🎙️ Ep 253 is live 🐂 Kool Krypto: The Story Behind The Anon DeFi Investor and What He's Betting On This Cycle ✨ Featuring crypto investor and trader @koolkrypto223 youtu.be/9E4iRENPdZM

What If Hyperliquid Launches Options? Well, what if Hyperliquid does options? People are now starting to do that with literally everything. “What if Hyperliquid does this? Who are they going to eat next?” I'm wondering if Derive is in any jeopardy of being under threat with that massive juggernaut of Hyperliquid stepping into the options market more intentionally. Yeah. I swear, every post I make that's bull-posting Derive, I get someone asking, “What if Hyperliquid puts out options?” or “What if Lighter puts out options?” I will say, to preface all that, I'm more scared of Lighter than I am of Hyperliquid at the moment. I'll get into that. Hyperliquid's infrastructure is not really super well suited to putting out options, and that ends up being a very technical answer that we could get extremely deep into. But when you're listing an options market, you're having dozens of different strikes, dozens of different expiries at once. You have a Bitcoin perp—there's a Bitcoin perp. There's one market, there's one order book. It's incredibly easy. When you have a Bitcoin order book for options, you have 17 different strikes and 12 different expiries that have to have different order books themselves. It is incredibly different. A counterpoint I would bring up to a lot of people is that Deribit has lasted as the premier options platform for years among the centralized exchanges, and has [unclear wording about altcoins and perp liquidity]. Why is that? Why did the options-specific platform dominate options for so long when Binance has options, OKX has options, and Bybit has options, but still Deribit is where most options are traded? I think there's a specific set of reasons for that. People are also very hand-wavy about how much of a lead Derive has, but also how much of a moat they have. Sometimes I say these things about Derive having an advantage over Hyperliquid. It's not to disparage the Hyperliquid team, because obviously I think they can practically do anything they set their minds to. It's obviously going to be part of the bear case in the future that, yeah, sure, they'll probably try to do this down the road. But Derive has built out a system that probably takes months, if not potentially over a year, for a Lighter or a Hyperliquid to try to build. They've integrated with tons of market makers that have to go through different hoops to get onto them in a way that actually works. They've built out this distribution where they have 95% market share. Look at when Lighter listed RWA perps. They had [asset name unclear in transcript] listed before Hyperliquid. They had SpaceX listed before Hyperliquid, and nobody traded it. It was doing hundreds of thousands of dollars of average daily volume. It's not just enough for these places to list these things. They have to solve a lot of inherent problems in options markets themselves. They have to educate users on how to properly use them. They have to get the distribution for them. They have to build out a better UI/UX than Derive currently has. I think there's a lot for Derive to still work on, but there is so much for them to play catch-up on. It is a monumental task for them to really easily catch up on that. ft. @koolkrypto223 @DeFi_Dad @Nomaticcap

Why @koolkrypto223 Does Not Trade Meme Coins Are you buying and selling meme coins, or do you avoid them? What are your thoughts? No. I don't really touch meme coins particularly much. There's a couple of reasons. One is on a more fundamental level: I just don't have a ton of edge on meme coins. I think if you have this really good pulse on culture and you just know which one's going to take off, some people maybe have that and some people don't. [The next sentence is unclear in the automatic transcript.] I think it's so much survivorship bias. The people you see making millions on meme coins—you don't see the other billion people who lost everything they put into all these other meme coins. I think it's extremely extractive. On a more spiritual level, I kind of just hate how much it distracts from all the good things happening in crypto. Being around this long, it's finally feeling like we're on the precipice of hitting what we've been building toward for north of a decade. Every time we have some stupid meme coins getting a ton of attention, and then, like the [example unclear in transcript] situation—it's such a distraction from an industry that's really cleaned itself up over the past couple of years. So I kind of hate them on that level. There are people who love trading meme coins. It's totally fine. It's a pure beta asset. It's complete degenerate gambling. If that's what's interesting to you, then absolutely fine. And I think the protocols that monetize it are truly good investments. If this is what people want, they're going to print a ton of money doing it. But let's just be honest: this is a casino. This is just another version of a casino. Let's not try to dress it up as anything. I do take some issue with people saying, “This is such durable revenue. Look at how much money.” The reason Pump.fun was valued at such a low valuation wasn't because people didn't think the revenue was real, per se. It was because they don't know how sustainable it is. It's so easy for that whole thing to dry up overnight, practically. It's hard to put a multiyear annualized P/E ratio on Pump.fun compared to Hyperliquid. I can feel pretty confident people are going to be trading Hyperliquid perps next year, the next two years, three years potentially. I have no idea what's going to happen with meme coin appetite. Especially with meme coins, it's such a wealth-effect thing. In the same way the regular economy views Bitcoin as a sponge for excess liquidity, it's kind of the same thing for crypto natives. When there's just a bunch of hot-ball-of-money sloshing around in crypto, people say, “Hey, you know what? Let's just blast it into memes.” I always kind of see it as a top-ish signal as well. So, yeah, I have nothing extremely against them—although I guess I just ranted about how much I do have against them. But I don't really personally trade them. I don't really have any edge there. ft. @koolkrypto223 @DeFi_Dad @Nomaticcap

What Wall Street Still Misses Onchain I think sometimes people in crypto, or crypto natives, think the TradFi world is perfectly priced—the meme that everything's priced in. But you were also talking about this Robinhood launch. You were talking to people at this family office we've mentioned, and you were filling them in or debriefing them on what was happening, and how big of a line item Robinhood Chain was becoming for Robinhood—HOOD, the stock. Maybe walk us through that, because it felt like they were totally oblivious to what you were saying. Yeah. You don't even really need my word for it. It was pretty easily demonstrable on the price. If you look up a DeFiLlama chart of their TVL and revenue on the sequencer fees for two or three weeks before the price really started to rerate. I actually know exactly what happened. There was an article put out—I forget by whom. I think it was on a Friday afternoon, and a bunch of people finally saw it. They needed someone to bring it to their attention. Then on Monday morning, HOOD's up [percentage unclear in transcript]. So it was one of those things nobody was really pricing in. In their defense, I'm talking on a time frame of days here, right? They're not weeks and months late like they've been to some other narratives in crypto. But they were days, maybe a week or two, late to this. To this day, there's just not enough eyes on crypto taking it seriously. Maybe a better example: you'd think all these guys are looking at pre-IPO pricing markets on Hyperliquid. And don't get me wrong, there absolutely are some that are. There are some extremely sophisticated guys out there who are incredibly keen on looking at crypto for signal. But there are guys with multi-deca-billion-dollar precious-metals positions who had no idea what funding rates were on copper, gold, and silver earlier this year. It's just not something they're really looking at for signal, and they're not gleaning as much as they could from it. I think the TradFi guys are incredibly good at the new meta coming up in crypto, where now we're talking about P/E ratios and P/S ratios and all these things. I think that type of meta really, really fits their skill set. But there's still a ton of edge to be had against a lot of TradFi natives, because I think a lot of them also just don't really use a lot of this stuff. There's a lot of insight you could have just by really being on the ground floor of these things. ft. @koolkrypto223 @DeFi_Dad @Nomaticcap

The DeFi Loan That Made Ethereum Click It sounds like you were very early to Bitcoin, but it also sounds like you were very early to primitive DeFi. I think you mentioned ETHLend to us when we were talking prior to recording. What can you recall? What were some of the major light-bulb moments after doing so well with Bitcoin? Yeah. It's exactly what you said. Coming from my business, I remember it was so hard to get a small-business loan, for example. It was mountains of paperwork. You had to prove this, show that, everything like that. When I realized, “Wait, I can load up a million bucks of ETH into a wallet and just take a $500,000 loan at like 2% interest. This is insane. This is going to change the world.” I think that was my biggest moment of realizing, “Okay, Bitcoin isn't just kind of a pet rock. This is more the building block of a much, much, much larger digital ecosystem.” That, to me, was when my conviction flipped almost on a dime from just being like, “Oh, this is cool. I was early to Bitcoin. Very lucky. Woo-hoo.” But now it's like, “Okay, there's actually a business to be made here, potentially. There's a lifestyle you can fund from yield generation. There's trading that could be done here.” Prior to that whole ETH summer, I didn't really consider myself much of a trader. I was kind of just a very fortunate investor, and really more on the tech side. I was a very early miner of Bitcoin, but there wasn't really anything trading about that. I wasn't really swing trading at that point in time. Whereas the moment ETH summer came along, that's when I really threw myself into, “Okay, what does it mean to trade all these different types of assets, to generate yield? What does liquidity provide?” I was entirely self-taught. I didn't go to college at all. I had no financial background whatsoever. Having to teach myself all those different primitives early on was what really got me into it. Because I realized, “Oh, wait. If I could get into this sort of stuff, then anybody's going to be able to access this stuff. It's going to be very, very accessible for the entire world to use.” So that was the big thing for me. ft. @koolkrypto223 @DeFi_Dad @Nomaticcap

The Hyperliquid Bet That Broke Their Position Limits I think for the Hyperliquid trade, it was such an extremely high-conviction thing. I was over here trying to scrounge up points, buying points from people on the market. The funny story is, we had to mark our points internally in the fund because we still had to credit investors with the fact that there's a value to these points. I kept kind of erring on the high side, but it's one of those things where it's way better to be low than high. I don't want to tell people, “Oh, I think it's going to be worth [unclear].” I'm over here like, “These are going to be worth $8 a point or something,” which was extremely bullish at the time. I really thought it was going to be worth quite a bit more, so I kept being extremely conservative. I remember every month just rerating them up and up—from $2 a point, to $4 a point, to $8 a point. At one point, there were really early primitives of those protocols. I remember there was LPoint and the whale thing, where people were trying to OTC points from one another. I was trying to find so many different ways to find points. The thing we found that was incredibly good for generating points was basically doing very rudimentary market making on the PURR spot market. If you did a lot of PURR volume back then on the spot ticker, you got thousands of points a week. It was extremely incentivized. The moment we found that out, we just went incredibly hard into it. Looking back on it, the P&L of that particular trade is revolting. I think we might have spent $2,000 on fees market making the PURR spot market, but got 20,000 or 30,000 points from it, which is now worth—I have no idea how much at this point. So that was a very large “make it” trade for us, essentially. My partner wouldn't love me telling this story, but it's funny because the TGE was at 4 a.m. He was in a different time zone from me. I wanted to buy more at TGE. He wanted to sell some of our point allocation at TGE, and he was completely well reasoned in why he wanted to. He was like, “It's going to come out at a $2.5 billion to $5 billion FDV. That's the ceiling for perp DEXs. It's going to be like every other airdrop and it's just going to dump. We got a nice, chunky airdrop. Let's just sell.” And I was like, “No, no, no. This is going to go to a minimum of $20 billion.” They're like, “No, there's no way. That's crazy.” Our fund, up to that point in time, our biggest positions were like 10% positions. We had these caps on what we were allowed to hold. As Hyperliquid kept going up to $4, $6, $8, $12, and $20, it kept creeping up in position. I kept adding to it as well. Then I had all the people at my fund saying, “Okay, we have to sell now. We actually have to sell. We literally have to sell.” And I was like, “Okay, everybody, shut up. We're going to keep holding this,” essentially. We even kind of broke some of our previous rules that we set for ourselves because we just thought it was such a generational trade. At that time, I didn't have a Twitter, so I wasn't putting it out there. But I was probably one of the few people who genuinely believed that. I remember telling my partners, “No. This is a $20 billion to $50 billion TAM thing,” if it really hits. Now, the fact that it's even trading north of that is very gratifying, but we had extremely high conviction that it was going to get to this point. ft. @koolkrypto223 @DeFi_Dad @Nomaticcap

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Ethereum Versus Zcash on Privacy The question I want to get to is Zcash versus where you're going with Ethereum. One thing I'm curious about is: could Ethereum become feature-parity on the privacy side with Zcash, or could it go beyond it? Or is that even a comparison that you're thinking of internally at the EF? Are they even on your radar? Are you drawing from anything that they've done in the space? What do you make of that? I think it's a very interesting question. I think the Zcash protocol itself is very strong. The team and the cryptography behind it is strong. It's almost like Ethereum and Zcash are at very different, opposite ends of the spectrum, but converging on a few things. Ethereum is proof of stake, right? And I think it has way better economic properties than proof of work. But now Zcash wants to maybe add proof of stake to its already existing proof-of-work thing, so they're working on this. Zcash has an enshrined pool. I talked about completely enshrining something like they did, but it's just for private transfers, right? So it's great, but it is not about DeFi or composability or money legos or things you can build on top of it. It is transfers. And so, with Ethereum, I think we have private DeFi in mind. Ethereum is programmable, and I think there are so many use cases that are unlocked by this that we can go way beyond simple transfers. And so I think that would probably be the difference. FT @soispoke @DeFi_Dad @Nomaticcap