# Ethereum's Commercial Vacuum and Institutional Altcoin Barriers

**Podcast:** The Milk Road Show
**Published:** 2026-05-25

## Transcript

You know, like Ethereum is worth more than 20 hyperliquids.
What's up, everybody?
It's LGG said here and welcome to the Milk Road Show, the daily crypto show that has not sold its ETH yet and might be the last people still holding it.
Today is May 25th, 2026.
Ethereum feels like it's in danger.
Just last week, many very...
vocal figures capitulated on the asset after many years of being permabulls, which coincided with many people at the Ethereum Foundation departing.
But our guest today tells me that it's way too early to make a call on the asset and that the subtext of what Vitalik Buterin is saying is that there should actually be a second Ethereum Foundation that focuses more on the business interests of the protocol to help prop up its price and adoption going forward.
We're going to discuss all that as well as why certain alts are pumping like Hyperliquid, Venice, Aneer, and Wax.
it would take for institutions to bid on them with our guest today hasib koreshi managing partner at dragonfly capital our usual monday episode with john gillen will be recorded tomorrow today's episode is brought to you by cape the privacy first mobile carrier nexo earn interest borrow and trade crypto and calshi where your takes finally pay out hasib welcome back to the show man good to see you again thanks for having me always good to be here yeah okay so listen we last chatted on december 9th and uh bitcoin was that in the low 90s stage and i think then we're talking about like okay is we going to recover are we going to not a lot has happened since then price action wise Today, I want to ask you about fundamentals that you discussed last time.
You're always so great to give me this really nice analogy, so we'll go through some of those.
But I do want to ask you, probably the most pressing thing for me, especially at the end of last week, was the drama around Ethereum.
And I feel like there are so few majors out there.
Out of everything, you look at the top 100 coin list, it's like Ethereum has really become this super polarizing asset or protocol or whatever you want to refer to it as.
A lot of people leaving.
slightly being shown the door, the Ethereum Foundation, Vitalik kind of painting a slightly new direction there with his post.
How do you feel about Ethereum?
Because I feel like you are generally a supporter, but do you feel like any of this is kind of shifting your view?
So first thing I'll say, we own a lot of ETH.
I wrote a tweet about four or five days ago where I wrote, Ethereum is the Microsoft of crypto.
And it ended up getting a ton of debate about, okay, is this a good thing?
Is this a bad thing?
And my response to that was like, well, it's neither a good thing nor a bad thing, right?
It's like much like Microsoft.
Ethereum is very big.
It's very slow.
It's very enterprise friendly.
It doesn't have the best UX.
You know, it's not the first to innovate on anything at this point, but it's extremely important and irreplaceable.
And it's worth a lot of money.
Now, Microsoft, if you look over the last couple of years, Microsoft has not been the fastest horse.
in the top tech companies hasn't done that amazing as a stock.
It's obviously not that exposed to AI, all things speaking, their AI products have been pretty shit.
And Ethereum, similar, right?
Ethereum has been kind of a laggard.
It had this moment where it was doing really well last year.
And since then, it's been kind of in the doldrums.
I mean, it's kind of neck and neck with Sol.
Sol is also kind of in this valley of darkness right now with respect to people not feeling like it has a lot of energy and a lot of catalysts.
But Ethereum is unique because it is so it's got so much baggage as a protocol you know and yet it's second largest asset in crypto extremely liquid extremely highly traded like people sometimes act like ethereum has somehow become like it's you know lost the mantle but it's still number two it's still you know a 270 billion dollar protocol so you know it's like i pointed this out to somebody last week is that if you take all of the public companies in crypto combined that are not DATs, if you exclude the DATs, all the public companies combined.
So you take the point bases and the circles and the eToro's and Galaxy and all that stuff, add them all together, it's less than half of Ethereum.
Ethereum is huge.
It is absolutely enormous.
So it's important to keep some sense of scale of how big and important Ethereum is relative to all the other stuff that we talk about.
Like, oh, the revenue meta and this and that and blah, blah, blah.
Ethereum is worth more than 20 hyperliquids.
With that all having been said, Vitalik recently came out and issued a statement where he basically said, like, look, the point of Ethereum is to be, quote unquote, exceptional.
It's to be a special chain.
And the way in which we're special is because we are decentralized and we're focused on the core properties that make Ethereum different.
The censorship resistance, the security, the credible neutrality, like the crops acronym that he's become fond of lately.
And he's like, look, we are not – the Ethereum Foundation, despite the fact that people have been leaving and there's all this uncertainty about the direction of the foundation, we are not a price org.
We are not a number-go-up org.
We are not going to be a number-go-up org.
And then maybe there's room for other orgs within the Ethereum ecosystem that can do that.
But at this point, I think he said that they own like 12 bips or something of the total ETH supply.
And we're just not – There are many, many people who are larger holders of ETH than us, and they are in a better position to play that role than the EF is today.
So his claim is that the EF is going to be leaner.
They're going to be focused purely on shepherding the protocol as well as stewarding these particular core properties of Ethereum.
But Ethereum is not, the EF is not the number co-op org.
So now a lot of people, I was reading some of the comments trying to understand what the vibe.
response is to this post.
And it seemed like half negative, so half people were saying like, oh, okay, this means that Ethereum is fucked.
And they're like, okay, Vitalik doesn't really care about the price.
And then other people fixated on this one comment that he made in this post that was like, he said, ETH is the core financial asset or financial output of Ethereum, and it's important that ETH does well.
And people just clipped this one part of his statement.
It was like, look, ETH is the most important export of Ethereum.
This is great.
Finally, Vitalik is full posting ETH.
which I don't think is really the right reading of the statement that he made.
Although on some level, what people read and what they amplify is going to be what the statement means at the end of the day.
So maybe that they sort of contorted what he was saying into a, oh, number go up.
I guess Vitalik is still on board with that project.
So I think on the whole, I think it's bearish.
I think the statement is bearish.
I think the direction for ETH is bearish is that In the Tamash era, when Tamash came back into the EF, he was the person who was appointed as the new executive director or the co-executive director of the EF.
He very clearly came in with this muscular mandate of, we need to scale the L1, we need to focus more on ecosystem development and BD and entrepreneurial support and making Ethereum great again.
That was the whole vibe of the post-Tamash shift in the EF.
And then Tamash left, and then a bunch of people left the EF.
And now all of a sudden they're publishing mandates and they have this whole, oh, crops is the new important thing.
That acronym emerged into the forefront after Tamash left the EF.
And all of that, I think, is unequivocally bearish for the EF.
But it does create room.
And the room that it creates is for this thing that Vitalik is talking about, about there being a new organization that steps in, that is more focused on the more...
entrepreneurial and more business-oriented side of Ethereum, it potentially creates room for that to step up.
And what he said explicitly is that the EF is open to working with those people who can step into that position.
And so what I'd love to see, and I think this will be the thing that kind of reclaims the mandate for Ethereum, is if there is some organization that's given institutional legitimacy, Right now, there's Etherealize.
Etherealize is this company that was venture-backed that's kind of doing Ethereum for enterprise.
I don't think Etherealize really has that.
It's a good org.
They've got good people, but it doesn't really have this megaphone, and it doesn't have the muscle necessarily to carry this torch forward.
Tom Lee kind of has it with Bitmine, but it's not his job.
to do that for the rest of the world it's his job to like sell his equity and to get people to buy his shares um and to you know affect his own buys of eith in the public markets but um he's he's clearly not the second foundation you know so i kind of feel like the the call that vitalik made if you sort of read between the lines is he's almost softly calling for a second foundation that's that's how i read it that's at least the the optimistic read that i make of what he said And a lot of people have talked about the need for a second foundation.
So actually, there was Dankrad talked about, oh, what we need is like a second foundation that's more focused on price and adoption.
Many people have talked in the past about this.
I think the Curve founder, Michael, he talked about, hey, there needs to be a second foundation.
I think if that emerges, that might be the really bullish turnaround that Ethereum needs that carries forward the energy that Timash originally started with last year when we saw the big run up in Ethereum.
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Wow, I've never even thought about that.
There being like a second foundation that is like...
So you think the role of the second foundation would be to what?
Like what would they...
like focus on value and price?
You know what I mean?
Just be like this, like what Tom Lee kind of is right now, but just Tom Lee, like you're saying- Not Tom Lee.
Tom Lee is, you know, he's at the end of the day, he's running a public company.
Yeah.
And he is a booster of Ethereum, but he's not a steward of Ethereum in any meaningful sense.
Right.
So think the Solana Foundation.
What does the Solana Foundation do?
Right.
Yeah, they do.
the core values of Solana is like, we're trying to distribute the steak and we're trying to do this and try to do that.
They do some regulatory stuff.
Okay, great.
And they also do the core development, right?
So some of it, obviously Anza does a lot of the development, but they also do some research stuff.
But most of what the foundation does is they support entrepreneurs.
They help the thing get adopted.
They tweet about it.
They talk about it.
They do number go up stuff.
And all that number go up stuff, basically what Vitalik is saying is that that's not our core job.
There is number go up stuff to be done, but we want to get away from that and focus more on being the high priests of Ethereum.
We want to steward Ethereum's core values.
We want to be, if anything, the bulwark against Ethereum becoming too commercial.
But okay, who are you a bulwark against?
It's like, okay, well, the commercial people, right?
It's like almost they're fighting against the Tom Lees, right?
They're fighting against the entrepreneurs because they're saying, no, you guys are trying to go into the world of more centralization, more capitulation, more cutting corners.
We are fighting against that.
That's what the EF is saying, right?
That works if there's a dialectic between another organization that is focused on number go up.
So I think this is what Vitalik is alluding to.
This idea has been in the air for years.
This is not a new idea.
I remember...
There was one more group that I'm forgetting now.
I think it was like the Constantine from Lido maybe who was talking about, or no, there was a rumor.
That's what it was.
There was a rumor that was widely reported that Constantine from Lido was planning to start a second foundation for Ethereum.
This is when Ethereum was like really, really in the dark ages.
And so I think this may be the room for something like that to be created and to exist.
And I imagine what might happen is that the EF still has some go-to-market people inside the EF, right?
You can imagine a world where the EF basically splinters.
takes some of that budget, takes some of those people, puts them in the second foundation, seeds them with some initial capital, and basically says, look, the capital that we have that's left is purely focused on research, values, and the privacy roadmap, the crops roadmap, censorship resistance, some of these core research tasks.
But the actual adoption of Ethereum is going to go in the second org, and that's not Vitalik run.
The Vitalik Run org just focuses on research and kind of values stewardship.
The second org is purely about go-to-market competition and winning the game.
Do you think that that's been beneficial for Solana though?
Especially at this point, because you're saying kind of like they're also in a valley of kind of uncertainty of like what is next for Solana, right?
So would you say that that has worked for them?
Is that maybe what propped them up to the point where that they got to?
in the last goal?
I think it's very clear that Solana could not have gotten to where they'd gotten, but for the foundation.
The foundation was a huge role in all the marketing, all the business deals, all the commercialization, super team, the entrepreneurship, all the stuff that really emerged in Solana came in large part from the commercial efforts of the foundation to make Solana more adopted.
And they were very successful in doing that, and they still are.
Right.
OK.
What role did recently, I guess, departed from being Ethereum superfans?
What role did Bankless play in something like this?
Like were they were that would you see them more as just being like they were supporters of the Vitalik vision and now they have kind of decoupled from that?
I mean, that's that was kind of like the big drama last week.
Whether that actually has a big impact is kind of.
You know, we don't know what we don't know what the large impacts are of us doing podcasts and newsletters and stuff like that.
Like, we don't know, you know, being influencers or whatever.
Like, we don't know what the actual impact is on.
Maybe there's an impact on sentiment, but in terms of like long term price action and mission, all that kind of stuff, we don't know.
It's hard to kind of quantify that.
But where does that did they kind of occupy a bit of that role?
Probably not.
I feel like they were more on the fundamental side anyways.
I would say, look, if this was 2022 and Bankless dropped ETH.
then I think that would have been catastrophic.
But it's not 2022 anymore.
You know, Bankless is great.
Obviously, they're a fantastic platform.
But you can see, you know, the day that David announced that he didn't have any ETH exposure, ETH didn't move.
You know, it like maybe went down like 50 bps or something or something tiny.
So I don't think, yeah, I don't think the market read that as like, oh my God, you know, Ethereum is fucked now.
The reality is that...
Bankless had already moved away from being ETH boosters.
Like, you know, they're doing shows on AI, they're doing shows on Venice and Zcash and blah, blah, blah, and like everything under the sun.
That's part of the reason why so many of their customers or their listeners were really pissed at them.
But like, not just now, but also over the last, you know, couple of years, we were like, oh, why are you talking about Solana?
Why do you do this?
Why do you do that?
So, you know, look, I feel for them because that's a very annoying audience to have.
But like, like if your audience doesn't let you evolve as a host or as a show.
That sucks.
I get why that's annoying for them.
But the reality is that no, Ethereum does not need Bankless.
It doesn't need any single podcaster.
Would this happen?
Would we even having this conversation or version of it if Ethereum was at like 4K?
or so you know what i mean for like 3 500 like if it hadn't because it's like bitcoin's down from all-time highs i don't know whatever still like 40 35 or whatever it is but it's like ethereum is down 60 you know what i mean like is that is that if we were down the same ratio even as bitcoin would any of this would this even be happening would we be talking about no clearly not and also ethereum didn't hit new highs in this market.
It's kind of the double-land.
It was a new high by like $10 or something.
It was like a tiny little bit, but it wasn't like Bitcoin.
That was like a huge new high.
Yeah.
Right.
I mean, if it was a Bitcoin-like high, it would have gone to 10K and it didn't get anywhere near that.
Right.
Okay.
So here's one last question for you about Ethereum, and then I want to talk about a few other topics that you've already kind of alluded to.
For people like you guys that are holding Ethereum, and you're saying the subtext to Vitalik's tweet is like, hey, I want somebody else to go out there and lead the charge in really commercial or playing the commercial side of Ethereum.
And maybe we'll be at odds at times or we'll kind of play both sides.
But we need somebody to do that for you guys to be happy as well.
That is like somebody else is going to do that.
I'm not going to do that.
That's what he's saying.
You guys are ETH holders.
Many of us are ETH holders.
A lot of people listening to the show are still ETH holders.
What is the positive outlook for us then?
What does the timeline look like then if this, what is the good case scenario from here for Ethereum over the next couple of years based on this kind of like, there's a bit of a turning point here?
Yeah.
So first thing is that way too early to say.
So it's very clear there's been a lot of changes within the EF.
Obviously, a lot of people have left.
There's been this...
It feels like a little bit of a spiritual battle happening inside of the EF itself.
And I think Vitalik, in saying this, that, hey, we want to support other people who are doing more of the commercial work, it is a little bit of his capitulation to the fact that, hey, I hear you guys that this is really important and that we're not doing enough of this.
And we're never going to do it to the extent that you guys want us to.
So we want to get out of the way and support whoever will be able to do this in a more muscular way than we currently can.
I think the...
The reality is that there has been a lot of improvements in the EF over the last 24 months.
If you compare to when AYA was pushed out back, this was like January of last year, all the Infinite Garden stuff and all the kind of just the sort of kumbaya slop that the Ethereum Twitter account was putting out at that time.
Ethereum has come a long way.
You can see that they're now, they're like, you know, They're highlighting entrepreneurs.
They're working with founders.
They're helping.
We now get intros from people who work at the EF trying to get entrepreneurs to get funding who are building on Ethereum.
All that stuff is great.
It's stuff that the EF used to never do.
They wouldn't deign to do it.
It was beneath them to deal with stuff like that.
And now, all of a sudden, they're doing things that other foundations have also done, which is to help cultivate capital formation.
on their ecosystems.
That is a new kind of EF, right?
So stuff has unequivocally changed and it's not going to go back in the other direction.
But I think Vitalik realized, look, we can't, we're not going to go all the way.
We're not going to be the Solana Foundation.
It's just not our DNA.
It's not who we are.
And it's not me because I, Vitalik, run this organization effectively.
And this is just not who I am.
It's never who I'm going to be.
So I think we have to be a little bit patient before we see what the new equilibrium is going to look like.
And we still haven't heard from the people who left the EF what their designs are and how they intend to contribute to Ethereum in different ways.
Because my understanding is that most of those people, it's not like they're out and they're just going to go work at Tempo.
The people who left the Ethereum, they have other plans of what they want to do.
And I'm sure at some point they will come public about what those plans in particular are.
So I think the answer right now is that we kind of have to wait and see.
I don't think this is the end of the story, but we'll probably know.
within a few months, if I had to guess, what that is going to look like.
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Okay.
okay well maybe next time you're on we can we'll be at that point we can chat about it then uh i think a lot of people just holding their breath as well just in the crypto market not holding their breath but also wondering you know a lot of people feeling like the rest of the year is a pretty crucial time with a lot of regulatory stuff coming down the pipe or starting to move forward and um midterms in the in the future as well a lot of different things that usually typically have some kind of effect on the direction of of this stuff long term um i did want to ask you though back uh when we had you on december 9th We had discussed that institutional bit that is coming.
And even since we've had you on, there's been honestly nothing but bullish news on that side.
You have every major institution hiring digital asset managers, digital asset teams.
You have a lot of new ETFs, even like HyperLuca, right?
The flavor of the week along with privacy and AI.
you know, not just hitting all-time highs, but hitting all-time highs based on ETF inflows and ETFs being launched.
And I think you had said that institutions would not necessarily bid on altcoins for a long time.
Do you feel like this has been a sufficient long time?
And is the bid on hyperliquid like that?
Do you consider that an altcoin bid?
What's your kind of view there of the institutions finally coming for stuff that isn't just the bitcoins?
Yeah.
I mean, if you're talking about debts, it's pretty clear that The DAT bit is not institutional.
The DAT bit is retail.
So there's a lot of retail capital that's unable to touch crypto native assets.
And they're sitting in 401ks or brokerage accounts.
And for those retail, yeah, giving them access to an asset like Hive or Zcash or whatever is great, but doesn't really answer the question of when are institutions going to be entering into these assets.
I think clarity is obviously the big decision boundary.
is that if the Clarity Act passes, that is probably the thing that's going to start getting the first trickles of institutional capital to come into the space that is able to touch tokens.
Today, part of the reason why they don't want to touch tokens is that they don't really understand them, don't feel like they're fully regulated, don't feel like...
I mean, the other thing, of course, is that for a lot of the people in the institutional world, they don't see why they would.
Like, there's a lot of...
exciting stuff happening in AI, public markets are going crazy, there's a huge volatility, things are printing all-time highs every single day.
On some level, the thing that's going to attract institutions back to wanting to experiment with crypto, even if there is, or sorry, experiment with altcoins, even if there is the ability to do so post-clarity, I think the number one thing you need to see first is for retail to come back.
If retail comes back, Then you can potentially see some of these tokens start to hit all-time highs.
And then once they're hitting all-time highs, that's when institutions want to come in.
So you kind of need assets to run for it to be attractive on a relative basis for an institution to say, look, I mean, why do I even need to look at this?
Things are hitting all-time highs in the stock market all the time.
And I see memory stocks and energy stocks and nuclear and quantum and all this other stuff is going crazy.
Now, look, I don't say that because I'm bearish on crypto.
very bullish on crypto.
I express that with my own portfolio.
But the reality is that we don't live in a vacuum, especially for institutions.
For institutions, there's no reason in principle why they need to touch any of this stuff.
Now, given enough time, they will.
Given enough time, one way or another, assuming that clarity passes and there's now some regulatory guardrails around the space and institutions feel like they can get their arms around it, they will come and they will buy some of these assets.
Not all of them, obviously, but they will buy some.
Before then, I mean, if you look right now, institutions basically only own Bitcoin and ETH and a little bit of Sol.
And that's pretty much it.
And institutions are not touching anything beneath those three.
What about hybrid liquid ETFs?
How does that fit into the picture?
I don't think those are held by institutions.
You don't think so?
So you don't think that that's institutions at all?
You think that that's just retail seeing that as an option and finally getting some exposure?
Yes, I would say that is almost certainly what's happening.
If somebody knows otherwise, I'm happy to be educated.
But as far as I know, if you look at IBIT, IBIT is the most institutional ETF, by far the largest.
IBIT is something like 35% to 40% institutions that are holding IBIT.
I didn't really like that.
I never really thought about that.
Yeah.
Majority of IBIT is held by retail.
And that's for the most institutional product held by BlackRock.
which is Bitcoin, right?
That's the thing that everybody knows.
You go further afield, you even go to ETH, right?
Or ETH, sorry, which is the BlackRock Ether.
That's less, more owned by retail.
So it's mainly just retail.
And if you go down to like the really long tail ETFs, there is almost all retail.
So is there not, okay.
So I guess, okay, so you're basically telling me that like- I don't know.
I haven't looked at any of this data.
Sure.
Yeah, yeah, you know, that's right.
And we'll see who the biggest owners are.
So you're basically telling me that institutions aren't going to care about any other coins until there's most of crypto is at all-time highs and that there's a clear, deep retail interest in these tokens, right?
So for something like – I don't think you have to get both.
But I'm saying for there to be significant institutional interest, you probably need both.
Institutions will start to dabble post-clarity.
You know, there'll be some that are ahead of the field, you know, there'll be like the Franklin Templetons and the Fidelities that are like, they've always been very crypto forward.
And they'll be like, great, we're going to buy a little bit of Morpho.
We're going to buy a little bit of this.
We're going to buy a little bit of that.
Like you've already seen Apollo coming in and buying some Morpho.
And, you know, there's like, there's these green shoots of institutions that are buying individual assets with whom they have relationships or which they like the underlying thesis.
But, you know, buying Hyperliquid is a very different kind of investment because Hyperliquid has a lot of regulatory risk that is usually the kind of thing that gets institutions queasy.
Historically, institutions, the thing that they really like is not, okay, this number is going up and to the right.
The thing they like is, oh, this thing is regulated.
It's got licenses.
I know exactly what the surface area is.
They weren't even comfortable touching stable coins until after Genius.
So hyperliquid, I think, is very far out the risk curve, which is part of the reason why it's a great investment for people who have more risk appetite, is because you're sort of front running the institutional demand before that regulatory clarity is present.
If you do see that regulatory clarity, then actually, I would expect that a lot more money is going to come in to start chasing some of these assets.
But today, I think it's very unlikely you're going to see that much institutional bid, unless, like I said, you see both these things coexisting.
So do you think that that's the kind of underlying sentiment driving the bid on kind of the outlying alts right now of the last couple months, couple weeks, which are like, you know, on-chain finance, something like Hyperliquid, which has been done really well in the news as being a place that you can trade oil and silver futures and everything as news comes over the weekends.
But also...
on the other side like privacy ai right so you've got like venice and near and zcash has been been pumping since basically you know kind of the turn of the tide way back in the fall is that what you feel is kind of like the underlying sentiment and thesis that's kind of pushing propping these up is that people you know uh i don't know i don't know what we call them retail whatever we all are uh are bidding on these things With the expectancy that it's like, listen, once clarity goes through and institutions actually get interested, they've been tracking these or that some people have been following them and that's when those things are going to get a real bid and those are the 10Xs of the next cycle.
Is that what you feel is kind of would be driving those?
I think that's likely.
I'm not saying that you're saying that.
I'm just saying that that's the sentiment that's driving it.
Yeah.
Right.
I mean, look, so we're investors in pretty much everything that you've mentioned.
The way that I would categorize it is that there's basically three different pools of capital.
There's retail, there's crypto native capital, and then there's institutional capital.
And there's a lot more shades that you can throw in there, but that's just for a very simple model.
Crypto native capital is here.
That's the dragonflies of the world and the crypto hedge funds and so on.
There's retail, which is partially here, but mostly not here.
Most retail has checked out.
and has not come back yet since 1010.
And then there's the institutional capital.
Institutional capital is not buying ZEC.
They're not buying VVV.
They're not buying Near.
They're not buying any of this stuff.
All this stuff is happening from a combination of retail and crypto-native capital.
And I think if you look at things like VVV and ZEC, a lot of that is really crypto-native capital.
Obviously, retail is now driving a lot on ZEC.
But for Near, which really started taking off in the last few days, That feels to me, at least as far as I can tell, mostly crypto native capital.
And retail is a laggard in getting onto the near trade.
And VVV, I think, is mostly crypto native capital.
And the retail activation in VVV, you can just see the volumes are not that high in VVV, despite the fact that it's done extremely well.
So I think, and you know, VVV is not even on Binance, right?
So the accessibility of these assets.
to retail is also not fully there for something like VVV.
So I would say on the whole, these are also not generally the shape of assets that institutions get involved with.
I would say that for something like Hyperliquid, it's probably easier at the end of the day for institutions to get their arms around because it's pretty easy to underwrite.
It's pretty straightforward.
Then there's something like Ethereum or Bitcoin, which is just categorical.
Like it represents an entire category.
It's just so huge that it's worth underwriting and understanding what it is.
But for a lot of these assets that are like, you know, a couple billion in market cap, institutions generally don't invest in $2 billion companies, much less $2 billion protocols or tokens, right?
It's just like not even worth their time to underwrite, okay, some company IPO'd and it's worth $2 billion.
Should I even...
try to figure out what this thing is or what it's worth or get to know the team or whatever.
Like, no, generally they're not in the business of doing that.
Like if you're not a $50 billion plus company, usually they're not underwriting single names, right?
They're looking at maybe ETFs or they're looking at indexes.
Or, you know, if you're $50 billion plus, like there are hundreds and hundreds of $50 billion plus companies.
So like the scale of assets that you're underwriting if you're an institution, you just don't have the manpower to underwrite something that's worth.
3 billion, 5 billion, 10 billion.
So these are small in the scale of an institutional book.
So that's why I want to underscore that I would not necessarily expect, even if you see a big comeback in crypto, that a $2 billion asset, institutions, quote unquote, are underwriting it.
There might be hedge funds.
There might be more sophisticated buyers who are coming into these things.
But for a lot of this stuff, even in the world where we have a big recovery, where we have retail coming back in in a big way and institutions are coming back in, The institutions will likely still be putting their money into Bitcoin, into ETH, into maybe an index, into Sol, into some of these assets, maybe hyperliquid, but they're probably not putting it into $2 billion, $1 billion assets.
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It's a good lens.
It's a good sobering lens to look at this stuff with because you think about it, yeah, something like Hyperliquid has reached, you know, fully diluted cap, 50 billion plus, flips Solana, sure.
But you look at it from the institutional standpoint, right?
It's like there's hundreds of other companies like that.
This thing has tons of regulatory risk.
Yes, it's a cool tool.
It works really well.
They've built something cool.
It's only a couple of years old.
tons of regulatory risk, tons of supply that's just sitting there.
They don't know what's going to happen with it.
And it's a small potatoes kind of company compared to other ones that have more established players, more have been around for a longer time.
And like you said, 50 isn't even that much to them.
So that's a good way to look at it, that it's like, that hasn't really hit that larger level that institutions will look at yet, right?
That would be like an outlying risk for them.
And you can see that from the fact of how it's priced.
right i mean that's part of the reason why it's priced very attractively so when we as crypto native investors look at hype it's like oh this looks like a great asset with respect to the multiple that you're getting in on earnings um if this were priced by all the institutions in the world there'd be a lot more money coming in and you would not be paying that multiple for what the asset is producing not necessarily anyway i don't know that you know obviously i'm i'm i'm speaking a little bit loosely about all these things but um That's the way you should be thinking about this, is that if the institutional bid does come in, then probably the multiples we're going to be paying for everything go up.
It also means that, of course, if you own these assets, there's going to be multiple expansion, which means valuations increase all things equal.
Hasib, the last thing I want to ask you about, and this is related to you guys at Dragonfly, and while we're on the topic of perps, last week you guys announced you led the round for a company called Variational, where they raised $50 million for real-world perps.
I've been a little under the weather, so I actually don't know much about this.
Maybe talk us through that.
I always love hearing about your work at Dragonfly and all the work you guys are up to.
always heavily investing in the space.
And I think people always want to hear that as a positive sign that you guys are still finding a lot of great companies being built out there that are going to come to, going to build over the next couple of years and several years.
But also tell us about this latest one.
Yeah.
So Variational is a team that we've known for a long time.
We actually invested in their seed round back in 2021.
And they ended up building, short version is it's an RFQ DEX for perps.
Okay.
Now what the hell does that mean?
Just break that down piece by piece.
So obviously, PerpDex, everyone knows what that is if you're listening to the show.
I assume you know what PerpDex is.
But their system, unlike most systems, like if you trade on Hyperliquid or you trade on LiDAR, in which, by the way, we're investors in both of those.
When you trade on a normal PerpDex, there's an order book.
You post an order.
Your order gets filled.
Everyone knows.
I assume if you trade, you know how that works.
But that is not how variational works.
Variational is an RFQ exchange.
And so it's technically not an exchange at all.
So calling it a DEX is a little bit of a misnomer.
But we're going to call it a DEX for the sake of simplicity.
So RFQ basically means request for quote.
That's what RFQ stands for.
And what that means is that you do not actually have standing orders on any order book.
There's no order book on variational.
Instead, you are getting quoted a price from a dealer or from some counterparty that is trading with you bi-directionally.
Right.
So it's a bilateral relationship between you and whoever's quoting you the price.
So to be clear, that is how we trade as Dragonfly.
When Dragonfly goes and buys stuff on the market, we don't go on Coinbase and just start sweeping the order book or something.
We go to a desk and the desk where you say, hey, we want to buy 20 million or something.
And the desk quotes us a price and we take it or we don't take it or we go shop around and we go talk to other dealers and we see what's the best quote that we can get.
That's how we trade.
And the advantage of trading that way is that you actually don't need to have inventory sitting on an exchange with orders sitting out there waiting to get picked off by somebody.
Right?
So now, why does this matter?
Why is this a better architecture?
Well, the first thing when it comes to crypto is that actually, if you look at the top perp decks, variational right now is like top five in all the perp decks if you just look by volumes.
If you look at all the perp decks, the number one perp decks for number of pairs right now in crypto is variational.
They have something like, I think they have like 600 plus pairs more than anybody else.
And the reason why is because they actually don't need to do anything in order to have those pairs.
As long as there's an order book on Binance, they can pull through the Binance price because if you want to go trade, you know, I don't know, Shiba Inu perps, they can just go look at, okay, what's the liquidity on Binance?
What is it going to cost me to hedge it on Binance?
And I just quote you.
that basically that same price was spread, right?
So you're basically getting Binance liquidity pulled through the interface straight to you just in time.
Now, the real unlock for this is not, okay, long tail perps.
The real unlock for this is in RWAs.
That's the big story.
Because if you look today at RWAs, right?
So Hyperliquid Trade XYZ has been blowing up into RWAs.
The top 10 RWAs on Trade XYZ do 90% plus of the volume.
You go out of the top 10, the top 10, it's like WTI, S&P 500, NASDAQ, NVIDIA.
You go out of the top 10 and liquidity sucks.
Liquidity is absolutely terrible.
Your execution is going to be awful.
The funding rates are going to be extremely volatile.
And even in the top 10, you go past just a couple of names, it gets pretty rough, right?
You're getting much worse execution than you get on a traditional exchange.
But with RFQ, totally different story.
With RFQ, you can basically pull through the same kind of spreads and the same kind of execution you could get on the CME or on NYSE directly on-chain.
That is how you are going to unlock the vast universe of RWAs.
With RWAs, it's not the same thing as it is in crypto where it's like, okay, well, almost everything is a Bitcoin and ETH and there's a little bit of other stuff that people trade.
That's not what the normal universe of investable assets looks like.
And so if you want to be able to pull in, Japanese stocks and Korean stocks and US stocks and Hong Kong stocks and commodities and currencies and everything, everything, everything all into one place.
I think that is the right model we wish to do it, is to tap in the existing liquidity that exists in TradFi rather than trying to make it yourself.
It's not what Robinhood does.
It's not what Schwab does.
That's the bottle that Variational is using.
And I think in long term, that is going to be the way that you pull through more and more of the RWA liquidity on-chain.
So it's kind of like almost like a broker for all those different, for sucking in liquidity from where it has it best instead of you having to sign up for those platforms and do that individually.
So if you love using one certain platform, but then certain assets aren't available there, you have to go and sign up for another platform and so on.
And these guys just kind of aggregate all that for you and find you basically the deepest liquidity for that asset.
That's right.
That's right.
So there are other dealers who step up onto the platform who have access to those underlying markets, and they're the ones that you're actually entering into a position against.
And is it live?
It's variational live?
Like it's a working product?
It's live, although right now it's access code gated.
But they will be going fully live soon.
I see access restricted to your region for me.
Depending on where you are, that's right.
You know where I am.
That's right.
I'm in the great white north here in Canada.
Some stuff we can use, some stuff we can't.
This is how it is.
That's cool, man.
I like that.
Personally, in the last couple of months, I was looking for a place to trade potatoes and tomatoes and stuff, which have gone berserk after the crisis.
Well, no, because of the crisis straight of Hormuz was like, okay, you're going to have this effect on agriculture and everything.
And I was like, where can I even bid that, man?
They don't have that on hyperliquid.
They just have oil.
So maybe that's where I can eventually bet on grocery store products.
You should subtweet them.
Get the potato market going.
Oh, man.
We'll bring the DJ inside back.
Asim, always a pleasure, man.
Thank you for coming on.
I always love talking to you and you always give us such great perspective on the market.
And I'm sure we'll see you again soon, man.
Thanks for having me.
time.
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