Dragonfly's Haseeb Qureshi: The Biggest Digital Assets Bull Market Has Started (Here's How I’m Positioned)

0:00Haseeb, I've came to learn that not everybody was full-port near hype, lighter, and Zach, and that the euphoria that I'm currently seeing, as you can see, is not reminiscent of, or it's not shared amongst the whole market. What's going on out there, man? How are you feeling? And I hope you bought those lows with that new fund. Great to have you back. Yeah, well, look, I'll say we're feeling pretty good. I think we own pretty much everything that you mentioned. You're looking pretty good. You look like you're in a lot of euphoria right now. What, where are you with? What is this? I've been floored, man. I've been floored. I needed to get out of New York City. And so I figured I would just embrace the old guys sipping the margarita on the beach vibe for the week. I mean, took off the penguin and unveiled his true personality here. Okay, nice. So Haseeb, give us, we have a ton of topics. Hyper liquid and lighter and variational. Obviously, we just got the TGE. We got calcium polymarket both going through their own scrutiny.

1:01We got, what else Rob? We've got this tokenization super cycle and then obviously near and this kind of privacy growth happening. So why don't we start with the perpside variational just announced their TGE day. You guys obviously early investors there and in later and I'll also purchase hyper liquid somewhat early with some size from the Jaguar Fly side. Perps are exploding. There's still 1% of global derivatives markets. The CFDC is just apparently as of a headline yesterday on Go mode, which feels like a rap song, but coming from a CFDC kind of like comms official just kind of tells us where we're at. What's going on with the perpside? How much do you think this trade has left in terms of its legs? Where are we at? So for a long time, perps on Shane have been one of these missing markets. And by missing markets, what I mean is that it was, it was, it wasn't obvious in the very beginning, the DeFi trading was going to be big because on Shane is slower. It's just kind of got these UX crinkles that are going to make it more difficult for people

2:03to be able to use this stuff the way they use stuff in traditional centralizing changes. But once spot trading started to work on Shane, we always ask ourselves a question of, okay, where's the derivatives? If spot is this big, derivative should be even bigger because that's how it always looks in every traditional market is that spot is only 20% of derivatives in any given market once it gets to maturity. So we were back, I mean, this must have been like, you know, 2018, 2019 when we invested into DYDX, then we invested into derivative, then we invested a lot of these early attempts at building perpsdexes on Shane. And they just never worked. The UX wasn't there, the latency wasn't there, the performance wasn't there. It wasn't really until hyperliquid cracked the code that all of a sudden people realized, aha, you must be this tall to ride in terms of UX latency, performance, and everybody, kind of set this pacing that everybody could start to follow as they started sprinting. So we're investors, as you mentioned, we own hyperliquid, we're early investors into lighter and variational that we invested into, obviously, variational pre-TGE still, but

3:06they've been growing a lot using an RFQ model rather than using an order book model. But all three of them have unique angles of attack on how to go at this perps market. I think the answer is that largely, it's hard to see exactly how the crypto perps market is going to grow that much because there's only so much crypto trading in the world. It's more like taking market share away from the centralized venues. And you've seen that with hyperliquid. Hyperliquid is now a meaningful portion of finances total volumes, and they've been going up and up in terms of open interest and in terms of volume. But the really bigger story is that crypto trading on the whole is not the tab. For hyperliquid now already more than 50% of their volume is RWA's. And the RWA tab for trading, if you look at the global CFD market, to say nothing of the onshore regulated trading market is absolutely fucking enormous, so much bigger than the crypto market. So the bigger story is that, okay, I'm not trying to be coinbase, I'm trying to be ice, I'm trying to be the New York Stock Exchange, I'm trying to be the NASDAQ.

4:08We used to talk about this meme of like, oh, the NASDAQ on the blockchain, but the meme is actually happening now. That is the much bigger market, which tells you that this trade has a lot farther to go. Even if you look at the volumes that are happening on hyperliquid and the liquidity available on hyperliquid on real world assets, so when you see people trading WTI, so people trading SK high nicks or gold, these are very, very small relative to the overall market compared to Bitcoin and ETH, which are now pretty significant relative to what's getting traded on the Binance. So that delta is the room to grow for this trade. Now, there's a lot more work that you have to do in terms of market development and in terms of getting the liquidity and also getting the awareness. We've got headlines now with people talking about, oh, the price discovery happening on the weekends or happening on a bank holiday or a trading holiday. That's stuff, okay, that's now happening when the market's closed on hyperliquid. That gets a lot of mainstream attention. And getting that day-to-day price awareness happening on hyperliquid or on decentralized

5:09venues, that's the bigger unlock. So in my mind, there's a lot more room to go. Yeah, and I know Rob's got a ton of questions. Just one follow up there. How do you underwrite the trade from hype at 94 lighter at 5.5 in terms of dollar values and you can, you know, people have different opinions on what the total market cap is. For these assets, just based on the buybacks and the burns and the treasuries, etc. But when you underwrote lighter and variational and hyperliquid from the liquid side but also on the venture side, if I'm underwriting that trade now, what's changed? What do I need a factor in from today's price and value to tomorrow? What is that underwriting? As an investor, how should I think about the risk of today versus six to 12 months ago? And then also where this could go and what needs to happen to make this thesis play out? Yeah, so I'd say if you look at variational and you look at lighter, right? So variational right now, obviously the pre-GGE lighter, lighter, fully-dolled evaluation is like 45 billion.

6:13Variational depends on where you price it depending on the points more I get in a given day. But you know, we call it somewhere between 1 and 2 billion for variational. That right now is if you just look at the tam, right? Let's say the tam is not even all the stuff that I just talked about. Let's say the tam is just hyperliquid. Is how much can these guys take a bite at a hyperliquid? And then when level up, how much can a hyperliquid take a bite out of a bite else? You're assuming no tam expansion. You're assuming not that we're going to eat anything else. Just that freeze the market where it is today. How much further do these guys have to grow? Right now, hyperliquid fully diluted is like, what is 80 billion, 90 billion? If you look at where variational is today, that's a no, basically they're like 2% of the market, 1 to 2%. And if you look at lighters, I'm like 4% to 5% of where hyperliquid is sitting today, which tells you that from their side, any advantages that they have, whether it's on the US go to market or whether it's on the product side that they're improving on or for variational,

7:15if it's on having a genuinely different model around RFQ and being able to offer deeper liquidity with their swaps product, relative to traditional approaches to doing RWA's with old-fashioned oracles and kind of just regular old perps. That, underwriting that requires, that's a venture type outcome. And that's the kind of stuff that we do that's our bread and butter. Now hyperliquid, that's kind of the market, right? It's like asking, what's the fair value of ease? Any given day, people are going to, you know, they're going to give you 15 different models to decide what is the way in which you're going to value these. As investors, we're largely agnostic to that. There's a lot of different ways that you can skin the cat about how to value the tam for hyperliquid. And I also don't want to be in the position of making your market call, but the large answer is that, look, just take hyperliquid versus finance and look at that chart historically, which is that it's basically been a one way ratchet for hyperliquid relative to finance. Now, the two move together, all of a sudden, when crypto trading is down, when volatility is down, both of them decrease in volume.

8:15But the relative number has basically been kind of one way only. And that's the number that I would keep an eye on if you're thinking about sizing the overall tam for hyperliquid. Yeah. And so just to close that loop there, Rob, is that there's kind of layers to this, right? So you've got at the lowest layer, if you will, you've got what can variational get from lighter in terms of market cap? Like, what can that, how can they close that spread? And then how can lighter close, or both of them close the spread on hyperliquid? And then you've got all the perps complex on chain closing the spread on finance and OKX. And then you've got the entire crypto complex closing the spread on NASDAQ and CME and interactive brokers. And so it's just kind of like, there's different risk parameters for each of these, of these different tokens and each of these different holds. I would assume that the lower market cap you go, the lower and the layering of the cake, the more risk. But sometimes that doesn't always happen. And sometimes, lighter flips goes on a crazy run and flips hype somehow, right?

9:15Or something crazy happens because hype gets hacked. There's always kind of like, extraneous things that could happen. But interesting view, yeah, back to Europe. I mean, I think you're absolutely right about TAM expansion, because for so long, you know, we were talking about decentralized exchanges and perps exchanges, taking volume away from centralized venues. But no, no, no, no, now we're taking volume away from brokerages, right? That are trading these massive asset classes. And I was looking for a tweet, I was able to find it. But I think if I remember correctly, it was basically saying that AMC, you know, this movie theater got tokenized their stock and CEO was very happy about it. But the tweet that I remember was that 2% of the volume around AMC was happening on chain. And I think, I see you mentioned that this is the metric to watch. What is the proportion of volume being traded for public companies that is happening on chain versus off chain, whether that be centralized or brokerage? That I think is a metric to watch. And I think you're absolutely right that the relative market share around public company and broader asset class trading is moving on chain.

10:18And you know, this is essentially a one way train, a runaway train. And we're going to see a lot more TAM expansion. And I think that is the thesis for hyper liquid and lighter in the rest of the perps complex at large. And so perps is one of the big four or the big five that we talk about on the show a lot has seen. And before you joined, I asked Andy, I was kind of thinking out loud, I was like, look, you know, you just raised 650 million in fund four right takes you to about four billion assets under management. I think we pulled that stat probably before this, you know, most recent bullish move up. So maybe we're higher. But so I'm curious. I'm curious categorically how you allocate four billion. Obviously you've got a significant portion of that adventure. A lot of that is in liquid as well. But if we put liquid adventure aside and we just look at the categories that you're allocating into, the big four that we've talked about has been perps prediction markets tokenization and stable coins. And then maybe you could extend that and include vaults if you make it a big five.

11:20Is that kind of the right categorical approach the right way to kind of divide the pie or do you have another framing for how you allocate four billion dollars? Yeah, I mean, those are directly correct. I'd say prediction markets are also a big area of a lot of growth as well as the intersection of crypto and AI. You know, we recently led around into Venice AI, which VVV has been on a tear over the last month or so. It's it's the other thing that you also want to be mindful of is that you never want to index too much on what's happening literally right now if you're VC. Because you're you're trying to not you know, we're not traders, right? As a trader, you're kind of thinking about what's going to move in the next week. What's going to move in the next month? We're thinking what's going to move two years from now, three years from now when a company that we're investing into at a seat stage or a series A is going to be coming to the four. Like when we are investing into lighter, we invested in lighter before hyperlake. We had its moment and before this thing was a big category. We invested in a polymarket before the twenty twenty four election.

12:23Like the time when you as a VC want to be shoveling money into startups is you want to try to see around corners and think a little bit further ahead than just like what the high water market is for the present market cycle. Yeah, it makes it ton of sense. And so can you give us any sort of breakdown as to like how you see these things playing out over the next few years. You know, if you were looking right now and allocating today over the next say two to five your time horizon and you have your choice of, you know, vaults tokenization infrastructure, stable coins, per prediction markets, you know, whether it's liquid or venture. How do you break those up? What do you most bullish? What do you least bullish on out of those five? Interesting question. Least bullish, I would say maybe vaults. I think vaults are, you know, it's clear that vaults have a lot of product market fit. There's a lot of demand for them. However, they don't. It's not obvious to me that they're going to have a lot of defensibility.

13:23Ultimately, like the biggest beneficiaries of vaults, maybe the issuers themselves and not the vaults platforms. Again, there's a lot of game left to be played on how people are going to pack these up and distribute them. But right now, my observation has been that I don't know that the vaults platforms themselves are going to be big winners. This might be a very commodified product at the end of the day, even if there's a lot of demand for it. You know, so for a lot of these traditional financial products, they're often lost leaders, even though they have, they gobble up a lot of AUM. It's not where the money is made for a lot of these big financial institutions that offer a lot of these commodified products. Before you get into the one that you're most bullish on, this announcement from Ando and BlackRock today around intelligent portfolios, it feels like it really resembles a vault. But you're like, hey, there's no moat. Distribution is the moat. BlackRock can go do this because they have tons of customer distribution. But anyone can kind of spin this up. There's really not much defensibility. I don't want to speak to that particular thing because I don't know the details of how it's being offered or what Ando is adding to the table.

14:28I do think actually tokenization is one of these things that is doesn't have quite the feature of a vault. So if you think about it, let's say there's two vaults that are offering the same underlying yield. So they're doing some kind of carry trade. And this vault is using this carry trade in order to give me some yield. So I don't really care if I'm going to vault A or vault B. So basically there should be pure price competition, right? As long as I have some redemption rights, I kind of don't care if it's vault A or vault B. So provided that both of them are legit and I have some guarantees that it's going to be a solid while I'm in this vault. On the other side tokenization, I really do care about having in the most liquid tokenized version of this asset. Because tokenization, I'm trading this thing, I'm moving it around. I really am going to get hurt by fragmentation. So tokenization is kind of the opposite of vaults in that sense because of the fact that vault them holding it for a very long time. Does it really matter if I'm in the less liquid vault or in the more liquid vault provided that I have the same redemption terms?

15:28And that, you know, again, I'm not going to be worried about the vault. You know, if the underlying is the same, shouldn't really matter. Yeah, you know, I'm not going to put my money into a vault run by some random bozo. But I'm just a lot less sensitive to market fragmentation and vaults than I am in the alternative. So, you know, that's why I think tokenization has more economies of scale. And obviously that's where condo plays primarily. But the reality though is I think tokenization is probably going to be secondary to purpose in this story that may not be true the farther out you go. But if you're talking about like one year from now, I would still bet on purpose over tokenization. But five years from now that might change, right? And why do I say that? I see that because when do you want to tokenize something as opposed to trade on a perp? The answer is when you are saving for the long term and holding a position over a long period of time as opposed to making a short term directional trade. If you're making a short term directional trade, that's when you want a perp because a perp allows you to get leverage. You don't need to worry about how much of the underlying is held in inventory. You don't, you're not like, okay, there's not enough capacity in the market, right?

16:30Like with a perp, it's all cash settled. And so you can have, doesn't matter how much AMC is out there. If the AMC guys like, I don't like this. I don't want you tokenizing this. You know, nobody has to go out there and like hold actual AMC on chain in order for you to have an AMC perps trading around. So, AMC, and of course, the other thing about tokenization is that people are talking about doing real tokenization in which case they have to be K. K.Y.C., there has to be some more regulatory surface area for doing this quote unquote real tokenization as opposed to these dead instruments, which are kind of these yellow tokenizations where you get the economic exposure, but you don't have the governance or, you know, the real stock quote unquote that you're that you have exposure to. So, I want that when you want to save. But if you're not saving, if you're instead speculating or investing over short periods of time, that is what most crypto natives are doing today. There's not a lot of people saving like people who are saving are saving using dollars, right? So, they have stable coins. They're in some emerging market and they're not at the stage right now where they're like, yeah, I want to go invest in AMC.

17:35I don't know if anyone's investing in AMC, but you know, it's something you're investing in the S&P or whatever in, you know, a Fortune 50 company. That's still a niche behavior on chain relative to the crypto natives who are mostly betting in short term trading. So, the CFD market coming on chain, I think much more proximal, much more similar to the existing crypto user base. But in the long run, I do believe that savers are going to come on chain where it's normal people distributed through Fintech, just like the stable coins are today, where you have some Fintech, some emerging markets person is like, hey, I have exposure to dollars through some Fintech that's in my region allows me to off board my local currency into stable coins. But I can also invest into a diversified portfolio of stocks and bonds, the same way that you or I might, that behavior will come. But I think it's going to take longer to get here than the purpose are going to take to grow. Yeah, I think, I mean, I think if you look at the mapping of tokenization expectations, you get this really exponential curve, but we're still in the early, early part of that exponential curve, right?

18:37And so, you know, right now, perps are kind of in their exponential era, you could argue just because of the regulation that's probably coming and turning it from a headwind to a tailwind, as well as just the broader growth of tokens and the attention. So yeah, I think aligned on that take and just grateful for Vlad Tenif, you know, to be the new main character for this industry. Like, I mean, he is undoubtedly the main character of crypto right now. His chain is blowing up. I think it's going to continue to explode. He's going on CNBC and just pitching tokenized assets and pitching perps and stable coins. Like, he's the perfect. We've had the worst main characters in the past. Absolutely. I'm trying to break his voice into some new characters. Right? Like, we need some, and so he's answering hard questions. And, you know, there's a Robinhood summit next week. I'm going to go. They're going to do these new trading tool unveiling and whatnot. So, very bullish. On the contrary, the negative perception, I would say the darkest spot right now is still prediction markets.

19:39So last week it was CalShi and was trading or, you know, even this week. And then today it's polymarket with the New York, you know, GA or whomever, suing them for illegal gambling practices. So, I mean, they're just under the fricking fire, you know, they're just getting just absolutely bamboozled by regulators, by the public eye. And I'm in the car driving it. It's coffee today. And you know, guess what I hear on the radio is an ad for betting on CalShi for the sports or for the NFL. You know, it's just kind of like they're all in your face everywhere you go at MSG, at every sports arena. And then they're always in your face in the negative press, you know, dynamics. So, questions one, CalShi was trading, does it really matter? Is it that big of a deal? You're obviously a big investor in polymarket. Doesn't seem like that big of a deal. How big of a deal is it? Two, what's going on with with polymarket, illegal gambling, where are they at with their US kind of push? And just kind of to top it off like what do these companies need to do to turn their image around?

20:43Yeah. So, I'll take those in order. So, CalShi was trading allegations. So, these are allegations. I think the answers to them have been somewhat satisfactory, somewhat less satisfactory. I think like the ratio between the open interest and the trading volume on CalShi is a little bit surprising. It's embarrassing in Lopsided. Yeah, it's embarrassingly bad. It's not great. That said, like obviously this is not the main story of CalShi. It is not how they're making their money. This is like kind of a side market thing. So, I think every exchange does stuff to try to bootstrap. I think they tried to own it. I don't know that they successfully owned it in the public eye, but them trying to walk the things back. The way that this whole drama unfurled was incredibly entertaining. I do have to thank them for that. Just because it was a little bit of a quiet weekend and a personal drama turned into something so spectacular was just it was kind of great television. So, who does it for that? Keeping it interesting. I'd say on the on the New York Attorney General thing where where the teacher James, I think is her name, she came out of Polymarket and called them an unlicensed gambling operation.

21:54So, look, basically what she's saying is that you guys, not that you can't do this, it's that you need to get a state gaming license and pay taxes in New York. It's about taxes, right? And like all these state attorney general who are suing all the prediction markets, CalShi, crypto.com, and Coinbase, and Polymarket, they're suing all of them. And the reason why they're suing them is that they want taxes. It's not that you can't do this, that you can do this, but you have to pay taxes to the states. Obviously, the prediction markets and the CFTC have taken the position that know these are federally regulated markets and therefore they do not have to get state by state licenses. We have a precedent for this, which is all the other markets that are licensed by the CFTC don't do this. They don't pay state by state taxes. They don't get license in every single jurisdiction because for federally regulated stuff, there's a different licensing path than every single state has a da da da da. Very clearly now there's a circuit split. Some of the circuits that this has been challenged in, it's gone up to a pallet court and the appellate court has voted in, not voted, but it ruled in favor of the prediction markets. Some of them, they've ruled in favor of the states.

22:59That means now this is going to Supreme Court. It's very likely Supreme Court is going to take this case and probably sometime next year there's going to be a Supreme Court ruling. This latest thing in New York is not like a, oh my god, I can't believe they did this. It's like every single state is fighting this fight because they all want money. So no surprise that this is what's happening. One, we go to the Supreme Court. The big question is going to be how Supreme Court going to rule. Are they going to rule and say, look, this is an entirely federally regulated market. States back off. Is it going to be federal government back off, give this all to the states. Each of them is going to have to go state by state and get licenses and pay the taxes in the state. Or are they going to split the baby and say, well, you know, some of these markets are appropriate for federal regulations. Some of them are going to be state specific. You know, if I had to guess, it's probably going to be some kind of splitting the baby. That's, I think, often the way Supreme Court likes to do these things and say, well, each of you have good points. We're going to meet you somewhere in the middle and like parts of these things are going to be able to exist globally. Parts of them are not.

24:01I think that's likely where we're going. At the end of the day, like a lot of the reason why the public sentiment against these companies is turned so negative. And I agree that it has is because these companies are super young. They're very brash. They're very aggressive. And like they're just more in your face than a lot of traditional. Yeah, they're just everywhere and they just everywhere and they just want you to bet. They just want you to predict. It's like predict. It's just like full fledged all like take the take the clothes off and just here's what we're doing. Like it's just in your face. Yeah, that's right. So look, I think the answer is going to be that people will get like both the companies are going to mature and you're going to see less of them in the headlines. And I think like the market is also going to saturate a lot of the reason why this advertising is working so well. And why they're paying so much for all this advertising. Is that a lot of people genuinely don't know about these companies and they're growing super fast. But eventually they will saturate the market. Everyone will have heard about them. They'll become more brand marketing rather than actual, you know, trying to acquire new customers because.

25:04Look, if you don't want to use one of these prediction markets, you're not going to use them. But today, a lot of people still genuinely don't know about them. They're in the early parts of their growth curves. That's a big part of the reason why the marketing is so aggressive these days. I see, maybe this is a little too in the weeds on the ruling front, but is this primarily going to be a case between the Supreme Court or the states and the companies or the states versus the regulators being like the CFTC that is taking jurisdiction over these things. No, so the CFTC will likely be in a make-us meaning a friend of the court. It will be somebody who's giving their own opinions and sharing their perspective in court. But the CFTC is not going to be the defendant. When Supreme Court hears a case, the case is an appeal from a case that was at a district court or it's an aggregation of multiple cases that happen at a district court. Those cases overwhelmingly are going to be the states versus some of the prediction markets or maybe just call she given that call she was the first in the US context.

26:06And they have most of these lawsuits against them. It will very likely be that a call she is the one up there that's defending prediction markets at Supreme Court. But it's possible they aggregate cases from multiple prediction market cases. And just a couple rapid fire know we're coming on time. Is it too far fetched to think that what's happening with the wall she writing stuff on CalShi is going to push some people in the CFTC's inner circle to consider accelerating the on chain per dynamics due to the transparency. And then too, maybe you could just give us your brazen blunt take on what's happening with near and Z cash. Will the CFTC accelerate on to I think that's probably pretty orthogonal to be honest. I think this CFTC. I mean, clearly there was there was a report the CFTC was investigating the reports of what's going on here with call she and probably they'll issue some kind of fine or something. I don't think it's like a shopper. You know, there's you can like the reality is that all this stuff was publicly accessible by API. You can get all this data yourself and verify that this was happening.

27:13So they weren't trying to hide this per se. It's part of the reason why I got called out publicly. This wasn't like a whistleblower. This was somebody looking at very obvious public data and saying, hey, this doesn't look like organic trading activity. So on the near Z cash side, look, we're investors in both near and Z cash. I'm a personal investor in Zodal, the Z cash wallet. I'll say very clearly, you know, this is kind of again one of these mega trends that they're both leaning into the re awakening of privacy as Bitcoin and crypto is institutionalizing. So there's always thesis antithesis happening at the same time. And I feel like that's a lot of the reason why you see this big Z cash resurgence near I think is part of the same story, but also part of the account abstraction story that was something we were promised a long time ago that blockchains are they're fragmenting. And I'm also going to get easier to use because we're going to unify everything into one central experience that kind of didn't really happen. You know, there's still a lot of complexity and managing wallets and moving assets here to their blah blah blah. FOMO really wrote success on having solved this in the form factor of an app. And I, you know, I made the argument on Twitter that near is also solving this problem, but from the other side is that your near is basically making the single account abstraction for every single chain, every single trading venue, every kind of financial activity you can do on chain.

28:29Whether it's, you know, something like buying Z cash, which you can't buy Z cash through FOMO or like do shield activity through FOMO. It's not about that. It's about me. We're trading. So one part of crypto ethos is I want to show everyone my PNL and screen it from the rooftops. The other part of the crypto ethos is that I want to disappear into the into the spectrum of privacy and not let anyone know I exist. That's what here is more. I only have time to talk to the exclusive either they kept it one after the other first you make a bunch of money shout out from the rooftops and then you get all many hide. I only lose money on FOMO so I don't have that problem. So I'm safe. I'm safe on that. Let's see, but always a pleasure. 2026 crypto predictions we have to go back in a couple months and do an episode in maybe December late December and you know prior to Christmas and just recap there. I think if you remember last time Robby now we're sitting in a in one of our parents homes at the fireplace and I know I'll all done up so we have to run that back. All right.

29:30Sounds good. Sounds good. All right, buddy. Thanks to you and token man. Peace out.