Onchain Finance Is Growing with Zack Pokorny

0:00Welcome to Galaxy Brains! An infinite amount of cash, cash, and pop. When your host, Alex Thorpe, the US banking system is sound and resilient. I've been quite meeting new old farm high. If you're not long, if you're not long, you're sure. Satoshi's gonna come on there. Waff is directly. Go quiet. I hope the coins will be erased. I've been quite, it coins the best crypto-user. I've been quite, it's going to zero! Welcome back to Galaxy Brains. As always, I'm your host, Alex Thorne. Head of Firmwide Research at Galaxy. Bitcoin not zero. We have a great episode for you this week. Zach Bacorni from Galaxy Research joins us to talk about Robinhood Chain. Tokenized stocks. What's going on in social trading. And much more. Zach's in the trenches. Working the data on blockchains at Galaxy Research. And has a lot of interesting insights. We'll also talk with our good friend Bimnet, a BB from Galaxy Trading. As always, about markets. We're talking a lot about the Fed, the Treasury, the interesting spot that the US government, and the Fed find themselves in.

1:01Visa, V's, whether to hike or cut, to hold what inflation looks like, the price of oil going up, and much more. Before we get to that, I need to please refer to the link to the disclaimer in the show notes. And note that none of the information in this show constitutes investment advice or an offer recommendation or solicitation by Galaxy, or any of its affiliates to buy or sell any securities. Wow, Phineas, we're back. We were in West Texas. Phineas was with me. He was out there shooting some awesome content. I won't spoil it, but I think there's some great content coming out from our trip to West Texas by Phineas and his team and others at Galaxy who were there, including me. And we went and visited Helios, Galaxy's data center there in Dickens County, Texas. Absolute sight to behold, you cannot fathom the size of this thing. First of all, the existing data hall that's been built and delivered, but also the project going on to build more there, truly astonishing. And I'm like sending back pictures of backhows and excavators to my kid who loves construction vehicles.

2:05Every single one you could imagine was there. I visited Helios for the first time in 2023 when we were, of course, only mining Bitcoin there. And the transition into whatever it is, whatever tier or whatever data center that it is, because I guess it's different. Not just mining with ASICs. You got to do it. You got tenant clients this time. You know, we're the data hall and energy provider, but you know, you got somebody else's equipment. You got to do a good job for building looks completely different. Absolutely insane. Can't wait for you to see those videos that will produce it's, you know, in the near future. Also, we went to the home opener at Texas Tech, where Galaxy is the named stadium partner. So Galaxy Stadium in Lubbock, Texas. Awesome game. They absolutely crushed ACU, Abelian Christian University. I believe it was called. And just great time. People in Lubbock and in West Texas.

3:05So nice. Very hospitable and welcoming of Galaxy. And we're very happy for that because we love to be there. Been building there since 2022 and have big plans to keep building there. And I just got to say, so fun going to that game. They love their football. And I'm, I'm, I got to say it. I'm in the tank for these guys. Big Texas Tech, Red Raiders fan right here. So Reckham Tech Guns Up baby. Let's get right into it. Bimnet a BB. Let's go now to our friend Bimnet a BB from Galaxy trading. It's always Bimnet. Welcome back to Galaxy brands. Thanks for having me. I've been away. I was in West Texas. I have no idea really. Couldn't tell. I mean, let's go Reckham Tech Guns Up baby. I have not been following markets very closely. Yeah. Bitcoin's been pinned in this area. So, you know, that, you know, one number that I follow. What's been happening the last week or so in equity markets? I know you were talking about, I heard you talking about some, you know, long and bond pricing earlier today. What's the big story right now? Well, the rally in Bitcoin and brought a crypto as well as gold that started about

4:11three, four weeks ago was started by Secretary Bessent saying that he will increase the size of the Treasury buyback program that he will double it. Subsequent to those comments, he suggested that he was going to increase it even further. And today we got the formal announcement from Treasury that essentially tripled the potential size of the buyback. So, what the buyback is, is, and this is specific to the long end buyback, is an operation that the Treasury runs to buyback certain parts of the Treasury curve that they've issued longer-dated stuff. They buy it back, decommissioned the paper, and then they issued T-Bills or some other things. And so, effectively, what the market viewed it as was a line in the sand where the Treasury was going to step in to effectively, you know,

5:11what people will say print money. Yeah. But it's not, it's really managed. Because it's not the Fed right doing it. That would be printing money for sure. But effectively, it is in a way because when the Fed issues more T-Bills has to get absorbed into the market. And as you know, like a couple months ago, the Fed had to, more than a couple months ago, but the Fed had to start buying back T-Bills to inject reserves back into the system because so far started blowing up. So, if you look at a chart of the Fed's balance sheet, it's actually started to move higher again. So, we are technically in a period where the Fed's balance sheet is actively expanding. And I would define that as QE, but you know, there might be some debate around that because the Fed doesn't want you to think about it as QE. But it is QE anyway. And so, the realization that, you know, the government was willing to step in if yields got to some level was a big catalyst because it kind of,

6:12like what's the value of money if you just like printed all the time? And if you don't like a price, like you just adjust it. And there was like a bit of disillusionment because of some of the tension between what Worsh has said previously and what Bessent wants. Worsh is in the camp of reducing the size of the Fed's security portfolio, 甲保, sheet runoff, et cetera. And it seems like Bessent is in the opposite of that. So, this friction and this inconsistency coupled with the fact that Worsh lost a little bit of credibility during the first FOMC. He didn't hike when the market was telling him that he could. And so, essentially, there's a lot of focus on this stuff. And the comments around, the comments that Bessent has recently made, made it seem like it could have been bigger than 6 billion, but it came in at 6 billion and it's like they'd buy back the par amount. So, it's like, he initially said two, right? And we were four. And now it's six.

7:12Now it's six. But we've even been saying, and you were saying that it's not so much the size of the cannon. It's merely the signal that he's willing to use it, that is really what was moving markets. And there's sort of recreating this debatement trade and that helps explain gold and Bitcoin moving. Which I've been moving at a high correlation. One of its highest 30-day correlations I've seen in a long time with Golda McQuind. But does it, is he based? Is he actually basically saying that he will bring out more money, too, if needed? Is that, that's what the market is assuming. Net net, it's a flat money transaction. Right. Because he's got a issue more. Right. He takes cash from what the TGA, the Treasury General Account, and buys back debt on the market 30-day bonds, 30 long-dated bonds, cancels the debt because it's that they owe themselves at that point. And then issues, maybe a similar amount back in the front end. And so really he's basically just taking money from the TGA and using it to just restructure the debt profile.

8:14So it's not, yes, it isn't net. But again, could he do it at much bigger scale? How much money do they have for this? Well, the TGA typically runs around like $850 billion. They do have a lot more. They do have a lot more, but it really is. It would signal a lot of fear if they started using that at a much bigger scale, wouldn't it? Yes, it would. I think $6 billion is kind of the cusp of like, it's hard to engage. Yeah, but it's a big number. Right. It's a lot of money. It's every operation. Yeah. Right. Up to that amount. Well, per time they do it, I see. Correct. So they can wield the cannon many times potentially. And is this kind of like, I know it's different. Usually it's like the central bank that would be doing yield curve control, but this kind of is. This is your curve control. Yeah, from that treasury. Absolutely. Because do we know what the line is? Well, we've always had your curve control. It just hasn't been explicit policy.

9:18But that was a little bit of time. Yeah, I mean, yelling when we were hiking rates and the back end supply had increased. She came out and like cut like treasury supply when tens were approaching that 5% area. And so this isn't, you know, something that is unprecedented. Right. But it just comes at a situation that's like a lot worse where, you know, you've got energy prices climbing like crazy. I mean, oil's up another 3.5% today. I know. I remember I was wanting to be long oil in and around the Iran war situation. And I was, I mean, wanting to be long oil. I was very disappointed for a while because we got down to the 60s, didn't we? Like 68. Yeah. Yeah. But it is. I see it is coming back. I also see that that war, you know, is simmering still. It's simmering. It's simmering. You know, I think the market has gotten its head around the fact that, you know, the Iranians are in a bad financial situation. And every day that passes, it gets worse. And so the chances of, you know, a more reasonable outcome, less kinetic one, is probably increasing over time.

10:27But at the same time, you could make the case that, you know, maybe this pushes them to be even. Yeah, we get desperate, lash out. So it's very hard to make some things. But they are kind of out of like, it seems like I don't do not know, but out of like very serious retaliation. You know, they're doing stuff through proxy. I saw, you know, some annoying stuff in the straight with some boats. But it doesn't, it seems like they're very degraded. So it's like that, yeah, I feel like you're sort of saying the market is anticipating if it does continue to be sort of a lower grade simmer. Right? I mean, I, it's just hard. It's pure, sorry. It's just, it's just, it's pure speculation. There's a lot of speculation. And, and, you know, I, I think the most important things to focus on are you've got PPI out tomorrow. You've got CPI out on Friday between those two. You'll have a good idea of where court PCE will print. And you've got Worsh in his FOMC meeting next Wednesday. And you have 16 basis points price.

11:28How does it work, by the way, you were saying how, you know, Worsh, the market was telling him the last meeting that he could cut. I'm sorry, he could hike. He could hike. But they didn't hike. Is it literally a straight vote or is it like the, ultimately the chair of the FOMC? They're voting members. He decided. No, no, no, it's a vote. Oh, so it is a vote of the vote. And they're specific voting members. But is it, it's very influential? Is it, is it, is it, is it influential? He is influential. So like we, we, not just us, but like the market is always talking about power or, you know, green span or yelling. Like, sorry, not yelling. Was he out of the Fed? Yes, he was. Yeah, okay. Sorry, sorry. So we usually go the other direction, you know, I feel like Fed is like the job you retire from. Yeah, we, we, we blame you say, yelling didn't cut or green span didn't cut or didn't hike or whatever. But it's actually all those FOMC governing voting members, right? But if the chair wants to, they can typically influence you think? The precedent is that the, what the chair wants usually goes. Yeah. And I don't think it's different.

12:29That's why it's such an important job. Yeah, specifically. Absolutely. Yeah. But I think, I think what we have here is an insane setup going into the SEPFOMC because it's a very similar setup to the last FOMC meeting where you have a lot baked in in terms of potential hikes. And if he chooses not to hike, those credibility concerns might pop up again. Yeah. Now he did a good job at Jackson Hole of explaining it. Explaining it and the nuance here is that in his first FOMC, he did not give the market enough color about his response function. In fact, he didn't give it the, the market enough color about what he's actually even looking at. Right. And so what metrics he cares most about. And so the market was just like, you can't tell me that you're not going to give me any information about anything and you're going to ask me to trust you.

13:30And at the same time, like when you were expected to hike or reasonable chance, you come in and hold. And you're not giving me that much info. Like, come on, dude. And that just makes people uncertain and that. I know it's bad for the SEPFOMC. That's right, basically. Right. And so you might have a little bit of a, of that. Could be a replay. But I think this time is a little different because you actually have a greater appreciation for the things that he's looking at. But if you look at what's come out, you had a gangbusters 163,000 job print for non-farm payrolls last week. You also, you know, revised higher, you know, some of the other, you know, month, month's worth of data. So the labor market looks okay. The inflation data that you're getting in the next two days is backward looking because it's the month of August. But it doesn't capture this a lot of this huge rise in oil that you've had since.

14:30Right. And it's not just oil. It is the diesel prices, the other refined products. And you've also had like a pretty big rise in other commodity prices. Right. Like the, because Valdenio and things like that. Copper, copper, wheat, like soybeans, corn, beef, like beef is up huge. I don't know about just lately, but I mean beef's up double basically in a couple of years. It's doubled the price. I mean, so the rate of inflation to the average person does not feel like it's had an acceptable level. No, it doesn't. No, it doesn't. And so, you know, I think there's a reasonable case to be made that you should be hiking. At the same time, can you find a way to like hold, but hawkishly hold such that there isn't an outsized reaction in the back end of the curve potentially. But it's a pretty interesting setup. But regardless, I think the take away from all of this is you have the like, let me just taking a big step back.

15:34Like the debatement narrative, the fiscal responsibility, irresponsibility narrative, the structural issues in the economy and debt. They've always been there. Yeah. Right. At every point since we've been doing this pod, we've always known that we'd get to this point. Yeah. What's different this time is they are so brazen, brazen, I think, about manipulating the market. That it's so in your face every day, like, best that yesterday said he is the house now. He intervened in the dollar yen market. That's right. Right. He's upsizing the best. And you're only like, you know, like a couple of years into this and less than two years into this administration. And then you've got warships well that seems to have this big credibility issue. And we're printing bigger deficits than ever. And it's just like, it's just so in your face every day that, you know, maybe you should diversify away from the dollar.

16:37Maybe the government is pursuing a weak dollar policy. Yeah, or an unsustainable one. And an unsustainable one. But you also, it's the press. And then think about this. The moment, like a week ago, Trump threatened to increase tariffs if the Fed didn't cut or if other nations didn't cut. So you've got the president telling you to do monetary policy that isn't kind of like with the consensus crowd of macro folks. And then you've got, you know, best on this other side. So it's just so in your face every day that it's really hard to ignore. And you couple that with, you know, a big shift in kind of, I don't want to say like anti-US sentiment. But there is a shift to diversifying away from the US.

17:38And I don't know, it's not anti-US. It's just the way I'd characterize it. It's just, let's diversify because we're just, we have all our eggs in this one basket. Right? There was a headline out the other day, the Norwegian sovereign wealth fund was considering like an 80 billion shift away from treasuries or US assets. I forgot the details. But, you know, we're in a trade war with Canada. And by the way, the inflation thing, just remember yesterday we, Canada just put on more tariffs. Right on us. Yeah. And so anyway, this is just to add to the whole inflation equation. The war is under a microscope here. It sounds like this war is on a microscope. I mean, what war says next week, especially if he does a hawkish pause in Iraq, which is my baseline. Yeah, that's what most are now, the market wants hikes, right? They're pricing hikes. Someone now, I don't know what it is currently, right? But they probably have learned from his last meeting that he may not do it anyway.

18:39Correct. And so how he lands the plane on explaining that is more important than probably a lot of meetings recently, right? Absolutely. And there's like, Jay Powell were seemed to be much more predictable when the market was pricing hikes he usually delivered hikes. Correct. When the pricing cuts, he usually delivered cuts. Correct. Right. And that predictability is what gives folks comfort. And it's like it's still being debased perpetually forever. Right. I mean, that's how dollar policy works. But at least you knew that you had confidence in the rate. There weren't going to be surprises. Right here, it's like, I mean, you know, cut high, who knows what's going to happen. Hold kind of feels, I mean, this is, I think, do you think that's played a role? I know Bitcoin was well oversold and, you know, long in a cycle and stuff like that. I mean, this seems like a perfect juxtaposition for the predictable monetary policy of Bitcoin. And similarly gold, I mean, has that been a big feature in the rally? Yeah, no, 100%.

19:41You know, this was just positioning in Bitcoin was like a one out of 10 and you had a positive catalyst. Yeah, all of a sudden, like, oh, I got to get my business fixed. And so I think if you just play this out over the next six months, Bitcoin will be higher. Period. Gold will be higher. If I had to pick which one of those will outperform, I will tell you looking at the historical Bitcoin gold chart, Bitcoin should outperform in that environment. And so I have never seen a setup like this where the macro debatement digital gold narrative for Bitcoin. I haven't seen it stronger personally. There you go. Well, this was what a roller coaster this year has been because you were a very prominent bear. Now, you've been very prominently bullish now, and I, which of course I love. But it's been really fascinating because you've really timed, I mean, look, again, looking back,

20:42not necessarily came, can't know exactly what happens, but you've been a great parameter for where this market is, because you were bearish until the bottom. Yeah, basically. What's different, a little different this time, though, about the Bitcoin rally, is that it feels like it's going to happen for the wrong reasons. What do you mean? Like, I like Bitcoin, right? I love what it represents, you know, self-custody, defined monetary policy, security privacy. But if you're telling me we're going to go up like crazy because our central bankers and our politicians and our government officials are making awful choices, it doesn't leave me with a great feeling. Yeah, this is like what Mike's been saying, though, for the years, right? That it's a, it's called a scorecard on a fiscal prudence or something like that. Yeah.

21:42And you hate to see it, you hate, but we're not quite there yet. I mean, we're not at, like, this is what Mike said, too, and many, I think, have said this, you know, you like to see maybe Bitcoin in a million dollars one day, but you like that to be gradual. You know, it shoots to a million, like, in a short period of time, that means some, some shit's going sideways. Yeah. All right, we'll leave it there. My friend, Bimba, to BB from Galaxy Trading. Thank you so much. Thanks for having me. Let's go now to our guest, Zach Bacorni, Galaxy Research, Zach. Galaxy brains. Going on, Alex, it's been a minute. It has. And, but you've been on Galaxy Grid, pretty much every week now for what? Like, I think it's been like a year, 50 weeks or something. It's a lot of episodes. That's the show that we put out usually Tuesday afternoon. I think we're recording this on Wednesday, September 9th. It probably comes out tomorrow or today. I think it's already out actually. Yeah, because, but it was Labor Day this week, so you didn't record on Monday. Check that show out. It's very good. I want to talk about a couple things. We're going to talk about the, your new lending report is out from Q2. I guess we'll start there, but we're also going to just put the audience to talk about Robinhood,

22:44Chain, some stock tokens. Maybe a little bit of AI. Was there someone else who was on social trading? Yeah, social trading. Let's start with the lending report. I guess, you know, one of the things that I love about that report is it's the only one that aggregates otherwise private numbers, mostly private from centralized lenders. Obviously, there's tons of data-driven stuff from on Chain in there. But where is the leaked able of centralized lending firms this time? What was the total? A reuppered down quarter of a quarter. Excluding Tether, most of them were up across the board, like marginally. But Tether just dominates so much of the, quote, centralized lending market. I mean, they lost like $2 billion where that's going. Like, nobody really knows. They didn't necessarily lose it, right? They reduced the loan book. They reduced the loan book. Yeah, I don't know. Yeah, we don't have a lot of clarity. But we do think they put some of it into DeFi, right? Yeah, there is speculation that they're just like collecting yield on the Tether Day on and then just minting new.

23:45Pretty nice. They get three depositing. They get three deals of stack yield. Yeah, because they get the yield from the underlying treasuries. And then they can also possibly blend it on Hava and earn some yield or something. Yeah, it's like a possible answer to the question of like, who is supplying so many stablecoins to DeFi at sub money market fund rates? Like when you're collecting the money market fund rates and additional 250, 300 basis points on top of that, like you can't afford to be rate insensitive. Just broadly on the report, what really stood out to you on this one or anything new that you added to that report? I mean, there's just kind of a continuation of a trend that we've noted for a while now. Like we didn't anticipate like market wide blowups. Right. Like we saw through the previous cycle, like unsecured lending is essentially eradicated. Not that it doesn't exist, but it's just not central to the market portion. And I think even centralized lenders have gotten better kind of underwriting that risk. And obviously you can't really borrow unsecured on. I think we basically got to on Bitcoin a minus 53% drawdown.

24:49Multi-multime high. And yeah, we've seen, I know 22 was a bit more violent than that. But we didn't see, I think we saw what was it, well, there's a small TC firm. I'm not going to name because I don't want to misname had a bit of blowup. But I think it was for their own reason. I deleted it and small. Yeah, I wasn't like this. That's pretty much it. Yeah, exchanges and lenders. I think that's been, is it fair to say as a result from that that this lending market is much more resilient? Yeah, I think so. And it's like very apparent to the numbers. I think we titled this one like taking the stairs down. Yeah, like it's just kind of risk gradually rolling off. So we're down a little bit because mostly because of tether, most of the other ones are up. But it's just also on chain right asset prices themselves impact a lot of this. If you're counting like lending, you know, rap Bitcoin on Ave as part of the size of Ave. And Bitcoin loses 50% of it. Thank you.

25:49Yeah, that stuff is like a lot more reflexive. The second quarter was unique because we had the kelp Dow exploit which obviously like Ave got caught up in that. So like Ave markets were essentially frozen and people were like running for the exit. So we also had that last quarter. But yeah, the on chain stuff is just way more reflexive with all the like stable coin looping, youth looping, and then you throw in a big exploit that locked to like essentially eight to ten billion dollars worth of value. Yeah. We've actually seen like a rebound like since Bitcoin has jumped from like 60k up to where we are now. I think it is up to like $12 billion in outstanding loans. So like still well below the all time high, but what was the all time high on Ave. I think it was like 22 or 25 billion. So like we're still kind of down in that like 50% range. Yeah. But again, like this stuff is like very reflexive. And if we could get some some activity flowing back on chain, these looping strategies become profitable again. Like I think we can actually climb back towards all time highs pretty quickly. Very cool.

26:49Check out the report at galaxy.com slash research. I was just out I think last week, right? Maybe the week before. Yeah, two weeks ago something like that. Well, we're finally here in the fall. So yes, the August is a blur to me now. We've moved on to the clarity of September. Let's talk about social trading. This is a huge trend in the trenches. But also I think it's actually I don't know will has been covering it for a long time. But it is FOMO is this app FOMO great name for social trading app. It's getting really big. It's not just like meme coins, right? I mean, people can trade other stuff there too. I mean, you could trade perps, but it's like primarily like. Oh, it is primary. We have like ultra low. What trends are you seeing in this part of the space? I mean, I think like the big, no worthy thing here is we finally found like an instantiation of social trading, social crypto that is actually kind of found like real product market. We've been beating the strum for so long with like, you know, temps at like a web forecast

27:52or social web social and blockchains. It turns out that the killer app or the first killer app is just trading crypto on social. Yeah, and just me essentially just like publicize your PNL. Yeah. Basically what it is, like tokenizing like Instagram posts, which like everybody thought was how this was going to go. Right. Base was big into that tokenizing. So we're yeah, with yeah, tokenizing content. And then there was like own your data like effectively tokenize your own or somehow transport or web three of five or X followers. So you bring your audience. You bring from this kind of like the front tech hasn't really worked. Yeah, X seems being of which to be heading down the route of social trading a little bit with the embedded price charts. Now if you do a dollar sign instead of a hashtag like dollar sign BTC, it will embed the price, a chart of Bitcoin in your post. And I've even seen if you go and click one of those, whether it's for, it may not for

28:52Bitcoin, that's an high issue. You should double check. I mean, they get like the contract address. And if you click for stocks though, it will suggest that you connect to interactive brokers. But I think you're getting close to like just trade on X as well, which is crazy. And X launched X money. They've like a Venmo inside there now basically debit card to yeah, it's kind of sick. Yeah, yeah. But yeah, they're just like a buy button away from kind of so how big is FOMO? I mean, they're doing billions of dollars in daily volume. The numbers are astonishing. Even when you compare like terminals from like the Trump coin era, which was like nobody ever thought we would get back to that point, like we're essentially there from in the third party terminals through which you trade the thing. Yeah, exactly. Which was like peak hysteria like the president of the United States launched a meme coin like everybody was going nuts. And we've actually just kind of like gradually trended back towards that level.

29:54And I think it speaks to kind of one like the animal spirit that have been like reawakened with things like Robin Hood chain and whatever else, but also just like the ease of access to this stuff. Yeah. Like you just sign on with an Apple ID and pay through Apple pay. The UX has gotten a lot better. I mean, it's exceptional. Yeah. Like this is also something that I think the industry has been like working towards for a while. Like how do we perfect like the mobile first experience like do the onboarding thing and like the chain abstraction meme and it's like we actually just kind of found an app that does all of the above. And it's kind of created this explosive movement. But yeah, right now it's just like meme coins. Hopefully we could get towards like perps and things that are higher than like 15,000 market cap. Yeah. You know, let's let's stick to this topic a little bit too because we mentioned Robin Hood chain. One of the things that I've been saying for a while and why I like working on tokenized Galaxy stock is that I think DeFi has great product market finish. Just the assets inside it aren't that good.

30:57You know, some are okay. But like what if we could put way higher, you know, would have way higher quality assets like shares and a corporation or fixed income securities or whatever could make use of these lending and swap protocols and whatever. Like that'd be very interesting. Robin Hood launched their L2, which is what an Arbitram L2, Albertram D. Yeah, it's an orbit chain. Yeah. And it isn't a theory of L2. They've had it up for a while now, but they only just really launched their tokenized stocks. And one of the things we've seen one, their audience and their user bases really well primed for this right? People might remember during the like AMC game stop stuff. That was like heavily on Robin Hood. And strangely roaring kitty from that era actually looks exactly like Vlad Tenev. I don't know if they've ever been in the same room together. They look exactly the same. Anyway, really ripe for the type of on chain speculation that you see on Solano or you'd seen on base, right? And we're seeing that now on Hood.

31:57So what we call it by the way, Hood. Yeah, Robin Hood chain at the ticker is that's what they call it. Robin Hood chain. Yeah. It's really not that good a name. Okay. It works. Yeah, it does. Surely it's working. But I think this chain is the number one gas pair on Ethereum right now. And it's the most widely used by by active users and volume of all the Ethereum L2s at this moment as we record. Yeah, and they're actually doing like crazy fee numbers. I think I saw like five plus million dollars a day, which like we haven't really seen that out of an Ethereum L2 a while. I know. It's like base at its height. Yeah, yeah, exactly. Which was also during like crazy like AI like the whole AI of the coin trade. Yeah. But you're going to be telling your grandkids, I was there doing the AI meme coin trade. Yeah, we were there, but I think what's interesting with the tokenized stocks on Robin Hood is like what's actually driving demand for it. It's not like people are just like, hey, I want exposure to like NVIDIA. It's like, no, we're going to like send a meme coin to a hundred million market cap

33:00pair with a stock and then force demand. Yeah, what is the pairing pairing with the stock? What is that? Yeah, I mean, it's like you just have an asset and then instead of pairing it in like USDC or ETH like most standard pools do, you just pair it in like. So it's a meme coin that trades in with the base? It's like a meme coin denominated in stock. In the stock. Yeah, then they like have like themes for it like AI like artificial E new is paired with NVIDIA because it's like an AI company. There were other, there were a few other like creative ones that you probably can't mention, but yeah, there was. Yes, there was a male vitality company that had a meme coin pair with it, I think. I think our audience can maybe find that one. That was super interesting and these stock tokens that Robin Hood has, they are of the third party issued variety, right? They're not, I don't know how they're, if they are or how they're bleasing this, but they're not available to Americans. This is offshore very similar to like X stocks, right?

34:04And I saw on Twitter, there was a beef between the CEO of AMC, the movie theater company that whose stock has been prone to the meme stockery like GameStop and Vlad Tenev where the AMC CEO expressed very, I would say anger over the fact that Robin Hood had tokenized AMC stock and Vlad said, you know, what exactly is your concern? What is the concern? Well, and then the AMC guy wrote back a pretty coherent, I would say, first principle's based list of concerns that are very similar to what issue-responsored security token issuers have been saying as criticisms of third party issue that it's not fungible with our real style, it's not a real stock, the shareholders of the token don't get all the rights of a normal shareholder that there could be many versions of it, that frankly it's rude to do because like we as the company choose, was that a big deal to people? What do people in crypto think about that that you saw?

35:04It was widely shared. Yeah, and I mean, I think from like a real world application, like the concern is like definitely real. Yeah. And could have like some negative knock on effects, but like understanding what the motivation of the people are on chain, like they're not buying it for economic exposure or having like- Not at all? Like any kind of rights, like these people do not care. Like the whole meme is like- Surely some do. Maybe some, but I would go- What's driving volume is this more mimetic behavior? Yeah, it's like the whole meme is like we stop at board seat, like they're literally trying to get like controlling interest in some of these companies to literally just be sitting in essentially like a uniswap pool on a private chain. That's what's so funny though, because they're not, it's not real stock. I mean, if they, even if the SBV behind a stock gets so much demand because the on-chain version is getting so much demand, and even if that SBV becomes like the majority share like 51%, there's no guarantee that the holders that tokens would control anything.

36:07If anything, maybe like you know, Robin Hood, whoever controls the SBV could take the board seat. It's unclear. Yeah, that's like kind of like the meme though. But it's not stopping them trying. Yeah, it's like 51% attacking a company. And like I don't think it's like far fetched to think that like that can't happen. It's like constitution now when they raise money on-chain to buy the constitution and then I guess Ken Griffith, Griffith in that time, he rugged by Peabot instead. But you're saying that it's possible that an on-chain cohort of capital could buy controlling stake in a publicly traded company. Yeah, like where the flywheel of demand for the meme coin can induce demand for the underlying stock. You get one of these things to run like crazy and it's like not out of the picture to buy like a 20, 30 million dollar market cap company. Like it's very real and very possible. That's true. If you get like a, I mean how big meme coins can get like 100 million is not, not that rare. It's been rare recently, but it wasn't rare. Historically not rare. Let alone multi-billion like a dogecoin.

37:08Like it's, it is possible. Yeah, and I think that would literally mark like the second like meme stock wave. It was like last time we short squeeze them like this time you literally just buy them out. I'm thinking about the time that those corners came together to buy the to sponsor the Jamaican Bob sled team. Like how far we've come if that's now the, if the new meta is by a company, they're unimic a prediction. You think we're going to see a meme coin community purchase a controlling stake in a company, public company? I'd give it like a 40% chance. That's pretty high. Very interesting. But what else are you looking at these days that has you interested? We've talked in the past, you and I on this show about ownership coins and a few tarkey. Is that still going on? Yeah, no, that stuff is still up and running. I mean this year was kind of difficult for ICOs and just raising money like on chain was pretty dead. The market really wasn't conducive to like the the risk on conditions that would require

38:12a lot of this stuff to really be humming. But I mean, I think it's all kind of looking good. We've had a competitor to Metadale launch on base or like the token is on base. They're just like an EVM at a broad project. So now we're kind of seeing this model being brought to the EVM. Previously it was just siloed to Salana. So now we kind of have like the crypto like on chain barbell. Interesting. Between the two and then we also had red crypto. Yeah. Three weeks ago or whatever it was. Yeah, red crypto assets, regulation crypto assets. It creates a new pathway for capital formation using tokens. It's sort of like a new fundraising exemption from the securities laws for non security crypto tokens to be set again. ICOs like sort of to be sold to the public under conditions. And I actually think it's quite a prudent proposed rulemaking. I think it I feel that it at least tries to and I may they may tighten or change in

39:13the rulemaking process, but it tries to ratchet up the disclosures and compliance requirements depending on how much you're raising. Do you think that's going to have that kind of impact metallics and umia and Metadale and Futarki and generally speaking, you think they'll start raising through that? Yeah, no, they could be a big catalyst for them. And when you look at kind of the average size of these projects that are launching off of like the Metadale and the umia, they fall under or at that like $5 million range. So they're kind of like right in that sweet spot where they could just like the lowest amount of disclosure required. Yeah, think above that you need it's not just disclosure. You actually need permission from the commission above that below that. It's a disclosure. Yeah, and I even think in like the event like there have been a few projects off of these launch pads that have raised like eight or 10 million dollars or whatever. I think even still having the path to like go in and register or whatever they have to do is still beneficial because now it can be marketed and you can have like proper

40:13ICOs without having to like limit yourself. Like you can now imagine a world where like Coinbase can get behind an ICO and like make it accessible through their front end to people and all of that stuff. Um, so I mean like a an ICO 2.0 boom seems like it could happen. And I think just with everything that's been going on behind the scenes with a lot of these projects like we force regulated ourselves into like having disclosures and investor memos already like block works. Yeah, it was a huge proponent of this and a lot of projects have actually signed up for it and it's kind of become standard practice for the projects launching off of metadata and umia to also follow that stuff. So it's like we're already kind of doing these things. So it's cool that you can now take it to like the SEC go through like a proper pipeline and then market your stuff to US investors and yeah. And people but I think like the question of like who the buyer of these tokens still are is an open question. Well, you still we still face the problem of like is it a new blockchain? Do we really need that? What is the actual token for?

41:15Why does it need a token? Oh, is a good question to ask. I've been asking that. I used to ask that about a blockchain back in like 2016 people be like, oh, we're doing this thing. We're making you know Bloomberg terminal in the blockchain and be like, what did you do? What do you need a blockchain? Do you actually need a blockchain? It's actually a great um great website. I think it's do you need a blockchain.com? It's based on the academic paper from a long time. So click through flow of like yes, yes, yes, no, it's like, oh, no, your branches, you need a shared SQL database. You don't need a blockchain. Yeah, but we still exist. Of course, the projects may or may not be good. But the fundraising mechanism I always liked. I always thought it was just intermediating and democratizing. It's with the proper you know controls and disclosures. Yeah, it's keeping like even beyond that stuff too like with like few turkey dows and ownership coins. Like the token actually is kind of equity like. Yeah. So like it mostly becomes a question of like you as a founder. Do you want to have a liquid value applied to the super early business you're building? That's a point.

42:16That's like is a token necessary? Because these things do kind of look equity like in some respects. Obviously, they're not like structured. Yeah, I know. Some of you write some of the ownership coins. They do not look like governance tokens. They have control. Control. Like ownership by control. Yeah. But like I think the open question is like there's still a massive cohort of big money investors that can't touch tokens for one reason or another. Can't participate in governance. And like if you can't actually have like any say in the future of the project like why would you invest in it or like you may just be completely barred from owning a token in general. Which I think is like the big next open question for a lot of these ICOs. But like nonetheless, I think it's like a big positive in general. And before we wrap Zach, what's like grand vision? How do you think this is going to play out for blockchains? You think we're going to have all these assets tokenized and they're going to become essential financial plumbing.

43:17You know, is Bitcoin going to be the main one that gets huge? Like, I know we talk a lot you and I you work a lot on the blockchains and data around blockchains. But you're also big supporter of Bitcoin, right? I mean, what are your thoughts on Bitcoin? How does it fit in here? Actually, let me ask that as a question. Because I mean, everything we talked about is like X Bitcoin. Yeah, I mean, I think Bitcoin is like the ultimate meme coin. It's reached an escape velocity that it just can't be stopped. And I think more and more people are on board with that idea and like kind of the re-ignition of the whole debasement trade. All that stuff. But this go around, you have absolute access to it. And that's like kind of what I'm most excited about it, like this go around. Because like even in 2022 when we were kind of coming out of the bear market or whatever, the ETFs weren't really a thing. People didn't have the mandate. Now I think it's like at a point where like there's no excuse to not have it. And some of these asset managers are probably going to be put under pressure. Like, hey, this thing is ripping like why are you not allowing it?

44:19Yeah, why are you not allowing it? It's kind of been like every app on every brokerage. Like yeah, it's going to be in a lot of funds. And sorry, back to the original final question. Like, you know, some people say like we're going to tokenize everything. I've been more conservative. I like to look at the percentage of crypto spot volume that trades on chain versus at Galaxy and Coinbase and Binance. It's only about 20%. So maybe 20% of things will trade on blockchains. And but you know, does this become boring eventually? In your view to the two traditional capital markets and crypto fully merge? I mean, on the first point, like does this become boring? Like, I don't think so. I think like once you start tokenizing this stuff and everything's a smart contract and absolutely programmable. There is going to be possibilities with all of this stuff that you can't really conceive of today that will just kind of have to wait for it to happen. So like on the world, this get boring like now and then we also have like all the AI stuff.

45:20Yeah. That's a whole separate category. That's going to keep us on our toes. But yeah, when you have an absolutely programmable 24, 7 movable whatever asset that you can assign to something that never sleeps and is smart and can do whatever like. That's like super exciting. And then like how far this actually goes like, I mean, the 20% analogy is kind of interesting. But I think it's like, wumpy. You might have like 20% of everything in aggregate, but maybe like half the stock market gets tokenized and then like fixed income stuff kind of falters. I think it happens in steps like right now the whole like trading stocks and all that stuff is kind of like the big logical first thing because like Dex's have kind of proved to work. We just love to trading gamble and do like degenerate stuff on chain. We being humans, right? Yeah, humans.

46:21Yeah. So that's like the logical first place for this to start. But as people get comfortable with that, it's just like the Trojan horse for the next thing like fixed income, you'll bearing stuff seems reasonable. I mean, we've seen like a ton of tokenized like money market funds and whatever. But yeah, and I don't know if like the same setups where you can have like an X stock style set up on like a money market fund exists. So there's also like gating regulatory barriers to a lot of the other stuff. Yeah. Obviously, not an expert on that, but just kind of looking at how the market is unfolding. I would assume like that is at least I played a some extent. Yeah, we're starting with stocks. 20% might be the number 50% might be the number. I don't know, but it's it's going to be lumpy. You're going to see more classes of assets tokenized than others. And yeah, we will see. We will see and I we think we're going to see more on the tokenized stock front soon because we're still waiting on the SEC's innovation exemption, so called, which we understand relate directly to tokenized securities on chain.

47:23So maybe you get the ICO you got the ICO 2.0. You get the tokenized stocks like blessed in the US. Because again, all these tokenized stocks we're talking about are for XUS today, but maybe with the US you get some stuff. That's just maybe the start of the next roller coaster for this, I don't know, knock on wood. Hopefully upcoming bull market in digital assets. Zach McCorney from Galaxy Research is always thank you so much for sharing your thoughts. Yep, thanks for having me. Thank you for listening to Galaxy Brains, the weekly podcast from Galaxy Research. I'm Alex Thorn, head of firm wide research at Galaxy. Follow me on X at Intangible Coins, follow Galaxy Research on X at GLXY Research. Read our written reports at galaxy.com slash research and don't forget if you like Galaxy Brains to like and subscribe on your favorite podcast platforms like YouTube, Spotify, Apple podcast and more. We'll see you next time.