a tokenized institutional grade fund seeded with $400 million from the mantle treasury and balance across Bitcoin, Ether, Sol and Yield enhanced stables. One asset broad exposure, pure Defi composability. The momentum is real me faults, FBTC, bridges and a $2.4 billion community treasury are all powering the next phase of on chain finance. Mantle brings real world access, yield and utility to digital assets. Ready for the next era of on chain finance that actually belongs in 2025? Explore Mantle at mantle XYZ or follow mantle underscore official Mantle bridging Tradfi and Defi so you don't have to Tom There wasn't that much news this week and I feel like we kind of covered it, so I'm going to bring up just a talking point. Vitalik tweeted out this tweet, which is a retweet of Joseph Lubin, and Joseph Lubin is tweeting out Ethereum Layer one will be the master ledger for the world. Vitalik retweets this Tweet saying Ethereum layer 1 L1 is the world ledger to which I retweet. So we're going in nesting dolls of retweeting and I say subtle change from Ethereum to Ethereum Layer one. And I have mixed reviews on this tweet. I have some people being like, bro, these are. This is so pedantic, like this is nothing new. Other people are saying like, oh no, Vitalik Buterin specifying that it's the Ethereum layer one that is the world ledger and not broad. Ethereum is actually significant. Where do you lie between these two debates?
- [44:32]
B
I mean, I think it's. I don't know if it's significant, but certainly different than the language that he's used in the past. I still, I don't know if this quite communicates the shift, the vibe shift that we've seen In Ethereum land of more of a focus on the L1. It's almost like by distinguishing the fact that it's the L1 and not an L2, like you kind of draw attention to this weird sort of sort of split which has been I think, a big point of the drama in Ethereum land. And so why not just call it Ethereum? Why not just call it, you know, why not just call it, why not.
- [45:01]
A
Call it Ethereum and mean the layer one? You mean like at the same time?
- [45:03]
B
Yes, yes. It's almost like when you're overly specific, you sort of invite more questions versus, you know, the product is what the product is and there's not really any more additional explanation or verbiage required. And so a little bit weird, but I mean, hey, at least there's some sort of narrative congealing around Ethereum L1.
- [45:23]
A
Yeah, there's narrative congealing around Ethereum layer one, which I'm a big fan of and I accept the point that it is really also driving a wedge between the fact that there's this Layer one, Layer two dynamic and there are some people on one side of the Ethereum aisle that Layer twos are Ethereum. They are the same thing as Ethereum, they're part of the system. And then there are other people who are like, no, they are technically not Ethereum. They are technically their own Layer twos. And naming them under the broad Ethereum umbrella is not helpful and not and not productive and also takes away focus from the Ethereum Layer one. I'm kind of leaning, I've been leaning towards the side more and more and more lately and I actually think it actually is almost critically important for us to figure this out because Ethereum the Layer one. I think there needs to be a line there as to what is and what is not Ethereum. And in being inclusive of things that I think are truly actually pretty disparate from Ethereum, like the mostly the roll up landscape that we know today, base world coin, world world chain like Arbitrum, which are separate chains that use Ethereum for security. There should be a separation there in my opinion. There should be a line there. And when we say Ethereum needs to be at the world ledger, people ought to like, I like ought to think Ethereum the Layer one without having to consider the layer twos and Layer twos are just customers of these things, they're just external protocols and we need to expand the capacities and the TAM of the Ethereum Layer one to the best of its ability and not have Layer Twos be inclusive of that. I'm on my soapbox right now, but I'm wondering what your take is.
- [47:00]
B
Yeah, I think. Probably. Right. I mean, I think a good litmus test is like, what Percentage of different L2 users know that they're using Ethereum or think they're using Ethereum. They're. They're settling back to Ethereum. Right. I think there's. There's probably a spread there, but, like, I think a lot of people on base probably don't think about that. You know, they're. They're probably.
- [47:21]
A
And basically interested in growing those numbers, by the way.
- [47:24]
B
Yeah, I. I'm not saying this in an accusatory way. I think there's malice more like if you're, you know, using a wallet as a service, if you're funding through Coinbase, Smart Wallet, or frankly, if you're funding through Coinbase and using cash, like, why would you ever think that, you know, you're using Ethereum or thinking about where does the transaction actually go? You're just thinking, oh, no, I want to go, you know, buy this coin, or I want to go coin this song, or, you know, whatever it is that you're actually doing, which is great. I think that's the way crypto goes mainstream. I think that was a large part of polymarket success, frankly, in the election was you can just sign up and use this thing the same way you would use a Web2 app. But the downside is Ethereum is pitching itself as infrastructure and plumbing. And that kind of gets lost when users are different than what crypto users look like today.
- [48:11]
A
Right? Yeah, there are different cohorts of users, people that kind of understand, pop open the hood and look at the chains that they are touching. And then there are users who are just using apps and they don't care and they just want to press the buttons and they don't really give a shit about what blockchain they are on. They just want it to go fast and work. And, yeah, the growth of those users is not going to be found on the Ethereum layer 1. If the Ethereum layer 1 doesn't focus on itself in that. In that same kind of capacity.
- [48:40]
B
Yeah, to be clear, I think that's totally fine. I think users should care about a chain being fast and cheap. And I think that is, you know, part of Ethereum's goal is to make this, make it the obvious choice for developers, for users, that it just kind of blends into the background, which I think something that Solana got right. And that's why so many people were were choosing it when they were looking to just have some very simple plumbing for their app.
- [49:03]
A
Yep, certainly, certainly. Yeah. It was a late week. Tom, I really appreciate you coming going through the news with me since we have a little bit of extra time. What's exciting to Tom, what are you interested about? You guys have done a couple of club order book based exchange episodes on the chopping block. What else is going through your mind? What are you, what are you looking at that no one else is looking at?
- [49:23]
B
Yeah, we had Vlad from Lighter. It's a ZK based per decks on the, on the chopping block this week. Very cool tech. They do pre verifiable matching of orders so you don't have to trust you know a single party even for a decks to match orders together and so you get this really nice ux. I was at my, my pet favorite Portco. One that I really am a fan of right now is this company called Megapot. They're trying to build the world's largest lottery doing it on chain.
- [49:49]
A
We are co investors in Megapot.
- [49:51]
B
That's right. Yeah yeah, yeah. So yeah, very cool. I mean yeah, already up to a million dollars today for the jackpot. And I think the coolest part is A it's global B it's verifiable, it's on chain. But see users get to be the house. Right. You can, there's a uniswap style LP mechanism where you can provide liquidity or you can buy a token and the market sort of sets the rate for you know what percent goes back to the house. So it's not just 50% which is kind of the standard for, for a lottery.
- [50:23]
A
Yeah, yeah. And to be clear this is a normal lottery that you see when you are driving down your highway and you see the mega Millions like X billion dollar jackpot. Same exact structure. No different except for the fact as Tom said that the users also get to be the house. The payoffs are much more fair because I think like the rational dollar going into like a mega millions or something is worth 22 cents in terms of like actual EV. Megapod is something much more close to an actual dollar $1 in almost $1 out and then users also get to be the yield on the other side. So like I think users the LPs have been earning somewhere between like 22 and 25% APY. There's a bunch of mechanics which with how that works but like any anytime that no one wins the lottery the LPs just continue to Rack up yields and then ticket sales. So it's fun that we get to have both sides of the market benefit. You can be a customer of both. I think it's pretty cool.
- [51:17]
B
Yeah, it's. I mean, I think ultimately you let the market speak and that's how you kind of get innovation. I think it's also, frankly, just cool as basically building an API for lottery tickets. I mean, it's sort of like striped with a single line. You get to do credit card checkout. Single line of code. You can buy a ticket, you can be an lp, you can sell a ticket, you can combine it with other people. All sorts of cool stuff. People are building on top of it. So that's a pet favorite Portco right now.
- [51:41]
A
Yeah, yeah, yeah. Were you down at Permissionless at all this week?
- [51:44]
B
I was, yeah. Seeing some folks doing a couple interviews. Overall, pretty good vibe, other than the fact that it was like 100 degrees in New York.
- [51:51]
A
Yeah.
- [51:51]
B
Insane. Yeah.
- [51:53]
A
Yeah. But I think, yeah, definitely the Permissionless attendance was actually pretty good as far as I was concerned that attendance for Permissionless was going to be down because it was in New York, because New York is such a. There's a magnet for side events there. But, man, people love going to the actual conference. And. And I mean, this is what happens when podcasters, I think, organize panels. It's like. It's actually, like, good and worth interesting and worth going. And also, Blockworks just did a killer job just organizing an industry city. There was like a 0x research dunk tank, so all the 0x research boys were getting dunked, which was pretty fun. And overall, yeah, the vibes were, like, pretty good and upbeat and everyone was there. Yeah, yeah.
- [52:32]
B
Gotta give a. Yeah. Shout out to the Blockworks crew for organizing another great Permissionless.
- [52:36]
A
Yeah, yeah, yeah. Tom, you are a podcaster. If people liked your takes and liked the sound of your voice, where can they go hear you?
- [52:44]
B
Uh, they can find me on Twitter. I'm Tom H. Schmidt. S C H M I D T. Or you can check out the Chopping block. We're underscore Chopping block on Twitter. Um, and yeah, you can check out Dragonfly or see me online if you know me already. But thanks for having me on on your pod. It was great.
- [52:59]
A
Yeah, I really appreciate it, my man. There's a ton of fun. Bankless Nation. You guys know the deal. Crypto is risky. You can lose what you put in, especially if you put it into a lottery. That's half of the. Nonetheless, this is a frontier. We are glad you're with us on the bankless journey. Thanks a lot.