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- [00:00]
Rahm Alawalia
A good piece of technical evidence would be a period of consolidation and basing. People have checked out, they moved on to other pastures. They're no longer talking about digital assets. You see these negative front page headlines again and then there's a quiet rally that's taking place in the background that no one's paying attention to except us on the show.
- [00:23]
John Wu
I would look at this asset class as a long term thing and it's, you know, if you want to get involved. I think I'm actually more positive on 2026 than probably Rom is. But you seem very bullish on 2026 just because, again, like the market forces are filtering out the nonsense.
- [00:39]
Chris Perkins
Supply consolidation will manifest itself in M and A. Hey, everyone. Welcome to Bits and Bips, where we explore how crypto and macro collide one basis point at a time. Today I'm your host. We left the the Mad professor today and I'll be your host. I'm Chris Perkins, the Golden Hannah Coin Fund. I'm here with Rahm Alawalia, maestro of wealth and leader of Lumina.
- [01:03]
Rahm Alawalia
How's it going?
- [01:03]
Chris Perkins
How you doing? And today I'm very, very excited to be joined by my friend, the one and only John Wu, Lord, president of the Avalanche Realm. Welcome, sir.
- [01:14]
John Wu
Welcome, both of you. Great to be here.
- [01:17]
Chris Perkins
Amazing. We're here to discuss the latest stories in the worlds of crypto and macro. And just remember, nothing we say here is investment advice. And please check out unchained crypto.com bitsandbits for more disclosures. And with that, we will go to our commercial break.
- [01:35]
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- [01:55]
Chris Perkins
All right, guys, we're coming to the end of the year. It's been a real weird year, I'm not gonna lie. Here we are today, hot ball of money's moved to precious metals. Gold's hit all time highs. Silver's hit all time highs. Digital gold has not. And in fact, digital gold, our friend Bitcoin, we're looking at potentially a down year, which would be its fourth in its history. It's kind of mind blowing considering the amazing things that are happening. And we could talk a little bit about it, but let's start with Rahm. What the hell is going on in these markets, man?
- [02:30]
Rahm Alawalia
Sure. So I was at a holiday party about a month ago. It was hosted by a crypto native who shall remain nameless. And he opened up by saying, what a year. Bitcoin's at $100,000 and last year Bitcoin's at $100,000. And that was a month ago. Now bitcoin's at I don't know what, 88. So that just puts it in context. I know this individual expected bitcoin to be at $750,000 in a few years. That's why he was still excited about it. So what's going on? Is this A few things. One is hype got ahead of reality. So. And two, the mission was accomplished. What was the mission? Stablecoin regulation, Genius act. Get a hospitable regulatory framework, get the SEC focused on solving the kind of issues we have here. And part of that sell the news. Another driver is hey, four year cycle. But another and maybe even bigger driver of this is just the proliferation of other competing momentum narratives. And that includes like space stocks. Look at what's happening with like Rocket Lab. It includes robotic stocks, it includes AI. They're all competing for attention. So the crowd that digital assets attract, so different kinds of crowds or like the gold bugs, there's the technophonist crowd. But one big crowd is the momentum crowd. And that momentum crowd will go to wherever the hottest hand is. And you mentioned Chris earlier, it's like precious metals. That's where momentum is. Momentum creates its own demand, it creates its own momentum and we're not seeing that in the asset. And so you get a self fulfilling prophecy.
- [04:24]
John Wu
So I think RAM is right on many levels there. RAM has actually talked about another factor that we haven't talked about, which is the fundamentals, in other words, and value. So like we've been trying to figure out what are these tokens fundamentally what they should be doing and then value. How do you value crypto tokens? It's very hard. But before we go there, I know we're probably going to be talking a lot about that in the rest of this podcast. I'll add one more thing to what RAM has said, which is basically there's actually been amazing number of new distribution channels for, for access for retail into this space and whether it's the DATs or companies like Circle IPOing and at the same time the demand has not increased. It's the same group of people and some of them are going to other call it high beta asset classes. But on top of that the supply side has increased tremendously. There's like tokens left and right now we're not just talking about the three to four or five thousand tokens on the exchanges, centralized exchanges of Coinbase or Binance, talking about on chain tokens left and right in the millions. And that's kind of confusing for a lot of people. And you had an unfortunate situation on October 10th. So what people don't talk about is, yes, there's a lot of these DATs, but a lot of the DATs were, in kind, contributors from the same people or funds that would have been buying these things on chain. So if suddenly they're locked up because a lot of these DATs haven't cleared SEC yet for a SPAC or the reverse merger, their money is held and holding on and down. So you're losing that incremental demand there as well. So there's all of these factors leading to this, as you called it, a weird year, Chris.
- [06:13]
Chris Perkins
Yeah, you know, till now we've talked about the conditions, Rob, like week after week, great setup. You know, now we got Mike Selig who is just. You couldn't shut your eyes and envision a better setup from a regulatory perspective. We've got two amazing leaders now of the agencies who matter. They're going to be setting precedent like that foundation is baked. You got institutions who are now saying, well, maybe clarity got pushed. I personally don't think that matters because the regulators are going to be playing ball. The biggest change since December, though, is that we've gone. The liquidity environment has improved and we've seen correlations with liquidity. And so now you're seeing, you know, the general, the treasury, general account, the TGA is coming down. We've gone from QT to, you know, the error of QT is over. And so now we even have liquidity on top of that. But Bitcoin is struggling to hold 90. I guess the question for both of you esteemed gentlemen then is, all right, what brings momentum back to crypto? Right? I think we all believe that it's coming long term, but what's the impetus? What's going to bring that incremental buyer back? What's next? How do we do it?
- [07:26]
John Wu
Well, I actually think 2026 will be a good year, but not for all tokens. I think underneath the hood we're going to have more differentiation. What's happening right now is a filtering out of bad tokens or projects. Okay? So right now they were treated as one gigantic asset class and too much supply of new tokens. But as those new tokens, all these things are just going to be worthless. But they not be worthless overnight, but they're starting to hit that, the incremental demand, which I do see. You see JP Morgan now supporting institutions, where they made that announcement a week or so ago for investing in this asset class. You've got the RIA channel just opening up, introducing this to their $40 trillion of potential users. And so if the demand pipes open up for more people to access the space, but the filtering lens is going to take the supply down as to like viable tokens, viable projects, viable things. So in some sense I think the supply is going to shrink in terms of reality versus optically on a notional basis. So that's going to allow this to be a much stronger asset class next year.
- [08:42]
Chris Perkins
So consolidation is what you're saying. But we already had the meme coin washout, right? Like where do you think that's going to manifest? Layer ones, layer twos, like apps, all the above. Any particular vertical is going to get washed out?
- [08:54]
John Wu
Well, I think it's not like necessarily a vertical, but it's more about where which verticals have more use and utility. So, you know, you could be, I mean, listen, meme coins are a thing and they'll come in and out just like collectibles are in the traditional world. They'll come in and they'll go out. So maybe there's another version of a meme coin that comes in and it's a fad, but it's not necessarily like everything's going to get wiped out based on a specific vertical. It's going to be what use case. There is a growing use case of on chain stuff. You can call it gambling, you can call it speculation, you can call it digital collectibles and meme coins, but somewhat similar. But that is a real use case. If we're going to allow prediction markets in the traditional environment, which is based on similar human characteristics, they're going to still exist, maybe just in a different form. On chain.
- [09:49]
Rahm Alawalia
I think a good framework for this is the trough of disillusionment. I think folks in digital asset cycle may be familiar with this. There's actually a better version of this chart. If you can see my screen. I see Chris is nodding his head. This is the perfect way to understand where we are. So at the genius cycle now passed. That was the peak of inflated expectations. Valhalla is coming. Look at all the amazing things. And you get there after you've climbed the wall of worry. The wall of worry was the Gensler era. And you see the promise and opportunity. So it turns out actually after the election last year, the markets discounted the next two years. In this one to two month period where Bitcoin went from 65,000 to 107, it was compressed. It's part of that hotball liquidity that Chris mentioned. The velocity of how information moves and the velocity of how people adjust their positions and trade compress that. We saw that same compression with the fact that bitcoin hit new all time highs before the having cycle, which had never done before.
- [10:59]
Chris Perkins
Yep.
- [10:59]
Rahm Alawalia
This is a different market condition, different market characteristic. So what we also saw in, you know, over the summers, this proliferation of DATs and IPOs, those people are going through the trough of disillusionment. Now they're saying, what the hell did I buy? I wish I never bought this. Someone get me out of this. Now what's going to happen is there's going to come a point in time where the people that own those, what's the psychology of that group? They want to own things going up. They thought this was a lottery ticket, they thought that this was a rocket ship. They were sold a bill of goods, that it's going to take this thing to the moon. They're going to say, I can't handle it anymore. Nvidia keeps going up. Meta keeps going up. Space stocks keep going up. Gold keeps going up. And then they're going to say sell. And when that happens, that'll be the best time to buy digital assets.
- [11:53]
Chris Perkins
I don't know, it feels pretty good right now. You got that improving liquidity situation. We're in the trough of disillusionment. And the fundamentals seem, and again to John's point, not every token, this does not apply to every token, fundamentals matter. But it does feel like a very nice entry point for various tokens with strong fundamentals.
- [12:13]
Rahm Alawalia
So I'm seeing value emerge by the way, which is interesting. Yeah. Now you don't want to buy when you first see value immersion because this thing is going to oversell, it's going to overcorrect and it's gonna have to attract people that are like, gee, how do I not buy that? So what I would wanna see is blow ups. I would like to see funds blow up and headlines around this. I would like to see a desert of capital. These are like my ideal. If you're asking for my perfect setup. Yeah, this is what you wanna look for. Like at the end of the debacle around FTX and the DCG Genesis, you know, you had Michael Saylor on the front page of the New York Times Magazine and Mainstream media were shaming him and they say, oh, so we know better. Don't look at this guy. I can't believe what he did. So it's gotta be an uncomfortable buy psychologically. People have to hate the asset class. You know, you probably see developers start leaving the ecosystem for AI. It's gotta feel that bad. That's when I would be really interested, actually. That's when I'm so like, are there tactical opportunities along the way?
- [13:26]
John Wu
Sure.
- [13:26]
Rahm Alawalia
You know, I would find it very interesting if I had that kind of frigidness in the ecosystem. I don't think we have that. I don't think we have that now.
- [13:42]
Chris Perkins
Yeah. So the bitcoin Viking himself, Alex Thorne, I don't know if you know him over at galaxy, he said 2026. Way too hard to call. I was speaking to Steve McClurg, CEO of Canary. He's like, look, we're going to retrench of Bitcoin back to 60 sometime in the middle of next year and then we'll march back up. How do you guys think this is going to play out in the 26?
- [14:03]
John Wu
The asset class or bitcoin?
- [14:06]
Chris Perkins
Both.
- [14:07]
Rahm Alawalia
I think it starts with you got to start with bitcoin.
- [14:09]
Chris Perkins
You got to start with bitcoin because bitcoin leads everything. Right.
- [14:12]
John Wu
I agree. It starts with bitcoin. I do think it's going to be better than 2025. And I am a believer that the four year cycle is no longer. Because there's, you know, that was a finite, not finite, but a small group of investors in the space or traders in the space and now we've expanded that. So expanding it means it's. The cycle is probably going to be slightly different. I mean elements of it still exist. You can't get around that supply, you know, side of the equation. But the demand side has changed so much.
- [14:46]
Chris Perkins
Yeah, you're right. Idiosyncratically we've seen a lot of the old bi, the old holders, the whales, they've cashed out the cycle. So you don't getting older, having kids, need to buy a house, I'm out. And so maybe that psychology is changing. That's a consensus view, by the way, that the four year cycle is dead. You agree with that, Rob?
- [15:04]
Rahm Alawalia
It's proving it out again, though. The four year cycle has expressed itself and it's worked again. A lot of bitcoin, as with other assets and holders of other kinds of stocks like Tesla, there's a tribal like religious component to it. You enter like this, the cathedral of Satoshi Nakamoto and you learn these things like the four year cycle and the having cycle and so you can get these self fulfilling prophecies. I do think that there are a lot of other factors that stacked up at the same time. I do think Bitcoin at 60,000 starts to share some value. But we have just address it when it comes. For example, if we get a first half midterm elections pullback in equity markets, which I believe has happened every single midterm year, maybe that sets us up anew for an opportunity that could be one. The second thing is, you know, there, there is value emerging. Like if you look at like Circle's ipo, that's a high beta name, it's past its lockup, starting to rally. That's a good sign. Like there, there are embers in the fire. You want to see that. I think we have more time to go. It's important not to rush into these things. Like a good piece of technical evidence would be a period of consolidation and basing. People have checked out, they've moved on to other pastures. They're no longer talking about digital assets. You see these negative front page headlines again and then there's a quiet rally that's taking place in the background that no one's paying attention to except us on the show. Okay. And then you're going to see that price and the moving average starting to slope up. And there is an opportunity that would emerge around that time period. So it could happen sooner. I think because of the pace of information velocity. We talked about how assets repriced so quickly. I think it actually could happen sooner than people think. Next year it might not be 2027.
- [17:12]
John Wu
I think to build on that, there is a. You talked about the OG selling out, Chris. Yeah, there is definitely a rotation of people or things that are interested in this space. And naturally, I mean the space has been around for 15, 17 years already now. And naturally, just like investors and just like builders, there's a certain class of people that are just attracted to early, early stage stuff where things are just like breaking convention and creating new things like zero to one style. But as we now, as I think Rob said earlier, you know, almost like sell the news as adoption is happening, the 1 to 10 is a much larger group of people. But it's going to take time to get them over and believe in this space. So there's a rotation of interested people in this space both on the investor trader and the builder?
- [18:07]
Rahm Alawalia
No, just briefly. I agree. Look, there's fragmentation of attention and focus you need to see fewer projects. You need to see winners. You need to see losers shake out and disappear too so you can concentrate around the winner. So we're not seeing that. Like you said earlier, there's so many names markets can't fix onto a narrative. There's competition in the L1 space. There's competition, L2s built on L1s. There's competition from pseudo chains like, like Canton Network. It's so it, it's very difficult for markets. We live this, we see that. Right. But take a step back to like the, a typical investor. They need a basic idea, okay, Capex spend on from hyperscalers on GPUs and data center going to go up because AI works. And I see in my app it's a lewd visceral experience. It's an easy underwrite. They can get their head behind that. You need to see that for digital with Bitcoin it was, hey look, the Fed is printing money. Look at this QE Congress can't control its deficits. Bending boom with Ethereum smart contracts, decentralized Turing Complete machines. Solana here is commercially focused applications. NASDAQ on chain. These are simple to underwrite stories. Those are all crowded themes. They have intense competition. If you look at what's happening in the payment stocks and public markets, they've also been destroyed. Competition is the enemy of returns. So you need a shakeout, shakeout of the protocols. And we've seen this. What's Polkadot doing? I don't know. Right, that'll happen. I think you also need like a shakeout of investors where convictions tested, they wash out and then it starts to attract the buyer, the OG sellers. When they start to step back in at some point that'll be a good sign too.
- [20:08]
Chris Perkins
Yeah, I think it's also going to be the season of M and A before us. Beyond that, consolidation will manifest itself in M and A. I'm really watching over this holiday period because a lot of interesting deals get done. Crypto or beyond. I know a couple of big time dealmakers, they love doing deals on Christmas because their competitors aren't paying attention. So that can be a really interesting space. Rob, the other thing we're talking about is like I feel like we kind of go back and forth between like retail and institutional and we, we use it interchangeably. I'd argue the institutions as they're marching forward, you know, they're using the technology more and more. I want to get John's perspective, but I still think their investment opportunities are limited. You know, we're going to talk a little bit about equity versus token, but when it comes to token, I don't know if they have a ton of opportunity. Like, you know, if, if they're, if they have the remit to invest in a ton of different tokens. You know, we talked in the past about not having the ability to hedge most of these tokens anyway. Just wanted to point that out. But John Rob brought up Canton and I think one of the big battles that we're going to see as we're going through this institutional adoption period is the battle for institutional settlement layers. And you clearly are at Avalanche. That's where you guys make your home is saying, hey, we are going to be that layer for institutions. Just want to get your take on the rise of Canton, the rise of Avalanche, Ethereum. How does this all shake out?
- [21:30]
John Wu
Well, I mean, first of all, kudos to Canton. They've built a very good consortium of large financial services companies from Goldman to bny, et cetera, that not only are equity holders, sometimes token holders of the Canton token, but they're also, you know, part of the consortium using Canton, if you will. The Canton. If we go back to the history of Canton, it started out as private chains. They help individual banks, individual financial services companies build private chains. Then they had to connect these private chains, allow them to talk. And that's kind of how the whole Canton public narrative started coming out because they're allowing the private chains to somewhat connect and talk to each other. I think RAM even called it a fake blockchain earlier because it was really more of a dlt. And then they're trying to build gates around each of these private blts. So but with that said, they've done a very good, well, getting a lot of volumes in terms of Treasuries, repos, working with places like Broadridge and having things run through those private chains. Avalanche and some of the crypto native stuff started decentralized. These guys started more centralized. So I think they've over indexed two things, which is large institutions and centralization. And they're trying to reverse engineer that now. Whereas the rest of the universe that we're used to started out more permissionless. We've over indexed or indexed to permissionless and as well as not necessarily the mega financial institutions, but other financial institutions. I mean AVA Labs just announced another partnership with a company called Intain in the asset backed securities world with FIS. Now FIS is actually a $40 billion publicly traded company. Bank technology for a lot of banks, not just large but mid sized banks. So what it does exactly is Intain has automated the asset backed workflow and made it now basically capital efficient that mid sized company, non S&P 500 companies can access the asset backed security, you know, markets because in the past the cost to access that market because the, the manual workflow was so expensive and the number of parties involved was so you know, onerous that it was hard for a small company to access that market. But FIS is plugged into small medium sized financial services and banks and Intain has created the workflow to automate that. So now all of a sudden an avalanche, the same small loans and the stuff you can do on Canton are available for the mid sized company and mid sized banks. So again like maybe the permissionless world over index for the smaller, you know, call it individual or smaller institution and Canton is over indexed to the larger institution which is literally what the permissionless world was trying to go against.
- [24:37]
Rahm Alawalia
Question for you. I think there's one fundamental question here and I'm just going to play devil's advocate here to keep it interesting. What's the need for a token whose price is floating if you have a decentralized technology and a permissionless ledger?
- [24:54]
John Wu
So that's another completely different thing. All points of tokens, whether it is private or public is to figure out utility and use case for it. And for the longest time Fred Wilson from Union Square Ventures thought of the FAT protocol which is like how you get value capture to the people who build the most bottom substrate in a permissionless world. We saw the biggest issue with Linux and it took so long for Linux to develop into what it was today. And you see it somewhat in AI as well. It's really hard for the people who are going to contribute work and creation in permissionless places to actually ultimately see the value. So how do you incentivize people to do that? And this is a grand experiment where the token for that city state, it's not a company, it's a city state of people contributing and using a community, so to speak. And the thought was that this token was going to help utility and create value and worth for people to want to incentivize them to continue to contribute. I don't think that experiment's over. We can say currently the experiment's gone through many iterations, has not been fully successful, but I think we're still experimenting and trying to figure out a way to grow permissionless systems faster.
- [26:17]
Rahm Alawalia
Well, I agree value capture is another key part of this equation. There's so many issues here, like they just need to be addressed, making progress on it. You know, if you have value capture, then it goes back to the Clarity act. And what do we own? Is it security or is it a commodity? The other fun of there are two final bosses from a regulatory perspective. Yes, we've made progress at Genius Act. Obviously Clarity is outstanding. But the two final bosses are. One is securities laws and the second is the fourth amendment in kyc, okay, so in securities laws, you have a permissionless network that's not compatible with how you register securities. You register securities to raise capital. The an s1 reg a or reg cf you can offer to the public. You meet standards. To do that, you have to file with the sec. You have some compliance obligations. What does that look like for digital assets? There's no good answer for that right now. And that is a major issue. That's a major issue for Internet capital markets. A major issue for on chain crowdfunding. It's the major issue. The second issue is around the KYC framework. It is not compatible with the ethos of decentralized value exchange. Now, somehow the regulators found a way with stablecoins, right? Stablecoins can be exchanged. There's no KYC requirement to send or receive stablecoin. If you want to off ramp, that's where the point of accountability and compliance and all the rest steps in.
- [27:52]
Chris Perkins
That's not true.
- [27:53]
Rahm Alawalia
That's not true.
- [27:54]
Chris Perkins
There's accountability right throughout. And this is something that is near and dear to my heart. And I think I just got to jump in. There's absolute accountability for AML KYC with any stablecoin exchange. But that accountability is on the individual, not on the protocol, right? Yes, very important distinction. Right. So this is really something that distinction.
- [28:15]
Rahm Alawalia
Screening as we were just speaking to though, like not interacting with bad actors under OFAC for sure.
- [28:21]
Chris Perkins
Well, no, you're still accountable, right? So if you're an issuer, you have to KYC the entity individual to whom you issue that from there, the onus of AML kyc, if you will, or sanctions Compliance is on the behavior of that individual or entity. So like if I'm in receipt of a stablecoin and I try to send it to my friends in North Korea, I'm going to be held accountable. You know, so like, I, I don't think it's fair to say that there's no compliance obligation for stablecoin holders on AML and afac.
- [28:55]
Rahm Alawalia
No, you're right, I should. You know, there are compliance. You cannot send assets to sanctioned entities and individuals. You know, the, the broader Point is like the, the AML KYC framework and the Privacy framework, tension between that the Fourth Amendment and AML KYC comes to a head in digital assets. That's the main point. These two.
- [29:20]
John Wu
Well, it comes to a head with digital assets because of the permissionless aspect of it.
- [29:23]
Rahm Alawalia
Because. Yes, because in a world where you have an AML KYC framework, in that world, Traffi wins. Ultimately, one way or another, TradFi wins. Fintech gobbles up crypto. In a world where those two can be addressed, then decentralized digital assets, that world wins.
- [29:46]
Chris Perkins
All right, so there's a lot to talk about. John, first you mentioned fis. Right. And I just want to dig in for those crypto natives who've never heard about it. It's probably the most important, one of the most important institutions in all of Wall Street. They power all of Wall Street. If you go back in history, Goldman Sachs tried to compete with them in the future space, and Goldman Sachs lost. They spent hundreds of millions of dollars and they couldn't. FIs did it just provide this very. It provides this, this tech infrastructure layer? And so I do think that, that those kind of partnerships are going to come very much in the fold during this period of institutional adoption, for sure. We also talked RAM about this constant battle between token and equity. And I think maybe we can dive into that next because this has been all over the news, right? You saw Hayden Adams at Unis Swap talking about unification. Hey, we're going to collapse labs and entities. We're going to burn tokens. Because there's been this constant friction throughout crypto between whether value accrues to the token holder or to the equity holder. And we've seen many, many iterations. It causes a lot of hate and discontent. That hate and discontent today is manifesting itself in a. Where the Dow and STANI and Labs are at loggerheads and they're saying, wait, wait a second. Value associated with the brand, the ip that should accrue to the Dow. No, it should accrue to, to Labs. I want to start with John, because you deal with this every day. You have a protocol, you have token holders. You also are the president of the Labs entity. How does this get adjudicated? How does it get solved? I mean, it's a constant tension. Look, as investors, I'll tell you that we oftentimes look at both. We're like, we don't have to call winners. We'll look at exposure to both token and equity. Not sure how it's going to play out. Five years from now, John, how do you deal with this friction?
- [31:36]
John Wu
Right, well, for convenience, let's just broadly characterize equity versus token, because each one of these Labs companies, whether it's Steiny's Lab or Axelar's Interop Lab or Ava Lab, there's different levels of equity and token out there. And then certain tokens have no use case, others do have use case for gas, for whatever, etc. Etc. So but for, for argument's sake, let's just reduce it to the most two basic things like equity value versus token. That's really like assuming we have identified what that token's use case is. Okay. And, and then if you want to talk about that, then it goes back down to like what is the utility that it's providing the system. Okay. And also where does the IP situation? If the IP sits at the Labs part, then maybe the equity has some value. But if the IP is not that valuable and it's really all about the tokens itself because you use them for gas, use them for paying for trades or whatever, then maybe the tokens have more value. So that's in a weird sense that's not that different from many systems in the traditional world. Think about like, I don't know if you guys have ever invested in hotels or in other things where there's a hotel owner that owns the real estate, but then Marriott or Starwood, they own the brands and they manage the hotel and they get a license percentage of all the stuff that comes through. So you now separated appreciation of land value versus the management of the hotels and the cash flows associated with it. That's actually very similar to a lot of this that we're talking about talking about without as much clarity as it is in the traditional world. In the traditional world, when you invest in Host, you know that Host is the owner of hotels with various brands. But if you own the stock from Marriott, you know you're getting cash flows for running the brands that house themselves at the real estate that's being run by Host. So I think we need transparency and we need to figure out a clear delineation of what the Labs are doing, whether they just are purely IP providers or are they also token holders and they also are figuring out one part of the governance of how these tokens will be used.
- [34:01]
Chris Perkins
Rahm, as an investor, how do you look at this situation? Do you have a general preference?
- [34:05]
Rahm Alawalia
I think that's the key question. It's loosey goosey. There's tokens that have equity, like properties sometimes or community and governance properties which you've got equity, which also should have governance. It all needs to get rationalized. Now the interesting thing is now you're starting to see projects talk about free cash flow and buybacks. We were talking about the hyper liquid. It all comes back to value capture. And free cash flow is an important part of this. Now one might say, well, gee, well, what about Bitcoin? Now Bitcoin's interesting, decentralized money. You're going to have some decentralized currency. But here's the interesting thing about Bitcoin. You could argue that even Bitcoin had a free cash flow story at a free cash flow bid coming from MicroStrategy. That was the cash flow. It was just extrinsic instead of intrinsic. It was MicroStrategy having these complex esoteric financial products issuing shares and driving it into Bitcoin. So even Bitcoin now, when the free cash flow machine stopped, what's MicroStrategy doing? It's doing buybacks. Then Bitcoin started to lag. So yeah, I think, I think token value, all this stuff needs to get clarified, ironed out. These are the right questions to ask. Yes.
- [35:24]
John Wu
Well, I do think the Clarity act, once it distinguishes different types of protocols and different use cases and decentralization and blah blah, blah, will help create more clarity, no pun intended, as to what type of token exists. And therefore you can distinguish equity value from token value better going forward.
- [35:42]
Chris Perkins
Yeah, I don't think you necessarily even need the Clarity act or its Senate equivalent. What you really need is taxonomy. What are the rules around what's a commodity and what are the rules around what's a security? And then you need to underwrite those assets as a commodity or security. And it takes an incredible amount of diligence to understand free cash flows, value accrual, burnback mechanisms, supply and demand, utility, blah blah, blah. But I do think taxonomy does absolutely help you. I don't know how you avoid the friction because again, it's been kind of loosey goosey. Well, I thought this. Oh, I thought that. I don't know how projects can avoid this because it seems to keep happening over and over again. Oh, like all the values accrue to the uniswap front end, not to the protocol holders. Now it looks like they've come around now through the unification proposal to say, wait a second, we're going to actually go back and burn tokens. Any other thoughts about how this plays out?
- [36:48]
John Wu
Well, I think over time. Over time, that's the key here. It's really the People who are participating in the ecosystem are going to help create standards. They just won't participate in things that are vague and unclear. Part of the reason a lot of people went to the space is for better transparency. You can't have a situation where you thought that there would be a, I guess, a governance call for a change in whatever, and all of a sudden someone unilaterally just decides, we're going to make a change because we can do that.
- [37:15]
Rahm Alawalia
Yeah. Look, the double dipping's got to stop. Investors have to be taken care of. The vesting schedules weren't aligned. People are going for the quick pops and the quick wins. Now, here's on a more optimistic note. Let's say we look forward. Let's say the Dems take back the House, maybe the Senate. That could be a capitulatory event for digital assets. It sets up a wall of worry, and it could be a flushing or rinsing event that makes the asset interesting again. Let us see how it plays out. I don't know if the future.
- [37:50]
John Wu
I can see that, but, you know, the way I will look at that is if you go back to the beginning days, you know, of Bitcoin or this asset class in 2008, 2009, you know, we had the great financial crisis in 2008, and that led to, you know, obviously a mistrust or, you know, lack of trust for large institutions and central banks and governments in general. That created Bitcoin. And then the byproduct of that was over regulation for like 15, 17 years. Consistently new regulation, regulation, regulation. And then when you have so much regulation, it's really hard to service everyone, allow the small player to get access to things and et cetera, et cetera. And crypto was basically not only leveraging the trend of distrust for institutions and governments and central banks, but also they were the deregulatory story, if you will. So people said, okay, we're going to create our own rails that people can get access to financial services, can move things around Instead of paying 20% through remittances, et cetera, et cetera. And all of a sudden, not even the first Trump term, it's really the second Trump term that all of a sudden there's a true movement for deregulation. So that greater meta theme of deregulation has created more of everything else and lost some of that interest from existing crypto builders and developers, because suddenly, you know, stripe is in there doing things for stablecoins, and so is, you know, visa, et cetera, et cetera. And Allows, you know, new participants to start using these Rails or quasi Rails, if you will, if it's private. Yeah.
- [39:30]
Rahm Alawalia
M and A would be interesting if you saw outside M and A, like a visa, MasterCard did some kind of acquisition in digital assets. I don't mean like a C5, but there's something more on chain related that would shake things up right away.
- [39:46]
Chris Perkins
Well, you saw Circle and Axelar, right? That's kind of interesting. Not great for the XLR holders, but kind of.
- [39:53]
John Wu
That's partially going there. I mean, they're buying the IP and people. Not necessarily.
- [39:57]
Rahm Alawalia
It's in the right direction. It's in the right direction.
- [40:00]
John Wu
I think Rahm is saying take the network, not necessarily just the labs part.
- [40:06]
Rahm Alawalia
Right, Cool.
- [40:06]
John Wu
Right.
- [40:07]
Chris Perkins
Cool. Guys. Hey, we have to, before we go on, we have to take a quick break. We'll be right back after a word from the sponsors that make this show possible.
- [40:15]
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- [41:07]
Chris Perkins
All right, so over the commercial break, we were talking about how awful it is to be bearish. I don't know, I'm a little more constructive. Rahm. I see liquidity coming back into the system. I see the treasury general account coming down. We're moving out of qt. So I think that.
- [41:24]
Rahm Alawalia
Where are you expressing? How do you express that?
- [41:26]
Chris Perkins
That's what I was going to ask you, man. I'm the host today, so you got, you got to answer.
- [41:29]
Rahm Alawalia
I was trying to head you off at the pass. Boomerang right back, Chris. I mean, I, I, I'm not, Look, I'm, I'd rather wait for a better setup than opportunity set, you know? Yeah, I think the better opportunity is just elsewhere right now. Look, when I see it here, I'll let everyone know. I laid out how I would think about that. Maybe after midterms, I guess that gives us a year. Funny thing about that. That would Set up the next four year cycle. Typical bear market year, year and a half. Right. That would be setting up in the next cycle on cue.
- [42:05]
Chris Perkins
You know Ram, you should have said Avalanche. Right?
- [42:09]
John Wu
Well, I mean I don't want to tout myself or Avalanche, but I would look at this asset class as a long term thing and it's, you know, if you want to get involved. I think I'm actually more positive on 2026 than probably Rahm is. But you seem very bullish on 2026 just because again like the market forces are filtering out the nonsense supply. So actually the supply is going to be more limited and then there's going to be far more distribution to RIAs to also institutions. So I think naturally the call it the quality supply, supply will be limited but demand for that will increase. And I'm more bullish on that. But I think the, the stuff that Ron mentioned earlier, competition with other asset classes that are early stage, whether it's AI to certain parts of AI to you know, rockets to EVTOLs, to other stuff like that will be out there for the, for the user who is, or the investor who's more inclined for the very speculative. And don't forget prediction markets is also a natural competition for a lot of this. I'm not talking about just crypto, I'm talking about for EVTOLs, for space equity, for very venture like equity that somehow has become public through the last SPAC cycle.
- [43:24]
Chris Perkins
Yeah, prediction markets, you can't deny, I mean one of the big success stories of 2026 but value doesn't necessarily accrue to crypto in that space. It accrues, I mean, yeah, Maybe the underlying layer 2 or layer 1, whatever may get some utility but you know, that's not really accruing value necessarily to crypto. Aside from the, from the Rails.
- [43:44]
Rahm Alawalia
Did you see the boxing match with AJ and Jake Paul? So they had a polymarket logo on AJ's trousers. So I don't know if poly market's actually making revenue. Those. Are they making revenue now? I know they, I'll be honest with you.
- [43:58]
Chris Perkins
Like to me, I'm, you know, I'm with the riddles guy. You make revenue three different ways through fees, through net interest income and also through data. When you hear Shane talk, he talks largely about data. Data. Data, yeah, most exchange models, data is actually the lowest revenue generator. But gosh, they're like one flick of the switch away with the stable. Stablecoins are the new net interest income. I'm going to say that again. Stablecoins are the new net interest income. If you have a deal with the stablecoin provider, you're like, hey, dude, I'm flipping the switch. That, that, that, that interest comes to me. That is your new net interest income revenue stream. And I think that's the way people are going to look at it throughout. When I see 2026, I think there are going to be a couple of battles. One is the battle for stable coins. I'm dumping yours, you're taking mine, or you're giving me that yield. The second is the battle for settlement layer. I'm going to capture those sequencer fees because you're settling on my chain. I'm not going to your chain.
- [44:52]
Rahm Alawalia
I like that, Chris. I mean, I'm sure you saw the Coinbase news about essentially like a stable coin as a service that you can spin up because the world needs more stable coins, I guess.
- [45:01]
Chris Perkins
Well, you can brand it, right? You can brand it. We should talk about the Coinbase announcement. I'm glad you brought it up. There's this vision now and even like the chairman of SEC has been talking about it. Super apps, the Everything app, the Everything exchange Coinbase is announcing. Hey, One stop Shop. What's your take?
- [45:19]
Rahm Alawalia
Rom, we need to solve real problems, customer problems, make money movement easier, lower the cost of interchange, make borrow lending easier, reduce counterparty risk, lower the cost of financing, do on chain tokenization of real assets, cut settlement times and capital time. Those solve real problems. The world doesn't need 97 new stable coins. You have stable coins out there. You've got a lot. You've got Nick Van Eck, who's got a decentralized launch of stablecoin as a service program as well too. So this goes back to again, like hype versus reality. Like there's so much capital throwing stuff at the wall because it's on theme. And Robinhood did the same thing when they said we're launching a layer one and we're going to do tokenization. You try to scratch a little bit more. Like, what are you really trying to do? What are you really trying to accomplish? What problem are you solving that's going to cut costs, drive value, convenience, revenue? It's just hard to see that now. I think that the bigger story there is, you're right, the super app story. And like this will be a big story for 26, which is what we've been talking about on the show is the convergence of different assets, convergence at the app layer where it all comes together. The SEC chair, Paul Atkins has been talking about this so crypto is going to start looking more and more like TCP IP on the back end, like polymarket, which is built on Ethereum, and it's going to be more around who owns the end user relationship. This is a complex story. Look at Google, right? Google Gemini is now on pace to be the fastest growing app of all time to a billion users, faster than ChatGPT. And they have an installed base with existing distribution. This is back to what we call what you call the Empire Strikes Back theme. So the super reps are here, you've got the big brands coming, the others that'll step in, Coinbase and Robinhood are duking it out. And when you see competition, it just hurts profits. That's the issue. It's great for consumer. Competition is what makes capitalism great. But we welcome the competition. Let's bring on the competition.
- [47:30]
Chris Perkins
It feels like we're moving into a bipolar world in a way. John Robinhood, super app, Coinbase super app. What's your take?
- [47:37]
John Wu
Well, I mean, don't forget Schwab just bought Forge for private securities. Interactive Brokers also, you know, have made headways in prediction markets and other things in this space as well. So there's still many other apps out there. I think what Coinbase and Robinhood brought together is basically that younger demographic where there's growth in terms of the assets per user. Now it's going to be segmentation. And with the Clarity act, it's not clear that Coinbase can be everything for everyone because they get away with things that are in the gray area that traditional financial services companies cannot do. Once it's clear what a token is the taxonomy you called earlier, you know, it's really hard to be the New York Stock Exchange, the Citadel for market making and the bank for issuing things all in one in place right now, it's possible, but once the rules are clearer, we'll see what happens. With that said, going back to one theme we talked about earlier, which is KYC on ramp and off ramp, there is no doubt Coinbase has a structural advantage for doing things correctly or as best as you can the last 10, 15 years of existence. So they have a huge edge over Robinhood. Robin's coming in from the equity side and Coinbase is coming in from the crypto side, but they are going to bump heads.
- [49:01]
Chris Perkins
Wow. John's calling Coinbase over Robinhood. Are you there as well, Rahm, or are you taking the other side?
- [49:06]
Rahm Alawalia
I think it's, you know, when competitors meet at an intersection, no one wins. It's not just that look, I would wager that X, formerly known as Twitter, they will have a super app. It'll have trading, it'll have payments, it'll have lending. They're going to get in this game too. They're not the only ones. I mean, you're going to see a proliferation. The super app thesis is one of these obvious opportunities that's going to attract so much capital and just a number of players trying to get after it. The big tech companies would try to do this if there weren't limitations preventing them from being banks. So they're going to, you know, they're going to try to do it from owning the AI layer and having a personal assistant that can do your econ transaction transactions. You know, it's an interesting look. Robin, who's got a pretty expensive valuation now, it's had an incredible run. I don't know, it's like what, 55 times earnings now and competition's increasing. So one question is around who's got a better dog in the fight? The other questions around, how do you make money on this as an investor? I think both are tough questions. Kind of my view on next year is more like have a bias towards value. I think you'd get a high beta rally now, the Santa Claus rally. I think that's happening now. Quantum stocks are up like 15 points today, for example. Right. It's going to happen, but I think actually value does better next year. Look, overall we just got a bit ahead of ourselves on a number of different fronts. And now the vibe is like free cash flow and buybacks and earnings yield. That's the vibe now. That's the sentiment.
- [50:43]
John Wu
Well, that'll be interesting because, you know, no doubt we're more value oriented right now, especially, you know, down markets, especially in crypto always, you know, people start talking about value and revenue capture. The thing is like everyone's expecting somehow it's going to be a big IPO year. If you consider competitors to the crypto asset classes broader than just, you know, crypto itself to other high beta stuff. How are we going to have a good IPO market if value is really back? Because a lot of the IPOs are really truly high growth stuff.
- [51:18]
Rahm Alawalia
Yeah, yeah, no, that's a great point. Yeah. A lot of names on IPOs, SpaceX, Anthropic, that's a lot of float hit the market.
- [51:26]
Chris Perkins
Yeah, I want to get to that for the last subject about capital formation, but I want to say my take first on the super app in the U.S. john, I kind of agree with you Kind of disagree with you been regulation that's really prevented this creation of the super app because you got different stuff in different pockets. But this, this, this administration is, is anti regulation. I think you're going to see more and more of it. And what is the end goal here? It's like two things that we used to say in TradFi. Operational efficiency and, and capital efficiency. You know what is that? Operational efficiency for retail? It's that like beautiful ui, one stop shop. I can just do whatever. I don't know if you guys noticed, but it's not only Robinhood and Coinbase that are getting into the game. If you look around the corner, you'll see from a decentralized perspective, Metamask can do most of those same things. Right now. Phantom announced prediction markets today, so you got that vector coming in too. Super, super interesting. And I think Rom's take on Twitter is another one. It's going to be battle for the super app. Last topic guys.
- [52:30]
John Wu
Well, think about this. Doesn't mean entrepreneurialism will be dead. Because if you look at closely at Coinbase's announcement, they're not 100% doing everything all by themselves. They are partnering with certain areas on each one of those things they said they would do.
- [52:43]
Chris Perkins
Well, they are until they're not like, you know, look at what they did with, with Ki. But then they just bought today.
- [52:51]
John Wu
They are until they're not. Correct.
- [52:53]
Chris Perkins
Yeah, right. They bought the clearing. What's it, you guys pick it up.
- [52:58]
John Wu
It's. Yeah, it was a small, it's an earlier stage prediction market. But they bought it. Yes.
- [53:02]
Chris Perkins
Right. I think Robinhood went live with Arbitrum, but then they're probably going to do their own thing. Right. And so I don't know if these are, you know, permanent relationships, but something to watch. Last, last question guys. And I know we're running out of time here. Capital formation. You talked about IPOs when Jeff Dorman came out last week and was talking about just how awful the TGE environment has been. And I think, you know, he said of 118 token launches tracked this year, 85% are now below their TGE valuation.
- [53:36]
Sponsor/Advertiser
Hey everyone, quick note. Chris, misspoke here. And it was Ash of Memento Research who tracked the 118 TGES this year.
- [53:45]
Chris Perkins
Are TGES dead?
- [53:47]
John Wu
Well, in the current manner, they're dying and they're not dead. I mean I get, I, it goes back to what's the use case and what's the token economics and why did this TGE need to be there?
- [53:58]
Chris Perkins
Yep. And then like, look, going back to the Coinbase news, they, they have a platform now, Launchpad as well. Does that solve it?
- [54:05]
Rahm Alawalia
Rob? Curation helps a lot, actually. I do think curation plays an important role. You know, you have that in, in other markets. You know, you have a, a sell side investment bank who puts their reputation on the line and they go to their buy side and they say, look, we've underwritten this. We think the numbers are sound, we think it's a good story, we think you should get involved. So I think that curation is an important step forward. There's a lot of other things we need to setting standards and all the rest, but. Yeah, I like that.
- [54:35]
John Wu
Yeah, I agree. Curation is important. At the same time, you have to figure out what the standards are because what are you curating?
- [54:42]
Chris Perkins
Yep. All right, guys, so let's all go forth and curate. And with that, I just wanted to thank John, special guest joining us today. Really appreciate it. Thank you everyone for joining this episode of Bits and bips. We'll be back next week to talk about more of the world of how crypto and macro collide. Until then, everyone, thank you.