Debate: Is Crypto Collapsing the Public/Private Market Distinction | DAS London 2025 | Day 1
Summary
Crypto and Market Distinction: The podcast explores how crypto is blurring the lines between public and private markets, with discussions on the evolution of blockchain since 2014 and its impact on market access and transparency.
Progress and Challenges: Panelists debate the progress made in tokenizing markets, highlighting the transparency and resilience of DeFi systems compared to traditional financial systems, while acknowledging the challenges in crypto market structures and regulations.
Market Structure and Regulation: The discussion emphasizes the need for robust market structures to support 24/7 trading of real-world assets on-chain, and the importance of balancing technology and regulatory frameworks to ensure market stability.
Recent Market Events: The panel reviews a recent market stress test, noting that while decentralized systems performed well, centralized exchanges faced significant challenges, raising questions about market manipulation and the need for better infrastructure.
Speculation and Stability: The conversation touches on the role of speculation in driving market energy and innovation, while also recognizing the risks of excessive leverage and the importance of developing more stable financial products.
Future of Crypto Markets: Looking ahead, the panelists discuss the potential for crypto to transform financial systems, emphasizing the need for sensible regulation and the development of products that provide real value beyond speculation.
Role of Major Players: Binance's role as a major player in the global crypto market is highlighted, with discussions on its influence and the potential for other companies to lead future developments in the industry.
Long-term Outlook: The podcast concludes with a consensus that the industry should focus on creating sustainable value and improving market infrastructure to support the continued growth and integration of crypto into mainstream finance.
Transcript
Hello everyone. So, as you may have noticed, there are some headphones on the seats. We recommend you putting them on because it's kind of like a silent disco operation going on here. And you will hear the audience and the panelists a lot better with the headphones. Um, thanks again for coming in. Hope everybody had a great lunch. I am Mark. I'm going to be your MC of the afternoon track. I'm on the block works research team and we are going to be kicking it off with a few panelists about whether crypto is blurring the lines between public and private markets. So can we um put our hands together for our panelists? Hib Keshi, Matt Hogan, Santiago Santos, Ron Neina, and Richard Mored. Amazing. [Music] Welcome, guys. I didn't realize we're doing it in a in a silent disco format, which kind of refreshing. It's kind of It's kind of refreshing to to not hear us dance. >> Yeah. Well, you can dance if you want. A very good start. So, >> yeah. So the topic today is around the blurring of the lines between public and private markets. And that is one of the reasons why I got into blockchain in the first place is because the access to public capital anywhere around the world. Uh the big promise. I got into blockchain around 2014 2015. Um I'm kind of interested to hear from you guys how far you think we've come since then and are we on the right trajectory? I see maybe you can start. >> Yeah. Um I mean crypto's changed so much since I first got into the space. So, I came in crypto full-time in 2017 and at that time crypto was still I mean one it was very subversive. We're now here at DAS. I see there's way more suits than there are kind of you know crypto cipher punky people and that there used to be no conferences that look like that. Um I think it's also a testament to how much crypto has in a way it's gotten subsumed by what it was originally trying to disrupt and it's now disrupting it from the inside rather than from the outside. So, you know, if you look at the the the Bitcoin genesis block, it says that basically Bitcoin is an insurrection against the banks and now you have banks launching their own stable coins and you have them figuring out how they can accommodate what's going on in this industry. So, it's total reversal from what I imagined it was like when I first came in this industry in 2017. >> But I mean, so I I get the feels different here and it does really feel different from the 2015, 2016, 2017. I still don't feel like we're making progress towards >> um >> all markets being tokenized and everyone being able to buy tokenized assets. >> You don't think we're making progress? >> I mean, I think we're making progress, but I think it's been 11 years. And I mean, when was the last time you bought a tokenized anything that wasn't a crypto utility token? >> Well, I think that's a good question for some of uh some of these other guys. >> Yeah. Uh I I think in this industry it's important to understand like are we making a marginal improvement to the current paradigm and I think it's not to say that we're going to make financial systems perfect. There are clear challenges with crypto market structure oracle pricing like anyone that was paying attention the last three days understands that but it's important just to understand are we making the system better more transparent and I think if you go back to 2008 where you launch Bitcoin and it and it's in response to global financial crisis why did the global financial crisis happen? because you didn't have any semblance and transparency in a system that is really fragile. You don't know if your counterparty is solvent. And if you look at how DeFi is behaved, I think you're in a paradigm where look, DeFi is not perfect, but you do have a system that is incredibly resilient and it's transparent. It's not going to fix everything, but I think just having transparency in markets is is a better state than the current paradigm. So, I think we made incredible progress. Um, and days like, you know, the last couple of days inform us of areas that we still need to fix. So you know it's not perfect. I don't think we should portray it as perfect. >> What what's the biggest barrier that we have between where we are today and we're between everything trading on tokens all the time um freely transparently is it a is it a technology issue or is it a regulatory issue? I'll come back to I if I look at I think a system like a has behaved exceptionally well time and time again. It's very robust. You had cascading liquidations. That system didn't produce any bad debt. you have perk protocols that are connecting like off-chain and onchain for an oracle pricing system. Well, that the oracle is like typically where things really fall apart. So, I think market structure if you want to create 24/7 365 markets and bring in real world assets on chain. I think that's where we need to do just think clearly of like how do we actually create a system that is robust enough to absorb that right um you know are circuit breakers should we be thinking about circuit breakers in crypto you know when I was on pary it's nice to get a call from a counterparty to refill the collateral sometimes and and so I think are we building like this Frankenstein system where yeah smart contracts are great and logic is great and transparency is great but we just got to make that if we're interacting with counterparties offchain, we need to just understand how that dynamic is going to play between onchain smart contracts offchain real world auditors verification of the collateral and all that stuff. >> Okay. You had a contrarian view if I if I well as requested I tried to come up with one. Um this >> it's a silent disco so you don't hear yourself. Um so um yeah kind of my uh I kicked off part-time in the space back in um 2013 and helped Panta get their position in in Bitstamp um uh sort of right at the the kind of beginning of everything and then their position actually in in circle and I think um we certainly going back to this point of progress I think we certainly you know if we're going to hit two trillion perhaps of stable coins in issuance in the next couple of years which is roughly where JP Morgan think it's going to be maybe we'll come up with another that we seem to be making some good progress and I think um as Santiago says it's for very good reason in terms of the transparency um um you know whether it's the great financial crisis in 2008 or I can actually frankly the first IPO I was involved in was now 25 years ago and the company that that I'd started and um it's not just transparency it's an inside club it was then and it's just as much you know an inside club now I think we can move away from those things if we have proper for tokenization of all these different assets. However, um there are a number of reasons. is that the we need to make sure the market infrastructure is there so you can cope with um you know the longtail events for example the crisis you need to make sure there's just the right amount of of of reg regulation and we have to be I think honest with ourselves that for startups and most of what we do at fabric is to sort of you know get involved with people right at the right at the beginning of their journey for startups coping with being uh solving technology problems and risk hiring co-founders and sort of say issuing a token and being publicly listed entity from the get-go is pretty darn complex. So, I think, you know, we still need to work out, you know, before we allow that to happen for pretty much any asset, literally under the sun, we need to continue to work out the startup science about how we make that work effectively, you know, so folks either don't get too greedy or just go off the rails. >> So, I want to talk about this weekend just for a second. Um, how did we do this weekend? I mean h I mean let's let's actually talk about >> we're alive >> we're alive is written >> but I mean I think I think I think any market I think any market the stress test is the only test that actually counts because under normal conditions everything works well but we had a stress test this Friday it shouldn't have been a stress test because if you think about the underlying cause of what happened it shouldn't have cascaded like that so what happened where did we go wrong where did we fail >> a few things so one this is the largest liquidation in crypto history >> west bigger it's like 10x bigger than >> yeah it's 10 well I think some of the numbers are probably not trustworthy but it's definitely the biggest um in large part just because the market has gotten so much bigger so in relative terms obviously when FTX collapsed and the covid collapsed those numbers were larger but the market was so much smaller back then compared to what it is today so that that's one thing second thing was that the number of traders in this market has also accelerated by quite a lot and the APIs that people have set up to be able to accommodate all of the traders that are interacting with Like what you saw was that a lot it was not actually the blockchains that went down. The blockchains were fine. Solana was fine. Ethereum was fine. Um you know Hyperlquid was fine but the APIs that people were using to interact with these things were falling over left and right. So this kind of load test there's no there's no practice run you can do for it, right? It's like when Trump dropped the memecoin and all the Salana wallets went down. There's no way you can simulate that kind of load because it's coming. They had uh like basically like a couple hours of borderline downtime where people could not get money in and out of Binance. Withdrawals, deposits were were having issues. APIs were failing. Um but actually most the other exchanges did okay. Um auto deleveraging happened. There was very little bad debt across the industry. DeFi performed swimmingly. Um so some things went well, some things went poorly, which is always how it is when you see big events like this. Um but overall I think what it what it showed us so I want I want to jump on this point Santi made which is you know when Paraf is trading in a normal market uh and you're running low on collateral um you don't get just you know automatically liquidated when you hit a certain price point uh instead you get a phone call and the phone call is a very nice phone call it's like hey you know your maybe it's not so nice but it's like hey you know your collateral is running low we really want to top you up we don't want to liquidate you right and in DeFi that's not how it works in DeFi or even on exchanges, right? The way that it works is that the moment you are below this level, boom, you get liquidated, no conversation, no phone calls. It's cold, mechanical, programmatic. And we we often tout this as one of the virtues of DeFi. Um, but of course, you know, if you're Parafi, you maybe don't like the fact that you don't get a phone call. And why is that phone call happening? The phone call is not happening because, you know, traditional businesses are stupid and they don't understand that like, you know, it's riskier to call somebody than than not to. Uh the reason why they're doing that is because this traditional business is basically they know that you're a good customer >> and they want to keep you as a customer and the grace window they're giving you is basically credit extension because they're like look purify will top up I pify they're good guys um and that credit extension doesn't happen in DeFi right now if you're if you're a long >> we don't have privacy >> or maybe you want to ask any >> yeah I actually think I mean so my my big picture answer to your first question of how we're doing is sort of that everything is happening exactly as as it should to get to our destination. Um I even think we sort of owe Gary Gensler a debt for holding down the tokenization and stable coin market while our infrastructure improved. And I think that to to your point um by which I mean that if we had had obviously I have a dart board that I throw Gary Gller's face every day. He's not my friend. that um but broadly speaking, if we had had this kind of sort of traditional engagement in crypto four years ago when transaction fees were spiking on NFT volume, the whole system would have collapsed. Wall Street would have roten it off for a decade and we would have been delayed. I think we're going to get there faster and and and I feel like that about this weekend as well. Everything you said is true and I think we'll get better next time and a few people sort of effectively had those phone calls, right? There's a lot of talk about Athena being hardpriced. That's almost the equivalent of the Paraffy phone call. And I think next time there'll be more of those bilateral arrangements. So I sort of think we're training at the right pace to get to the ultimate destination and it's almost happening almost perfectly. So I think we're making pretty good progress. >> Well, you you seem you seem satisfied even after the connage the carnage of this weekend. >> Can we go back to >> maybe not happy? I just mean that it was a it was a proper learning experience and I expect that the market will be better. It didn't end anything. No one collapsed. And I think we'll improve >> that we know of. >> But my my point is as an industry, I think we've been waiting for regulation. We're a very different environment and regime now. But I think as an industry, it'll serve it will serve us well to put together some guidelines of how we want to operate. I'll give you an example. Uh there's a tweet of Brian Armstrong three a couple hours before all this went down where Coinbase now allows 50x leverage. >> It's about time. But what I'm trying to say is that the right thing to do and and look I get that we are touting uh ideology in this industry of decentralization and openness but there comes a point where you ought to wonder if that is the best product for this industry and are you playing a short-term game or are you playing a long-term game and I think the retention of customers in this industry is non-existent because the longer you spend time in this casino the more likely it is that you will walk away And so I think that we got to look at ourselves in the mirror and say I think we need to reduce the dependency on exchanges. I think we need to reduce the dependency on it being the only funnel to acquire users and to serve this technology. We're selling ourselves short. There is stable coins and stable coins in their own right as a tokenization product. We don't need to innovate more than that for this industry to be 10 times larger and transform businesses. >> So what exactly are you saying about exchanges? What I'm saying is you want to sell a stable coin to a business or you want to sell a product to a consumer that delivers value because people want to stay save dollars and earn yield. That's a great product because there is no financial infrastructure in the rest of the world. You walk into the casino, you're not going to think like that. You're going to be served a 50x per and you hear your stories about you get caught up in that game. And so as an industry will serve us well to look at ourselves in the mirror and say, "Gosh, is this the best thing we can do with this goddamn technology?" Are we attracting investors or >> No, we're attracting speculators. We're >> attracting gamblers. >> And so I get it. The financialization's great, but and speculation is an prerequisite substrate to onboard users and get attention, but god damn, we've been 12 years in this [ __ ] and the tech works and we should do a very different go to market. But you're not really proposing or I don't think you >> have you heard about inversion? >> Yeah, it's a pretty damn good project I heard about. But >> so I'm going to have to [ __ ] do it. No, it makes a lot of sense. Get get some proper products in there rather than kind of these addictions, but um but you're not really proposing that we come up with some some uh you know credo for the for the space and that is going to direct us in a more moral direction. Well, just in the sense not that it's a bad sort of idea in principle, but that is perhaps sort of a work. >> Yes. If you're if you're a user aggregator, it is on you to protect your users. >> Yeah. because you are optimizing for unity economics LTV to CAC and right now there is non-exist there's terrible unics. So why was Brian >> Coinbase doing that? because everyone's looking at the same [ __ ] numbers which is the penetration of this industry is less than 5% and you get around this whole ideology that like look you get you get the next sucker >> right >> okay so okay I I don't usually find myself in the situation of defending centralized exchanges but let me let me let me erect a defense um so first is that most users on exchange on exchanges do not trade anywhere near the max leverage right so like anybody who's offering one of these products knows by looking at the user flow average leverage of people who trade with leverage is closer to like 2 to 3x. It's nowhere near that. >> I see that's not true because because >> it is true. I will tell you >> because we trade we trade we're one of the biggest affiliates in the world for exchanges and we know that the default setting on an exchange is 10x. And >> do you know what the average trader is trading with? >> Well, it depends. When you say average, if you're taking the long tail, if you're using average as the longtail in terms of numbers, I can tell you in terms of volume, I can tell you the average in terms of volume is very much near the 10x button, if not if not even even higher. And I know because I could see I I could see how the base got liquidated this weekend and anyone who was on one or two or 3x didn't get liquidated, but those that were >> a lot of people got liquidated even 23x >> on Binance. >> On Binance on Binance. So I think my my my postmortem of of this weekend is not as generous as your postmortem of this weekend. I think that the decentralized part of the of the blockchain actually succeeded very well. Salana passed the ultimate stress test. I think he failed at the stress test putting through transactions. Like I was getting quoted $400 gas fees, but I think people were posting gas fees of $1,500. So I think Salana passed the flying colors. E showed I think it's true colors uh in terms of it's unusable on the layer one specifically when it actually gets tested. The the uh perexes the decentralized perexes handled beautifully. Hyperlid handled beautifully. Probably one of the best the it passed the flying colors. Then we look at the centralized part of of the um of the industry and they failed terribly. They were manipulated. Um people got liquidated when they shouldn't have got liquidated. Tokens went to absolute zero. It didn't happen on the decentralized exchanges. So I think for me the silver lining is that where we're heading to which is a decentralized world actually did very very very well. The minute we brought back centralization, I think I mean I'm going to say the quiet part out loud. I think that there was that this was a very highly coordinated attack. I don't think that this weekend was coincidental. I think that this weekend was very very very highly coordinated. Let me give you let me give whiz. >> I'm not going to I'm not going to say who I think because it's too late. No, I'm not going to say is going in a very different direction. >> But but hold on. Let's just talk about some facts. When did this liquidation happen? after the the US markets were closed when Europe was asleep and when and when Asia wasn't online yet okay period of zero liquidity where were the automated where were the market makers who are always there who are paid by the protocols in tokens to provide liquidity there was no market makers yeah they why did why did coinlass get attacked I don't know if you saw but there were that coglass who was supposed to give the data as to what was actually happening on the market got hacked at exactly the same time and the oracles got manipulated to give you prices close to zero You want to tell me that that's not a coordinate? And by Monday morning, everything's fine. Like if you switched off your phone on Thursday, you arrived back on Monday, you didn't even know what happened. Now, and it by the way, it only happened on the centralized exchanges. On the decentralized exchanges, nothing happened. >> So, so maybe if you work backwards from this idea that look, crypto is a system that it will constantly be attacked because as it's a very adversarial environment. Go talk to any founder in DeFi and they'll tell you like you build Lindy and there are protocols that have built a lot of Lindy. There seem to be common recurring themes as to why things fail. Oracles probably being the number one and then market structure just happens in these like go talk to a high yield bond trader and he'll tell you the same thing that there the high yield market sometimes really dries up. So what should we be token like do we draw a line of like I know it's permissionless and I know anyone can do whatever but are there as an industry should we focus on if we just assume that this is not going to be fixed should we work backwards from that and say hey maybe we shouldn't be tokenizing to your point like maybe it is worth taking a little bit of a buffer and saying let's maybe hold off on opening Pandora's box or maybe Pandora's box been open and you can't peel it back. >> I think it's other way around. I think that it I think that it's the centralized part of the industry that is controlled by centralized figures is destroying the part that's actually is the most vulnerable and it is the one and it's destroying the the part that's actually working. If you look at the collapses that have cost us money in this industry, you look at FTX, okay, that was the centralized party failed. You look at the the Luna what what subsequently came out as the Luna manipulation. It wasn't the protocol that failed. it was a centralized party that failed. And so time and time and time again, I think that what we're seeing is the quicker we move to a decentralized, non-human, non non-manipulatable uh non-corrupt situation, the better. >> Well, I would say some hyperlquid traders might might have an objection to building a Frankenstein of like just an automated liquidation. Are you are they reading the fine print of how that mechanism is going to work? Like I mean, you guys are very involved in that protocol. I don't know if you have an opinion, but like you know >> Yeah. Yeah. I mean, so in a world where hyperlquid exists, it's very difficult to argue that like, oh, well, you know, the centralized exchanges, they should protect you from taking on high leverage because there will always be some protocol available to you somewhere where you can go get 100x leverage, right? Coinbase is offering uh 50. 50 is like basically kind of the the median, I think, for most exchanges that offer high leverage. >> Hyper liquid offers more than that. >> There's some exchanges that offer a,000x leverage, and I to be honest, >> thousandx leverage is a joke. >> So, to be honest, I actually I actually took a trade. I I took a trade on a >> You took a thousand x lever trade >> just for fun just to see how how this thing works. And you cannot believe the speed at which this trade moves. It is. >> How'd it go? >> It is absurd. You didn't >> I lost my money. I lost my money. I I don't think you understand. I don't think you understand how that's like thousand time, >> right? No, I know. I know. I That's why I think it's mostly self-correcting. Uh >> yeah, that's the thing. There's a reason why people don't offer thousandx leverage is because your customers will immediately turn >> because they will lose all their money. Um there like look we're we're investors into buy bit. We're investors into Bit. We know a lot of these exchanges. We've known them for a long time. It is just not true that people come on these things and gamble at 50x leverage and lose all their money. You would immediately lose all of your clients. That's not how these exchanges work. Most people trade at relatively low amounts of leverage. But the headline number gets somebody in the door because it's like, "Oh, this exchange only has 10x leverage or 5x leverage or whatever." And maybe the moment that I do have super high conviction on something and I want to take an insane punt, I might. The other thing to remember is that most people are not trading alts, >> right? Most of the open interest in crypto is on the majors and Bitcoin and ETH did not move anywhere near the ver the ferocity that you saw in alts, right? The alts unwind was very much for a different reason than what you were seeing happening in the majors, right? Bitcoin traced from what was it 120 something to like 110. >> Well, let me let me just maybe frame the question, man. I'm going to throw this question to you. How much damage do you think that that last Friday did to the cycle? You had they say 20 billion in liquidations. The onchain data shows that it's probably way more. Um they say 1.7 million uh um people got liquidated. I think it's way way way more. How much damage did that do to this cycle? I know in the big scheme of things we'll probably forget that this weekend ever happened. >> Yeah. >> But in this cycle, how much damage was done? I mean so the the so my starting point Bitwise serves primarily professional investors, family offices, financial adviserss, institutions um and my view is this cycle which I think is going to extend for many years is driven by those investors coming into crypto and everything else doesn't really matter for the term of the cycle. So given that framing, the answer is not at all because those people uh closed their computers when Bitcoin was at 117 and opened their computers when it was 115 and the weekend literally never happened. Like my ETF didn't experience the weekend. Um and so >> Bitcoin also didn't experience the weekend if you look at it. >> Well, there's that. That's a whole another thing. But I I don't think it's I I think I think this is uh I think this is unique to this corner of the market. And we've seen these sorts of giant liquidations in the past and actually they're non-determinative of future returns. If you look at the last six largest uh liquidation periods, three of them ended up up a year later, three of them ended up down. So that's slightly negative skewed versus the average, but they're not like deterministic. And because this cycle didn't affect who I think is or this weekend didn't affect who's driving this cycle, which is professional capital that are zero going to 3%. I think that's what's driving the cycle. I don't think it will end up mattering. >> So totally agree with this. The other thing to remember is that we're talking about perpetuals, right? We're talking about futures and these futures are zero sum. It's very easy to forget that but futures are zero sum which means for every dollar gained somebody lost, right? But like it's one to one. There is no creation or or uh like it's it's a pot of money and people are betting on who gets the pot of money. So the liquidation was good because it has reduced the leverage in the system and clearly there was a lot of leverage. I mean, we saw all the craziness going on with the the BNBcoin rotation and all the leverage trades people were making and all that stuff has gotten unwound. That's healthy. >> 40% 40% of the entire crypto leverage XCME because obviously CME was closed. 40% of the entire leverage of the market was completely wiped out. Yeah. >> Between between routinely this happens routinely in bull runs is that there's a re there's a reset. A lot of traders who are taking leverage one way or another, they get wiped and we start over now with less leverage, more spot driven than than uh futures driven. And that's healthy. >> Yeah. >> I I I agree with you. But the reason why I agree with you is because I think this cycle is institutionalized. And as you said, the institutions, they were playing golf on the weekend. >> Totally. >> You know, I I think I I had to remind a lot of people today. We we have a call every morning and I had to remind them like, guys, not everyone follows crypto every minute by every minute by every minute. Some people will check the price on Thursday and check the price again on Monday. >> The people driving the market can't pronounce Salana. >> I I I correct. That's that's a meme right there. But I I do think it it matters on the margin. I get it. The ETF flows and have been instrumental in the cycle and they're the front, you know, front row seat and they're driving. There is an element of RWAs which is emerging. Um and I do wonder around this tokenization aspect of if you're if you're bringing more tokenization of different instruments and you look at the market structure um stuff like Athena and how you know you could you could have an opinion on is it okay to hardcode is it I do think it poses the question of are we are we ready to bring this kind of more and more RWA on chain what does that look like because again you're moving from a paradigm of you know Monday to Friday 9 to5 orderly markets you close you close your your computer and >> you can phone the NASDAQ >> and you can phone the NASDAQ to like now real time markets global liquidity composable in and interoperable in real time like I don't think we're there yet >> yeah so so building on that point exactly the the topic of debate here was kind of meant to be something to do with public private markets and you're always matter by the way that matters um um and and actually you know I was thinking before it's actually the wrong question in a sense I think we all agree the destination is like tokenization of you know everything and radical markets are just different descriptions and so um and your your point I think I agree with which is like are we ready um we should think carefully about that and putting aside um you know any conspiracy theories I'm not saying that there isn't mileage in that but let's put that to aside for one moment I think we can probably all agree although I'm surprised by your opinion on this that leaving it to the market to decide you know for central centralized exchanges to decide what they want to offer in their kind of shops is probably the best way to go. In fact, the only kind of workable way to go and then things will self-correct. Um, but what I I wanted to point out is something that you said hib um and I think Santi you commented on you said well actually you suggested we could do work on it. How do we make sure that people think about um the entanglement we have between these you know in this real-time world between decentralized and centralized worlds think about this the scenarios that we're going to encounter in the future simulate those and also on your point I was actually surprised we can of course come up we can programmatically come up with a lot of scenarios and test rigs for those APIs and we should I mean we I've done it myself back in back in the day um and I'm sure we could come up with the most probable ones if that was the right way to do it and some folks do it. I think for me that sounds like an opportunity for building new companies and products to solve these problems which is >> it's very simple stable coins like let's just work from fundamental premise which is there is a lot of financial literacy and you will never change consumer behavior stable coins programmatic yield you look at JP Morgan the amount of money that sits on checking accounts that is not sweeping into a money market account is staggering people are not sophisticated with their money like It's just it that will never change. As much as we want to drive technology, it will never change. So a stable coin that comes in and programmatically rotates and does that for you within a certain parameter that is expressed with code is beautiful because it eats into the business of banks and it translates consumer preference to people that should be earning a very lowrisk treasuries for 5%. That's great for consumer that's great for the economy. Stable coins as programmable money is amazing that we should lean on. Um, and I think that's that's great. Um, but assuming that people have and then the other extreme of that is allowing your grandmother to go 50 times levered on on Dogecoin. >> Well, somehow I think I think we're I think well for >> but I do think that that that's where we need to draw the line around we are in a excellent time in the industry to craft sensible regulation. Um, and I think this is a moment to get rid of archaic rules and regulations and do sensible regulation because there is more financial products that are available for people. >> So, what do you think we should do with the grandmother? >> Yeah. So, with the grandmother, it's very simple. Like you have on one end accredited investor rules that make absolutely no sense that were drafted predates the internet and they're like if you make $200,000 a year, somehow you're equipped to make investment decisions. There's of course the knowledgeable investor exemp uh uh uh rule which allows people to prove that they're knowledgeable or an insider in a company and I think we should lean more on that right if you're an exchange will gamify Binance does this to some extent or like you have to answer a questionnaire do you understand kind of how this works you understand how perfectly >> are you sure you understand how leverage your exchange >> and I and I do think that we should um we're in a world where we can create UIUX that qualifies people such that they really understand what they're doing and and prove that you have the financial literacy to go 50x levered. I don't think exchanges are doing enough of that. >> So I I will take the other side of that is that actually so I mostly agree with you about people who are trading high leverage. They're just gambling. >> Um I think uh we were just talking about this backstage is that like apparently in Monaco there's you know famous casinos in Monaco but if you are a Monaco citizen you cannot go into the casino. >> Only foreigners are allowed to go trade or go gamble in the Monaco casinos. Same thing in Singapore actually is that Singaporeans are not allowed to gamble in Singapore. Only tourists are allowed to gamble in Singapore. Um, and so I'm I'm sort of partial to like you you take one or the other, right? If you are, you know, look, if if my my grandmother would unfortunately not trade or fortunately for her not trade Dogecoin, but if if you are sufficiently motivated, you will figure out a way to pass the test to allow you to trade Dogecoin. And when you do, I don't know that that's much evidence that you should be going 50x long Dogecoin is that you understand how liquidations work, right? But I think at the same time it's like either you say this stuff but put that aside. Uh I think either you should say look people shouldn't be allowed to do this period or you say like look you know people these tests are >> let's go more it's it's very simple as op in op out like go look at Richard Thaylor like behavioral economics of like how you design a product like to your point if the a if the default leverage on an exchange is 10x. We have a problem because people got liquidated over the weekend on one and a half to two times leverage because the oracle like this is a very volatile asset class. It's for backwards from shit's going to go down 80% in 20 minutes. Even if you have two times cross collateralized cross mark, you're going to get blown out. >> And so that's where I kind of draw a line like the default shouldn't be 10x. Maybe it should be one and a half or two. But I think there's twice in the last six months that you would have been blown out on on 3x leverage on in February when Trump announced tariffs. >> Let's think probabilistically. >> Yeah. But what is this exchange that's 10x default? >> I don't want to mention it because if >> you're an investor. >> Oh, okay. >> Yeah. I don't know. >> I mean, most exchanges if you go into the leverage, the the the default leverage is 10x. >> Nice round number, >> right? It's a great Yeah. >> Yeah. Yeah, and I mean remember we have a big community of traders and we can see what they're doing and the leverage the average leverage that they start off is 10x. >> No one starts off with >> but I agree with his that the market will determine how that plays out. you know that you as the market broadens as a kind of the consumer base broadens um and unfortunately as people suffer from more Trump tweets um that you know something will happen and people will no longer ch choose the platform you know I mean look you see this with Robin Hood right on Robin Hood um you cannot like they don't have okay trade with leverage but they allow options and with options you can construct any leverage profile you want by just constructing your your option in such a way that it's basically equivalent to taking on 20x leverage 30x leverage So, and so the reality is that people if if you don't give them leverage, they'll buy some crazy memecoin that is effectively leverage. >> Yeah. >> Yeah. I think I think I mostly agree with that. I think it's mostly self-correcting. Like people don't buy memecoins. That's self-corrected. Many people are skeptical of ICOs. That's self-corrected. I think the industry would be better off if it didn't exist. So, I I actually agree on that point. Um >> better off if what didn't exist. >> Well, if we didn't have 100 and a thousandx leverage, but I think they're downstream consequences of making that impossible that are probably larger. And I also I would add I think we're hyperfocused on this element of the market. If you put this in a traditional context and these were stocks and you know x% of levered traders got blown out over the weekend, it wouldn't change people's view on Nvidia, right? It wouldn't change people's view on the stock market. I I think that's probably true here, too. Uh I mean, we're in a it's kind of crazy that we're evaluating the merits of this technology because the price goes up or down. Like people don't make a decision to use AWS or AER because the price of Microsoft or Amazon goes up or down. Like hopefully you get to that state soon. >> I think the whole industry is is around creating value and when you create value that didn't exist, people are going to trade it. >> Yeah. >> And so I think I think I think that is how you got to evaluate the industry is how well value how efficiently value can trade because all we're doing is creating value. also because most of the value we have delivered to date has been associated with the kind of world casino not the world computer and to your point hopefully we go beyond stable coins RWA >> Salana gets 70% or 80% of its uh revenue as a chain from speculation and memecoins we were going to get to a state where we will onboard users we will have activity that is not correlated with the the self like the self-referential reflexivity of this industry which is it's all tied to a casino again we're selling ourselves short as an industry we will fix this one way or another, whether it takes 20 years, 5 years. >> So that's my next question is who's going to fix this? Is it going to be Binance, buy bit, all the ones that you mentioned you're invested in? Or is it going to be the banks? Is it going to be Robin Hood? Is it going to be JP Morgan? Is it going to be who's going to fix this problem? >> Right. Why you looking at me? >> Because you're an investor. Um, look, I think I I think the answer I'm very partial to the answer is that it mostly fixes itself. is that in the early days of any technology of any big installation of a society shifting movement there's a lot of speculation always whether it's railroads canals the internet telecoms all of them had gigantic bubbles all of them had a lot of speculation what drives speculation the answer is excitement excitement is what drives speculation people don't speculate over you know GE and you know washing machine companies because they don't care um so now that now that all being said um are there things you can do at the margin with respect to market structure to make markets more stable and reliable. Yes. And the way that we're figuring this stuff out is not because, you know, there's some global regulator overseeing Binance and making sure they do the right thing. It's Binance doing the right thing or they die and they get replaced by somebody else. So, I think the the reality is that this industry up up till now um in spite of all the regulatory uh fury that's been that's been pointed at it, it's mostly been self-regulation that's gotten us here, right? Binance doesn't work the way it does because someone told them to work that way. for Coinbase, maybe you could say, okay, well, you know, obviously they're they're hewing much closer to regulations, but the vast majority of crypto today trades on Binance. It's 40% of the global market. Coinbase is less than 5% globally of what happens in crypto. And so that global market has gotten the way it is through basically learning by doing, through repeatedly going through these getting punched in the face moments like we had this weekend and figuring out, okay, what can we do better to do this better next goound? And I think that's mostly going to continue. I'm interested to know just from the audience here, how many of you got punched in the face this weekend? >> Well, if they did, they're not going to raise their hand. >> No, I mean, I'm really at least one Facebook. >> I'm I'm really keen I'm really keen to know whether whether >> this is not the leverage trading crowd. >> But what I want to know is how many of these people actually did get punched in the face just because they took 2x leverage because when I mean I think 2x leverage is a responsible leverage to take, right? That's irresponsible. >> I last not responsible. Yeah. I mean 2x on Bitcoin or ETH is not irresponsible. >> Well, you got to look at it in the framing of volatility. Yeah. It's a lot. But yeah, >> it's still levered. Yeah. >> Levered. >> Most people don't trade with leverage. The notional people trading with leverage makes it a very very large number. >> Yeah. >> So you think it's as completely insignificant like in the >> It's not It's not completely insignificant, but but again like there are as many people who who made money as who lost. >> That's how that's how you know perpetual swaps work. >> Yeah. Well, look, I I'll tell you what I think, which is there's a whole segment of this industry that people are waking up to Bitcoin with products like yours, and that's phenomenal. That's great. Getting off of zero is important. Bitcoin is a instrument that is a commodity. It's like very separate out bucket and the rest of the industry. I think our focus at inversion is really this idea of injecting this technology in businesses and making them more efficient. And I think there are very specific operational improvements that you can make to a business if you introduce stable coins. And and I mean it's huge working capital settlement times conversion cycles like that is a very measurable impact that heck it's even more than AI >> like if you look at the drag it changes the consumer relationship you look at large and the best part of this is large companies public companies are now doing this like new bank >> they've really improved their unit economics their onboarding their customer acquisition cost has gone down because people in Brazil and Latin America want to get access to dollars and tokenize dollars and and that is just one example of again moving away from pure speculation which is always going to be a good thing. It's a good precursor. It's important. I get you. But I'm excited more about that. And as an industry, very few people I think are focused on on doing that. >> I think I think um Mike Novagratz actually mentioned the and Tom Lee mentioned the concept of energy and energy bringing in uh investment and I think that the casino did bring the energy like you got you got to give it the casino. The casino brought the energy. >> The casino is a side effect of the energy. It's not the cause of the energy. >> Well, I think you were saying like there's no such thing as bad publicity in some senses. So, it brings more people to focus their attention on on crypto. >> Um, so, you know, if maybe that's too too cynical, but I mean, that's helpful. But, I mean, I'm 100% behind the point that, you know, these are lessons for us as an industry and, you know, if you take Binance, they're having to, you know, compensate people. uh that's a real cost to them as well as the kind of you know maybe the few customers are put off and they join another exchange and so they hopefully will fund uh internally or maybe in a startup through easy labs or whatever someone building something that might solve some of that problem for them and architect their their infrastructure a little bit better next time. >> What do you think what do you think of Binance refunding or or compensating not refunding compensating customers? Um what what are your thoughts there? Is it an admission of guilt? Is it an admission of guilt? Is it a Is it a >> I don't take a moral position on it. It's more kind of like if that's their decision in the context of being competitive and so they should they should go ahead and it's not like it's in the fa flies in the face of kind of like the decentralization of a protocol or something. They can choose to do it. If you're at serial gaml in Vegas, the Caesars will fly you out and they'll invite you to the Super Bowl >> and they'll and they'll give you free lobster [ __ ] I mean, if you're locked up and they know they did >> and they said it very clearly, these assets should not have deped. We should not have had the inability of people to redeem and like market makers were unable to get inventory to Binance. >> That's very different from Binance flying you to the F1 to watch to watch a race car >> drive. Bance does that stuff too. Well, no, no, no. I'm I'm not disagreeing with you. I I think it's an admission of guilt and it was a clear market failure and they're now admitting to that and then say, "Yeah, like we we we're owning up to that." >> But hopefully they're not just tactical about it and they help. >> Well, look, it's also important to understand Binance is the biggest fintech company in the world. It's the biggest fintech and most valuable fintech company in the world. They're bigger than Stripe. They're bigger than all these other companies, right? They're bigger than PayPal. And the round of applause for finance. >> It is because um and the the thing to realize like we we talked so much about what's going on with stable coins. The reality is that uh the most distribution of stable coins happens through Binance pay and trust wallet de facto. That is where most that is how most stable coins are distributed today. So Binance has their their tentacles in almost every country in the world by default. They're usually the dominant player in almost every market in emerging economies. Now I think there's a lot of stuff that people can do better than them but right now we have to give it to them that they are a big part of why this industry is so big globally outside the US. >> Well Tron to some extent too. >> Tron is the rails on which it runs really but it's like it's their software. >> All right guys five years from now do you think that still is the case? >> Uh no I don't think so. >> Definitely not. >> I agree. >> If if we're here in five years and that doesn't happen we've done something terrible as an industry. >> I agree with that. >> I agree with that. >> So now now that we all agree I think uh time's up. I think now we can maybe start talking about the actual topic which is the blurring of the lines. Guys, thank you very much. We are completely out of time guys. Thank you. Thank you.
Debate: Is Crypto Collapsing the Public/Private Market Distinction | DAS London 2025 | Day 1
Summary
Transcript
Hello everyone. So, as you may have noticed, there are some headphones on the seats. We recommend you putting them on because it's kind of like a silent disco operation going on here. And you will hear the audience and the panelists a lot better with the headphones. Um, thanks again for coming in. Hope everybody had a great lunch. I am Mark. I'm going to be your MC of the afternoon track. I'm on the block works research team and we are going to be kicking it off with a few panelists about whether crypto is blurring the lines between public and private markets. So can we um put our hands together for our panelists? Hib Keshi, Matt Hogan, Santiago Santos, Ron Neina, and Richard Mored. Amazing. [Music] Welcome, guys. I didn't realize we're doing it in a in a silent disco format, which kind of refreshing. It's kind of It's kind of refreshing to to not hear us dance. >> Yeah. Well, you can dance if you want. A very good start. So, >> yeah. So the topic today is around the blurring of the lines between public and private markets. And that is one of the reasons why I got into blockchain in the first place is because the access to public capital anywhere around the world. Uh the big promise. I got into blockchain around 2014 2015. Um I'm kind of interested to hear from you guys how far you think we've come since then and are we on the right trajectory? I see maybe you can start. >> Yeah. Um I mean crypto's changed so much since I first got into the space. So, I came in crypto full-time in 2017 and at that time crypto was still I mean one it was very subversive. We're now here at DAS. I see there's way more suits than there are kind of you know crypto cipher punky people and that there used to be no conferences that look like that. Um I think it's also a testament to how much crypto has in a way it's gotten subsumed by what it was originally trying to disrupt and it's now disrupting it from the inside rather than from the outside. So, you know, if you look at the the the Bitcoin genesis block, it says that basically Bitcoin is an insurrection against the banks and now you have banks launching their own stable coins and you have them figuring out how they can accommodate what's going on in this industry. So, it's total reversal from what I imagined it was like when I first came in this industry in 2017. >> But I mean, so I I get the feels different here and it does really feel different from the 2015, 2016, 2017. I still don't feel like we're making progress towards >> um >> all markets being tokenized and everyone being able to buy tokenized assets. >> You don't think we're making progress? >> I mean, I think we're making progress, but I think it's been 11 years. And I mean, when was the last time you bought a tokenized anything that wasn't a crypto utility token? >> Well, I think that's a good question for some of uh some of these other guys. >> Yeah. Uh I I think in this industry it's important to understand like are we making a marginal improvement to the current paradigm and I think it's not to say that we're going to make financial systems perfect. There are clear challenges with crypto market structure oracle pricing like anyone that was paying attention the last three days understands that but it's important just to understand are we making the system better more transparent and I think if you go back to 2008 where you launch Bitcoin and it and it's in response to global financial crisis why did the global financial crisis happen? because you didn't have any semblance and transparency in a system that is really fragile. You don't know if your counterparty is solvent. And if you look at how DeFi is behaved, I think you're in a paradigm where look, DeFi is not perfect, but you do have a system that is incredibly resilient and it's transparent. It's not going to fix everything, but I think just having transparency in markets is is a better state than the current paradigm. So, I think we made incredible progress. Um, and days like, you know, the last couple of days inform us of areas that we still need to fix. So you know it's not perfect. I don't think we should portray it as perfect. >> What what's the biggest barrier that we have between where we are today and we're between everything trading on tokens all the time um freely transparently is it a is it a technology issue or is it a regulatory issue? I'll come back to I if I look at I think a system like a has behaved exceptionally well time and time again. It's very robust. You had cascading liquidations. That system didn't produce any bad debt. you have perk protocols that are connecting like off-chain and onchain for an oracle pricing system. Well, that the oracle is like typically where things really fall apart. So, I think market structure if you want to create 24/7 365 markets and bring in real world assets on chain. I think that's where we need to do just think clearly of like how do we actually create a system that is robust enough to absorb that right um you know are circuit breakers should we be thinking about circuit breakers in crypto you know when I was on pary it's nice to get a call from a counterparty to refill the collateral sometimes and and so I think are we building like this Frankenstein system where yeah smart contracts are great and logic is great and transparency is great but we just got to make that if we're interacting with counterparties offchain, we need to just understand how that dynamic is going to play between onchain smart contracts offchain real world auditors verification of the collateral and all that stuff. >> Okay. You had a contrarian view if I if I well as requested I tried to come up with one. Um this >> it's a silent disco so you don't hear yourself. Um so um yeah kind of my uh I kicked off part-time in the space back in um 2013 and helped Panta get their position in in Bitstamp um uh sort of right at the the kind of beginning of everything and then their position actually in in circle and I think um we certainly going back to this point of progress I think we certainly you know if we're going to hit two trillion perhaps of stable coins in issuance in the next couple of years which is roughly where JP Morgan think it's going to be maybe we'll come up with another that we seem to be making some good progress and I think um as Santiago says it's for very good reason in terms of the transparency um um you know whether it's the great financial crisis in 2008 or I can actually frankly the first IPO I was involved in was now 25 years ago and the company that that I'd started and um it's not just transparency it's an inside club it was then and it's just as much you know an inside club now I think we can move away from those things if we have proper for tokenization of all these different assets. However, um there are a number of reasons. is that the we need to make sure the market infrastructure is there so you can cope with um you know the longtail events for example the crisis you need to make sure there's just the right amount of of of reg regulation and we have to be I think honest with ourselves that for startups and most of what we do at fabric is to sort of you know get involved with people right at the right at the beginning of their journey for startups coping with being uh solving technology problems and risk hiring co-founders and sort of say issuing a token and being publicly listed entity from the get-go is pretty darn complex. So, I think, you know, we still need to work out, you know, before we allow that to happen for pretty much any asset, literally under the sun, we need to continue to work out the startup science about how we make that work effectively, you know, so folks either don't get too greedy or just go off the rails. >> So, I want to talk about this weekend just for a second. Um, how did we do this weekend? I mean h I mean let's let's actually talk about >> we're alive >> we're alive is written >> but I mean I think I think I think any market I think any market the stress test is the only test that actually counts because under normal conditions everything works well but we had a stress test this Friday it shouldn't have been a stress test because if you think about the underlying cause of what happened it shouldn't have cascaded like that so what happened where did we go wrong where did we fail >> a few things so one this is the largest liquidation in crypto history >> west bigger it's like 10x bigger than >> yeah it's 10 well I think some of the numbers are probably not trustworthy but it's definitely the biggest um in large part just because the market has gotten so much bigger so in relative terms obviously when FTX collapsed and the covid collapsed those numbers were larger but the market was so much smaller back then compared to what it is today so that that's one thing second thing was that the number of traders in this market has also accelerated by quite a lot and the APIs that people have set up to be able to accommodate all of the traders that are interacting with Like what you saw was that a lot it was not actually the blockchains that went down. The blockchains were fine. Solana was fine. Ethereum was fine. Um you know Hyperlquid was fine but the APIs that people were using to interact with these things were falling over left and right. So this kind of load test there's no there's no practice run you can do for it, right? It's like when Trump dropped the memecoin and all the Salana wallets went down. There's no way you can simulate that kind of load because it's coming. They had uh like basically like a couple hours of borderline downtime where people could not get money in and out of Binance. Withdrawals, deposits were were having issues. APIs were failing. Um but actually most the other exchanges did okay. Um auto deleveraging happened. There was very little bad debt across the industry. DeFi performed swimmingly. Um so some things went well, some things went poorly, which is always how it is when you see big events like this. Um but overall I think what it what it showed us so I want I want to jump on this point Santi made which is you know when Paraf is trading in a normal market uh and you're running low on collateral um you don't get just you know automatically liquidated when you hit a certain price point uh instead you get a phone call and the phone call is a very nice phone call it's like hey you know your maybe it's not so nice but it's like hey you know your collateral is running low we really want to top you up we don't want to liquidate you right and in DeFi that's not how it works in DeFi or even on exchanges, right? The way that it works is that the moment you are below this level, boom, you get liquidated, no conversation, no phone calls. It's cold, mechanical, programmatic. And we we often tout this as one of the virtues of DeFi. Um, but of course, you know, if you're Parafi, you maybe don't like the fact that you don't get a phone call. And why is that phone call happening? The phone call is not happening because, you know, traditional businesses are stupid and they don't understand that like, you know, it's riskier to call somebody than than not to. Uh the reason why they're doing that is because this traditional business is basically they know that you're a good customer >> and they want to keep you as a customer and the grace window they're giving you is basically credit extension because they're like look purify will top up I pify they're good guys um and that credit extension doesn't happen in DeFi right now if you're if you're a long >> we don't have privacy >> or maybe you want to ask any >> yeah I actually think I mean so my my big picture answer to your first question of how we're doing is sort of that everything is happening exactly as as it should to get to our destination. Um I even think we sort of owe Gary Gensler a debt for holding down the tokenization and stable coin market while our infrastructure improved. And I think that to to your point um by which I mean that if we had had obviously I have a dart board that I throw Gary Gller's face every day. He's not my friend. that um but broadly speaking, if we had had this kind of sort of traditional engagement in crypto four years ago when transaction fees were spiking on NFT volume, the whole system would have collapsed. Wall Street would have roten it off for a decade and we would have been delayed. I think we're going to get there faster and and and I feel like that about this weekend as well. Everything you said is true and I think we'll get better next time and a few people sort of effectively had those phone calls, right? There's a lot of talk about Athena being hardpriced. That's almost the equivalent of the Paraffy phone call. And I think next time there'll be more of those bilateral arrangements. So I sort of think we're training at the right pace to get to the ultimate destination and it's almost happening almost perfectly. So I think we're making pretty good progress. >> Well, you you seem you seem satisfied even after the connage the carnage of this weekend. >> Can we go back to >> maybe not happy? I just mean that it was a it was a proper learning experience and I expect that the market will be better. It didn't end anything. No one collapsed. And I think we'll improve >> that we know of. >> But my my point is as an industry, I think we've been waiting for regulation. We're a very different environment and regime now. But I think as an industry, it'll serve it will serve us well to put together some guidelines of how we want to operate. I'll give you an example. Uh there's a tweet of Brian Armstrong three a couple hours before all this went down where Coinbase now allows 50x leverage. >> It's about time. But what I'm trying to say is that the right thing to do and and look I get that we are touting uh ideology in this industry of decentralization and openness but there comes a point where you ought to wonder if that is the best product for this industry and are you playing a short-term game or are you playing a long-term game and I think the retention of customers in this industry is non-existent because the longer you spend time in this casino the more likely it is that you will walk away And so I think that we got to look at ourselves in the mirror and say I think we need to reduce the dependency on exchanges. I think we need to reduce the dependency on it being the only funnel to acquire users and to serve this technology. We're selling ourselves short. There is stable coins and stable coins in their own right as a tokenization product. We don't need to innovate more than that for this industry to be 10 times larger and transform businesses. >> So what exactly are you saying about exchanges? What I'm saying is you want to sell a stable coin to a business or you want to sell a product to a consumer that delivers value because people want to stay save dollars and earn yield. That's a great product because there is no financial infrastructure in the rest of the world. You walk into the casino, you're not going to think like that. You're going to be served a 50x per and you hear your stories about you get caught up in that game. And so as an industry will serve us well to look at ourselves in the mirror and say, "Gosh, is this the best thing we can do with this goddamn technology?" Are we attracting investors or >> No, we're attracting speculators. We're >> attracting gamblers. >> And so I get it. The financialization's great, but and speculation is an prerequisite substrate to onboard users and get attention, but god damn, we've been 12 years in this [ __ ] and the tech works and we should do a very different go to market. But you're not really proposing or I don't think you >> have you heard about inversion? >> Yeah, it's a pretty damn good project I heard about. But >> so I'm going to have to [ __ ] do it. No, it makes a lot of sense. Get get some proper products in there rather than kind of these addictions, but um but you're not really proposing that we come up with some some uh you know credo for the for the space and that is going to direct us in a more moral direction. Well, just in the sense not that it's a bad sort of idea in principle, but that is perhaps sort of a work. >> Yes. If you're if you're a user aggregator, it is on you to protect your users. >> Yeah. because you are optimizing for unity economics LTV to CAC and right now there is non-exist there's terrible unics. So why was Brian >> Coinbase doing that? because everyone's looking at the same [ __ ] numbers which is the penetration of this industry is less than 5% and you get around this whole ideology that like look you get you get the next sucker >> right >> okay so okay I I don't usually find myself in the situation of defending centralized exchanges but let me let me let me erect a defense um so first is that most users on exchange on exchanges do not trade anywhere near the max leverage right so like anybody who's offering one of these products knows by looking at the user flow average leverage of people who trade with leverage is closer to like 2 to 3x. It's nowhere near that. >> I see that's not true because because >> it is true. I will tell you >> because we trade we trade we're one of the biggest affiliates in the world for exchanges and we know that the default setting on an exchange is 10x. And >> do you know what the average trader is trading with? >> Well, it depends. When you say average, if you're taking the long tail, if you're using average as the longtail in terms of numbers, I can tell you in terms of volume, I can tell you the average in terms of volume is very much near the 10x button, if not if not even even higher. And I know because I could see I I could see how the base got liquidated this weekend and anyone who was on one or two or 3x didn't get liquidated, but those that were >> a lot of people got liquidated even 23x >> on Binance. >> On Binance on Binance. So I think my my my postmortem of of this weekend is not as generous as your postmortem of this weekend. I think that the decentralized part of the of the blockchain actually succeeded very well. Salana passed the ultimate stress test. I think he failed at the stress test putting through transactions. Like I was getting quoted $400 gas fees, but I think people were posting gas fees of $1,500. So I think Salana passed the flying colors. E showed I think it's true colors uh in terms of it's unusable on the layer one specifically when it actually gets tested. The the uh perexes the decentralized perexes handled beautifully. Hyperlid handled beautifully. Probably one of the best the it passed the flying colors. Then we look at the centralized part of of the um of the industry and they failed terribly. They were manipulated. Um people got liquidated when they shouldn't have got liquidated. Tokens went to absolute zero. It didn't happen on the decentralized exchanges. So I think for me the silver lining is that where we're heading to which is a decentralized world actually did very very very well. The minute we brought back centralization, I think I mean I'm going to say the quiet part out loud. I think that there was that this was a very highly coordinated attack. I don't think that this weekend was coincidental. I think that this weekend was very very very highly coordinated. Let me give you let me give whiz. >> I'm not going to I'm not going to say who I think because it's too late. No, I'm not going to say is going in a very different direction. >> But but hold on. Let's just talk about some facts. When did this liquidation happen? after the the US markets were closed when Europe was asleep and when and when Asia wasn't online yet okay period of zero liquidity where were the automated where were the market makers who are always there who are paid by the protocols in tokens to provide liquidity there was no market makers yeah they why did why did coinlass get attacked I don't know if you saw but there were that coglass who was supposed to give the data as to what was actually happening on the market got hacked at exactly the same time and the oracles got manipulated to give you prices close to zero You want to tell me that that's not a coordinate? And by Monday morning, everything's fine. Like if you switched off your phone on Thursday, you arrived back on Monday, you didn't even know what happened. Now, and it by the way, it only happened on the centralized exchanges. On the decentralized exchanges, nothing happened. >> So, so maybe if you work backwards from this idea that look, crypto is a system that it will constantly be attacked because as it's a very adversarial environment. Go talk to any founder in DeFi and they'll tell you like you build Lindy and there are protocols that have built a lot of Lindy. There seem to be common recurring themes as to why things fail. Oracles probably being the number one and then market structure just happens in these like go talk to a high yield bond trader and he'll tell you the same thing that there the high yield market sometimes really dries up. So what should we be token like do we draw a line of like I know it's permissionless and I know anyone can do whatever but are there as an industry should we focus on if we just assume that this is not going to be fixed should we work backwards from that and say hey maybe we shouldn't be tokenizing to your point like maybe it is worth taking a little bit of a buffer and saying let's maybe hold off on opening Pandora's box or maybe Pandora's box been open and you can't peel it back. >> I think it's other way around. I think that it I think that it's the centralized part of the industry that is controlled by centralized figures is destroying the part that's actually is the most vulnerable and it is the one and it's destroying the the part that's actually working. If you look at the collapses that have cost us money in this industry, you look at FTX, okay, that was the centralized party failed. You look at the the Luna what what subsequently came out as the Luna manipulation. It wasn't the protocol that failed. it was a centralized party that failed. And so time and time and time again, I think that what we're seeing is the quicker we move to a decentralized, non-human, non non-manipulatable uh non-corrupt situation, the better. >> Well, I would say some hyperlquid traders might might have an objection to building a Frankenstein of like just an automated liquidation. Are you are they reading the fine print of how that mechanism is going to work? Like I mean, you guys are very involved in that protocol. I don't know if you have an opinion, but like you know >> Yeah. Yeah. I mean, so in a world where hyperlquid exists, it's very difficult to argue that like, oh, well, you know, the centralized exchanges, they should protect you from taking on high leverage because there will always be some protocol available to you somewhere where you can go get 100x leverage, right? Coinbase is offering uh 50. 50 is like basically kind of the the median, I think, for most exchanges that offer high leverage. >> Hyper liquid offers more than that. >> There's some exchanges that offer a,000x leverage, and I to be honest, >> thousandx leverage is a joke. >> So, to be honest, I actually I actually took a trade. I I took a trade on a >> You took a thousand x lever trade >> just for fun just to see how how this thing works. And you cannot believe the speed at which this trade moves. It is. >> How'd it go? >> It is absurd. You didn't >> I lost my money. I lost my money. I I don't think you understand. I don't think you understand how that's like thousand time, >> right? No, I know. I know. I That's why I think it's mostly self-correcting. Uh >> yeah, that's the thing. There's a reason why people don't offer thousandx leverage is because your customers will immediately turn >> because they will lose all their money. Um there like look we're we're investors into buy bit. We're investors into Bit. We know a lot of these exchanges. We've known them for a long time. It is just not true that people come on these things and gamble at 50x leverage and lose all their money. You would immediately lose all of your clients. That's not how these exchanges work. Most people trade at relatively low amounts of leverage. But the headline number gets somebody in the door because it's like, "Oh, this exchange only has 10x leverage or 5x leverage or whatever." And maybe the moment that I do have super high conviction on something and I want to take an insane punt, I might. The other thing to remember is that most people are not trading alts, >> right? Most of the open interest in crypto is on the majors and Bitcoin and ETH did not move anywhere near the ver the ferocity that you saw in alts, right? The alts unwind was very much for a different reason than what you were seeing happening in the majors, right? Bitcoin traced from what was it 120 something to like 110. >> Well, let me let me just maybe frame the question, man. I'm going to throw this question to you. How much damage do you think that that last Friday did to the cycle? You had they say 20 billion in liquidations. The onchain data shows that it's probably way more. Um they say 1.7 million uh um people got liquidated. I think it's way way way more. How much damage did that do to this cycle? I know in the big scheme of things we'll probably forget that this weekend ever happened. >> Yeah. >> But in this cycle, how much damage was done? I mean so the the so my starting point Bitwise serves primarily professional investors, family offices, financial adviserss, institutions um and my view is this cycle which I think is going to extend for many years is driven by those investors coming into crypto and everything else doesn't really matter for the term of the cycle. So given that framing, the answer is not at all because those people uh closed their computers when Bitcoin was at 117 and opened their computers when it was 115 and the weekend literally never happened. Like my ETF didn't experience the weekend. Um and so >> Bitcoin also didn't experience the weekend if you look at it. >> Well, there's that. That's a whole another thing. But I I don't think it's I I think I think this is uh I think this is unique to this corner of the market. And we've seen these sorts of giant liquidations in the past and actually they're non-determinative of future returns. If you look at the last six largest uh liquidation periods, three of them ended up up a year later, three of them ended up down. So that's slightly negative skewed versus the average, but they're not like deterministic. And because this cycle didn't affect who I think is or this weekend didn't affect who's driving this cycle, which is professional capital that are zero going to 3%. I think that's what's driving the cycle. I don't think it will end up mattering. >> So totally agree with this. The other thing to remember is that we're talking about perpetuals, right? We're talking about futures and these futures are zero sum. It's very easy to forget that but futures are zero sum which means for every dollar gained somebody lost, right? But like it's one to one. There is no creation or or uh like it's it's a pot of money and people are betting on who gets the pot of money. So the liquidation was good because it has reduced the leverage in the system and clearly there was a lot of leverage. I mean, we saw all the craziness going on with the the BNBcoin rotation and all the leverage trades people were making and all that stuff has gotten unwound. That's healthy. >> 40% 40% of the entire crypto leverage XCME because obviously CME was closed. 40% of the entire leverage of the market was completely wiped out. Yeah. >> Between between routinely this happens routinely in bull runs is that there's a re there's a reset. A lot of traders who are taking leverage one way or another, they get wiped and we start over now with less leverage, more spot driven than than uh futures driven. And that's healthy. >> Yeah. >> I I I agree with you. But the reason why I agree with you is because I think this cycle is institutionalized. And as you said, the institutions, they were playing golf on the weekend. >> Totally. >> You know, I I think I I had to remind a lot of people today. We we have a call every morning and I had to remind them like, guys, not everyone follows crypto every minute by every minute by every minute. Some people will check the price on Thursday and check the price again on Monday. >> The people driving the market can't pronounce Salana. >> I I I correct. That's that's a meme right there. But I I do think it it matters on the margin. I get it. The ETF flows and have been instrumental in the cycle and they're the front, you know, front row seat and they're driving. There is an element of RWAs which is emerging. Um and I do wonder around this tokenization aspect of if you're if you're bringing more tokenization of different instruments and you look at the market structure um stuff like Athena and how you know you could you could have an opinion on is it okay to hardcode is it I do think it poses the question of are we are we ready to bring this kind of more and more RWA on chain what does that look like because again you're moving from a paradigm of you know Monday to Friday 9 to5 orderly markets you close you close your your computer and >> you can phone the NASDAQ >> and you can phone the NASDAQ to like now real time markets global liquidity composable in and interoperable in real time like I don't think we're there yet >> yeah so so building on that point exactly the the topic of debate here was kind of meant to be something to do with public private markets and you're always matter by the way that matters um um and and actually you know I was thinking before it's actually the wrong question in a sense I think we all agree the destination is like tokenization of you know everything and radical markets are just different descriptions and so um and your your point I think I agree with which is like are we ready um we should think carefully about that and putting aside um you know any conspiracy theories I'm not saying that there isn't mileage in that but let's put that to aside for one moment I think we can probably all agree although I'm surprised by your opinion on this that leaving it to the market to decide you know for central centralized exchanges to decide what they want to offer in their kind of shops is probably the best way to go. In fact, the only kind of workable way to go and then things will self-correct. Um, but what I I wanted to point out is something that you said hib um and I think Santi you commented on you said well actually you suggested we could do work on it. How do we make sure that people think about um the entanglement we have between these you know in this real-time world between decentralized and centralized worlds think about this the scenarios that we're going to encounter in the future simulate those and also on your point I was actually surprised we can of course come up we can programmatically come up with a lot of scenarios and test rigs for those APIs and we should I mean we I've done it myself back in back in the day um and I'm sure we could come up with the most probable ones if that was the right way to do it and some folks do it. I think for me that sounds like an opportunity for building new companies and products to solve these problems which is >> it's very simple stable coins like let's just work from fundamental premise which is there is a lot of financial literacy and you will never change consumer behavior stable coins programmatic yield you look at JP Morgan the amount of money that sits on checking accounts that is not sweeping into a money market account is staggering people are not sophisticated with their money like It's just it that will never change. As much as we want to drive technology, it will never change. So a stable coin that comes in and programmatically rotates and does that for you within a certain parameter that is expressed with code is beautiful because it eats into the business of banks and it translates consumer preference to people that should be earning a very lowrisk treasuries for 5%. That's great for consumer that's great for the economy. Stable coins as programmable money is amazing that we should lean on. Um, and I think that's that's great. Um, but assuming that people have and then the other extreme of that is allowing your grandmother to go 50 times levered on on Dogecoin. >> Well, somehow I think I think we're I think well for >> but I do think that that that's where we need to draw the line around we are in a excellent time in the industry to craft sensible regulation. Um, and I think this is a moment to get rid of archaic rules and regulations and do sensible regulation because there is more financial products that are available for people. >> So, what do you think we should do with the grandmother? >> Yeah. So, with the grandmother, it's very simple. Like you have on one end accredited investor rules that make absolutely no sense that were drafted predates the internet and they're like if you make $200,000 a year, somehow you're equipped to make investment decisions. There's of course the knowledgeable investor exemp uh uh uh rule which allows people to prove that they're knowledgeable or an insider in a company and I think we should lean more on that right if you're an exchange will gamify Binance does this to some extent or like you have to answer a questionnaire do you understand kind of how this works you understand how perfectly >> are you sure you understand how leverage your exchange >> and I and I do think that we should um we're in a world where we can create UIUX that qualifies people such that they really understand what they're doing and and prove that you have the financial literacy to go 50x levered. I don't think exchanges are doing enough of that. >> So I I will take the other side of that is that actually so I mostly agree with you about people who are trading high leverage. They're just gambling. >> Um I think uh we were just talking about this backstage is that like apparently in Monaco there's you know famous casinos in Monaco but if you are a Monaco citizen you cannot go into the casino. >> Only foreigners are allowed to go trade or go gamble in the Monaco casinos. Same thing in Singapore actually is that Singaporeans are not allowed to gamble in Singapore. Only tourists are allowed to gamble in Singapore. Um, and so I'm I'm sort of partial to like you you take one or the other, right? If you are, you know, look, if if my my grandmother would unfortunately not trade or fortunately for her not trade Dogecoin, but if if you are sufficiently motivated, you will figure out a way to pass the test to allow you to trade Dogecoin. And when you do, I don't know that that's much evidence that you should be going 50x long Dogecoin is that you understand how liquidations work, right? But I think at the same time it's like either you say this stuff but put that aside. Uh I think either you should say look people shouldn't be allowed to do this period or you say like look you know people these tests are >> let's go more it's it's very simple as op in op out like go look at Richard Thaylor like behavioral economics of like how you design a product like to your point if the a if the default leverage on an exchange is 10x. We have a problem because people got liquidated over the weekend on one and a half to two times leverage because the oracle like this is a very volatile asset class. It's for backwards from shit's going to go down 80% in 20 minutes. Even if you have two times cross collateralized cross mark, you're going to get blown out. >> And so that's where I kind of draw a line like the default shouldn't be 10x. Maybe it should be one and a half or two. But I think there's twice in the last six months that you would have been blown out on on 3x leverage on in February when Trump announced tariffs. >> Let's think probabilistically. >> Yeah. But what is this exchange that's 10x default? >> I don't want to mention it because if >> you're an investor. >> Oh, okay. >> Yeah. I don't know. >> I mean, most exchanges if you go into the leverage, the the the default leverage is 10x. >> Nice round number, >> right? It's a great Yeah. >> Yeah. Yeah, and I mean remember we have a big community of traders and we can see what they're doing and the leverage the average leverage that they start off is 10x. >> No one starts off with >> but I agree with his that the market will determine how that plays out. you know that you as the market broadens as a kind of the consumer base broadens um and unfortunately as people suffer from more Trump tweets um that you know something will happen and people will no longer ch choose the platform you know I mean look you see this with Robin Hood right on Robin Hood um you cannot like they don't have okay trade with leverage but they allow options and with options you can construct any leverage profile you want by just constructing your your option in such a way that it's basically equivalent to taking on 20x leverage 30x leverage So, and so the reality is that people if if you don't give them leverage, they'll buy some crazy memecoin that is effectively leverage. >> Yeah. >> Yeah. I think I think I mostly agree with that. I think it's mostly self-correcting. Like people don't buy memecoins. That's self-corrected. Many people are skeptical of ICOs. That's self-corrected. I think the industry would be better off if it didn't exist. So, I I actually agree on that point. Um >> better off if what didn't exist. >> Well, if we didn't have 100 and a thousandx leverage, but I think they're downstream consequences of making that impossible that are probably larger. And I also I would add I think we're hyperfocused on this element of the market. If you put this in a traditional context and these were stocks and you know x% of levered traders got blown out over the weekend, it wouldn't change people's view on Nvidia, right? It wouldn't change people's view on the stock market. I I think that's probably true here, too. Uh I mean, we're in a it's kind of crazy that we're evaluating the merits of this technology because the price goes up or down. Like people don't make a decision to use AWS or AER because the price of Microsoft or Amazon goes up or down. Like hopefully you get to that state soon. >> I think the whole industry is is around creating value and when you create value that didn't exist, people are going to trade it. >> Yeah. >> And so I think I think I think that is how you got to evaluate the industry is how well value how efficiently value can trade because all we're doing is creating value. also because most of the value we have delivered to date has been associated with the kind of world casino not the world computer and to your point hopefully we go beyond stable coins RWA >> Salana gets 70% or 80% of its uh revenue as a chain from speculation and memecoins we were going to get to a state where we will onboard users we will have activity that is not correlated with the the self like the self-referential reflexivity of this industry which is it's all tied to a casino again we're selling ourselves short as an industry we will fix this one way or another, whether it takes 20 years, 5 years. >> So that's my next question is who's going to fix this? Is it going to be Binance, buy bit, all the ones that you mentioned you're invested in? Or is it going to be the banks? Is it going to be Robin Hood? Is it going to be JP Morgan? Is it going to be who's going to fix this problem? >> Right. Why you looking at me? >> Because you're an investor. Um, look, I think I I think the answer I'm very partial to the answer is that it mostly fixes itself. is that in the early days of any technology of any big installation of a society shifting movement there's a lot of speculation always whether it's railroads canals the internet telecoms all of them had gigantic bubbles all of them had a lot of speculation what drives speculation the answer is excitement excitement is what drives speculation people don't speculate over you know GE and you know washing machine companies because they don't care um so now that now that all being said um are there things you can do at the margin with respect to market structure to make markets more stable and reliable. Yes. And the way that we're figuring this stuff out is not because, you know, there's some global regulator overseeing Binance and making sure they do the right thing. It's Binance doing the right thing or they die and they get replaced by somebody else. So, I think the the reality is that this industry up up till now um in spite of all the regulatory uh fury that's been that's been pointed at it, it's mostly been self-regulation that's gotten us here, right? Binance doesn't work the way it does because someone told them to work that way. for Coinbase, maybe you could say, okay, well, you know, obviously they're they're hewing much closer to regulations, but the vast majority of crypto today trades on Binance. It's 40% of the global market. Coinbase is less than 5% globally of what happens in crypto. And so that global market has gotten the way it is through basically learning by doing, through repeatedly going through these getting punched in the face moments like we had this weekend and figuring out, okay, what can we do better to do this better next goound? And I think that's mostly going to continue. I'm interested to know just from the audience here, how many of you got punched in the face this weekend? >> Well, if they did, they're not going to raise their hand. >> No, I mean, I'm really at least one Facebook. >> I'm I'm really keen I'm really keen to know whether whether >> this is not the leverage trading crowd. >> But what I want to know is how many of these people actually did get punched in the face just because they took 2x leverage because when I mean I think 2x leverage is a responsible leverage to take, right? That's irresponsible. >> I last not responsible. Yeah. I mean 2x on Bitcoin or ETH is not irresponsible. >> Well, you got to look at it in the framing of volatility. Yeah. It's a lot. But yeah, >> it's still levered. Yeah. >> Levered. >> Most people don't trade with leverage. The notional people trading with leverage makes it a very very large number. >> Yeah. >> So you think it's as completely insignificant like in the >> It's not It's not completely insignificant, but but again like there are as many people who who made money as who lost. >> That's how that's how you know perpetual swaps work. >> Yeah. Well, look, I I'll tell you what I think, which is there's a whole segment of this industry that people are waking up to Bitcoin with products like yours, and that's phenomenal. That's great. Getting off of zero is important. Bitcoin is a instrument that is a commodity. It's like very separate out bucket and the rest of the industry. I think our focus at inversion is really this idea of injecting this technology in businesses and making them more efficient. And I think there are very specific operational improvements that you can make to a business if you introduce stable coins. And and I mean it's huge working capital settlement times conversion cycles like that is a very measurable impact that heck it's even more than AI >> like if you look at the drag it changes the consumer relationship you look at large and the best part of this is large companies public companies are now doing this like new bank >> they've really improved their unit economics their onboarding their customer acquisition cost has gone down because people in Brazil and Latin America want to get access to dollars and tokenize dollars and and that is just one example of again moving away from pure speculation which is always going to be a good thing. It's a good precursor. It's important. I get you. But I'm excited more about that. And as an industry, very few people I think are focused on on doing that. >> I think I think um Mike Novagratz actually mentioned the and Tom Lee mentioned the concept of energy and energy bringing in uh investment and I think that the casino did bring the energy like you got you got to give it the casino. The casino brought the energy. >> The casino is a side effect of the energy. It's not the cause of the energy. >> Well, I think you were saying like there's no such thing as bad publicity in some senses. So, it brings more people to focus their attention on on crypto. >> Um, so, you know, if maybe that's too too cynical, but I mean, that's helpful. But, I mean, I'm 100% behind the point that, you know, these are lessons for us as an industry and, you know, if you take Binance, they're having to, you know, compensate people. uh that's a real cost to them as well as the kind of you know maybe the few customers are put off and they join another exchange and so they hopefully will fund uh internally or maybe in a startup through easy labs or whatever someone building something that might solve some of that problem for them and architect their their infrastructure a little bit better next time. >> What do you think what do you think of Binance refunding or or compensating not refunding compensating customers? Um what what are your thoughts there? Is it an admission of guilt? Is it an admission of guilt? Is it a Is it a >> I don't take a moral position on it. It's more kind of like if that's their decision in the context of being competitive and so they should they should go ahead and it's not like it's in the fa flies in the face of kind of like the decentralization of a protocol or something. They can choose to do it. If you're at serial gaml in Vegas, the Caesars will fly you out and they'll invite you to the Super Bowl >> and they'll and they'll give you free lobster [ __ ] I mean, if you're locked up and they know they did >> and they said it very clearly, these assets should not have deped. We should not have had the inability of people to redeem and like market makers were unable to get inventory to Binance. >> That's very different from Binance flying you to the F1 to watch to watch a race car >> drive. Bance does that stuff too. Well, no, no, no. I'm I'm not disagreeing with you. I I think it's an admission of guilt and it was a clear market failure and they're now admitting to that and then say, "Yeah, like we we we're owning up to that." >> But hopefully they're not just tactical about it and they help. >> Well, look, it's also important to understand Binance is the biggest fintech company in the world. It's the biggest fintech and most valuable fintech company in the world. They're bigger than Stripe. They're bigger than all these other companies, right? They're bigger than PayPal. And the round of applause for finance. >> It is because um and the the thing to realize like we we talked so much about what's going on with stable coins. The reality is that uh the most distribution of stable coins happens through Binance pay and trust wallet de facto. That is where most that is how most stable coins are distributed today. So Binance has their their tentacles in almost every country in the world by default. They're usually the dominant player in almost every market in emerging economies. Now I think there's a lot of stuff that people can do better than them but right now we have to give it to them that they are a big part of why this industry is so big globally outside the US. >> Well Tron to some extent too. >> Tron is the rails on which it runs really but it's like it's their software. >> All right guys five years from now do you think that still is the case? >> Uh no I don't think so. >> Definitely not. >> I agree. >> If if we're here in five years and that doesn't happen we've done something terrible as an industry. >> I agree with that. >> I agree with that. >> So now now that we all agree I think uh time's up. I think now we can maybe start talking about the actual topic which is the blurring of the lines. Guys, thank you very much. We are completely out of time guys. Thank you. Thank you.