# Crypto Pivot: Revenue-Driven DeFi Over Speculative L1s

**Podcast:** The Milk Road Show
**Published:** 2026-02-20

## Transcript

The crypto industry is different now.
It is not what we are used to from 2020 and 2021 or even 2017.
It's very different.
It is a smarter game.
You are playing up against much smarter people because you're not just trying to front run retail.
Retail's not here.
So you've got to do the work now.
What's up, everybody?
It's LG DU Set here, and welcome to the Milk Road Show, the daily crypto show.
They can't wait to see all those declassified alien documents and spin it as a bull case for crypto.
Today is February 20th, 2026.
And I hate to say it, guys, but the easy mode of crypto is done.
We can't just wait for retail to come along and buy ETH and SOL and all the other stuff anymore.
And if you want to make it during this bear market, you have to evolve your thinking and see where the real money and capital is going and who is going to capture that value.
Today I'm joined by our co-owner Kyle Reedhead to talk about which apps and equities are worth betting on in this down market and why there are many reasons to still be very bullish on crypto.
Today's episode is brought to you by Warbucks, the easiest way to trade crypto.
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Kyle, what's up, man?
Are you ready for today?
I am.
Let's go.
It's a big day.
Big day for multiple reasons.
One, Canada is in the semifinals against Finland.
So I'm super stoked on that.
We've got some.
I won't even go into other things, but anyway, it's a big day.
Ooh, ooh, he almost said it.
Anyways, okay, let's get right into it.
You I I I teased this in the preamble in the intro.
Do you think we are in a bear market?
Because if you don't, you're probably the only person left in crypto.
I think look, obviously we're in a massive drawdown.
Uh and I I guess the the definition of of bear market in crypto is kind of odd.
Like if we had a 40% pullback in equities, that's a bear market straight up.
But you have 40%, 50% pullbacks in crypto all the time.
Um, and so I don't know if we call those bear markets.
I think in the crypto industry, we refer to bear markets as like these year-long drawdowns, right?
Like 2022, like 2018, like 20, was it 14 or 15, whatever it was.
Um, so like that's what the crypto industry typically refers to as a as a bear market.
I don't think that a 40% drawdown or 50% drawdown even, which is crazy, is a bear market in crypto because we had one last year, right?
It happened in March and in April, and we immediately came back.
Um we had it in 2024 as well.
Um, and so almost every year we have something like this.
So, do I think we are in a long, year-long drawn out bear market?
I don't think so.
And now that said, I do think probably 80 to 90 percent of crypto tokens will be that, and they'll be in a more even longer than a year long bear market, which I guess to be honest, many of the alts already have.
Um, but I don't think crypto as a whole will remain in a year-long bear market where it doesn't see some sort of all-time higher or growth or appreciation in certain select assets.
Um and I guess I also look at markets as a broader thing outside of just crypto.
And if you look at like stocks and equities and commodities, like none of them are in a bear market.
They're in a growth scare and we're in a growth scare recently.
And so, like even the Meg 7 and some of the AI stocks and just equities in general have kind of struggled the last few months.
I wouldn't call that a bear market though.
Um, I would call it a rotation in capital, I would call it a growth scare.
Like there's just certain things that have gone on uh in global markets.
Crypto obviously has been hit the hardest, which I think we'll talk about why that is in a second, but I don't think it's in a year-long bear market.
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So what so how would this?
I guess uh let's not call this a bear market, but you were also comparing before we're before we started recording, you were comparing last bear market to whatever this is, not bear market, but you're comparing 2022 to today in terms of the opportunities that people had and where they could put their cash at the time versus today is a little bit different.
Tell me about that.
Yeah, I mean, so in 2022, we had a bear market because the Fed was raising rates at like 50 bips every single month, which was like the fastest we've ever done that in I don't know, decades, right?
And they were doing it because inflation was at like what nine percent or 10% or something in the US, and globally it was like almost double digits everywhere.
So it was it was a crazy, crazy time.
It was also after this really wild um speculative bull market of basically every asset um because of COVID, and so it was a very different world back then and a very different reason for the market to go risk off, let's call it.
Whereas today we're not actually risk off, right?
Um, it made sense in 2022 if you really understood what was going on because, and and I didn't fully grasp it at the time either, but it did make sense because you know, when they're raising rates that fast, you know, the risk-adjusted returns didn't really make sense in crypto anymore at its valuations or even in stocks.
It made sense to just be in treasuries, right?
Or certain different various various forms of yield because you could get some pretty decent returns.
Rates went up to like, what is it?
Was five or six percent-ish and even higher in some other countries, right?
So the the market dynamics were very different back then.
Today that's not the case, right?
Inflation remains very low and continues to go lower.
Um, rates are low and continuing to go lower.
So you don't really have the like option to go into treasuries and make a good risk-adjusted return.
You know, growth is doing well, the the business cycle finally is beginning to pick up.
So it's like it's just so different than 2022 and in 2018, which again back then the Fed was raising rates as well.
So it's a different world today.
And the thing I really want the audience to think about is when you buy an asset, uh, or even just like if you're holding an asset, you always gotta ask yourself, who's the next buyer, right?
And whoever that next buyer is, who are you competing with in terms of that asset, right?
So let's say you're an ETH holder or a Bitcoin holder or whatever.
Who's the next person that might buy that?
Maybe it's retail, maybe it's an institution of some sort, maybe it's some sort of fund, maybe it's a some sort of country that needs it for a specific reason, right?
Like you gotta think who the next target market is of buyers.
And what's the competition?
Could they buy Bitcoin, or would you know gold satisfy what they need, or would NVIDIA or the NASDAQ or I don't know, something else?
And I think the one thing to think about of what's happening right now, why crypto has been so oversold or drawn back so much versus like stocks and other things, is you know, if we think about who's the been the previous buyer of crypto, it's been retail.
And is retail buying your bags today?
The answer is no, right?
There's not one person in my family or friend group that is asking about crypto today whatsoever.
Everyone that was in crypto previously, they're not here buying it, okay?
They are now buying AI stocks.
That's what you hear your family and your friends talk about, right?
It's the cool things going on over in that world.
The other thing is, okay, well, is it institutions?
That's what we've been promised for forever.
Every cycle is the institutions that hear, the institutions are coming.
And the question is, well, are they buying your bags?
And the answer is no, they're not, not at all, right?
And why is that?
Well, because we don't have regulations still, right?
We thought we would have this many years ago and we don't.
We thought we would have it last quarter and we didn't get it, right?
Because the government shut down, so it got delayed, and now there's this kind of delay with what's gonna happen with banks and the yield on stable coins.
We still don't have that regulation, which means institutions are not here to buy my bags.
So if I don't have retail and I don't have institutions, who the heck is gonna buy my bags?
Even if we're in a risk on world, right?
Which we are, if the macro is a good setup, why would they come?
Like, who's gonna come and buy my ETH or my soul or my, I don't know, Jupe, or whatever the the token is?
There's no one to buy it.
Now, Bitcoin, ETH, a little bit different because they do have DATs, they've got ETFs, they've got other structures that institutions could buy it without the regulation coming.
Okay, but the rest of the industry doesn't have that.
And so because the rest of the industry doesn't have that, it's doing poorly, which then reflects on things like ETH and Bitcoin as well, right?
So it's really important just to understand who's the next buyer.
Now, we might get this regulation soon.
I think odds on poly market now is that it comes, I think it's like 90% or something coming this quarter.
Um, so that might come.
Does that mean they buy it right away?
Unsure.
But I think the big thing, and this is what we've, Martin and I have talked about on this show a ton, is there is one next buyer, and that is the protocols themselves.
For certain, in a very sub like small subset niche group of protocols in crypto, there is a next buyer.
Sky is one of those that does, you know, they did 100 million dollars in buybacks last year.
So that's who's buying your bags.
Dupe has this hyperliquid has this, which is why a lot of these companies um or protocols that have these buybacks have actually performed quite well, right?
Like Sky is up since November when Bitcoin and Ether down 30%, hyperliquid is up since then.
And so, like, they're not really in a bear market, right?
They did have a pullback from you know July or something like that, if you look at the chart.
But otherwise, like they're actually doing all right, and their tokens look pretty good.
So there is a next buyer for some stuff in crypto, but for much of it, there just is nothing.
So you're so you're basically telling me that there's lack of any kind of bid on all assets in crypto, and that it may be even last year.
And we've heard this a few times on the show from Matt Hogan and a few other people, that it's like maybe even most of 2025, the bid was propped up by these institutions kind of buying in these different ways, and now that's evaporated.
They're waiting for clarity.
Uh, there's a lot of other uncertainty, and then alt's didn't really have a bid last year either so now as a result you kind of have this lull where there are there's where is the bid coming from nobody's there and I think the other thing too that you pointed out to me a few times um and a few other people on Milk Road have said is there's also an opportunity cost problem right where there's like there's a lot of other things happening why would you hold these things when you're not sure what's going to happen with them when there's a lot of other sexy things to look at so what you're describing to me is like well where is there a bid and it's for a lot of these really great protocols that have buybacks they're gonna be propping up the token and buying a lot of that back.
Yes now to be clear those tokens with buybacks they still don't have a bid from institutions or retail right they just have a bid from their own revenues they just happen to be making a shit ton of money buying back their own token that's the only thing propping that up so if the buybacks went away those would get cooked as well right now you make a great point last year there was basically a bid on nothing again except for those tokens with um with buybacks except for ethan which is kind of what I explained is they have different structures they're sort of wrapped into the into the like public market world and so they were able to raise capital to buy ETH and to buy Bitcoin through Michael Saylor and the million other Bitcoin DATs and then Tom Lee, Joe Lubin, et cetera, at Sharplink and Bitmine.
So like that's where that demand came from.
But now that they've gone into a a a discount rather than a premium, that's slowed down quite a bit.
And so this is again why I think crypto has has come back so far.
And I think the issue is until we get that the the Clarity Act, I don't know that we're gonna get much demand back into any of these assets, right?
So we need to see the regulation come first of all.
Um and then the other thing is like so a lot of the capital, the retail capital, has gone into AI stocks.
A lot of the institutional capital has also gone there, but you also gotta remember there's like, I don't know, we had something like $500 and something billion dollars of CapEx spent in 2025, and there's gonna be close to 700 billion uh in 2026, which is crazy.
The thing that people don't understand for that is that means there's a lot of opportunity to fund the things that are being built, right?
And so there's a lot of yield opportunities, okay?
And so a lot of these institutions that could go and buy Bitcoin or ETH or Bitmine or Sharplink or even Google or Amazon or whatever, they're going and getting involved in the funding of all that stuff.
Because there is it.
That's that's one of the biggest pools of capital we've ever had in a year, like $640 billion all to do the same thing, build data centers, right?
So it's like, okay, let's go fund solar panel projects, let's go find like all these other things, right?
So there's a lot of high yield you can get 10%, 15%, 20%, et cetera, to help build the things that are needed to make those data centers, and that CapEx actually work.
So that's kind of who we're competing with, right?
Now, there's an interesting sort of synergy here, which is if anyone saw an article that Stani, who's the founder of Ave, wrote recently, I think it was last week.
He talked about how Ave wants to become the capital formation protocol for the energy buildup, for renewable energy, for solar panels, et cetera.
So meaning $640 billion going into this space, okay, each year, and it's probably going to keep increasing.
They're going to need a lot of energy build-out.
What do they need?
They need capital formation to actually build those solar panels or those, you know, wind turbines or those nuclear or whatever.
So that means there's a lot of debt that's needed.
What is crypto really good at?
It is really good at forming capital.
That's what Ave does.
That's what Sky does.
That's what a lot of DeFi does.
Whether we think about, we always think about crypto as just these random tokens that you buy and trade, but it's all about capital formation.
And so what Ave is trying to position themselves as is to become the new place that you go to form capital to fund the development of all this CapEx, right?
And so it's tapping into that.
That's a huge opportunity, right?
So that's something really cool.
Ave is doing Sky is doing those things as well with their sky agents, things like Spark and other things like that.
LG, we had someone Daylight come on the podcast, right?
They talked about this.
Just fully get what I'm saying.
I'd go watch that podcast.
A lot of you guys didn't watch it.
It was one of our worst performing, which is crazy because it's like so much alpha to understand where the space is going.
So I would go check that one out because that's a that is an example.
Um, and what Ave is talking about is an example of tapping into where the world's capital is going.
That's what crypto needs to do.
I talk about this all the time, where on-chain capital markets are competing with American capital markets and Hong Kong capital markets and you know, UK capital markets, right?
And this is how capital markets have worked all around the world always.
It used to be the UK, like London was the spot for capital formation.
Then the US came along, New York came along and just kicked its ass.
And now no one goes to London for anything anymore, right?
It's a pretty shit city now.
No one cares about it.
Everyone goes to New York or Dubai, right?
And on-chain capital markets are trying to do that to America, who's the new leader of capital markets.
But the problem is on-chain capital markets don't do much yet.
We just have capital market financial services for like a bunch of shit tokens that no one cares about, right?
A bunch of useless assets.
And so, what on-chain capital markets need to do to start to compete with the US and in Hong Kong and London is they need to go and get part of the real world where all the money is, which is the CapEx today.
That's what DeFi's starting to do.
Maple's doing this, Ave's doing this, even hyperliquid's doing this.
A lot of hyperliquids um volumes over the last couple of months were silver, right?
We're commodities.
So they're starting to become the new place that you raise capital or trade um commodities and that kind of stuff.
That's what's gonna make the on-chain capital markets world super, super valuable.
Um, and so that's where you really need to be keeping your eyes on.
And so the companies that are doing that are DeFi applications, Sky, Aave, et cetera, hyperliquid.
These are the ones generating real revenues even in this bear market.
Sky's revenues are growing month over month during this.
Um, there's a few others we looked at.
Hyperliquids, they're not growing, but they're staying um fairly stable.
Aave growing.
There's a few others that are uh maple growing, right?
So we've never had that in crypto before.
There's never been a time where prices went down as as heavy as they are today, and yet somehow the protocols of applications continue to grow their revenues.
We've never had it.
It's the first time.
This is why I think we don't have a 12-month bear market in all of crypto, because there's certain things, primitives inside crypto that are finally making it into the real world, and they're getting into things that actually matter, and they are able to generate revenues and compete with their product versus the traditional financial world, and then they're driving value back to those tokens.
So those things will grow over the next year.
That is my very strong opinion.
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I like that.
And and uh last bear market, not that this is a bear market for Kyle's terms.
Um, revenue was something we never really talked about.
We're just talking like when's the price gonna go up and down, right?
And only in this most recent like bold turn was it like, hey, let's actually talk about let's go to DeFi Llama and see who's making money.
And that became such a huge part of it.
Now those companies do buybacks and hype and pump and all those things.
Like that's what actually started to matter.
And now that's what you're telling me as well.
It's like, listen, like ignore all the other crap.
Forget trying to figure out what all these other tokens and L1s and all the stuff are doing.
Just focus where the who's actually making money, who's building a product, who's built a product that makes money.
That's what matters the most.
That's the whole point.
And and then remember, it's all about just making money isn't enough, right?
The reason why stocks and equities are priced so well versus the amount of money the companies make is because if you own the stock, you have claims to the balance sheet, so the amount of money that they're saving up and the revenues, right?
So if they go bankrupt, if they decide to shut down the company, you as the holder, you get that.
Okay, you get to say, okay, you have 100 billion dollars in cash, Apple, but you're gonna shut down.
I get, you know, let's say I own five percent of Apple, I would get five percent of that 100 billion dollars.
Cool, okay, makes sense.
Crypto, that's not the case, right?
Pump has $2 billion dollars in their treasury.
I get nothing to, if they shut down today, they can have that $2 billion dollars.
There's nothing I get from that.
I have no claim on it.
Same with their revenues.
So it's it it is a bit of an issue there.
Now, the way that this industry has gotten around that today is through the buybacks, right?
It's not perfect, it's not like equities, but it is every profit that Sky makes, for example, it comes to me as a holder, right?
I earn 15% while I stake my sky.
That's pretty massive for a token that's getting has, you know, $100 million in buy pressure per year, right?
When it's only a $1.4 billion company.
That's huge.
So that's the way we've kind of solved it.
But again, there's three buyers.
There's either retail, there's institutions, and there's there's buyback.
So the protocol themselves.
Some of them have that protocol themselves buying back, so that's a win.
Retail's not buying any of this.
We know this because they're not here.
They're gone.
They're in AI land.
Institutions won't buy something unless it has revenue in earnings, right?
They will not.
We we know that for sure.
So there's no, so this is why I think there is a bear market.
95% of crypto is in a bear market and has been for years and will continue to be, right?
But that's not because crypto is bad or crypto is in a bear market.
It's just because there's just a bunch of terrible trash companies, right?
The good companies with real revenues that are buying back have two people to buy.
They have protocols now, institutions soon, once we get regulation.
That's the key thing that you need to be playing for while these prices are so suppressed.
So you're basically telling me, and this makes a lot of sense that the the assets that you're most bullish on, you think have a really good case to stand up in this bare of not bear market, are the ones that treat their token responsibly, like almost kind of like a real stock, right?
Where it's just like, listen, we're, you know, there you don't have ownership, but we are going to use some of our revenue to do buybacks and to make sure that there is value here.
So basically, these companies that are actually doing something a lot more responsible in terms of treating their token like a real asset, right?
Versus everybody else that just like you're saying, pump fund could just shut down fuck off with their two billion dollars and too bad, you know.
Yeah, um exactly.
Kyle, can you summarize for me kind of everything you just said?
Just I want to understand this very specific through line that you are painting.
Um how that works of relating like all the capex that's being spent to build everything that we need for AI and everything else of the future, and how that kind of delineates back to something like an Ave or a Sky being the on-chain kind of capital formation.
Just if you can, like just in a 30-second one line, like how does that how does that work backwards or work forwards?
So to build out anything in the world, you need to borrow and lend capital.
This is called capital formation, right?
Someone has to, you know, whatever you want to go.
If I want to launch a company and I need to raise capital to do it, I need to find a someone to lend me the money.
So I have to be a borrower and someone has to lend.
So the whole financial world is basically built around that, right?
There's borrowers and there's lenders everywhere, right?
Um, and so the the trad fi world does that today.
And so this capex that's happening of $640 billion this year.
There's borrowers and lenders all over the place to build all the things needed to, you know, build the the fact uh the the data centers and the GPUs and the like all the the energy and all that kind of stuff.
What blockchains do is they do that job way better, right?
So they take away a lot of the middlemen and they make it way more efficient, okay?
So I can get way better rates when I want to borrow capital and I can borrow at scale.
Now it's not better than the tradfy world yet, but it's getting there, right?
Sky does have a better savings rate, for example, through their sky savings rate than the Fed funds rate, way better, right?
Um, and that's because of the efficiencies of a blockchain.
So Ave and some of these others, that's what they're trying to do is be go be more efficient borrowers and lenders.
And if they can succeed at that, which they currently are, but at a small, small, small amount, if they can succeed, their revenues will just continue to accelerate and grow and grow and grow and grow and grow.
And so right now, Ave and Sky and all these, they're very small compared to the rest of the TradFi world, right?
Tiny.
They're billion dollar companies.
That's it.
TradFi has 100 billion dollar companies, right?
Banks.
And so if they can start to tap into that market into this trillions of dollars of CapEx and borrowing lending that happens globally, then the revenues that they have today, like I don't know, Ave makes like 10 million dollars a month, can go to 100 million dollars very soon or 200 million dollars a month very soon, right?
Like you can be massive how big these things are because they're built on code that can scale without the need for a million humans all over the place, right?
And they provide a better product than what exists out there today.
So if they can find product market fit, which they all slowly are, then there's massive earnings ahead for these tokens to come back into buying their own token and growing the underlying asset.
So it's key that they tap into the rest of the world, and we're finally starting to see it for the first time.
Got it.
Okay, thank you for summarizing that for me.
That makes that makes a lot of sense in terms of just kind of putting it all together.
Let's talk about ETH, Kyle.
How does all this come back to ETH?
Because you're talking about RWAs, we're talking about all this stuff coming on chain, and and I think you really believe that ETH is gonna be a huge beneficiary of that.
It's gonna be the host for a lot of that.
Ave and Skye are on ETH as well.
So obviously that matters.
Tell me your thoughts there.
Yeah, so this is um people aren't gonna like this, but uh so if you think about um, okay, so the the bull case for Ethereum or Solana or whatever, name your L1 is well, if we're gonna bring all the world's credits and all the borrowing and lending and all the assets that exist in the world on chain, you've got to think the chain that they're on is going to benefit from that, which I would agree with.
Okay, definitely.
When you have trillions of dollars in assets and tens of trillions to hundreds of trillions of volume of those assets just moving around the world, it's very likely that that infrastructure is going to be valued a lot, right?
Very high.
Okay.
The issue is today, that doesn't actually exist.
We've got like 25 billion dollars of real world assets on chain.
The rest is all useless crypto tokens that I've talked about, right?
So we always say like the value of crypto right now is I don't know what what's the total market at probably two trillion or something like that, three trillion.
Most of that though is Bitcoin.
Okay.
So minus out Bitcoin, minus how Ethan, you're you're well under a trillion dollars, right?
Um, probably like 600 billion, 700 billion.
Most of that is garbage, right?
You got like Cardano is like 30 billion of that, which is useless.
You've got polka dot, which is 10 billion of that, which is useless.
You got like a bunch of just useless junk.
And so, like the real assets under management of these chains is actually much smaller than it appears, right?
And actually, a lot of it now is just stable coins, so it's dollars, which has some value.
Um, I think dollars, the stable coins are like now at trillions of dollars of in volume a month starting this year.
So that's like a good start.
The thing is, the problem is that Ethereum is valued at like what 200, 300 billion right now.
Okay.
Does it make sense for a chain to be valued that high if we look at its revenues?
In 2025, it made $165 million dollars in revenue.
But don't forget, it also has like a I don't know, close to one percent inflation rate.
So it's paying a lot of that out as well.
So, like in terms of earnings, like profit, I don't even know if it was profitable.
I think it probably wasn't, right?
Or it's very close.
So, in in no world ever would you see a company that has zero profits be worth $300 billion dollars, right?
It just doesn't exist, or very difficult for that to exist.
It's P ratio would be like a thousand or $1,400 or something crazy like that.
So probably it shouldn't be worth that high now.
Uh and this is like Stani, I think came on the podcast and talked about this.
Is like if you're gonna do cash flows for these assets, it makes no sense.
So again, retail doesn't care about cash flows.
They're not valuing these assets that way.
So they would buy it.
So who's your next buyer for ETH and L1s?
Retail might be, but they're not here.
Okay, damn, tough.
Are they buying back their token?
No, they're not, right?
They're not profitable.
So they're not buying back token.
Okay, so no protocol either.
Institutions, are they?
Sort of.
Some are, right?
They are through like Bitmine and Sharp Blink and there's ETF.
So like there's some.
So yes, you have some.
But if you think about a lot of institutions, how do they value assets?
Cash flows.
So will they, when they run their models buy ETH?
No, not a chance, right?
Because it looks extremely overvalued.
And here's the problem.
Even if like my bull cases will have like seven, $700 billion of like um real world assets on chain or like trad fi assets on on Ethereum in the next year, right?
A lot of that being stable coins, and then you know, you name it, whatever else.
The problem is is that still doesn't bring the revenues high enough for cash flows to matter to anyone who values assets with cash flows, right?
So the other side of this is well, cash flows don't matter, and it's that fact that ETH is money, it can be used as collateral, which I'm a believer of that too.
Okay.
So I do agree, ETH is not valued as cash flows, though for a lot of the world it is, so you just have to know that.
But for some of the world, they might see it as something different, right?
It can be used as collateral to take out loans to borrow more stable coins, etc.
But it's currently for Ethereum to succeed, what I'm saying is it needs to bring a bunch of other assets on chain, so it's bringing more competition to it as money or as collateral, because when NVIDIA comes on chain, well, I'll just use NVIDIA instead of ETH, right?
Or gold comes on chain or dollars or treasuries or whatever, I can start to use that as collateral too.
Now, what this means is like, hey, the pie is getting much bigger, and there's going to be all this use on Ethereum or Slaughter, whoever.
But the real impacts of this, I think, probably take years to really see ETH make extreme revenues from all this, right?
And for it to really become this like trustless asset used as collateral at scale, we need a lot to happen for that.
And that's not today, that's probably not a year from now, it might be two years from now, three years from now, four years, five years.
I don't know, right?
And so the problem is is maybe, and I don't know, but maybe there's a world where just Ethereum and that are just too overvalued for what they are, you know.
And sometimes things get overvalued, sometimes they get undervalued.
So it's not to say like it can't go up from here, of course it can, but it's to say like there's a rational approach here, and I think a lot of the next buyers outside of retail are thinking about it the way I just explained it.
And so to just say, you know, tokenization of everything, everything's coming on Ethereum, ETH good, that's not enough.
That's that doesn't make sense.
So there's a world where crypto does well, but ETH and all the L1 tokens still don't, right?
So that's the kind of idea, which is, but there's not really a world where DeFi protocols, which are the thing that I'm saying is gonna power all one.
It would be very challenging for everything to come on chain, but DeFi protocols not do well.
Because no matter what assets come on chain, they're gonna use the best ones, Ave, Sky, et cetera, and they actually have profits and revenues and buy back their tokens.
So there you can see the the appreciation of those assets.
You could and so those must go up if more assets come on chain.
But ETH, it's a little bit different, it's a little bit diceier.
And so I feel a little bit uncertain on the L1s.
I feel much strongly about certain DeFi projects.
And then one other point I'll make here is I also feel pretty good about crypto equities, right?
Because as more token or more assets come on chain, a lot of the Coinbase is the one doing a lot of that.
I did a I did a podcast on this last week as well.
Most of you didn't listen to that one either, it wasn't very good performing asset.
Uh but again, again, you know, you can bring trillions of dollars on chain, and it might not matter for ETH cash flows, but if 25, 30, 40, 50 percent of those assets come on chain via Coinbase and they custody it, you bet their revenues and earnings are gonna go up, and you actually get claims on their balance sheet and their revenues.
So, and I also don't think it matters if the if the if the assets come on ETH or on Solana or on whatever, Coinbase, Robinhood, maybe Galaxy, they're the ones doing that and customing that and helping the institutions figure all that out.
So they're actually creating revenues from that.
And so I think crypto equities will do really well even this year as more assets come on chain.
And I think the DeFi protocols that provide financial services for these assets will do really well.
I'm uncertain about the L1s.
I think they could do well, but I could see why they wouldn't do well.
Um, and so I I'm more I'm allocating a lot heavier to the the other two that I just mentioned, if that makes sense.
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Right.
So yeah, that makes a lot of sense.
And I think basically what you're telling me, and even and even to summarize also what you were saying earlier is that you're making a case of apps over chains at this point, right?
That that crypto is starting to find product market fit in a few different ways.
It's starting to make a lot of revenue.
Some protocols are using their revenue very responsibly in a way that really benefits token holders and is good for them.
And that as more of the stuff comes on chain, there's gonna be a lot of value that accrues to these apps that are helping them do that.
But the chains like ETH, it's hard to see why people would go buy more ETH rather than some of the other, you know, some of the equities or some of the apps or the DeFi tokens.
I wouldn't even say I'm making a case of apps versus chains because hyperliquid is an app and a chain, and they are actually creating really good revenues, right?
So they made 821 million dollars last year, uh, right?
Um, which is a lot considering it's I don't know, what an $8 billion asset or something like that.
Maybe it's $9 billion now, 10 billion.
And most of that revenue came and bought back its own token, right?
So there's a world where chains can do well here if they're generating real revenues and have real earnings and are bringing that back to the token.
Problem is L1s are not doing that today, right?
Um, and I don't know when they will.
And so what you're hoping for for an ETH or a soul to go up is that either retail comes back and just buys things because they've heard of that brand, or people believe that ETH and Sol are money and will be pristine collateral.
That is there's a much smaller chance of that happening than anything else, right?
It could happen, which is why I'm saying I'm not necessarily saying that ETH never does well or sold never does well.
It's just something really a small chance um of that happening, in my opinion, because I don't know that the world believes that today.
So it's gonna be hard to get them to believe that.
Whereas the world already understands revenues and cash flows, and so they can they can get behind that pretty easily, which is why hyperliquid I think is done so well, if that makes sense.
The only thing I'll point out for hyperliquid is that most of their money comes from their actual app from their tool, and their actual chain doesn't make that much money.
I'll just point out I was gonna point that out.
I think the actual L1 that they that they built is actually still struggling in the apps they're struggling to bring in TVL or anything else, versus the main app, which is where they're doing commodities trading and all that kind of stuff.
That's the cash cow for them.
Definitely, but it's all about the the asset, and the asset is for both of them, right?
So it doesn't really matter.
The fact is they have one product doing well and one product not doing so well, right?
Which is like, and this is the key thing too.
That's a good business.
They have diversified revenue streams, which is why, again, I go back to Coinbase as a better bet on the industry than ETH, because Coinbase, similar to ETH, makes its money, uh, makes a lot of revenue on volume, right?
Um, on trades.
Every time there's a trade, it takes a little cut.
That's how Ethereum makes its revenue as well.
However, Coinbase is already diversified from that.
It also makes money by just custodying assets.
ETH, Bitcoin, dollars for stable coins, right?
Makes money there.
It makes money on subscriptions, people to sign up and have the Coinbase, what's called Coinbase One or whatever it is.
Um, so like it has different revenue streams that are not related to trading volume, to the price of these crypto assets going up.
Ethereum doesn't have that, right?
So again, there can be a world where prices of ETH and whatever stay lower, but tokenization happens like crazy, a bunch of dollars come on chain, Coinbase's revenues could skyrocket, even without the price of ETH or Bitcoin going higher, right?
So there's just there's a higher chance of earnings increasing on something like some of the crypto equities and the DeFi apps than there is on a lot of the L1s and then most of the other alt tokens.
So, Kyle, with this, with all this in mind, have you been rotating at all based on this thesis in the last couple months?
So, in the last couple, like so in the last six months, I've rotated some of my crypto assets into, and this is mainly like your ETH and soul into AI, right?
Because I just want to diversify.
So I've been doing this for a while and I've talked about this.
Um, and then I have rotated some of my L1 assets, so again, ETH and soul, into more DeFi assets and into more crypto equities.
So, yes, I have definitely rotated.
Now it doesn't mean I don't hold an ETH.
I do.
I do not hold any soul right now.
Uh I do hold ETH, I do hold Bitcoin, which I guess that's an important um clarification here is Bitcoin's a bit different here, right?
Bitcoin is not a smart contract blockchain that, you know, when tokenization happens and credit and all this comes on chain, that doesn't matter to Bitcoin, right?
It's it's something completely different.
It is seen as money store value today, right?
Um, and so it's it's different than what we're trying to see with ETH and soul.
So there is a world where Bitcoin does do well, but it's for different reasons than why ETH and Soul will do well, uh, in my opinion.
So uh I I don't know.
I don't have a strong opinion on Bitcoin here, but I do have a strong opinion on Bitcoin long term, which is why I still hold it.
But will it do well in 2025?
I don't know.
I just know that when it decides to do well, it will do way better than everything else that exists.
And so, like, I don't care on the opportunity costs of the next six months if Bitcoin just chops around.
Doesn't really matter to me.
I'll keep adding to that because at some point it'll go from wherever it's at, 70, 80k, and it'll go to 200k in like three months, right?
This is what it always does.
And so, like, I'm okay with you know not getting a 20% gain in Google or Apple during that time and trying to jump around and trade.
Soul and ETH, a little bit different.
Uh, I'm still again long-term bullish, so I do think it's fine to hold them, but you've got to really extend your time horizon on those because again, I do think the world comes on chain and it comes on those chains, but for it to really start to crew value, it's gonna take some time.
So eventually it's gonna be really big.
And again, they'll have big moves.
I just don't know if it's this year, next year, or or many years.
All right, Kyle.
Listen, um, I I'd love to keep chatting and picking your brain, but there's an important hockey game that started somewhere and we're both Canadian people.
So it's time to wrap up.
Hell yeah.
Let's go.
The Olympic games do not start late.
Not like NHL games where there's anthems and all this crap, all promotional shit.
They start on time.
They don't mess around.
Kyle, in 30 seconds, what is the main takeaway for investors from from this chat today?
What is the main thing they should think about going forward in the market?
The the crypto industry is different now.
It is not what we are used to from 2020 and 2021 or even 2017.
It's very different.
It is a smarter game.
You are playing up against much smarter people because you're not just trying to front run retail because retail is not here.
So you've got to do the work now.
There's still massive opportunities, right?
What I talked about is like I know some people are like, oh, that's kind of bearish, whatever.
No, it's a massive opportunity because retail's not here and institutions are not here, but we have real business finally.
So it's like it is getting somewhat easier to find the the good stuff.
And at some point when we get regulation and the excitement comes back, you're gonna get the flooding of capital from both retail and institutions.
So now is the time to be allocating and staying in the game and learning and figuring this stuff out without a doubt.
Sucks that some of us are down a lot, but that's okay again if you just if you think deeper down uh the the lane here, because there's still a massive arbitrage opportunity because nobody understands crypto and or maybe they do, but they just can't buy it.
That's your opportunity.
You just got to make sure you're in the right assets, and that's the thing that I think most people are wasting.
Um, and so you've got to adapt and really figure that out.
It's not just a set and forget on anything anymore.
Um, so that's the key.
Awesome.
Well, thanks for sharing, man.
Great to hear from you.
I think these are all really great thoughts and a lot of uh food for thought for people going into the weekend and whatever the hell happens next in crypto in terms of price action.
Kyle, thank you so much, man.
And uh thanks everybody for listening to Milk Road as usual, man.
Have yourselves a great weekend.
And for the Americans, we'll see you guys on Sunday in the gold medal game.
Let's go.
You might have beat us in the women's hockey, but men's is men's hockey is the one that matters.
So we'll see you on Sunday.
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