← CRYPTO 101
CRYPTO 101
Ep. 675 Bull Market Portfolio Construction, Market Signals, and Emerging Narratives in Crypto
00:47:53
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- [00:00]
Austin Barack
Foreign.
- [00:09]
Bryce
Everybody, welcome back. I am Bryce. It's really, really been an exciting, exciting summit. And we've got another great guest, Austin Barack, founder of Relayer Capital, which is an incredible crypto hedge fund. Austin, how are you doing?
- [00:26]
Austin Barack
I'm doing well. Thanks for having me here, Bryce. I, I think the last time we chatted was one of the most fun conversations that I've had in these sorts of settings. So I'm excited to kind of dig into some of the interesting things happening in the market today. But yeah, do it doing well. It's markets are creating lots of opportunities.
- [00:45]
Bryce
Yeah, no doubt. And I appreciate that. And as a full disclosure to everybody watching, I'm an investor or sorry. Our hedge fund Tower 18 is invested in Relayer Capital, and Austin's one of our, our favorite managers that we have backed. And it's just been incredible to see, you know, your growth. We were talking kind of before we got on here, just catching up and all the different learnings that again, even as a professional, we're still continuing to refine our trading strategies and refine, you know, our, our risk management, all that kind of stuff. And so I want this conversation to be wide ranging. I want to talk a little bit about, you know, your background, your history, kind of becoming such a, you know, a force, a titan in the crypto industry, a little bit about your learnings, but I really do want to focus a lot of the conversation on what's hot now, where's the market going, you know, narratives, metas, that whole thing. And we'll just kind of go back and forth. But, but yeah, Austin, tell the good citizens here, Crypt Nation, who are tuning in, meeting you for the first time, a little bit about who you are. Just high level.
- [01:46]
Austin Barack
Yeah, absolutely. And thank you obviously, for the really nice compliment on the investor side and also for calling me a titan. That's very generous, but I aspire to be that sort of titan in the hedge fund world and in crypto broadly. But yeah, to tell you a little bit about myself started Relay Our Capital about a year and a half ago. Prior to that, I was a partner at Coin Fund, where I invested across early stage liquid and venture strategies. Was at Coin Fund for four years, really from, from the early days, helping them scale up under, you know, Jake and Alex and, and Seth. Prior to that, I led strategy at 21Shares, the crypto ETF issuer, which has some really interesting crossovers now that we're seeing so many ETFs come to market, having that perspective. And then before that started a A borrow lend protocol in the early days of Defi and then was an early employee at a cross border pay payoneer that I was fortunate enough to be a part of and kind of lead certain divisions there as it scaled from a small startup to a NASDAQ publicly listed company, epic.
- [03:02]
Bryce
And so you've been every different spectrum of crypto investor from the liquid side to the illiquid side to working in the industry. Why did you even decide to come into crypto originally? You know, you, crypto was born, you know, in 2008. Many people didn't even see it as an industry kind of. When did you get in and what, what was the pull factor?
- [03:25]
Austin Barack
Yeah, so it's kind of like there's a lot of pieces that pulled me in at different times. Just as a background for all of this. Had a unique upbringing. I started trading when I was 10 years old, started investing, literally would get like the Wall Street Journal and there's, it's a little, not to age myself, but it was a little while ago. So you get the Wall Street Journal delivered and read that in the morning before the markets open and then look through 10Q's and K's and then began trading options when I was 16. So really, really was fascinating by the idea that you can find these unique opportunities and kind of scenario or situations where you can see something that the rest of the market doesn't and there's, you know, an opportunity to, to kind of be ahead of that and, and get in the weeds on interesting growth technology companies. So I wasn't investing in like ExxonMobil or utilities. I was investing in solar energy and biotech and emerging tech. And I ended up going to college to study finance, did some banking and trading internships. Realized that that was kind of not what I wanted to really pursue. I found it not super interesting. So I went to work in cross border payments because I was really more attracted to the technology side of things. So when I came across crypto it was this awesome combination of early stage tech and just fascinating things that were being built with the ability to express views and invest in, you know, a public permissionless setting. So that's kind of what drew me in over time. I first came across Bitcoin actually in 2013, my brother was invited to a poker game where the buy in was with bitcoin. And at that point Bitcoin was $40.
- [05:24]
Bryce
Wow. And yeah, I would've liked to win that pot.
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Austin Barack
Yeah. So he ended up winning that game and then he calls me afterwards and he's like, so how do I receive this? How do I set it up? So we kind of dug into the weeds together. I was just starting my job at the payments company and, you know, I followed Bitcoin tangentially but came across Ethereum in 2016 and that's what really captured my imagination. This platform and protocol for programmable money on the Internet and a new form of kind of trustless communication. So got really in the weeds in 16 and 17 and then in 2018, early 2018, in like true first cycle fashion, decided to leave my job to go full time just as the markets were peaking.
- [06:12]
Bryce
That's classic.
- [06:13]
Austin Barack
But yeah, it was, it's, it's been a lot of different things pulling me into the industry over time, but I couldn't imagine doing anything else.
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- [09:38]
Bryce
Yeah, and there's so many interesting cool aspects of it. And you mentioned Ethereum was really the thing that like got you hooked, got you in. You realize the programmability of, of this and you know, I, I think what's so interesting and when people ask me what do you think is going to be the biggest sector, the biggest narrative or whatever, I'm still hooked on defi. I still think because finance touches every industry and so no matter what industry you're in, you're going to need financing or you're going to need money. And so to me Defi is, is still the end all, be all. But I know a lot of people are still saying, are starting to say AI is going to, you know, crypto and AI, how do you kind of pair the two? And even if you just like from a portfolio management standpoint, like do you think, okay, I want half the fund in Defi, a quarter of the fund in AI and how do you kind of pair all that in your portfolio management too?
- [10:27]
Austin Barack
Yeah, so it's an interesting question and I take a very fundamental thesis driven approach in investing. So I invest heavily across Defi, decentralized physical infrastructure. So deep in crypto meets AI crossover, broadly scalable infrastructure. But things evolve really quickly. So you kind of have to be nimble. And that's one of the benefits of liquid investing where you have the opportunity. And I invest in venture as well and take that even longer view. But in liquid you can buy and sell assets, you can be nimble. So really depends on where the opportunities I see in the market are. Right now I think the biggest opportunities are in Defi. We've had a little bit of a run up recently where, you know, with a lot of these digital asset treasury deals there, there's kind of like shiny objects in every single direction. And Defi had done really well in April, May, some of June as the market was recovering. But as we got into that next stage of market excitement, there was what I like to call shiny object chasing. But the fundamentals on Defi have only continued to improve and I think that next leg up is going to be driven there. And the really nice thing about Defi is, as you were saying, it's like at the end of the day these are, it's just a better accounting ledger is what blockchains are. So it's a better way to make and you know, receive and send payments. It's a better way to, to kind of disintermediate and expand upon the products that you would get from traditional entities like banks. So I'm a really big fan of borrow LED protocols, you know, Maple in particular, Euler Fluid, Aave, Camino and others because they just have a really incredible amount of user and activity stickiness where. And that's one of the things that like you often like hear people say that like, oh well, the reason that TVL is so high on Ethereum versus Solana, even though Dex volume is so much higher is because TVL is a lagging indicator because it's stickier. But like if it's stickier let's really think about that. And is that a huge opportunity for these sorts of protocols? Because it's not as easy to unwind positions where you collateralized an asset to borrow against it and you kind of built up your position from there or you're doing a leveraged loop on another particular asset. So what I'm looking at right now are these protocols that have real stickiness on from their customers but are also generating lots of revenue and finding product market fed and you know, right now borrow lens have found the most, you know, the highest take rate and the, the best revenue capture. You know, syrup, for example. This is Maple finances token. They were doing $4 million of annualized revenue in March and now they're doing $20 million of annualized revenue. A couple months later they had about $500 million of assets under management. Now they're 3.2 billion. Like and we can get more into the mechanics.
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Bryce
Rocket ship ride.
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Austin Barack
Yeah, it's a rocket ship. And we can get more into the mechanics of why they've done really well and why some of the others have done well. But that's one component that I'm really excited about. You know, also I think Dex is beyond Uniswap because Uniswap has been like the grill in the room for a long time. There's a lot of interesting things that are happening there in emerging ecosystems.
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Bryce
Yeah, those are all great names that you name. I think every single coin that you listed off, I think I have exposure to in our fund as well.
- [14:06]
Austin Barack
So I realized, by the way, I actually only answered like half of your question. One of the other things, because you were saying like how do I think about portfolio construction?
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Bryce
Right.
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Austin Barack
I definitely want to be nimble, but I also think about it very much in what's the maximum exposure that I feel comfortable having for a particular sector of the market. And for certain sectors they're certain they're more mature than others and a little bit further along the adoption arc. And I think you can feel comfortable with a higher concentration because like Defi.
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Bryce
For example, because there's real cash flows that are backing it.
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Austin Barack
Yeah, exactly. So when you look at different verticals, I, I typically, I'm comfortable having IT go up to 50 of the portfolio, but not above there. Defi. I'm comfortable seeing it go as high as 75% but then I also have individual position limits. And the reason for this is as much as you try and be a long term investor and I mean that's the lens through, through which I look at Everything. Often in market euphoria, prices move way further than fundamentals. And because you're a liquid investor, you have the opportunity to rebalance your portfolio and be prudent and take profits. And I think, you know, and there's a whole bunch of different rules that I've put in place, but I think this sort of structure allows you to both continue to have exposure in the areas that you're most excited about, but also be prudent around where you take profits and make sure that you don't have too much exposure to one name where it goes all the way up. And then, you know, you, you can, you know, see it round trip.
- [15:45]
Bryce
Yeah. And I, I think, you know, one of, one of my big lessons learned is exactly that, like, take profits when the market allows it, especially in crypto, because you need to understand, like trading crypto, especially when you're far off the risk curve, trading some of these smaller cap assets, like on an annualized basis, they have like 200 volatility or 300 volatility, meaning it could go up, you know, expected, you know, 100 times, or it could go down 99% or whatever. It's like it's such a wide range of outcomes. Whereas like the s and P500 is like a 15% annualized volatility. So it's like the range of expected outcomes are really small. So it's like that's much more fit. Like S and P, like long term investing, don't trade around those positions. Like, you kind of have a greater understanding and clarity of like the path for that asset. Whereas like with crypto, that wide range, it basically just means there's so many unknowns. And so when you do have the opportunity to sell, when the price is, you know, 200 or 300 above its 200 day moving average, it's like that is like a key point to, to, you know, take profits or whatever or, or any sort of, you know, metric. But I, I love what you say is like, that's the pr, like that's kind of like the exorbitant privilege of being a, a liquid crypto investor is like you could actually, you know, take it, you know, capitalize on the markets. Whereas like a lot of these folks who are doing, you know, long venture lockups and stuff, it's like they could see the market go up and they're still locked up for, you know, three years or whatever it is and can't capitalize. So what other lessons from the, from the bear market and the bull market of the past that you kind of have like what other lessons are like super applicable to today's market environment.
- [17:19]
Austin Barack
Yeah, so. And by the way, I should have said this at the beginning, but caveat to everything I've said and we'll say not financial advice, my personal views, not, not the views of my fund. Yeah, but yeah, there. So there's a lot of learning lessons. One, you know, thinking about like these discrete buckets and these discrete sizing. Another, and I think this is an edge that you can have when you're small and when you're like an emerging manager versus if you're like already a billion plus in AUM is the alpha in the market is to be early and to take advantage of low liquidity like you, you need to understand where the real opportunities are. And I think and also of course have a differentiated view that the market doesn't yet get and get really in the weeds and on kind of getting to that thesis. But I think that's a unique part of crypto markets versus public equity markets where smaller investors actually have an advantage to larger investors. Where if you're, you know, let's say putting in a $5,000 order, you're not going to move the price much. But say you want to say you're a $500 million fund and you want to buy 5% of the asset, that's $25 million and if the asset itself is $50 million, like the numbers don't work, you would just move the price too much. So I think having these high conviction views but also not really worrying if. All right, well, now the liquidity is in super high, doesn't have a lot of exchange listings. Like that's the opportunity to get in ahead of when the liquidity comes. So really leaning into that and then another one is on at least the risk side of things. There's a lot of signals that are the same across cycles and then there's a lot of signals that rhyme. And there's going to always be a reason to say like this time is different so you can't try and have everything match because you're going to say like, oh well, Coinbase needs to be the number one app in the app rankings. And that didn't happen. But then we still, you know, had a, a big pullback after, you know, the, the inauguration in January. So I think like, there's a couple indicators that I found to be really high signal. So one is just like longer time frame Fear and greed index. This is pretty basic, but literally every time it gets into extreme Greed, which is above 80 and then falls below. There's it's always been a good time to sell and if it goes below 20, it's always been a good time to buy. And I'm not saying it's like on a one hour, one day or one week time frame, but on a medium term and often a short term time horizon, there's a lot of signal on that. And then you can look at like how elevated are borrow rates on chain for like the demand for capital whereas open interest. So how much leverage is there in the system? What are funding rates? So kind of a reflection of derivatives activity, you know, what's the relative market cap changes of different assets over time, a lot of other things like this. And I have a laundry list, another one. And you can actually think about it across different cycles, not even just crypto, the pace of asset creation. So like how many new tokens are being created in a given period of time. And that's something we saw with AI. It's like in December, January of December of last year and January of early this year, there was just an insane pace of new asset creation. And kind of conversely, if you see really emerging signs, but you don't quite see the fundamentals there yet, you know, are you early or is there not product market yet? So I know I'm kind of like touching on a bunch of different topics.
- [21:12]
Bryce
It gives a lot of people or gives people a lot of ammo to kind of go, you know, pause, you know, maybe watch the recording or whatever, rewind it and kind of get a couple ideas in their mind. Like the Fear and Greed index, I loved what you said about it, is like, you know, to me it's almost like an RSI or like some kind of momentum indicator. It's like when you hit the top, sort of the top of that, that upper boundary, people think, oh it's overbought, it's good time to sell. But that's often time when the most momentum is there. It's about when it exits that overbought. Right.
- [21:43]
Austin Barack
You don't want to or. Yeah, it's like when it just enters there, it could be there for a while and you can see the craziest part of the run.
- [21:50]
Bryce
Bingo. Yeah. And people always just, you know, start shorting right when something gets overbought. I'm like, that's when momentum is the strongest. You want to see that strong momentum start to wane and go back down. So that's a really good sort of call out with, with what a lot of people Kind of miss, you know, have misconceptions about with.
- [22:05]
Austin Barack
Yeah. One other thing that I've learned that's pretty interesting is like the different role that bitcoin has in the ecosystem than it's had traditionally. Where in the past when there were large kind of market pullbacks, you'd see bitcoin go down 70, 80% and not quite as much as alts, but it would still go down a lot now because there's so many broader based forms of inflows whether it's from like a MicroStrategy or ETF or sovereigns or otherwise. It's kind of decoupled from the rest of crypto and we saw that earlier this year where it didn't have the drawdown. It went down like 30% when everything went down a lot more and actually held up well and was up before you knew it. So I think it kind of creates this different paradigm where now it's a lot easier to think about and this could always change tomorrow. And of course pre couples and, and kind of sees that sort of downside. But there, there's an opportunity like as you reach like as you're moving out of the extreme greed area, just like as an example with one indicator, don't necessarily need to think about it in a discrete binary way where it's like all right, I should move half of my portfolio from alts into cash. You can actually feel pretty comfortable de risking into bitcoin where it's like all right, well maybe I'm not going to have the same magnitude of upside from that point on, but the volatility of my portfolio will be dampened and you'll still be able to participate in some upside because you've just swapped the alt exposure for bitcoin exposure that has different, more persistent capital flows.
- [23:44]
Bryce
Yeah, no, it's really a good point. I was just looking at this big breakout in Ethereum ETF inflows just before we hopped on and bitcoin has this sort of big huge inflow whether it's microstrategy and all these corporates and these massive ETFs. The, the most successful ETF ever has been the Bitcoin ETF. And just this morning the Ethereum ETF has been now has eclipsed $10 billion or something in assets under management for the BlackRock one was it was that it and it was like the fastest to 10 billion ever.
- [24:20]
Austin Barack
I don't know if it was the fastest to 10 billion. I think that was still the Bitcoin one but really nice to See those flows and I think it's because the first time Ethereum right now has price insensitive buyers where they were previously buyers on Fundamental, where now you have these digital asset treasury vehicle like Tom Lee's one, like Bitmine and Joe Lubin's one, the sbet where now they're just trying to accumulate as much Ethereum as possible regardless of price. And that's a new dynamic and something that, that I think before long we'll, we'll see with Solana as well as the next candidate for that price insensitive buy.
- [25:01]
Bryce
Yeah. And once we get staking yield basically into the ETFs which I know a lot of these different. I think BlackRock actually just recently refiled their Ethereum ETF to include that native staking yield. That'll just blow the doors open off of that. It's just a completely new product and hopefully Solana gets an ETF with staking spot. Any insights there? Do you think the ball is going to be breaking one way or another over, over the course of this year?
- [25:27]
Austin Barack
Yeah, I mean it seems likely that it'll get you know, full ETF and sticking ETF approval at some point this year. I don't have like any insight beyond just like the chatter that you hear and whatever's published by the, you know, the, the ETF experts. You know there's the, the two guys that, that everyone follows and, and that's the source of information.
- [25:51]
Bryce
The Bloomberg guys.
- [25:52]
Austin Barack
The Bloomberg, exactly. But that, that's actually an area that I'm really excited about. Salana liquid staking staking protocols Jito of course is the, you know, 800 pound gorilla in liquid staking. But in particular I'm a big fan of Sanctum which has it both has the, has its own liquid staking product called Infinity, but also has another product that it allows any validator to create their own liquid staking token. So you know, Binance and Bybit for example, created ones like that using Sanctum's infrastructure. Moonpay just announced one today, dfdv, the treasury company, as an accretive way to bring value to their shareholders. They actually spun up a validator and created a liquid staking token on Sanctum Stack called DFD VSOL and then you know, Marinade being another one that is doing a really great job on not even just the liquid staking although that's growing, but on the native direct staking with integrations with Bitcoin and others. But they have these really nice token tailwind where 40% of the revenue from the token is actually going back to buy. Is going to buying back the token.
- [27:15]
Bryce
That's Marinade.
- [27:16]
Austin Barack
That's Marinade. And right now, the value of buybacks versus the market cap of the token is essentially 15% of the token would be bought back every year with how much is going to buybacks versus the market cap. So, like, really, really nice tailwind in terms of just the amount of revenue they're generating and where that's going.
- [27:36]
Bryce
Yeah. And full disclosure, I've got positions for the funds in jido, Jito and Marinade. Marinade's a much smaller position that. That, that number might, that might be going up actually.
- [27:48]
Austin Barack
Now, Marinade, by the way, is very cool as well. And they just released a new protocol called BAM to improve how you order transactions in Solana. So very much a fan of them as well. But. But I like to lean into these, you know, smaller cap opportunities that are a little more, you know, under the radar. And I mean, sometimes they take longer to play out.
- [28:09]
Bryce
Yeah, I mean, they're. They're high beta. Right. So in the market, when the market's going up, they're going to go up stronger and faster and harder. And when the market's going down, you know, they end up, you know, losing value quicker where, you know, I think a lot of people who are watching, they're like, man, like, you know, if I could just spend a day with Austin over his shoulder, you know, seeing how he's finding these opportunities, it'd be invaluable. So can you give us kind of the, the. A little bit of the spiel of, you know, how do you find these opportunities? What tools are you using? Like, are there sites that you're frequenting? Are there forums that people could kind of join and, you know, learn more or, like, what's your, like, overall sort of research process look like?
- [28:47]
Austin Barack
Yeah, so it's.
- [28:50]
Bryce
It's Mosaic theory is how I describe mine, by the way.
- [28:54]
Austin Barack
Oh, I really like that term. I may copy that. Yeah, but, but yeah, it's kind of like data from a fire hose. And there's a lot of different sources. So one just constantly tracking all of the different, like, major data platforms. So Defi Llama is one. Dune analytics is another. Block Works, Artemis Token terminal. Sure. I'm forgetting a couple.
- [29:24]
Bryce
Yeah, skew.
- [29:26]
Austin Barack
Exactly. So I'm looking through all of those and I do a combination of things. There's a university universe of assets that I find in that I'm. Let's call. I find interesting for xyz. Reason And I'm tracking their fundamentals on a regular basis. And then I have like a, I call it like kind of surfing the web where you're just scrolling through that and see like what pops out. And what interesting trend is, is like where, where's their revenue growth or where's their tvl? And then going, going down that rabbit hole. It's like, all right, well, why is this deck's volume at 10x? And it's like, all right, well, they took away or like purse platforms. Like, all right, well, they took away fees or they're doing a points campaign, so maybe you can discount that. But then you start to filter through and it's like, all right, well, maybe there's new product market fit and that's why something's happening. Spend a lot of time on Twitter just reading tweets, articles, blog posts from people that I respect. And, you know, also kind of, there's a lot of really smart analysts loose on Twitter and trying to consume all that.
- [30:34]
Bryce
And they're just doing free research for all the research.
- [30:37]
Austin Barack
Yeah. And I, I do put together a list though, because I follow 4,000 accounts.
- [30:44]
Bryce
There's a lot of garbage.
- [30:46]
Austin Barack
Yeah, there's a lot. So I, I think I've distilled it to about like 150 accounts that I found to be most useful. And I have it broken out into different categories. What else? There's some, you know, on chain tools, so Moby Screener, I think, is an incredible one. They've released a ton of really interesting products. So being able to determine whether an asset is trending and the criteria that they use is really advanced wallet tracking. So if they say, like, well, token holders of a particular token are often early investors and successful in this vertical of the market, or if there's a particular investor and wallet holder that generally has a high win rate. So this is not a novel concept, but I think their algorithm around tracking which are the right wallets and where they provide the right signal gives very, very early trend indicators and you can look at across time frames. They recently rolled out a feature that just lets you look at who's doing a large dca. Something that's kind of dollar cost average.
- [31:57]
Bryce
Like entry or exit from the market.
- [31:59]
Austin Barack
Yeah, exactly. So who's trying to put in a big order on chain, which is visible, say over like a day, and someone's trying to buy a million dollars of a token, and it's going up, but it's not clear why. And that takes a lot of technical work to set that up on your own, but they just provide that for you so you can get like a real time sense of where flows are going. So, so that, that's one that I like as well. And then another is just having a trusted group of fellow investors to, yeah you know, brainstorm and share ideas and you know, being really open and honest and feeling comfortable saying like, all right, well maybe you see all the positives about this, but what about the negative XYZ and kind of people to keep you honest in your research because as a long biased investor, it's easier to get excited about positive catalysts than potential negative catalysts. But they're all important.
- [32:56]
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- [33:56]
Bryce
Yeah, and one of the big ones actually I just pulled up Moby's screener. Just it's something that I've, I've heard about and looked at once or twice. But I'm gonna dive into it a little bit more and check out. But I see here at the top of their list is pump and full disclosure. You know, our fund has, has some pump. What do you think? That was the one of the biggest ICOs. I think they sold out like 700 million or 500 million or something like that in 12 minutes. What do you think of the whole pumpkin pump.fun ICO and what that might mean for the future of crypto.
- [34:27]
Austin Barack
Yeah, I think it's really interesting in a couple ways. One, so they raised a ton of money and there was a lot of demand. So I think the number was from remembering right 5 or 700 million on chain, but there was another couple hundred million on exchanges and otherwise. So yeah, believe it was 1.3 billion total, which is an enormous amount of money to raise. And now they have this huge war chest of capital to iterate on the product. However, they went to market with their token at a unique time where they went from having 90% market share to actually no longer being the market leader in Bonk, capturing a lot of volume, where now bonk has about 2/3 to 1 third that Pump still has. So what it showed was, all right, maybe this segment of the market that Pump capture, it wasn't. They didn't have necessarily, like, the stickiness that it seemed like they had this incredible moat that couldn't be surpassed. However, I definitely wouldn't discount Moat. Sorry, wouldn't discount Pump to capture back that. That volume they've been doing. You know, they've been an incredible executor and really catalyzed this category for Meme Coin Token launches in such a seamless way. Regardless, though, I don't think Meme Coin and speculative activity on chain is going anywhere. So depending on where the market share lies, I think this category as a whole is only growing. And for now, it looks like Pump and Bonker are the two leaders. But we can definitely. And, you know, for a little period there, there was Launch Coin, the Believe app, that. That had gained some share, but. But I think it'll be really interesting to see it evolve. And, you know, Pump right now, they started to direct some of their revenue to token buybacks like we've seen with other assets. Like I mentioned, Marinade Hyper Liquid has been really famous for this, but that's only just one tool. And they haven't, you know, delivered their airdrop to early participants yet. They haven't rolled out any other sorts of incentives. There's a streaming product that's coming soon, so. So I think they definitely have a lot of cards up their sleeve. But, yeah, Bonk is a. Is a much more formidable competitor than people were expecting. But there's. There's definitely a lot of room for both of them. Yeah.
- [36:51]
Bryce
And I think Bonk, you know, I love watching competition unfold in the free markets because they unveiled that product about a week before, you know, Pump went live. And, like, it just had a big groundswell of support and money. And so it was perfectly timed. It was like, you know, shooting an arrow right at the perfect piece of armor to kind of go right through. And it really did kind of kneecap. Pump pumps momentum. So hopefully we'll. We'll see, you know, things shake out positively, you know, for both. But you Know, it's, it's a, it's a PVP market still. So we'll see if, if, if it's winner take all or enough to share.
- [37:26]
Austin Barack
Yeah, that's one of the nice things about crypto and things being on chain where, you know, like I was saying before about tracking data, blockworks has an incredible dashboard where you can see the number of tokens launched, the number of tokens that graduate from bonding curves, the amount of volume, the amount of revenue. So you can literally watch market share gains and losses in real time. It's not like waiting for a quarterly report so you can be first to market on, on seeing a trend change just by being on top of the data and following things closely.
- [37:56]
Bryce
Yeah, no, crypto investing really is the most, like, democratized and like, low barrier to entry opportunity for anybody to kind of become like a millionaire with a very small amount of money. Like, not even saying that, like, what is it called? Like, you know, hyperbolically. But like, I know a lot of people who've become millionaires off, like, very, very small, like, initial investments because, like, the data is there. You just have to kind of roll up your sleeves and just dig in and like, have some street smarts. Don't click on random links. Don't, you know, buy if it's too good to be true. You know, you know, good operational security measures and all that stuff. Because, you know, keeping your crypto safe is just as important, if not more important than like, earning more crypto. Because I've just heard so many stories of people getting wiped out. But, but I want to tap you about a little bit in regards to the AI agent stuff, because I know you were really, really big into virtuals back in October, November, and like, completely crushed this trend. And then in Q1, the. The whole trend kind of fell flat on its face. What happened there with that trend? And will we see a resurgence in AI agents?
- [39:03]
Austin Barack
Yeah, so 100. We'll see a resurgence in AI agents. That's just the direction that every industry is going in. Like, I'm sure everyone sees these Salesforce commercials with Matthew McConaughey. Yeah, had something bad happen. And Woody Harrelson's like, well, you should have had the Salesforce AI agent. So AI agents are just useful tools, period. I think one of the benefits of AI agents living on chain is the ability to interact with each other and have this permissionless environment for micropayments. So just like Deepin is really well suited to crypto rails because you have this payments infrastructure and also this like incentives, Rails. Same thing applies for AI agents. What happened in Q4 and Q1 of this year is there was just too much, too much market euphoria. It's like the example of like how many tens of thousands of agents were being created at one point in time where there were some that are actually really useful like AI xbt, but most of them didn't have a ton of functionality. And I think ultimately when the rest of the market pulled back it was just a higher beta, more correlated move down. However, I think we're continuing to see some really nice development in that category. So it's really just like what are the protocols that have continued to build and are emerging from it? One of the ones that I think is pretty interesting and there was a really great write up, I think it was like two days ago on it, but it's called Ray Network R E I and it's like you can think about it as like a token driven AI research lab like Anthropic or some of the these others that is just public and there's a token and like you know, it's not available in any other format and what they've done in. And it's, it's fundamentally different than an LLM. It's kind of structured a little bit more like a human brain the, the protocol that they're building. But it has a couple key differences versus an LLM. One is persistent memory and durable memory. As you interact with an agent, the ability to learn from the experience that it's had with you and build that over time versus every interaction being almost insular to itself. Another really interesting component is how inference, fine tuning and training work in models. In traditional LLMs they don't really learn and this ties in with memory a little bit. But they don't necessarily learn from every interaction. They only learn in these discrete batches when you take these because the model weights are fixed, right? So then you have to retrain the model and fine tune the model separately and then they improve over time. Whereas this can be done kind of more like a human brain and how a human brain learns in a constantly adaptive way where it's like the fine tuning happens at the same time as the inference and then another piece is just this is all happening on crypto rails in the open. Lot of other pieces to this they call the new memory type behavioral memory. Would definitely recommend looking at it. I'm still like to be fair, like completely honest somewhat early in my research journey on this one. But this is one of the like more Unique protocols that I've come across recently that's doing cool stuff.
- [42:46]
Bryce
And so this is, I was just pulling it up. Is it REI network? I think it's like a $16 million market cap or is it the REI like RIA search reisearch box? Is that the one? 160. Yeah.
- [43:02]
Austin Barack
Yeah, so. So that's the one. It's about 170 million. Yeah. FTB. Their, their Twitter handle is ray network@raynetwork0x.
- [43:12]
Bryce
Wow.
- [43:12]
Austin Barack
And it's research. So like research with an I dot box.
- [43:16]
Bryce
Love it. That's it. That's it. That's it. That's a hot tip. And yeah, I don't have any yet, so I'm going to do some research. Check it out. One of, one of the AI ones that I've gotten kind of red pilled on was Tao. People have been, you know, talking about the bit Tensor Network and so that could be an interesting one for people to look into. But we don't have enough time on today's call to go too deep into it. I got enough time to do it.
- [43:37]
Austin Barack
For the next one.
- [43:37]
Bryce
The next one, exactly.
- [43:38]
Austin Barack
Yeah.
- [43:39]
Bryce
We got plenty, plenty in the backlog. But. But kind of the last thing I wanted to ask you. You've just always got a knack to be like really early on trends like you called dpin. Well before it was even a category, you know, with DeFi, before it was even defined as defi. Like you were already in it with agents. Like what's kind of that next next one out there that maybe the market's not really appreciating right now that you think maybe deserves like a small portion of speculative capital that that could grow into a larger portion.
- [44:09]
Austin Barack
Yeah. So I guess I'll just double down on two things that I've kind of already said. But explain why it's early. So one within DeFi, kind of the CD5 crossover where you marry off chain demand for capital with on chained capital lending and capital sources to be able to lower the cost of capital and expand into more traditional markets to expand that opportunity set. So like let me give a concrete example. At its peak in 2022, the centralized lending in crypto was a $35 billion market. Now it's about 15. It's growing quickly. But the problem with that market back then is with Genesis and Celsius, there's.
- [44:56]
Bryce
A lot of fraud.
- [44:57]
Austin Barack
And block five, it wasn't, some of it was fraud, but it was mostly poor risk management because what they did is they lent out money with no Collateral and they said like okay, if you'll pay us 15 interest, you don't need to give collateral. And then what is happening is three AC blew up and you know, Luna blew up and all these things blew up in there. And then the counterparty is like sorry, we can't pay you back and they lost all these money. So like in that context at least under collateralized lending did not work. Now as it's coming back and you know, obviously the fraud stuff is bad, but putting that aside, that's one of the major reasons why it blew up. But now we've had the shift to collateralized lending, but there's even more demand than there was last cycle even though the size of the market right now is half. So it's not just funds over the counter trading desks, market makers that are demanding this kind of have this borrowed demand, but also now it's these digital asset treasury vehicles that are looking to borrow against the bitcoin that they've already purchased or the ETH that they've already purchased to accelerate the pace at which they can buy. And then a lot of other kind of interesting use cases so like paying out to miners, kind of helping fund capital costs of businesses. So I think this intersection and what this ties in with Maple specifically because this is what they're going after. They've created a dollar denominated dollar kind of stablecoin that yields and is generating like six and a half percent apy that then feeds the capital demand off chain. But the interesting thing about the composability of defi is you can take that asset, put it in pendle and split into a principal token and a yield token. You can loop it so put leverage on it and you can get 30 to 50% APY on stable coins. So now you're meeting the demand off chain with this really really low cost of capital source, but also can earn a lot of money for the participants. So I think that markets could expand enormously. Another example of CDFI is so like off chain demand and on chain execution or like on chain rails is aerodrome. You know, I'm really bullish on the growth that we'll see from base. And what they're doing is they're shifting their users and to be able to do more and more activity directly from their app on chain without even thinking about it. So coinbase, instead of having to list a new token, you can trade through their app directly on a dex where tokens listed immediately and it doesn't need to go through coin funds, you know More arduous processes. Or say you want to borrow against your Bitcoin on Coinbase, you can source that, borrow from Morpho on chain. And I think that's going to just drive an explosion of activity for those sorts of applications. Aerodrome being one that, you know, I'm, I'm particularly excited about. So that's one category and then the other.
- [48:05]
Bryce
I just want to pause there just real quick because those are three names that I've, I've got exposure to. Morpho, Aerodrome and Syrup. Those are, those are some great picks and I, I love that. Like, even though those are, you know, in, in our world right now, I mean, those are still so hot. Some hot things. But you're saying, like, we're early on those still because. Oh yeah, the roadmap is still so big. Yeah.
- [48:27]
Austin Barack
Like Syrup, for example, it's doing 20 million of ARR. It's trading about a $50 million. Sorry, $550 million market cap. That's 27x multiple. That's like more or less the average S and P multiple for a company for a protocol that's done 4x growth in the last quarter.
- [48:44]
Bryce
That's crazy.
- [48:45]
Austin Barack
Yeah. And then the other side of thing is we've seen a lot of innovation in kind of advanced trading apps and infrastructure. So things like Axiom, Trojan, Bullex, Photon Deck Screener. None of these have tokens. None of these monetize and give value back. Or they monetize but they don't give you value back to the community. Mobi is an example of a project that's doing that. I think we'll see more of that. So that's one of the reasons that I'm bullish on them in that category. Also, of course, almost all of the things that I've mentioned are assets that the fund owns because, you know, if I, if I'm excited about it, the function own it. Otherwise, you know, I wouldn't be excited. Or vice versa. Exactly. So, yeah, caveat on, on kind of the things that I've said today. But those are two categories, bringing token level incentivization and value return to trading infrastructure. And then the CDFI combination.
- [49:45]
Bryce
Beautiful. I've got one last question on Syrup in just kind of like I, I'm not really sure how to parrot. But the whole genius act, saying that you can't have yield bearing stable coins, how does that kind of come to bear on Maple and like the Syrup token.
- [50:00]
Austin Barack
Yeah, I, I think, I think how I at least interpret the genius act is like they're stable Coins for payments in their stable coins for like yield bearing investment. So like, think about it like a treasury is not a stable coin, but it's how you look to save money. Or, or you know, you don't really think about saving money in your Venmo account. Or maybe you do, I. I guess.
- [50:28]
Bryce
Oh, you're getting no yield in your Venmo account.
- [50:30]
Austin Barack
Yeah, but, but that, that's essentially how I think about it. Like these are two discrete categories.
- [50:35]
Bryce
Okay, that makes sense.
- [50:36]
Austin Barack
And maybe these get different names over time, but the way I look at it is syrup is adult on the lending side. The syrup USDC product, it's a dollar denominated savings account, essentially not an account, but a dollar denominated savings asset. So whether you think of it as a stable coin by that exact terminology or not, it serves a different purpose than I think what the genius act is going after. However, with more clarity around stablecoin regulation overall, I think that brings a ton more capital on chain and when that capital is on chain and it's not being used for payments, it's going to want to earn yield. And I think that's a really big opportunity.
- [51:17]
Bryce
Love it. Austin, we could talk all day, man. We are at the top of the hour. I want to ask you where people can kind of follow along with your journey. Are you big on X substack and any websites?
- [51:28]
Austin Barack
Yeah. So post most of my thoughts on on X. So it's just at Austin Barack my name there. And you know, if, if you have any questions or want to jam on anything, I, I try and read through as many of my DMs as I can. So you know, feel free to shoot me a message and you know, always happy to kind of get a new perspective and you know, learn something new.
- [51:54]
Bryce
Amazing, Austin. Thank you so much for being so generous with your time today and everybody at home watching. I hope you enjoyed. Stay tuned.
- [52:11]
Austin Barack
Think about the app you've been wanting to build.
- [52:13]
Bryce
Sell something you've created, run your community.
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Austin Barack
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Austin Barack
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