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- [00:00]
A
The no KYC market is enormous. So the answer to that is so I don't know about the word dominant, but do I think that hyper liquid could continue to grow if they could only legally operate outside of the us? And the answer to that in my perspective is obviously yes. I mean, just look at Binance, by far the biggest exchange in the world, has never been able to have a successful US based business of any real scale.
- [00:31]
B
Hi everyone. Welcome to Unchained. You're no hate resource for all things crypto. I'm your host, Laura Shin. Thanks for joining this live stream. Before we dive into today's show, let's hear from our sponsors. Fidelity has been investing in blockchain since 2014. They're not wondering if digital assets will shape the future. They're hiring the talent to help ensure they do. Explore opportunities today@crypto.fidelitycareers.com Fidelity is an equal opportunity employer. Quick plug before we keep going. If you want crypto news without the hype, subscribe to the Unchained Daily. It's our free morning newsletter. The day's most important stories explained clearly in a few minutes. Sign up@unchained crypto.com newsletters. Today's guest is Mike Dudis, managing partner at Six Man Ventures. Welcome, Mike.
- [01:25]
A
Hey, how you doing? Good to be here.
- [01:27]
B
Yeah, nice to have you. Despite the fact that it's been a bloody week in the crypto markets.
- [01:33]
A
What's new?
- [01:36]
B
Yeah, yeah, well, that's true, but Bitcoin's down about 12% over the last week, 22% on the month, 27% year to date. The numbers for ETH are even worse. 11% on the week, almost 26% on the month, 40% in the year. We are not even going to go to Solana because that's even worse. But it seemed like this week what really affected the price was this news that MSTR had sold 32 bitcoin. It's only two and a half million dollars worth, but that seemed to, I guess, cause some lack of confidence in the market. Not only did we see that the price dropped 10k basically over the last few days, but we're continuing to see a lot of discussion about these various instruments that are part of mstr. Jeff Dorman of ARCA was on the show earlier this week and talked about how the company's kind of put itself in a bind with the capital structure, has four different sets of stakeholders. He says that they cannot all be satisfied at once and he feels like the company made a few different missteps that kind of caused the market to lose at least a little bit of confidence. How do you view everything that's going on there?
- [02:49]
A
Yeah, so Saylor and strategy are trying to do sort of like two things at once. And I think the one that Jeff, that you just talked about, the financialization of bitcoin and bitcoin exposure is one big thing that they do. And I think it's the most covered thing by analysts looking at what's happening with strategy this week or this year. But the other one is it's very different than the financialization of bitcoin and that's this sort of turning it into a memetic asset. Saylor posts quite a few memes and sort of a religious, believe me approach that this is a messianic asset and it's the chosen one and
- [03:40]
B
those two
- [03:40]
A
things aren't super compatible. It's like dissonance to hold them both in your mind at the same time. So the, the messianic promise had always been like, I'm never a seller of this asset. Like I simply believe in it. So, you know, whether it was a couple hundred bitcoin or, you know, tens of thousands of bitcoin, if selling any sort of takes one leg of the stool of this story of strategy away. And the market responded tremendously negatively to the never sell promise going away. And the next steps are going to be the really interesting ones. Are they going to sell more? Because obviously it would take some concern over the next couple of years around strategy and STRC away that would be negative. Are they doing that right now? I think the market maybe doesn't really know, but I think part of the story around strategy, the, the sort of religious fervor and belief in it has, has been punctured. And I don't know how you put that genie back in the bottle and, and you know, the market doesn't like it at all.
- [04:43]
B
And if the bitcoin price continues to go sideways or even down further. Do you have an idea of what you think MSDR should do to, you know, be able to keep paying the dividends on the preferreds? Yeah, I, I don't know if you have thoughts on that.
- [04:57]
A
It's fair. Again, to me it's so it's not obvious and I think many people would disagree and own the different assets that MicroStrategy has issued for different reasons than I would. But to me it's pretty clear that you need complete belief and that he's an always buyer of this thing. So they have to get back as it drops lower and they have to figure out a way to buy this asset, clearly. And I think most observers thought this day would come eventually at some point. I just think it came a lot sooner for them because they started levering up because they have to pay out so many cash flows and sort of the check is coming due.
- [05:37]
B
All right, so now let's turn to Ethereum, which also has been having a sort of moment of reckoning. You know what kicked off the latest round of news, because obviously this story has been actually going on for a couple years, is that there were a number of senior departures from the foundation. Then Vitalik kind of tried to respond to the criticism, saying basically the foundation will be shrinking and he views it as becoming one among many nodes. We also saw longtime believers like David Hoffman losing their faith. At least an ETH asset is how he describes it. I'm curious, are you bullish or bearish on ETH or Ethereum and generally what's your analysis of everything going on in that ecosystem?
- [06:19]
A
Yeah, it's funny because there's a commonality in the conversation that we're having about different assets. I think Ethereum, the asset that David from Bankless wrote a really excellent post about this. It ended up being what many people wanted it to be, which, you know, it does have some like moneyness properties. But for whatever reason the foundation and a lot of the writing about it doesn't really want to own that narrative. So you know, they're writing about this like credibly neutral layer on a multi decade horizon and sort of building towards that. But it's like you look across 100 massive stakeholders within Ethereum and every one of them is telling you a different story about what the asset is, what the long term mission of the network is. And so it's pretty obvious it's been five years now. The market simply doesn't know how to value that into the future. So ETH asset's not something that we own as a firm or that I own personally. We have zero exposure to it because I just can't tell you what the story is today and I can't tell you what it's going to be in three years. And I don't know who's going to win this wrestling match between the folks who want it to be a money asset, who want to embrace institutions and securing trillions in value, and the people who want it to be sort of this utopian world computer style thing.
- [07:41]
B
And what would Ethereum need to do to, I guess the tokenomics or some other aspect of how Ethereum fully is constructed for you to say, we at Six Man Ventures should own this.
- [07:56]
A
Yeah. So I get into tricky territory. No financial advice, but I think what we're seeing is assets that are financialized hype. We can talk about that later. Being a good example of this is one that the markets understand better. And it's pretty clear that you have to have a clean single narrative on what that story is and what people are buying to get enough stakeholders to get enough flows with enough consistency over time to that, you know, people can get confidence in holding these assets. And Ethereum hasn't done that over the past few years, nor have candidly any of the other smart contract L1s general purpose L1s.
- [08:38]
B
And so Solana is usually the competitor that's talked about most frequently, you know, in comparison to Ethereum. It's obviously faced like an even kind of more challenging year so far. I think you're more bullish on Solana. They're at this moment, you know, looking at changing the tokenomics on that. You know, what are your thoughts there about why it's down and where it could go from here?
- [09:01]
A
Yeah, so I. It's a cleaner story as to why Solana is underperforming Solana. You know, the foundation and key sto key stakeholders. I did do a better job, I believe, than, yeah, the Ethereum stakeholders in terms of, you know, honing in on kind of a true north in rev real economic value. You sort of fees that accrue to people who hold the tokens and stake them for Solana. It's just been a performance issue. So activity fees peaked, I believe, early 2025 and have been in a downward trend since. And so has the price of Solana. The activity was driven largely by Meme Coin activity and other really speculative activity on chain that involved lots of trading, lots of price insensitivity, lots of retail flow, people willing to pay high fees. And there just hasn't been enough durable economic activity in other areas to replace the decline in Meme Coin volume. I think there's a good chance that, you know, we'll see that activity in the future. And Salon is embracing a bunch of different narratives and has, I think more shots on goal than maybe other ecosystems and, you know, is going after the areas that they've historically been weak, you know, perpetuals being the big one. You see the foundation and other stakeholders talking about, but there's not proof to the market today that, you know, the teams building atop a Solana are going to execute in that areas or that Solana is L1 will become performant enough to support them, you know, at kind of like close to centralized exchange levels of performance. So if that is to happen, you know, it's, it could be an undervalued asset at some point, but you know, you need to start seeing some of the activity that people are promising start to manifest and materialize. So for Solana is just a performance thing in my, in my perspective.
- [11:11]
B
All right, so now let's talk about the other linear one that just, I think has really been taking up all the air in the room this year. And that's hype. And it's basically, you know, pretty much one of the only crypto assets that's been up year to date. But we've just had news in the last week that shows it's about to face some tough competition. Perps are coming onshore here in the US Both Kalshi and Coinbase had news on that front. How do you think Hyper Liquid can kind of navigate this moment where it's going to face, you know, upcoming competition? Do you see a way for it to remain no KYC and still be as dominant?
- [11:49]
A
The no KYC market is enormous. So the answer to that is so I don't know about the word dominant, but do I think that that hyperliquid could continue to grow if they could only legally operate outside of the US and the answer to that in my perspective is obviously yes. I mean, just look at Binance, by far the biggest exchange in the world has never been able to have a successful US based business of any real scale. I understand, by the way, the analogy is not perfect because there is KYC on Binance, but you can operate xus and be really, really large. So to the extent that, to the extent that they could operate with KYC in some manner in the US that probably is unpriced potential upside. But I don't think the default case that the people who are pushing flows towards hype today is like, hey, next year US citizens are going to be able to trade 50x perps in on Hyper Liquid.
- [12:59]
B
And do you, do you think it can navigate the competition? You just feel like they're separate markets? Is that what you're saying?
- [13:06]
A
Yeah, it's like tether versus circle. That, that's my like base case. And the, the base case is that the, you know, the tether analogy can be really, really large. You know, the L1 Tron is extremely valuable, more valuable than a lot of more hyped L1s. Just anything in Crypto that sort of like non kyc or international market is really, really significant in size. And so the bigger question for me is can they continue to add higher and higher quality assets to the platform, which is, you know, what's driven most of the growth over the last six to nine months? Right. Can they add, you know, the next oil? Can they, you know, maybe become the home to the largest compute markets, you know, can they add more and more pre IPO stocks which have just taken off? So really to me the hype question is one of asset quality and liquidity and they continue to outperform on that front. And obviously they're now adding hip4outcome markets to get into the prediction markets type space. And so they're just growing their markets and then can they attract folks to build on top build interfaces to market so that their costs to attract more liquidity and users don't grow know, exponentially?
- [14:19]
B
All right, so in a moment we're going to look at Mike's final thoughts on the L1 wars. But first we're going to take a quick word from the sponsors who make this show possible. Fidelity has been researching and investing in blockchain since 2014, long before it was a headline, and they're hiring crypto and defi professionals to join their team and discover what's next in finance. Fidelity is looking for people with fresh perspectives from different backgrounds, whether it's tech, UX or product design, whether you're crypto savvy or crypto curious, as long as you have the passion to make a real impact at a company striving to make finance accessible to all. Explore crypto careers at Fidelity today and make the decision that could change your future for the better. Visit crypto.fidelitycareers.com to learn more. That's crypto.fidelitycareers.Com Fidelity is an equal opportunity employer. Heads up, everyone. We'll now be fully transitioning Bits and Bibs to its new dedicated Bits and Boobs channels. So starting next week. So if you're not yet subscribed to the Bits and Bibs channels on X, YouTube, Spotify, Apple Podcasts or wherever you get your podcasts, then go there now and subscribe after that transition for a few weeks. We'll place segments of the full interviews on Unchained as a reminder, but head there now and subscribe so you don't miss an episode. You can get links to all of the platforms on Unchained Crypto.com Bits and Bips. Again, that's Unchained Crypto Crypto.com Bits and Bips spelled B I P S Back to my conversation with Mike. So we just talked about Heath Saul and Hype individually but I was curious to hear you talk about how you think. Well first of all whether or not you think they really do compete with each other and if so how you think the competition will play out.
- [16:06]
A
Yeah, so. So they do compete with each other, they compete for liquidity, they compete for asset issuance and they compete for trading volume. So there's no question if Solana and Ethereum are I think more similar than Ethereum and hyper liquid or Solana and hyper liquid and it's a weird type of competition because Solana Theorem are both focused on becoming a general purpose blockchains with use cases that go beyond hyper liquids focus on becoming the house of all finance. There's stablecoin issuance payments all the kinds of web3 type things that exist on Solana and Ethereum. So they're playing and basically on Solana Ethereum they're being valued on the EKT activity of the apps built on top of them much more than hyper liquid which is basically kind of like a full stack protocol where basically most of the volume goes through their own sort of front end and sort of values of the entire ecosystem is captured there. So it's tricky. I think Solana Ethereum would benefit far more from know not really talking about competition with Hyper liquid and really just focusing on the features and attributes that make them great and why builders should build on their layer ones because ultimately they're downstream of that developer activity and candidly they're not really fighting on the developer side. I mean they are but, but I think on the margins. So yeah Solana and Ethereum need the next great apps to be built on top of them and the aperture or the breadth of where those apps could come from are much broader I believe than hyper liquid. So you know hyper liquids not I mean they're competing with them but only in the sense of like they just, they just seem to be mostly a heads down they're really small team sub 20 people from what they say and they have a roadmap and they don't really share too much about it too far in advance and they execute against it's a company so it's just like hard to say. So basically they're not competing in the sort of business traditional strategy sense but again they're competing for liquidity mindshare to some extent for where developers are going to build and then attention in the markets. So Solana and Ethereum compete more directly. But what you're finding more and more is it's less direct competition in the sense that BlackRock is going to issue their new tokenized funds on both Solana and Ethereum. So again, you're really just, you know, they start to become substitutes for one another in the end user and consumer. And who's going to bring that liquidity? So that's really what everybody's competing for.
- [19:02]
B
Yeah. The way I view it is basically Ethereum kind of comes in and is sort of like the IBM where, you know, that's saying nobody's going to fire you for putting something on Ethereum. But there are a number of technical issues there. Just even starting with something as basic as the block time. But then also kind of this whole L2 situation, there's just certain things where on the tech side, you know, it sort of makes you wonder, okay, in the future, you know, where is this going to go? And that's where maybe Solana has a little bit of an edge in terms of, you know, things like the long time. But then of course, they don't have the track record, you know, the, the length of time. Just, you know, Ethereum is 100% uptime. That is just sort of an unbeatable metric. And so essentially, you know, what you have is like, because we're in this moment of adoption, that's almost why, like you see people keeping the door open but, but yeah, like what really ends up winning the race at this point is sort of anybody's guess.
- [20:05]
A
Yeah. And my sort of last point, Ethereum would be a lot of what is cited as their advantages. Like things like TVL people often so mention are like really legacy things, you know, capital that's been there that people, you know, made money off, you know, being on Ethereum from many, many years ago, by the way, in the same way that many people are getting rich on hyper liquid today, you know, through their airdrops and taking on more positions and provide liquidity into markets. But in terms of, you know, net new, what's happened over the last three or four years, there's no question that, you know, the, the rate of change on Solana has been faster than Ethereum.
- [20:43]
B
Yeah, yeah. So we'll have to see. Well, so in general, you know, we're, because we're at this stage where it's sort of like this, you know, real adoption phase. People are, you know, seeing this moment where, you know, tokens are getting shaken out, basically. I'm sure you saw yesterday, Charles Hoskinson sort of Pieced out and people are tweeting about Cardano and I see it's at number 16, which in my book is. That's a good sign to see that these sort of zombie chains are finally getting shaken out. I know in general you're bullish on tokens with value accrual. So there's a number of different mechanisms there. Which mechanisms do you like or which tokens do you think have made that setup work?
- [21:27]
A
Yeah, I think the two most important things are one, that this is the crypto and these are viewed as protocols. And so having the mechanism for value accrual be programmatic is really, really important. Right. So hyper liquids mechanism for value accrual is 90%. 97, sorry, 97% of the fees go back into buying back the token and theoretically long term burning the tokens. So being programmatic is really important. The second is being consistent in communications. It's no different than. It's not only about the token mechanism, but it's about how you tell the story to the public. So to be consistent and professional about how you talk about your product roadmap, that you value investors who are investing in your ecosystem, the folks who are staking and the folks who are building around you. And that there's a mission bigger than just the team that, hey, we're doing this together. So storytelling a big part of it. So I like tokens where the investor, sorry, where the leadership is, is telling a consistent story. And you know, so I think pro. Those are like the two biggest things to me. And a lot of people would disagree and say that, you know, token buyback should be discretionary. And that's confusing. And, and it's, it's. We've seen it. I don't want to name specific projects, but ones where they were discretionary and they stopped buying or they changed plans and you just. This is an industry where the default is not to trust the people building the businesses. It's just the pattern says that you're going to have a higher incident of, you know, fraud, abuse, grift, sketchiness than in traditional business markets. And so the things that have discretion are going to get valued less than the things that don't. The last thing I'll say on what evalu. There has to be some balance. There has to be some. If you're doing 100% buybacks like our portfolio company Pump was doing for a long time, you have to give people confidence that you're actually investing into the future growth of the business. So they modified their buybacks from being Discretionary, they changed into Programmatic for a year and they set it at half the protocol revenue such that there's a credible statement that they're investing in the protocol and new products they introduced with today and pump go. And so you want to see that there's going to continue to be reinvestment in the business because it's funny mentioning the Cardano example if it's just purely the protocol and the foundation needs to discretionary. You've seen this with Ethereum. Sell tokens or continuously be selling on secondary at discounts to folks to fund operations. You have this token that it just starts to get really messy like where are the funds going to come from? I think Cardano's had that problem. Charles is really wealthy. There's a lot of people who've made a lot of wealth in that ecosystem but it seems to be underinvested in today. So I have a hard time with tokens where I feel like the only source is just this allocation that was pre mined and granted for the protocol to function and operate because you run into these weird incentive and you know, lack of fund issues.
- [24:54]
B
All right, so now let's talk about the real world perps sector because that has been so interesting this year. You know, it started with those crude oil perps on hyper liquid trading based on events happening on the weekend, you know, involving the Iran war. Obviously recently we've seen that pre IPO stocks are getting price discovery on hyperliquid. To me this is sort of like glimmers of something that's probably going to be way bigger. I'm curious, you know, where you think all that is going.
- [25:24]
A
Yeah, so the biggest thing that we need to do clearly and you're seeing, you know, the hype token and hyper liquid get rewarded for it is bring interesting assets into, you know, the crypto markets and you know, so bringing them to a place, you know, on chain where they can be traded, you know, 24 7, 365, you know, relatively low cost. Obviously no KYC plays a part here. So the ability for folks to trade not with a centralized counterparty is a big deal for whatever reason they may want to do that. But bottom line is the more high quality assets that we bring on chain, the more all boats are lifted and we have now enough proof points that people want to trade these things all the time and they're comfortable to doing it from a self custody wallet. So it's every ecosystem I know the Solana foundation is deeply focused on this. Hyperliquid is trade xyz the teams are really focused on getting new assets issued, spun up with robust oracles and pricing mechanisms so that more people can trust these. Because even with all the trading that you're seeing and the volume you're seeing today, these are still not major institutional venues by any means. If that does happen, you know, this becomes really, really, really big.
- [26:45]
B
Yeah, yeah, I agree. So we also can see crypto and AI. That's going to be a huge thing. You know, in my opinion, agents are definitely going to transact more than humans at some point. But you know, where do you see value accruing in that activity? Like would you imagine it at the protocol level, at a platform level or just generally, how do you see all that coming to fruition?
- [27:09]
A
Yeah, it's a good question. So the trend has been the exchange. So again, if Solana, the L1s will benefit from activity where people are somewhat price insensitive and will pay fees. Right. So to the extent that you can get more and more trading volume, like Hyper Liquid has a really direct value capture model. And again Solana's come through. So the extent that you can get massive trading volumes and these agents trade, you know, number of trades and strategies more than humans do, that would be great for fees. And I think that's how these L1s are primarily going to be valued moving forward in the future. Then you move a layer up the stack to the app layer. It's unclear that exchanges are going to be able to be differentiated in their value capture, the dexes of the past and things of that nature. So I think we're still working through whether you can capture significant volume there. But where it's been clear that you can capture value is through front ends. So if you can present data, certainly in the meme coin era, the front ends were able to capture up to 1% per trade, sometimes more. So that's an interesting area of exploration. What the front ends are is going to change. So in terms of trading, you're going to have, I would imagine, products like AI, research labs working on financial markets that can help individuals and institutions put on, let's say really, really complex and performance based trades that humans aren't able to put on or make me able to put on strategies, for example, that today the best algorithmic traders put on. And if you can do that again that's sort of an interface area based, built on top of, you know, your models. And that's an area where you could charge me, you know, for that service if I'm able to outperform so anyway we look at like who's touching the end user, the institution and the consumer and then are they providing something value more than just being the venue to execute, like the pure venue to execute. Can they help me with the idea? Can they help me know, get better to liquidity or tighter spreads, et cetera. And that's what you're looking for. And I'm so focused on agents and trading because it's actually not clear to me that agents and payments is an incredible business. You know, we hear a lot about like agentic finance, meaning agentic payments. But you know, the incumbents, the visas, the mastercards, the stripes are moving really, really, really rapidly and aggressively to capture the value there. It's going to be really challenging for new entrants to outperform the installed customer bases. Those folks have the trust, the fraud, the compliance, the risk algorithms they have. It's just going to be a real challenge on the payments and the sort of non trading speculative side.
- [30:06]
B
All right, so as we've been talking about, because crypto is in this adoption moment just everything is getting scrambled right now. But it means kind of real things are coming to the fore. You know, crypto VC is kind of like just an interesting business because it's sort of, you know, you're sort of looking far into the future and you're trying to figure out what's going to hit the mark. And I'm wondering how this moment in time where crypto is sort of becoming real or adopted by normies, how that's changed the crypto VC game and how it's changed just how you even think about investing.
- [30:43]
A
Yeah, so a few things have changed pretty significantly recently I would say in like crypto vc, but really in all vc one is the cost to get started on something has dropped. You know, you can hire fewer people to build to you know, an MVP because basically you have like all the world's developers available to you and Claude or Codex or whatever tooling that you want to use and even somewhat non technical people can spin up ideas. So the cost to entry has decreased quite a bit. I think that there's a good chance that that shrinks, well either shrinks the pre seed category or increases the number of pre seed projects that are out there. So the earliest stage projects but it's going to be really hard to weed through the signal versus the noise. So you're basically as a VC at the earliest stages now looking for traction much sooner and proof points that somebody could build something that has users that has a little Bit of emergent economic activity on top of it. So costs have decreased. At the same time scaling, the ability to scale to really big numbers has increased. And crypto's always been about that, this massive power law, how rapidly something like pump grew, how rapidly the cycle before that something like OpenSea grew. The biggest thing that cryptos struggle with is are those things sustainable long term. So having now been through at the app layer multiple cycles, I think we're kind of like in our third cycle of app layer in crypto. Again there have been very few multi cycle long duration businesses that stood the test of time. Most of those have been in Defi, you know, the defi leaders. So I think that you know, for crypto VCs, you're, you're basically looking at like what's sustainable behavior. And what you're finding is it looks a lot like things that have existed in the world before, but you know, done better because of blockchain rails. So again always on cheaper liquidity formation from anywhere. Obviously. No KYC is a big property of a lot of these, accessible to all. And yeah, so that's where we're looking. But we're in a time of like massive upheaval. You know, most of the world's venture dollars and private equity dollars, private capital is going into like AI first companies. And not just crypto, but anything outside of, you know, pure AI is somewhat capital starved. So it's a, it's a unique time and not only capital, but talent. Talent starf. So the, you know, you're seeing a lot of the brightest minds. What's interesting, you're seeing a lot of the brightest crypto minds actually do things outside of crypto and succeed. So these are people who were really early to crypto. They did exceptionally well, they have incredible foresight, generated wealth, built great products and are now you moving into adjacent industries. Right. Even Brian Armstrong, you know, just announced his multi hundred million dollar raise for his longevity firm. So his like side hustle, this is like a massive successful unicorn. You see a lot of that happening. So you're also seeing it with the VCs themselves. So most of Paradigm's recent deals, to the extent that they're announcing everything that they do seem to be in areas outside of crypto. Adjacent to crypto you're seeing a lot of VCs do things in Power, Energy, Computer, you know, Framework, you did a public markets deal and just doing a lot with Better Dot Com. So you're just seeing a lot of folks expand into areas that seem to be adjacent to crypto. And I think that's going to continue because the opportunities are significant. The domain expertise that these VCs bring, from being on the frontier of crypto and seeing new market structure, developers helping to create that an entire new asset class, fastest growing, you know, the last 15 years be created, they're real innovators, both the crypto VCs and the builders. And so you can kind of see many of them starting to expand their aperture while keeping their crypto roots and advantages.
- [34:55]
B
All right, Mike. Well, it has been so interesting to chat with you and to find out what you're thinking about all this market activity. Thank you so much for coming on Unchained.
- [35:05]
A
Appreciate it. Thank you so much.
- [35:08]
B
Nothing you hear on Unchained is investment advice. This show is for informational and entertainment purposes only and my guests and I may hold assets discussed on the show. For more disclosures, visit Unchained Crypto.com.
- [35:30]
A
Sam. Sa.