# Beyond Bitcoin: DeFi, Stablecoins, and RWA Growth

**Podcast:** The Milk Road Show
**Published:** 2026-02-16

## Transcript

We were always taught to be, hey, you know, retail is the dumb money and institutional money is the smart money.
Over the last seven years, that has completely flipped.
I mean, retail has been right every single time buying the dip.
Everyone is focused on Bitcoin right now and trying to time the bottom.
But what are the big opportunities in crypto that everyone is missing because they are too focused on price action?
Hello and welcome to The Milk Road Show, the daily crypto shows that knows that when BlackRock buys an altcoin and it still doesn't pump, you might be in a bear market.
I'm your host, John Gill, and today is Monday, February 16th, and today we are joined by Jeff Dorman.
Jeff is the chief investment officer at ARCA, a digital asset investment firm with over two decades of experience in portfolio management and trading.
Jeff is going to share a ton of alpha today that most people in crypto are missing.
So if that sounds good to you, make sure you like and subscribe.
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and some turn crypto tax chaos into confidence without further ado welcome to the milk road show jeff jordan how are you sir i'm good john thanks for having me I'm excited to have you on the show today.
There's a lot to talk about.
I wanted to start with a blog post you wrote on your blog that's called That's Our Two Satoshis.
And it opened with the line, this recent meltdown was caused by Bitcoin selling from TradFi.
And I wondered if you could elaborate on that for us and kind of walk us through what you've seen here that's caused this recent downtrend.
Who was selling during this recent crash and what caused the selling?
Sure.
I mean, you're never going to have a perfect answer to that question, right?
Seven years ago, you could ask me what happened to Bitcoin.
I could probably tell you exactly what happened because there was like nine players in the market and it was usually driven by a couple of the miners or a market maker or something like that.
You know, now Bitcoin is so big and has really become more of a Trad5 macro trading vehicle than anything.
You're never going to pinpoint exactly what happened, but you can get close.
Right.
And, you know, the combination of on-chain versus off-chain usually gives you somewhat.
of a signal of what really happened out there.
And then I would caution again by saying a lot of things have happened over the last couple of weeks that have nothing to do with crypto.
You're seeing software stocks blowing out.
You've seen credit default swaps and certain software companies blowing out.
You've seen a huge rotation into more defensive sectors in the equity market and away from some of the cyclicals like tech.
So this is not just a Bitcoin thing, but obviously Bitcoin gets...
hung up in this and then being the biggest digital asset, it's largely what drives a lot of the other action in digital assets.
So, you know, what I saw last week that gives me confidence that this was being driven by TradFi and not by, really not by crypto natives was, you know, first and foremost, like I said, just the fact that a lot of other things were happening right last week.
You had a lot of CTAs and macro funds having big deleveraging actions because of cross correlations.
You also saw the CME, for example, when you look at the basis trade, which drives a lot of the Bitcoin ETF, meaning when you're going long, you know, something like Ibit, Bitcoin ETF and BlackRock and short futures on CME to ARB a little bit of a spread.
Usually there's anywhere from three to 10 percent in there.
That basis blew out and it didn't blow out anywhere else on crypto native places like Deribit or Binance.
So, again, that's a suggestion that not the asset itself being the problem, but the players who were transacting in the asset being the problem.
So when the basis blows out, it indicates that.
people are deleveraging right so if you're long the ETF and short futures and all of a sudden the future starts going up and spot goes down it tells you that people are blowing out of their positions right they're selling their spot and covering the shorts on the futures so you know actual crypto native people for the most part it actually looks like they bought the dip right there's anecdotal evidence from anywhere from coinbase to other sources that we look at that for the most part retail you know, whether that's RIAs or just individuals or boomers, whoever actually were out there buying the dip while most of the puking of digital assets was coming from cross correlation funds and others who are actually having bigger issues with.
um software stocks and you know japanese yen and things like that gotcha so you're saying that there were a lot of other factors in the market that had consequences that impacted crypto but this is not a crypto specific thing um a lot of people have argued you know the direction and i know you've never been a subscriber of this four-year cycle theory but it does seem like some of the timing has lined up here what's your view on that do you think that this is this sort of like self-fulfilling prophecy of the four-year cycle playing out or is it unrelated um and then you know the follow-up question is how long does this bearish period go on?
Like, is this another year of this action?
Or do you think these forces in the market have mostly worked themselves through and are behind us now?
Well, again, this is where, you know, you have to put, you have to use, you either have to use logic or suspend all logic, right?
Logically, there was nothing that ever made the four-year cycle make sense.
It had nothing to do with the halving.
It had nothing to do with anything other than, you know, business cycles, right?
You've had plenty of other things happen over, you know.
Anybody who's running actual data would never see something that happened twice and assume that that's a pattern, which is all that the four-year cycle is.
It happened twice, once around 2022, when the Fed was hiking rates at a historically fast pace and broke tons of things outside of just crypto.
The other in 2018, you said the same thing.
a macro story than everything from repo unwinds and other things.
So logically, the four year cycle just makes absolutely no sense.
And on top of that, everything I just said a minute ago, which is that Bitcoin is no longer even a crypto native tool, right?
It's more about TradFi and ETFs and, you know, the CME and collateral and all kinds of other areas where.
You would logically say that we should be moving even further away from anything that was crypto native or happened specifically to the crypto markets four years ago, eight years ago, 12 years ago.
So logically, again, it makes absolutely sense.
The only thing that makes sense is what you said, which is it becomes a self-fulfilling prophecy.
So anytime you see even a hint of selling, people throw their hands on the arm and go, oh, here we go again, four year cycle, time to sell and just go to cash and wait.
And there's probably some cohort of crypto investors who are doing that.
But, you know, again, I can't subscribe to things that happened where there's no evidence as to why it happened just because they have.
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Gotcha.
And I think that's a rational approach.
And I hope that the market does follow rationality at some point.
I'm curious to hear your thoughts on this bottoming question, because a lot of people are wondering, is this over or are we going to crash down to the 50s or lower?
And I want to just get your thoughts quickly on that.
Do you have a view on where Bitcoin bottoms or what a bottom looks like when it forms?
for Bitcoin here?
I've been investing in crypto professionally for eight years and before that, many years before doing it professionally.
I've never heard anybody come up with even a reasonable argument for why Bitcoin should be worth anything other than just its gold is worth X and therefore Bitcoin should be worth some percentage of X.
The network itself works fine when Bitcoin's at 10,000, when it's at 50,000, when it's 100,000, when it's at a million.
There's no logical framework for valuation of something like Bitcoin.
As a result, any question around what it's worth is flawed from the start in terms of what the question, I don't know when it's going to bottom.
Again, it makes no sense at any price.
This industry has, for whatever reason, decided to take an asset and pitch it to the dumbest, fastest money, most irrelevant investing crowd there is, which is your macro CTA, fast money crowd.
So when you take an asset that has no actual valuation and you spend all of your time marketing it to the fastest money least convicted area of investment which is macro and cta you're going to get a lot of volatility so you know bitcoin at 70 000 50 i don't i don't care like long term it seems like a decent asset in the sense that um you know it's a belief system and people seem to believe in it um you know i've always looked at bitcoin more as like a credit default swap on banks and governments meaning every time the world loses confidence in local banks or local governments.
That seems to me when you would be logical to move into Bitcoin.
You saw it around the Cyprus banking crisis six or seven years ago.
You saw it around the regional banking crisis in the US in 2023.
You saw it around the Russian currency standoff.
You saw it around Turkey and South Africa, currency devaluations.
So anytime any part of the world loses confidence in their banks and local governments, that's when Bitcoin catches a bid.
but outside of that it's just a bunch of technical analysis and nonsense from fast money traders and there's no rhyme or reason for any price Yeah.
So this is something I did want to have you share with our audience is that you've been very critical of this Bitcoin centric and price centric focus of not only investors, but also of the media.
And as you said, you have a long and successful career of investment in digital assets.
Some other things that you've been focusing on where there's been a lot of opportunities, a lot of growth, stable coins, DeFi, RWAs, and we can kind of take those one at a time or whichever one you want to start with.
But I'm curious to hear your thoughts on where you're seeing opportunity for investment outside of Bitcoin right now in digital assets and what's got you most.
excited at this point in the market yeah and then that's a big reason why i've been critical right i mean you know i was a long short equity manager long short credit manager for a long time nobody ever asked me what my opinion on silver or gold was because they knew that's not what i did right and why would you yet the entire digital assets industry if you just say the word blockchain or crypto people ask you your opinion on bitcoin it's like okay well let me ask you this if i wanted to generically be long software he'd probably point me to a software ETF.
Or you'd say, here are the reasons why you'd want to be a long software.
If I wanted to generically be long energy, he'd probably point me to an energy ETF or some other area of the market specific to energy.
If I said, I want to be generically long the growth of blockchain, most people would point you to Bitcoin.
But if you actually break down what is actually growing in blockchain, it has nothing to do with Bitcoin.
There's only three areas of growth in blockchain right now.
And it's been the same three areas for five years.
It's the growth of DeFi, right?
Any way you slice it, every graph you look at about DeFi is up and to the right.
Whether you're looking at users, whether you're looking at value in DeFi protocols, whether you're looking at, you know, decentralized exchange trading as a percentage of centralized trading, whether you're looking at lend borrow, everything in DeFi is up and to the right.
Guess what has nothing to do with DeFi?
Bitcoin.
The other one is stable coins and payments.
Again, same thing.
Any graph you would look at.
that show the growth of stablecoin AUM, but the growth of transactions or the integration of payments rails that are using stablecoins.
Same thing.
Everything you look at is up and to the right.
Bitcoin has nothing to do with stablecoins or payments.
Nobody even uses Bitcoin for payments.
And then the third one is more new, but it's growing equally fast, which is the growth of tokenized real world assets, right?
Thinking tokenized stocks and commodities and real estate and bonds.
You know, there's an extension of that to stable coins because really stable coins are just tokenized money markets.
But you're seeing more than just that, right?
You're seeing everything from, you know, Robinhood trading tokenized stocks to BlackRock talking about tokenized everything to Hyperliquid, right?
You know, you're seeing, again, everything up and to the right in terms of number of real world assets that are now on chain, the volumes that are happening, potentially using it as collateral.
Again.
None of that has to do with Bitcoin.
So I'm not anti-Bitcoin.
I think Bitcoin's a fine asset.
I just think the tying the entire industry to Bitcoin is just illogical when everything that's growing and everything that's happening on blockchain is actually sidestepping Bitcoin.
So to me, it's just about compartmentalization.
If you want to have this macro trading fast money Bitcoin asset over here that maybe long term has some relative value versus gold and other store of value, that's great.
I support that.
Separately, if you want to actually be long the growth of blockchain and usage, you have to look over to these other three areas, which is stable coins, real world asset tokenization, and DeFi.
And that's where, you know, that's where the, again, the sort of a logical framing of this industry.
You look at any index, for example, and I don't want to pick on any index providers, but any index in this space is 98% made of Bitcoin, ETH, SOL, and Ripple.
And none of those have to do with what I'm talking about.
So it's a framing and a marketing problem more than anything.
You're trying to steer people to invest in a new industry that is clearly growing by leaps and bounds and has more Wall Street and Washington and TradFi participation than we've ever dreamed of.
But you're pointing everybody in the wrong direction.
So I really appreciate that framing and how there's a lot of opportunity outside of Bitcoin.
And just like you said, it's not taking anything away from Bitcoin as an asset.
But there's still a lot more to digital assets than just Bitcoin.
How are you thinking about allocating to these growth areas in digital assets and as an investor?
Because, you know, like you said, stable coins, just as one example, did $10 trillion of volume in January of 2026, which is an enormous amount of volume, huge amounts of growth.
Same thing in RWAs, same thing in DeFi.
And this is something we've been talking a lot about at Milk Road, too, with our pro community.
But how are you thinking about allocating to these things?
Are you just buying Ethereum or like what is the strategy around that?
How do you think about approaching that as an investor?
yeah and and honestly that's what captures probably 95 of the discussions that happen inside of our fund uh all day every day is you know a big part of investing is identifying the themes and the narratives that you want to invest in and that changes over time you know there was a time where we thought gaming was going to be a big part of the growth of blockchain that seems to be less likely now there was a time when we thought you know nfts and deep in other areas.
So like the narratives change, but right now the narratives are pretty strong in the sense that again, we can see every single data point saying that these are the three sectors to focus your investments on.
The next step of investing is finding out what is the most pure play way to play that.
And that's really, really been challenging in this space for a lot of reasons, right?
One is that the majority of these opportunities are still private.
um you know take stable coins and payments for example there's very few liquid opportunities at all you know circle went public last year that was probably the first opportunity you know we think that stock was largely overvalued maybe it's more fairly valued now but circle was really the only pure play way to play the growth of stable coins you had other disasters like luna and ust in the past you had things like you know maker sky and athena that don't really have the same kind of growth engine that tether and circle have Not to mention, you know, JP Morgan and Citi and Fidelity and everyone else, you know, PayPal or every single fintech and Wall Street firm is now realizing they can create their own stablecoins.
There's a lot of competition there.
But I think that is definitely an area where, you know, you have to start thinking about how do you express that view in some way, shape or form.
And it's hard.
It's hard to find that.
DeFi is a little easier because not only are most DeFi protocols effectively just stocks inside of a token wrapper.
You know, some some accrue more value than others from the growth of their protocol.
But for the most part, you know, these are cash flow producing entities that if they're smart, they're using those cash flows to buy back tokens and create a direct link from the token price to the growth of the protocol.
That's why like Hyperliquid has done so well.
You know, there's others trying to do similar things like lighter in the perp space and, you know, in the lend borrow space you've seen, you know, from your Aave's and your Morphos and everything that they're trying.
They're trying to link the token more to the growth of the protocol.
So that's a little bit cleaner and easier.
And then the growth of RWA tokenization is probably the hardest because none of that value is accruing anywhere into the actual crypto space, right?
You know, you have major TradFi banks, brokerages and exchanges all entering the race.
JP Morgan, Goldman, Franklin Templeton, Apollo, BlackRock, New York Stock Exchange, DTCC.
You know, thousands of others are talking about tokenizing stocks, bonds, real estate and other assets.
And that's a huge, huge growth engine for blockchain because there are $600 trillion worth of assets that are off chain right now.
And if you bring any of those on chain, it immediately dwarfs everything that's happened to date on chain.
So like, you know, half of crypto Twitter debates, you know, it's Ethereum.
No, it's Solana.
This is like neither of them are even remotely relevant compared to the future of what crypto is going to look like, depending on which chain ends up having all the stocks, bonds and real estate.
So I'm not saying anything negative about Ethereum is on it.
It's just that it's a testing ground.
Nothing significant has happened on any of these chains relative to what's coming when you talk about maybe a trillion dollars on chain today versus 600 trillion plus that's coming.
And you look at like, well, how do you play that?
You get so many different players involved, right?
You've got Chainlink and Centrifuge and Canton Coin and Ondo and now Layer Zero and Syrup, not to mention Robinhood and Hyperliquid.
And again, all the Wall Street firms themselves who might just find a way to do it themselves.
So, you know, I think this is this is probably what's going to separate good investment returns from bad investment returns over the next five years is we know the theme.
Every single investor in crypto should be focused on these three themes.
We don't know who the winners are going to be.
And it's just because it's so nascent.
Blow the account?
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So this seems like a partnership between Uniswap Labs and BlackRock.
BlackRock has also announced that they've purchased an undisclosed amount of Uniswap tokens.
This seems like a huge change, a huge movement of, you know, these TradFi companies you talked about into DeFi.
and into the largest decentralized exchange on Ethereum.
Now, as you said, it still remains to be seen where this many trillion dollars of economic activity and value are going to be tokenized.
But that seemed like a big signal to me, and it seems like the market has not reacted.
How are you thinking about this movement from BlackRock with Uniswap?
Is this a prototype?
Is this a bigger signal?
How are you thinking about this?
What's the opportunity that this is highlighting to investors here?
What should we take away from this?
Yeah, so it's actually both.
It's a huge big picture event.
but it's not necessarily the most relevant investment event.
And there's actually, you mentioned Uniswap, BlackRock.
There was actually two other huge announcements last week as well.
It was Apollo Global Management partnering with Morpho.
And then again, Layer Zero partnering with DTC and Citadel and others.
And the problem with all of these is, again, at a high level, it is absolutely a home run that all of these things are happening.
At an individual level, we don't know anything about the Uniswap and BlackRock transaction.
We have no idea how much BlackRock actually bought of the Uniswap token.
In fact, we don't even know if they did buy it.
They might've just been given it to, right?
You know, we've seen that in the past where like, you know, four years ago, I think it was like Apollo announced a huge initiative with figure in their Providence blockchain and their hash token.
And then we found out that they actually got the hash tokens for free and they never actually even used the figure blockchain.
So, you know, you get these partnerships and announcements and then you drill into the substance and it's like, well, What is actually happening here?
So for BlackRock integration with Uniswap specifically, and actually I wrote about this for our, you mentioned our, that's our two Satoshis blog, which we write every week.
This one will come out tomorrow because of the US holiday, but it's actually what I wrote about.
I said like, you know, the tokenized treasury money market that BlackRock.
built, which is called BIDL, B-U-I-D-L.
It's not new, right?
This launched two years ago on Ethereum.
It peaked at about 3 billion of AUM.
It's down to like 2 billion of AUM now, but it only has 82 unique holders.
And the problem is that it has a minimum investment of 5 million and all participants have to be KYC'd and whitelisted through Securitize.
So the assets never really leave the regulated perimeter, even though they're going to be trying to use Uniswap.
We don't know what that means, right?
So yes, you can now trade this potentially on Uniswap's RFQ style system.
But in practice, you still have to kind of go through a whitelisted filter.
And, you know, I think the UNI token shot up 40% and then came right back down, you know, shot right back up because most of the market is driven by algorithms and market makers, not by actual investors.
And it came right back down because you can't actually quantify what this means from a usage standpoint.
And even with the Uniswap token fee switch.
There's just so little money that actually flows through the protocol.
Most of that money just flows to the LPs themselves, the automated market makers.
So it's a combination, right?
On the surface, yes, there's no way you can say this isn't positive.
It is absolutely positive.
This is what we wanted to see forever.
We wanted to see integration of real world assets and DeFi.
We wanted to see growth.
But when you actually say, okay, what am I supposed to do about this news from an investment standpoint?
I mean, the answer might be BlackRock stock.
I mean, they're the ones who are going to benefit more than Uniswap is.
So I think you're just sort of at this weird transition.
And actually, I never did this work myself, but I've seen a lot of other people's good work comparing the 2001 tech bubble and what happened thereafter to what's happening in crypto right now, which is that...
It wasn't that people were wrong about technology in 2000 and 2001.
It's just that they paid way too high of multiples for growth that didn't happen for 10 to 15 years.
And eventually that growth caught up to the valuations, but it took a really long time.
I think it took something like 15 years after the crash of the tech bubble until the NASDAQ got to the same level.
And you can still have made a fortune.
investing in certain technology assets, and you still could have made a fortune investing just generically in technology.
It just takes longer than people think for that hype cycle with no substance to then fall out and then ultimately build that substance back into it.
And I mentioned, just to continue on that, the same thing is true with the Morpho and Apollo announcement.
The signal is incredibly strong.
Apollo is one of the largest alternative alternative asset managers.
They have almost a trillion of AUM.
They manage a lot of credit.
They're migrating that credit on chain.
They're going to be using Morpho.
you know, Morpho started to rally, but then you look at it again and it's like the language on the agreement is pretty vague.
It says Apollo may acquire Morpho tokens through a combination of open market purchases and OTC transactions.
It's subject to an overall ownership cap of 90 million.
So you're capping how much they can buy and they're doing it over a 48 month period.
And again, Apollo has a history of doing this stuff where they just get it for free like they did with figures.
It's not that it's bad.
There's no way you can say that this is bad.
It is 100% undeniably a great thing for the industry and a great thing for Morpho and for Uniswap, the protocol.
It just doesn't necessarily matter for investors.
So what does matter for investors?
And I think that the question here, so first just to...
kind of synthesize that and agree with you i do think that there is a lot of recognition by the traditional finance system and all players in it that there's a lot of value in digital assets but they're also i think trying to launch these products and like iterate with different solutions where they continue to expand retain or um yeah like keep control of capital clients assets um and like force themselves in as middlemen as opposed to just adopting public blockchain infrastructure i'm not sure where that ends up right i don't know if there's going to be sort of like one permission chain that accrues all the value and one company has all that or if eventually they give up on some of these things and go towards the public blockchain space um we'll kind of see how that plays out but but the question is is um is important.
What do investors do to try to capitalize on this?
Because even if, like you're saying, it takes a long time for this value to accrue, investors really do want to know, like, is the answer just buy BlackRock stock?
Or is there a place in digital assets where you think investors should be paying attention for allocation for that capturing some of that long term value accrual that we're expecting in the space?
I think the answer is, we at least are going to have a pretty simple investment thesis over the next five to 10 years, right?
We know blockchain technology has proven to work incredibly well for asset movement and transfer, but the majority of the world's most popular assets, which, again, we've talked about at length here, stocks, bonds, and real estates, are not available yet on blockchain rails due partially to regulatory issues and partly due to workflow issues, right?
As these barriers between crypto native assets and TradFi assets break down, which, again, is clearly and unequivocally happening now, more tokenized assets will be issued and traded and sent on chain.
And the beneficiaries of that will be certain layer one blockchains.
We just don't know which ones, but I think we can all agree that like the growth of the market cap of layer one blockchains will probably increase.
It just might be one chain at the expense of others.
And it's very hard to figure out who that's going to be.
But, you know, in general, the more assets on chain, the better for a layer one blockchain, because they're going to support that growth.
But more importantly, The only way to actually make money that the layer ones themselves don't often make the money.
It's the DeFi applications and the stable coin providers that make all the money.
So what you want to do is you want to, you know, and actually there's potentially more, you might see, you know, some, some AI businesses, for example, also benefit from that growth because the more assets on chain, the more AI agents are going to help you navigate on chain.
So there's some subsectors as well, but it's basically the stable coin payment providers, the DeFi providers.
And the L1 blockchain, like that's where you want to be.
But we haven't really even begun to see what blockchains are capable of yet because of the fact that, like I said, most of what's happened to date has just been an experimental phase to prove the concept.
And now we get to see it with real assets.
So I think from an investing standpoint, there's a couple of different things, right?
One is you can basically try to play an entire sector.
Like I said, you could just create your own custom index of all the layer one blockchain tokens and just say, I don't know who the winner is going to be, but I know that ultimately the market cap of layer one blockchains is going to be higher in 10 years than it is today.
And you want to invest in as many as you can.
The problem with that is new ones pop up every day.
There's no barriers to entry and you're going to have to constantly actively manage them.
Two is you just look at the DeFi protocols that are already capturing all this and already generating the revenue and using that revenue to buy back their tokens.
to me that's the more simple and obvious way to do it because you can actually quantify what that growth is and you can see it all on chain you don't need 8ks and 10qs and 10ks you can just you know get smart with a block explorer or um you know buy a research subscription to any of the good providers out there that show this data and you can see you can see exactly how much money these these protocols are making and how many users they have and how that's affecting the tokens um you know and three is um You know, you take a more internet-like approach, which is you just avoid the startups, right?
For every Amazon that worked, you had 100 different pets.com and other businesses that didn't work.
But what did work was Walmart benefited from the growth of the internet.
And JP Morgan benefited from the great growth of the internet.
And Domino's Pizza benefited, right?
You had companies that had been around for 100 years that ended up streamlining and making their businesses better and more efficient by integrating.
internet services into their businesses that's probably going to be the case here as well right you're going to find companies that have been around for 50 100 150 years that just start to utilize blockchain rails and payments and ultimately their margins increase and their stocks go up so you know i just don't think you can holistically kind of just look at crypto anymore you have to just recognize that a crypto asset is just a wrapper and you can put anything inside of that wrapper And some of those are more equity like tokens.
And those are pretty interesting.
Some of them are just protocols, which are to me less interesting, you know, governance protocols and things that are highly inflationary.
And some of them are just pure crap meme coins that have no value whatsoever.
You know, we tend to look at the equity like tokens that have real quantifiable cash flows and buybacks.
And we look at the stocks of companies that are using blockchain to improve.
Gotcha.
So what I'm hearing you say is there will be some value accrued to the layer ones, to the stablecoin issuers, to the DeFi protocols, and you're evaluating tokens based on their fundamentals, based on the value that's accruing to the token, how they go about driving that value to the token and how much value is being driven.
There's a lot of questions I could ask you more about this, but I think one of the ways that you talked about Hyperliquid a little bit, but one of the ways that some of these protocols have started to do this is with, well, not started to have, but have done this is with buybacks.
And I think that there's been some competing ideas about whether or not that's a good way to do it.
In other words, should that capital be used for further development or expansion of the protocol in a different direction?
Or if buybacks of the token accruing value to the token is the proper way to do that?
How do you think about that when you're doing this evaluation?
Are buybacks something you think is appealing?
Or is it a detriment?
What's your thoughts around that?
I think buybacks are the only way to create value for your token.
I think anybody who's arguing otherwise is just flat out wrong.
I don't even think it's debatable.
I'll tell you why.
Now, I'll caveat that by saying it doesn't mean you have to start buybacks right away because obviously a lot of these companies are in growth mode and a lot of them are early stage companies that might not have enough revenue to start buybacks yet and they have to use that revenue for other things.
But the end goal has to be buybacks.
and here's why so if you think of a token let's think of like an equity like token right basically a company that has chosen to issue a token you basically have everything looks exactly the same as a stock except for a stock has actual rights to the ownership of the business right and most of the time that ownership means nothing like as a company is growing let's say you own the stock of a growing company You have no control over what that company does with its cash flows.
You have no control of how much they spend on R&D.
You have no control on when or whether or not they turn on a dividend or stock buybacks.
You have no control over how much money they pay management.
You have no control if they make a horrible acquisition.
You can say that you have ownership via the rights of an equity.
But the reality is that most of the time it doesn't matter because you have no ability to dictate how management chooses to spend the money.
the only time your ownership comes into play is when they go bankrupt and at that point it's usually too late because there's nothing left for you as a shareholder or if you decide to fight a proxy battle and try to go activist and basically change the board of directors and management to listen to your ideas which you know is not a very practical thing for most individual investors and happens very infrequently so the reality is you as an equity holder the reason you're willing to give a company the benefit of the doubt, even if they're not paying you dividends or doing buybacks, is either because the industry itself has made you realize that that's something they might do in the future with their revenues and cash flows.
So you just sort of trust that if you own a stock, eventually they might turn on dividends or buybacks.
Or more importantly, because there is an actual terminal value and that somebody could eventually buy the company and you benefit from the acquisition.
That right there is the biggest reason, the biggest difference between tokens and stocks.
is when you are owning a token, nobody believes that you're eventually going to turn on revenues or buybacks because, and this is probably more regulatory than anything, right?
The lawyers in the crypto space put the fear of God in every token issuer that you can't talk about revenues or buybacks or you're going to be a security and you're going to go to Gensler jail, even though most of that was completely misinterpreted by crypto lawyers, in my opinion.
Regardless, like some of it is just that the token issuers are just not as good at investor relations and that the industry hasn't bought into the fact that even if your token isn't buying back today, they will eventually.
So one is that.
But two is, and more importantly, is there's no M&A.
There's no end terminal value where somebody is going to buy your protocol and pay out all of token holders for that.
In fact, we've seen the opposite.
We've seen several instances where there's M&A and the token holders get left for dead.
And ultimately, it's just the employees and the labs or the equity part of the protocol that ultimately takes all the value.
So as a result, because of that huge difference, the fact that you don't physically own the cash flows, the only way to tie the value of the token to the growth of the business is to make a direct tie between the revenues and cash flows of the business by doing buybacks.
And if you look at a hyperliquid or a pump fund, um or a sky protocol or you know there's probably 10 or 20 others there's certainly not 100 others there's there's you know there's not a lot like it doesn't take that long to to go into defy llama or go into a token terminal or somewhere just look at how few of these entities are actually producing revenues and doing buybacks but let's take pump fund for example pump fund has a two billion dollar fully diluted value that's that's all there is um and they also have about a billion dollars of cash on their balance sheet so right away that's insane right you're trading basically a billion dollars net of cash and market value and even in this downturn they're still doing 500 million dollars of revenue a day and they're using that revenue 99 of it to buy back the token which means that if you if you just own the pump token and everything else is the same the buyback ratio is the same the revenues are the same they're going to fully buy back the entire issue in less than three and a half years Which means that if you're the last token holder standing, you can basically just wait with a flag that says, OK, I'm the last token holder.
You have to pay me $8,000 per token because I'm the last one left.
So, you know, the way you look at one of these protocols is you say, are you actually earning any revenues and cash flows?
Are you tying the token to those revenues and cash flows?
Which, again, the only way to do that is either by doing buybacks or by signaling future buybacks.
And then you just do a math equation of, okay, well, how long is it going to take for you to fully amortize my tokens?
And again, there's BNB, there's Leo, there's all these tokens.
Leo is a good example, the old Bitfinex token.
You can go on a dashboard.
I think it's like leo.bitfinex.com or something like that.
And it tells you exactly.
We started with a billion tokens.
We have 900 million left because we've already amortized 10% of them.
It's just simple math.
All you have to do is bet on the right team and look at the ones that make money and make sure that they actually care about tying the growth of their business to the token.
And if they do, then you just run how many years till they buy back the entire token.
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I really love the visual of the last PumpFun token holder waving a flag being like, pay me eight grand for my tokens.
That's a really colorful illustration of that idea and a helpful illustration of the investment concept around it.
Jeff, I want to ask one last question here.
You've commented a lot on some of the hurdles to adoption, and you talked about this breakdown of the barriers between...
crypto and TradFi and how that's progressing rapidly.
But one of the things that some people have argued is a hurdle to adoption is that TradFi seems reluctant to directly hold tokens themselves.
In other words, they prefer to buy ETPs, ETFs.
One example of this Goldman Sachs 13F filings recently revealed a multi-billion dollar position in digital assets, Bitcoin, Ethereum, Solana, and XRP.
But they made these purchases through ETPs rather than buying the tokens directly.
How big of a hurdle is this to adoption?
Or do you think that it doesn't really matter if TradFi is comfortable using ETPs or holding tokens directly?
As long as they're coming in, it's good for the industry.
How are you thinking about this?
I don't think it ultimately matters in the sense that, you know, let's back up for a second.
Ideally, you'd want everybody to own tokens because I think this is a technological better asset, right?
The fact that you can own something and send it peer to peer.
is much better than the current way you do equities, which is T plus one settle.
And, you know, you have to go through a different settlement process and you can't actually physically spend it or send it in any way.
So I think logically we would want the world to be moving more into tokens rather than tokens moving more into this antiquated, you know, old settlement rails.
But ultimately, from an ownership standpoint, it really doesn't matter if we have to package every single token inside of a stock wrapper, whether that be a digital asset treasury company or ETF or whatever.
It ultimately doesn't matter.
Ultimately, that flows through to the purchasing of the tokens.
But I think the reason why they're doing that is, again, one, because a lot of these TradFi companies actually have no interest in the underlying tokens.
They're not actually investing in the growth of blockchain.
They're just trying to be a new middleman and make the money themselves.
So for instance, if Goldman's buying all of this Bitcoin and ETH via the ETPs, most likely that's because they're trying to become a market maker and trade this stuff and make money, not because they're actually a long term believer.
I'm speculating, right?
Each bank, each TradFi firm maybe has their own reason for why they're getting involved or not.
But for the most part, they're trying to extract fees.
They're not necessarily investing in the growth of this industry.
But ultimately, again, I don't think it really matters.
And a lot of the reason that they won't touch the tokens themselves is regulatory, right?
There's still confusion around the custody rule.
There's still security issues with who you're going to actually use as a custodian or self-custody or how you're going to...
utilized wallets.
So I think that's probably another potential area where investors should be looking right now is the growth of wallets that actually help these TradFi and Wall Street firms safely and securely own their assets.
Obviously, Bitco just IPO'd and the stock went straight down 50%.
Anchorage is coming.
But to me, it doesn't matter so much whether or not they own the tokens directly today.
I think what matters more is that they actually have a reason to own this stuff and right now again i'm not sure what that reason is in a lot of cases Jeff, I really appreciate you coming on The Milk Road Show.
I think this time in the market is a time when a lot of people appreciate hearing from an investment professional who is still enthusiastic about digital assets.
The final question I want to end on, we talked a lot about institutions, TradFi, getting into crypto.
There seems to be an all-time high of interest and investment activity from the institutional side.
At the same time, retail investor sentiment is at all-time lows.
Our audience is primarily retail investors.
What would you say to people right now who might be feeling frustrated or just in general?
despair about the state of the markets and digital assets, what would the message be you would convey to them right now?
Well, the funny thing is, I think I started my career in 2000, 2001.
We were always taught to be, hey, retail is the dumb money and institutional money is the smart money.
Over the last seven years, that has completely flipped.
I mean, retail has been right every single time buying the dip while institutional investors are panicking and selling the lows.
from like you know the april 2025 tariff lows to uh you know the yen carry trade it's employed like almost every incident that has happened in the last five years you've seen institutions get it wrong and retail get it right so even though you're seeing sentiment at the lows right now you actually are seeing retail buying for the most part like you know coinbase came out the other day saying that they're seeing nothing but sticky hand buyers.
If you follow any of the Bloomberg ETF guys, James Seifert and Eric Balchunas have done great work talking about Bitcoin's down 50% and only 3% or 4% of the ownership has turned over.
For the most part, you do have sticky hands or diamond hands, if you want to use crypto terms.
You're actually seeing what you want to see for a healthy market.
What you're not seeing is differentiation.
Right.
You know, I mentioned at the top of the hour that, you know, in the equity market, you're seeing a big rotation, right?
Some of the biggest tech stories are down 30 or 40 percent from the highs, but the indices themselves are only down one or two percent because you're seeing a huge move higher in energy and health care and defensive stocks and non-cyclicals.
You just don't see that in crypto ever.
Right.
You're seeing student body left, student body right, everything moving together.
And to me.
That is not an asset problem.
That's an industry problem.
That's Coinbase's problem.
That's Binance's problem.
That's the CoinGecko and CoinMarketCap's problem and all these other entities that should be doing a better job of differentiating the different types of tokens and different types of assets.
Go to Coinbase right now and if you're new to crypto, you think Bitcoin, Dogecoin, Ripple, Hyperliquid and Pump are all the exact same thing because they don't do anything to differentiate it.
And then you say, OK, well, maybe I'll just sign up for the research and I'll learn from that.
And then you get Coinbase research and it's one dude writing macro research.
They don't have any token.
It's like this industry is failing to educate and differentiate the types of assets.
There is nothing similar about a hyperliquid to a pump fund, to a stable coin, to a ripple, to a doge.
And we need to start teaching and educating investors that you can play the growth of blockchain and you can make smart investments if you actually differentiate the assets.
And once you start to see more dispersion in the market, and once you see more interest in certain areas, but not generically, which way is crypto going, then all investors, retail and institutional, will do better.
But like, you know, the joke I always use is like, imagine if, you know, you went to your asset manager or your broker and they were like, hey, ETFs are up today.
You'd be like, huh?
What are you talking about?
How are ETFs up?
Like, which ETFs are up?
It's like, that's what we do in crypto.
We're like, oh, crypto is up today.
Like, what does that mean?
Which one?
Why?
So I think retail actually has this more right than some of the institutional players in this space.
Well, that's encouraging and a little disillusioning to hear at the same time, but I think it's very true.
It's kind of just where we are in the maturation of the asset class.
Jeff, I really appreciate you coming on the show.
Where can we send people to find more of you and your work online?
Sure, I appreciate you having me.
Obviously, for anyone who wants to read our stuff, go to our website, ar.ca backslash blog.
We put weekly commentary and blogs out there.
You can follow me personally on Twitter or X at jdorman81.
Jeff Dorman, thanks so much for being on The Milk Road Show.
I hope we can have you back again soon.
Great.
Thanks for having me.
Thank you all for joining us.
I hope you all learned a lot today.
I know I did.
So until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of The Milk Road Show.
Thanks for being here, everyone.
Bye.
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