[00:00:00] Ryan Watkins: If you understand this, this could actually be the thing.

[00:00:03] Luke Martin: I followed you as an individual investor. Now it’s a nine-figure fund. Been very early to some of these ideas. Hyperliquid.

[00:00:07] Ryan Watkins: We’re so early. What percentage of finance is any of this? The answer is, like, basically zero. Just think about how many people that you know use this on a daily basis.

Almost none. Look at the volumes, open interest, TVL. It’s like 1% of like the US dollar M1 money supply. I’m like, “No, we’re not late.”

[00:00:25] Luke Martin: What’s your single highest conviction idea in crypto right now?

[00:00:29] Ryan Watkins: It’s still early enough in the growth of this entire category. That’s the one that I think I’m most long, and I don’t think anyone’s paying attention to it.

[00:00:37] Luke Martin: You were insanely early to Hyperliquid, like very early. You wrote a big thesis. You doubled down after you bought. What’s your single highest conviction idea in crypto right now? Is it still Hyperliquid?

[00:00:48] Ryan Watkins: It’s still Hyperliquid.

[00:00:50] Luke Martin: Is that normal? You’ve been in crypto for a while. Yeah. You’ve had a fund for, uh, for a few years now, longer than a cycle.

[00:00:55] Ryan Watkins: Yeah.

[00:00:56] Luke Martin: Is it normal to have an idea where you bought it a couple years ago and you’re still as bullish today?

[00:01:01] Ryan Watkins: It’s rare.

[00:01:02] Luke Martin: Yeah.

[00:01:02] Ryan Watkins: It’s rare. I mean, I think what’s changed is… There, there’s a couple things that changed. The first thing that changed is that the types of ideas that do well now are different from what did well, say, in 2017 cycle or even 2021.

Back then, all you needed was an idea and some semblance of traction, and that was enough of a story to get people to bid. Sure. And I do think that there was so much more speculative premium in all these altcoins that people were just willing to bid them. And I think what’s changed is that the bar of quality is so much higher.

The bar to get people to allocate is so much higher, and that’s for a couple reasons. I think, one, uh, there’s just more competition for capital in the world. You have to compete with AI and all these frontier technologies that are now hitting the S-curve as well. Two, uh, we had this big crisis in… crisis of confidence in 2022 where, like, we tried doing all this stuff, and it all failed, and then SBF was a fraud, and we’re kind of rebuilding from there.

Yes. And no one wants to go and bid all this nonsense again if it’s not gonna be real. So how many projects are actually real? Well, it’s like a very small number of projects that are real, and then an even smaller number of projects that are actually like secular winners where if you didn’t have a mandate to invest in this asset class, would you even own it?

Yeah. And I think for almost every single asset, the answer is no. So then when you fast-forward to today, you know, how, how rare is an opportunity like this? Well, I mean, how many assets can I find where, like, big enough market opportunity, a category leader, this like secularly growing, uh, founder who is actually, like, generational?

Like, this is actually a business that’s compounding. So like, yes, I’m still really bullish on it, and the story continues to improve. Like, my thesis has evolved so much since day one, and, uh, it’s even surprised me ’cause I, I wouldn’t even say that when, you know, we, we first, uh, you know, bought the position that it was gonna become what it is today.

[00:03:00] Luke Martin: That’s what I was gonna ask you. Like, did you know that early? Like there’s… Sometimes you have a feeling. You’re like, “I… This is the one,” or you size up, you have more conviction. Did you know that with this one?

[00:03:10] Ryan Watkins: Yeah, I mean, so we did have a gut feeling that this could be big, but- I mean, we don’t have a crystal ball.

So I think the time the thesis was more simple about just perpetual swaps and whoever could create a category leader there had the potential to be– build a big business because this is a big business for Binance and Bybit and OKX. Like, this is one of the biggest businesses in the industry that generates tens of billions of dollars a year in revenue.

And at the same time, if you can nail perpetual swaps, well, then this is one of the hardest things to do on a permissionless system because of like the latency and throughput requirements, that if you can nail it, you kinda get these other use cases for free. So like, okay, you could probably do prediction markets, you could probably do spot.

And if you can do all this, then that’s like the everything exchange thesis. So I think that was like some of the original thinking when we first, uh, you know, were developing the thesis. Now, I think that, well, what has changed is that that vision is very much like on a path to being realized. Mm-hmm. And I think HIP-3 was kinda like the first sign that this was gonna be bigger than just crypto.

I think what we’re now a little bit earlier to is that this is evolving beyond just an exchange. So if you look at HyperCore, and this is one thing I didn’t actually appreciate, uh, early on because I was like way more optimistic about the HyperEVM as like this, this, this foundation for all these new DeFi primitives.

And HyperEVM’s just been a wash, like no one u- this thing is like un- unusable. But HyperCore, you kinda see what they’re doing now, where you have like all these core primitives of, uh, of DeFi, lending and borrowing, perpetual swaps, spot, prediction markets, vaults. You kinda just list out all the use cases for DeFi, and these are now building blocks on HyperCore that people can build applications on top of.

So you start to look at it and you’re like, oh wow, you know what? Maybe on the surface it’s not this general purpose blockchain, but it provides foundation to do all these core financial use cases as everything else, Solana, Ethereum. That’s what I think is the next stage of this, is you’re gonna see lending and borrowing grow on Hyperliquid.

You’re gonna see prediction markets grow. You’re gonna see vaults grow, and that I think is the story we’re still very early to. And when that is actually now the TAM Now you’re not just competing with the exchanges, you’re also competing with Solana and Ethereum that are way more valuable than Hyperliquid is today.

[00:05:37] Luke Martin: This is gonna be fun ’cause I’ve followed you for a long time in crypto. Um- Yeah, same. Always had very good insights. I followed you as an individual investor, and now it’s a nine-figure fund. Been very early to some of these ideas. And not just early, you were also very loud, which is kind of like a… It’s a unique thing.

If, if there’s someone I respect in, in their decision-making with investing, and they take a position, that’s one thing, but then you were loud about it. Like, you gave your thesis publicly. You said, “This is what we’re doing. This is why we’re bullish.” What do you think you saw in Hyperliquid early on that most people missed?

Uh, and the reason I’m asking is ’cause, you know, as we kinda move through, we’re gonna talk about Hyperliquid, but I also wanna think broadly about crypto. Like, how do we apply that to, to other ideas that people watching are like, “What’s next after Hyperliquid?” Now there’s gonna be another Hyperliquid, but what’s the next big trade?

But first, like, what do you think, uh, most people missed? Like, how were you able to, to see that opportunity when you did?

[00:06:22] Ryan Watkins: What people missed on, say, like, the first day and leading up to TGE was a couple things. I think… And, and this was the case, I think, even in the first six months after TGE, is that most people ask about Hyperliquid, they’d always make these comparisons to GMX or DYDX and be like, “Oh, well, this is going to fail like those.

There’s so much turnover in who the leader is of this sector.” Yeah. They didn’t appreciate what was unique about what Hyperliquid built. That was one. Two is I think that people didn’t appreciate how much money this was making and how sticky the user base was, because this was something that even I was still somewhat skeptical of after TGE, is how much would the volumes drop- Yeah

once everyone got the fat airdrop. Like, you’re trading on there expecting an airdrop. You get airdropped, like, a billion dollars as a community, there’s probably gonna be some fall-off, and there actually wasn’t.

[00:07:17] Luke Martin: And we’ve seen that how many times with protocols that incentivize it? You think it’s gonna be the next big thing.

Friend.tech, a good example. Yeah. This big airdrop. This is a social trading app.

[00:07:24] Ryan Watkins: Yeah.

[00:07:25] Luke Martin: After the airdrop, it’s dead.

[00:07:26] Ryan Watkins: Oh, it’s like, it’s like clockwork. It happens all the time. Yeah,

[00:07:28] Luke Martin: it happens all the time.

[00:07:29] Ryan Watkins: Yeah. And, and I think when the, when the volume didn’t drop off, that should’ve been the signal of like, oh, wow, like there’s, there’s actually, like, a real value proposition here of why people trade here.

And then the other one was, uh, this was, like, one thing that, uh, I didn’t quite appreciate at the time, but I think maybe it was, like, intuitive. But- The only way you could buy HYPE was you had to go onboard to the exchange. Mm. And that forced every single person who want to buy it to become a user. And that was a first of a kind go to market- Yeah

where you literally force people to use the product in order to get the exposure. And no exchange listed Hyperliquid for a long time, and that was, like, strategic masterstroke. Like-

[00:08:12] Luke Martin: Do you think that was Hyperliquid, or was that other exchanges that didn’t wanna help them? Uh, uh- Yeah … the, the way that I mean that was other exchanges didn’t wanna help Hyperliquid grow, or was that Hyperliquid decisively saying, “You’re not gonna list our token”?

Like, which one was it, you think?

[00:08:25] Ryan Watkins: Uh, it’s probably, I think it’s probably more the, the former. Like, the exchanges probably just didn’t have any interest in listing it. Yeah,

[00:08:32] Luke Martin: yeah.

[00:08:32] Ryan Watkins: But even if they did, it’s just hard to support a new blockchain day one. Right. ‘Cause the team is very, uh They don’t share information with anyone.

They keep information so tight. Mm-hmm. And it’s refreshing because there’s no insiders. Yep. Which is good. I think sometimes, like, a big issue with so many projects is there’s always insiders, and you can kind of see it in the chart. Yep. You can see it in, uh, just certain KOLs, and you feel like you’re always at a disadvantage.

And it’s a, it’s, it’s honestly a shame, and it makes this asset class hard to navigate at times, uh, if you don’t know. So I think it’s refreshing to have a team that’s just honest and transparent, and when they release information publicly, everyone’s getting it the same time. Yeah. And that’s good.

[00:09:16] Luke Martin: The way that Hyperliquid launched, where you said they, they forced people to become users basically to buy the token.

Yeah. It reminds me of, like, what Robinhood just did, and I was just talking to, uh, someone on the Robinhood team. I think a lot of their success comes from you had to bridge to Robinhood and see what was happening. I mean, that’s, like, a, a big component of it, seems like, what leads to a sticky user base, what leads to a network effect, is you have to force people to use as opposed to just do one activity, collect an airdrop, and you’re out.

It’s like Hyperliquid nailed that. Robinhood’s doing a good job of it. We’ll see if it’s as sustainable. Yeah. But, but you’re right. Like, that was a key component of Hyperliquid being so, being such a winner. You had you had to trade on Hyperliquid to own HYPE.

[00:09:52] Ryan Watkins: You had to. And then when you trade on it, you’re like, “Oh, wait, this is actually pretty cool.”

[00:09:55] Luke Martin: This is smooth.

[00:09:56] Ryan Watkins: Yeah.

[00:09:56] Luke Martin: This is better. I think the people that were writing off Robinhood, I was using the analogy of, like, if you wrote off decentralized exchanges after EtherDelta or after whatever the hell- Yeah … we used to trade on five or six years ago, you would’ve totally missed it. The same way, it’s like if you wrote off prediction markets after Augur, you would’ve missed Polymarket.

[00:10:13] Ryan Watkins: Yes.

[00:10:13] Luke Martin: Yeah. It’s like you couldn’t invest in Poly- But that’s a big, it’s a big primitive. Um, so I think it’s important, like, when a new leader comes up, I think it’s… Crypto’s still important to experiment. Like, I think some people, uh, you know, sometimes easy to be like, “Eh, I’m writing that idea off. Too many things failed.”

Hyperliquid kind of proves that’s not the case.

[00:10:31] Ryan Watkins: Yeah. Yeah. And, uh, that’s why sometimes it’s always helpful just to have, like, a beginner’s mind with this asset class. It’s easy to get jaded over the cycles, just seeing… For, for many reasons, whether it be the vision erodes over time as new entrants come in, or you just lose money so many times, you see so many scams.

It’s just, it’s just really… Yeah, I think it just wears on people over time, and sometimes, like, the people who are newer, like, yes, they may have a disadvantage of not the experience of having gone through a drop, big drawdown or go through a cycle, but they can see things with fresh eyes.

[00:11:02] Luke Martin: Sure.

[00:11:02] Ryan Watkins: And that probably makes that person, you know, for example, a Uh, DeFi Monk, uh, who, who we hired, he was, like, one of the first sell-side analysts to cover Hyperliquid.

He got into the industry in, like, that 2022 to 2024 period. Mm-hmm. So he didn’t have, like, the baggage of seeing, like, all these derivative exchanges- Yeah … fail, and he’s just like, “Yo, Hyperliquid is dope, and here’s all the reasons why.” Yeah. And, you know, that’s why he’s able to capture the opportunity, right?

[00:11:27] Luke Martin: That is cool. Fresh eyes. How do you do that, like, for yourself? I mean, it’s, it’s something that, uh, Robinhood was helpful for me to, like, remind me, okay, there’s still opportunity here. There’s still, like, new things that can pop up. But, like, is there something you do for yourself? Is it writing? Like, is there a way that you kinda keep a fresh set of eyes on these things?

[00:11:43] Ryan Watkins: I think writing for sure, ’cause wr- writing, it, it forces you to… It forces you to first make your assumptions clear, ’cause they’re not always clear in your head. You think they’re clear, but they’re not clear until you put it on paper. Mm-hmm. And then two, once your assumptions are clear, it forces you to actually, uh, challenge them, and I think that that process, uh, that I first developed when I was at Messari doing research has been so important.

Yeah. Uh, and then part of it, too, is just, like, a willingness to sometimes, like, take a, take a chance on something new. And I think what helps my ability to take a chance is, uh, ideally, like, developing relationship with the founder. Mm-hmm. And, you know, maybe, like, this category has failed many times before, but this person may have not.

Hmm. Or this person might be different, and I think that’s also gonna help build the conviction as well.

[00:12:31] Luke Martin: Before we get into some of the new ideas and kinda, like, applying that framework to, to what’s happening in crypto today as we look out at 2027, which is coming up quick, uh, a- another whole, like, fresh year of crypto, before we do that, still thinking on, on Hyperliquid, you said you’re still as bullish today as you were before, probably more bullish with just how things are developing.

How do you think about Hyperliquid? I- I’m not saying it’s overcrowded, but obviously now the whole world probably sees, uh, some of the vision that you had early on. You ha- you even had President Trump getting o- getting on TV- Yeah. Yeah … and saying Hyperliquid, which no one expected to ever happen. I don’t know how many times the sitting president has name-dropped a token or name-dropped a protocol.

How do you think about Hyperliquid today as, like, the g- I- I guess the outlook is a little bit different. It’s not so much as, like, this is a new thing no one understands. Now it’s, is it underowned? Is the revenue gonna grow? Like, what’s the, what’s the variable that you’re most interested in? Is it volumes increasing?

Is it, uh, how much of traditional finance is coming on chain and trading on, on Hyperliquid? Like, what are… what things are you still looking at as someone who is early and still bullish?

[00:13:31] Ryan Watkins: So I think you’re right. I think within the, withi- within our community, uh, everyone has opinion on Hyperliquid. Right.

We all understand the thesis, at least at a high level, I think is, is fair to say everyone does. What, where Hyperliquid is today is I think it’s at, uh, this kind of rare inflection point that very few projects get to, which is the point where it’s starting to graduate into an institutional asset. And you can say that happened with Bitcoin.

You can maybe say it happened with Ethereum and Solana. Yeah. But outside that, there really hasn’t been any. I mean, there’s ETFs for everything, but, like, the people who buy ETFs, it’s like retail people buying on their brokerage account. It’s not-

[00:14:10] Luke Martin: And a lot of them are small. I mean, some of these ETFs, it’s like- It’s small.

Yeah. It’s a good headline, but like- Yeah … who’s buying Shiba Inu

[00:14:15] Ryan Watkins: ETF? Exactly. Yeah. It’s not like pension funds buying, you know, some random ETF just because, like, someone had tried to list it. Uh, but with Hyperliquid, you can now see, like in these like quarterly filings, you could see, uh, large institutional investors, whether it be, uh, large multi-manager hedge funds or pension funds or endowments that now have positions in this asset or are starting to build positions in this asset.

You see the, the DAT as well, which again, you see these quarterly filings and there’s many of these types of folks that are now getting involved.

[00:14:45] Luke Martin: Who was the… Someone announced a, a per holder. Was it Paul Tudor Jones

[00:14:48] Ryan Watkins: or- Oh, uh, Druckenmiller.

[00:14:49] Luke Martin: Druckenmiller.

[00:14:50] Ryan Watkins: Yeah.

[00:14:50] Luke Martin: Makes an investment just- It’s

[00:14:51] Ryan Watkins: huge. Yeah. Yeah.

[00:14:53] Luke Martin: That’s wild. Yeah. When you saw that, were you surprised? Was it like just a matter of time or?

[00:14:57] Ryan Watkins: I think if the idea’s good enough, like everyone will find it eventually. So I’m not surprised. But yeah, uh, maybe what was surprising is that some of these people are just skipping over everything to go to Hyperliquid.

[00:15:10] Luke Martin: That is interesting. Yeah. What else has Druck talked publicly about with crypto? I know Paul Tudor Jones has been adamant about Bitcoin. He’s called it the fastest horse before, but I don’t think I’ve ever seen Druck talk directly about Bitcoin other than like a throwaway comment of store of value, and it fits- Yeah

the gold nar- I don’t think I’ve ever seen him name a token.

[00:15:29] Ryan Watkins: I don’t think he has either. I mean, I don’t even think he’s talked publicly about Hyperliquid either. It’s just a disclosure.

[00:15:34] Luke Martin: Did he read, uh… So there was no like comment. He never wrote an article. It was just disclosure.

[00:15:38] Ryan Watkins: It was just a disclosure.

Yeah. Yeah. So, uh, so maybe it’s going back to the point about the, how it’s, how it’s graduating. Yeah. So I think there’s like the flows argument of now there’s just a much larger universe of buyers that are now entertaining this idea and want to get allocated. And for some of these people, uh, it’s not even just like a fundamental bet.

It’s like if you want to index a growth of the crypto economy, you have to have this in your book alongside with Ethereum or Solana or Bitcoin, and that’s even a reason of itself. So I do think there’s like a lot of those people that are going to continue to come under the fold. And then there’s actually like the, the fundamental, uh, story, which is that, okay, I think we can all understand that HIP-3 is, has going to be a big thing.

You can see in the data, you can understand that just perps as a category gonna be a big thing. But like what I think people have not quite fully underwritten yet is one, like this entrance into the US market. Uh, I remember even just going back to say three months ago before the, the Trump, the the press conference.

Yeah. I would always talk to different managers even in the space, because I, I was actually surprised how many managers either just like don’t own it or just don’t own enough or just keep- Crypto specific? Probably crypto specific. Okay. Or just like they keep trading around it like, “Oh, it’s at 70, I’m gonna like sell and I’m gonna buy back at 40.”

And doesn’t get the 40s, then maybe they buy back at like 60. And it’s just like, what are these people even doing? Like, I thought you actually had the conviction, you know? And so I, I, I see that, I’m like, okay, you know, maybe people don’t actually get this thesis and like, I’d always talk, talk to these managers and the thing that people would always say is, “Okay, what happens if the US does XYZ?”

Right? It’s like s- it’s like this big overhang. Like, oh, uh, Kalshi’s gonna be Hyperliquid, Coinbase is gonna be Hyperliquid, CME’s gonna be Hyperliquid. Yeah. Uh, Hyper will never be able to enter the United States, and then lo and behold, you get to end of July, early August or, uh, and you see, uh, the Stars update come on to Hyperliquid test net, public test net.

And I remember looking at that, and I was lining up with the comments that Sally was making from the CFTC about wanting to onshore perpetual swaps. And I’m like, “Huh, well, why would Jeff put all this on public test net unless he wanted the public to be aware that this is an upgrade that could hit main net soon?”

And if you look at the history of all Hyperliquid upgrades, it usually takes on average three months for something to go from public test net to main net. Mm-hmm. And at most it takes six months. So I started to get the sense of like, oh wow, this is something that’s probably gonna happen before year end, and I don’t think anyone’s paying attention to it.

And then we get the huge Trump announcement, which I had no idea was happening. Yeah. And I was like, oh wow. Like, now it’s on. Now I think there’s still some people that even still today I talk to, and they’re still skeptical about how it’ll enter the United States. Uh, so I don’t think people fully like price that in.

I think you’ll probably need to see it launch. You need to see who are gonna be the partners here. Like you have Kraken, there’s like the Coinbase rumor. They’re gonna do something there. Sure. Um, may have to be more partners to come out. Uh, and then that’s how you can get like a better sense of like how, how big and how fast this can actually scale.

I think the other is, I still think there’s a lot of people who narrowly view this as just the, the perps exchange. Mm-hmm. Because that is what has gotten the most attention and the most, uh, usage. But I do think that you, all you need is one of these new categories to take off, whether it be, you know, perpetual sw- or sorry, um, prediction markets- Mm-hmm

or spot or tokenized assets. And then before you know it, you kind of start to look at this and you’re like, “Wait, why, why are we still treating this as if it’s a separate category from Solana and Ethereum?”

[00:19:04] Luke Martin: Interesting. Can you expand

[00:19:05] Ryan Watkins: on that? Because it’s

[00:19:05] Luke Martin: not. Yeah.

[00:19:06] Ryan Watkins: You know, I think we have these, these, these kind of weird categorizations in crypto where like, oh, Bitcoin’s a special snowflake, and Ethereum’s an L1 and Hyperliquid’s an exchange, and Solana is like some weird in-between of an exchange and an L1.

It’s like, dude, this stuff is meaningless. It’s all like, they’re all blockchains and you just have to be just two… You just have to underwrite, okay, two things. Like one, like how does this blockchain accrue value? And two, like what is the categories going after? Yeah. If Ethereum, Solana, and Hyperliquid are all going after the same addressable market, dude, the, it’s the same thesis.

Like, what, what are you even talking about? Like, the fact that one just is building this like, uh, maybe more methodically by saying, “Okay, here are these core primitives, uh, you can now build on top of them,” versus someone who say, “Here’s a general purpose blockchain. You just build everything from scratch on your own.”

That’s just a difference in strategy. It’s not a difference in the outcome.

[00:19:54] Luke Martin: Mm.

[00:19:54] Ryan Watkins: So I, I do think over time people are gonna start to like look more critically at this rather than being like, “Oh, this is an L1, therefore should we value this way, or this exchange should be valued this way,” and just throw them all in the same bucket and let them all compete.

Jeff has been saying for the longest time, like the purpose of Hyperliquid is to house all finance. How is that different from Solana or Ethereum? It’s the same thing

[00:20:13] Luke Martin: That clip, uh, of Jeff on TVPN that’s, like, etched into my mind where they say, you know, “What’s the total addressable market cap of this?

Like, what’s the big picture?” Yeah. And he just looks at them and says, “All of finance.”

[00:20:22] Ryan Watkins: Yeah.

[00:20:23] Luke Martin: It’s incredible.

[00:20:24] Ryan Watkins: Yeah.

[00:20:24] Luke Martin: Like, that is- that’s a- the

[00:20:25] Ryan Watkins: biggest- All of finance, period … mic drop

[00:20:26] Luke Martin: moment, and they both didn’t even know what to say. They’re like-

[00:20:29] Ryan Watkins: Yeah … ”

[00:20:29] Luke Martin: That’s pretty bullish.”

[00:20:30] Ryan Watkins: Yeah.

[00:20:30] Luke Martin: Even if you fail a little bit at that, it’s still pretty bullish.

[00:20:32] Ryan Watkins: Yeah, it’s bold, but it’s, uh, he’s insistent about it.

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The profits go to you. Thank you, Kraken, for letting me do this. Let’s get back to the show. As you think about it, I’m trying to steel man, uh, maybe the risks, right, of, of the people that either think they’re too late to Hyperliquid or didn’t get in as early as you, and they look at some of these where I- I’m aligned with your view of when an asset

It’s very rare in crypto when an asset kind of becomes an investable asset in crypto. The, the list is small, um, and there’s so much disparity now of, like, that top 10 of coins that people are like, “This is gonna be around,” versus the other ones where it’s like, “I’m making a total gamble here. In a year, this might be zero.”

There’s a big gap. Um, Hyperliquid has, has definitely crossed that gap now of an investable asset. But I’m trying to steel man, and I wanna get your take on this, of the risks. The people that are still like, “I don’t know if I wanna buy Hyperliquid.” Like, we- we’re now at the moment where Trump’s talked about it, the regulatory picture is more clear, they have X amount of numbers of revenue and whatever else.

Now it’s kinda like owning a traditional business. I’m not, I’m not so excited about the upside. If you were to steel man, if you were to make the case for, like, what is a risk you, you are still thinking about with Hyperliquid? Not, not necessarily saying this is, like, why you’re bearish or something. Yeah.

Clearly you’re still bullish. Yeah. But, like, is there a risk that maybe doesn’t keep you up at night, but that you are still like, “That is something we have to figure out here”?

[00:22:31] Ryan Watkins: So I’ll talk about the risk, and I’ll talk about maybe just… Or something more, it’s more, like, s- psychological.

[00:22:36] Luke Martin: Yeah.

[00:22:36] Ryan Watkins: Um, so here, I’ll tell you what, what are not risk anymore.

Yeah. So I remember a huge risk at first was what if the bridge gets hacked? And that’s no longer a risk. We have native USDC there. Like, they’re winding down the USDC in the bridge. Like, that’s not an issue anymore. Another risk that people were concerned about is, okay, like, there’s four validators in Tokyo that are running this, and they’ve al- methodically over time expanded the validator set.

I think what people have started to become more comfortable with is that, okay, maybe we don’t actually need globally distributed consensus at this moment. Mm-hmm. Uh, it seems like both retail institutions are more than comfortable to trade here. And, you know, maybe down the road, if, uh, this, this, this may be something where they need to change it, but I mean, as far as it seems, like, there’s a path for this to enter United States without any major architectural changes beyond just permissioning who can actually trade in these order books.

Right. And then another, another one that people just bring up is, okay, like, maybe there’s, like, a concentration of power with TradeXYZ. Like, what if TradeXYZ were to, were to leave? Which, I mean, there’s a number of reasons why I think TradeXYZ is very aligned with, with, with, with Hype. I mean, obviously, you know, Shoko just being one of the earliest members of the community.

Uh, but I think the biggest one is that let’s just walk through how this actually works.

[00:23:46] Luke Martin: Yeah, please

[00:23:47] Ryan Watkins: do. Like, TradeXYZ is dependent on Hyperliquid to serve their product. It’s not like they can just wake up one day and be like, “Okay, we’re just gonna go spin up our own exchange.” All the users are coming from Builder Code applications, but more so Hyperliquid’s front end.

They don’t have a direct relationship with the user. Hyperliquid has the direct relationship with the user. They’re actually benefiting from the distribution that Hyperliquid has. They’re just a market deployer, and that’s not to minimize the work they’ve done. In fact, the work they’ve done is incredible.

Yeah. But it’s a symbiotic relationship where, like, the economics are quite clear. They’re splitting the fees on HIP-3. That’s all you need to know. And I think that this is a big enough, uh, op- opportunity where… And this maybe gets into, like, the, the psychological thing, where if we’re actually thinking about this opportunity, not just on the, the order of, like, months or quarters, but, like, many years, you just gotta zoom out.

Like, HIP-3 is just, like, an infinitesimally small fraction of global finance. Right now. Even just equity- Yeah … and commodities volume. Yeah. We are so early in this story of blockchains taking over finance, that if you actually believe that this could be a real generational winner, you just gotta raise your numbers across the board, ’cause we’re on the exponential.

And I think so many people have become jaded to think about exponential growth because you got punished for doing that in 2021, for believing in something. Like, the whole WAGMI energy is why everyone lost, like, 90%. Um, and we had, like, the meme coin, I think, meta, which just fried people’s brains of like, “Yo, I need to get in and out of these assets in, like, a week, otherwise I’m gonna lose my entire, like, net worth.”

Yep. And then you look at it now and it’s like, well, the common is two things. People are so afraid of heights. But the thing is, like, you have to embrace new heights- Sure … if we’re actually long this exponential. So I think, like, the psychological thing is, is, is, is the biggest one. And so when I actually think about what risk that I think matters most to me right now is I, I do wonder if, like, globally distributed consensus is a requirement- Yeah

for whether it be payments or trading or anything HyperCore is going after. How easy is it to Transition your architecture to this new globally distributed system. Yeah. That’s an architectural issue. The other ones are just more competitive of like, oh, like what if Solana wins instead? Or what, like… But-

[00:26:02] Luke Martin: How real do you think that is?

Like, a- and again, I’m actually bullish on Solana. I think, uh, for the first time in a long time, So- Solana- Yeah … is contrarian again, where it’s- It is, yeah … you go back a couple years, it was like Ethereum is too old, it’s moving too slow. A lot of unclear, uh, you know, maybe their lead wasn’t as real as we all thought it was, and Solana’s gonna eat their lunch.

And now it’s, you fast-forward a couple years, people are like, “Ethereum’s back. Solana, what are they winning at? Hyperliquid kind of is, is winning on the finance side, so what is Solana good for?” It’s like funny how it goes back and forth. Yeah. But how real do you think it is that people say, you know, Solana can be faster, it’s gonna compete with Hyperliquid.

Like, you know- Yeah … how real is that for you? Or are they two separate things? I mean, we just talked about it’s maybe not helpful to categorize them as this is now one, this is an exchange. I think you’re right in that they actually are competing in a much more similar way than, than people- Yeah … give credit for.

But like, how do you view Solana and Hyperliquid? Is it okay to just be bullish on both? Or is it like these two, like one wins and the other one suffers?

[00:26:58] Ryan Watkins: Uh, so I am bullish on both. I think that it’s still early enough in the growth of this entire category that I think many can win- Yeah … for the foreseeable future.

Now, it doesn’t mean that the end market structure is one where everyone wins. Yeah. Like, I, I do think that exchanges, I do think that blockchains do demonstrate network effects, and they will be winner or winners take all long term. I do think that of all the competitors to Hyperliquid, not including the centralized companies like, I don’t know, whatever, Coinbase, Kalshi- Mm-hmm

w- uh, Binance, that’s a separate category. I think of all the decentralized competitors, I actually think about Solana the most relative to Hyperliquid. Why? Rather than, say like a lighter or Aster- Yeah … or, or anything like that. And- I think the reason why is because the, I think the biggest opportunity for a blockchain is not to host one single segment of finance.

Mm. It’s when you host all of finance and it’s composable with each other. And that is what Solana’s been building towards for a long time. Uh, it seems like for the past, say, three years, since 2023, they’ve only been able to nail the, the meme coin trading. Mm. But I think in the process, it’s kind of really accelerated development of all this trading infrastructure and stress tested the system so that now that they’ve done the work to reduce slot times down to, like, 200 milliseconds, and to get all these wallets and, uh, and, and infrastructure so that it’s, like, really smooth for people to trade on Solana.

Uh, they have all these users that maybe are a little bit less captive today because FOMO kind of just makes it so easy for people to go in between all these different chains. Yeah. But they have all these users that convince builders that, “Okay, if I wanna go build an application, I wanna get distributed, I go to Solana.”

It still is the number one option if you wanna go build a finance application outside of just trading perps. You’d probably build it on Solana. Yeah. So when I think about, you know, long term, if, like, the vision for perpetual swaps is you have portfolio margin, and you can use any asset to trade anything, well, it’d be helpful if you had a wide variety of tokenized assets to use as a portfolio margin.

And I think that is, like, the most optimistic view of, like, the Solana perpetual swap thesis. Now, do I think anyone is executing on this that well right now? No. But if we’re thinking about this over the arc of time, like, many years out, uh, I do think this is something that is feasible for them to figure out.

And I think, like, the biggest, uh, skepticism I would have is just that this stuff is path dependent, where, you know, you can be right that s- maybe Solana is, like, the right architecture long term, and you, you want global consensus, and you, you wanna have, like, everything on a single shared state machine, and that’s actually, like, the best vision.

But, uh, if what actually works and gets, like, the distribution and gets the users and liquidity now is actually, like, the Hyperliquid vision, where yes, it’s all co-located in Tokyo, but then you actually just… Y- y- you kind of decentralize where it actually matters today, which is, like, at the, like, builder level of, like, it’s permissionless for anyone to build, it’s permissionless for anyone to use.

Like, you have all this buy-in, all this enterprise buy-in. Like, why is it that, like, Coinbase and Kraken are, like, building on Hyperliquid and they’re not building on Solana? Like, that’s… This stuff is, like, really important for, I think… So then when you think about it, it’s like, okay, maybe by the time that this whole global c- distributed consensus thing matters, Hyperliquid’s just run away with it.

Sure. And then, like, who actually cares? Like, there, there’s, like, real path dependence with this stuff.

[00:30:22] Luke Martin: There is, ’cause it’s hard to get back. Once you have that much of a user and network growth, it’s like, that’s where the users are.

[00:30:27] Ryan Watkins: Exactly.

[00:30:28] Luke Martin: That’s where you’re gonna build the next app.

[00:30:29] Ryan Watkins: Exactly.

[00:30:30] Luke Martin: Another big thesis you were early on, very early to the idea of how important perps were gonna be.

I think you had a article you kind of wrote about the global perpification. Oh, great perpification? Yeah, the great perpification. You’ve argued that, that perps could kind of become the biggest market in finance or play a role in all the biggest markets in finance Can you make that case for someone who doesn’t understand perps?

I mean, more and more people are seeing it now as perps are entering traditional finance, but this is something that came from crypto. This is, like, a financial product that is now entering all of finance, and, like, a big trend in crypto now is tokenized equities. Everything is becoming crypto. This is something that started in crypto and is now kind of entering the rest of finance.

For someone that’s, uh, behind the curve maybe as to, as to why this matters, can you just walk through that?

[00:31:13] Ryan Watkins: Yeah. I, I really think it’s one of the, the biggest exports from this industry. So we’ve had digital gold, we’ve had prediction markets, we’ve had stable coins. These are, like, three of the biggest exports that this industry’s had.

Like, genuine innovations in finance, and I do think perpetual swaps is the, the fourth. And for a long time, I think it went unappreciated because, you know, let’s say Arthur Hayes invented in 2016, and for a long time it’s just, like, this way for a bunch of degens to go lever trade Bitcoin. No one really cares.

And, uh, what’s interesting is that, you know, futures did exist in this asset class before perpetual futures. Yep. And they didn’t really get that much traction, and one of the reasons why is, like, you’re fragmenting liquidity across all these different, um- Expirations … expira- expirations. Yeah. And if you could just concentrate liquidity into a single contract, and it was just perpetually rolling over, well, then that could be a superior product.

I think that was one of the original insights, I think, with that, uh, the, the original perpetual swap, and it just kind of took off from there. Now, one of the things that was most interesting as we’re doing our research, because I think one of the, uh, easiest targets near term is, say, like, global CFDs. Sure.

The other one is, uh, retail options. A lot of people just trade options because it’s a way of getting leverage, and they don’t have any idea about the Greeks. Right. And this could just be a simpler way for them to express the same thesis of wanting to get long something- Mm … with leverage very fast. But the other one that I think I was, like, most interested in as I was doing research is actually just, like, global futures volume.

So looking at, like, what percentage of global futures trading is actually non-speculative. So let’s say, like, it’s, um, some commodities producer. Sure. They want to, like, hedge the price of this commodity they’re producing, and there’s actually physical delivery at the end. Uh, that’s, like, about 10% of all global futures trading.

Another 90% is actually all speculative. So this is just people taking bets on whether the price can go up or down. Right. And I think for that, it actually might be better to do the perpetual swaps if, like, you don’t actually need any physical delivery. This is purely just for speculative purposes. Just concentrate all liquidity into one contract, and this is, like, a better way of actually expressing that risk of, uh, of where you think price is gonna go.

[00:33:21] Luke Martin: In the future where everything becomes a perp, because I buy into that. Like, if you’re- Yeah … even if you are using it as an actual vehicle to, you’re a farmer, you want to hedge the price of soybeans, whatever it might be, you don’t want to get delivered. I mean, you’re already in that business. I’m sure some do.

There’s probably some deriv- like, very exotic, uh, farmers out there that maybe do want the deliverable if they’re in the money or something, but perps just being better. Can you kind of opine or, kind of give us that future of if everything does become a perp, like stocks, commodities, pre-IPO stuff, like what does that look like?

Who wins there? Does Hyperliquid benefit? Kind of going back to Hyperliquid for a moment, but like who captures the value in the great perp-lication? Like, what is the trade here? Or outside of Hyperliquid, like what’s the, what’s the trade if this is something that’s inevitable, and we’re starting to see finance adopt it.

Yeah. How, how do you benefit? How do you like, how do you, I guess, make a bet on that?

[00:34:08] Ryan Watkins: Well, Hyperliquid is one.

[00:34:08] Luke Martin: That’s one. That’s the obvious one.

[00:34:10] Ryan Watkins: Yeah, I think that’s the most obvious one and, and the one that we’re making. And, um, yeah, I mean, I think what it, what it ends up being is you can use any asset as your margin to trade any asset.

Like that, that is what the vision is, and that doesn’t exist anywhere in finance today, and I think that if we could achieve that here, then that’s like a, that’s a huge, I think, transformation in the financial system. Like it’s just so much more capital efficiency and being able to express your view.

[00:34:40] Luke Martin: What do you think? So as, you know, I don’t know if, who was first, if it was, uh, the Cboe or someone announced like a, a traditional finance exchange announced perps were coming, this is all happening. Is that a risk to Hyperliquid? Or as you said, is like Hyperliquid still probably the purest way to express that?

I guess what I’m trying to say is- Yeah … if the the- if the thesis is right, perps are just the best instrument to do this. The- Yeah … the average investor who’s gambling on zero-day options, they think NVIDIA’s gonna go up, they really just want 10X leverage on NVIDIA. It’s easier to do that with a perp.

Does Hyperliquid win there? Or like Decentralized exchange is now offering it. Does that hurt Hyperliquid? Like, how do you think about specifically with perps, like, uh-

[00:35:17] Ryan Watkins: Yeah. I’ll just bucket CME, CBOE- Yeah … Kalshi, all these into one category, which is regulated perps. Yeah. And then there was all, like, the unregulated perps for a long time.

And even still today, uh, you can only do regulated perps for a select number of cryptocurrencies.

[00:35:37] Luke Martin: Mm.

[00:35:37] Ryan Watkins: And the fastest growing category of perps is actually RWAs.

[00:35:41] Luke Martin: Yeah.

[00:35:42] Ryan Watkins: You can’t do that right now. Like, there’s, like, regulatory constraints on any of those players, Kalshi, uh, CME offering that. Yeah. And there’s a chance that it might ch- not change for years- It moves so slow

before they can do it.

[00:35:56] Luke Martin: It moves so slow.

[00:35:57] Ryan Watkins: It moves slow. So I think you have, like, a good runway for Hyperliquid and, and in the field of like, you know, Layer, Solana, whatever, to really run with it before these people even enter the picture. That’s one. Uh, the other one is, and this is more for CME, uh, than it is for, say, Kalshi, is that you…

They would need to re-architect their entire exchange stack because it’s built on the assumption that you needed to segment out all these different layers, like brokerage and clearing- Mm … and settlement and custody, and here we kind of have built these exchanges that assume this is all in one single integrated stack.

And you need that because how are you else are you gonna be able to, you know, hold the, the margin on the exchange and liquidate it at, like, a fraction of a second- Yeah … when you need to liquidate a position. Like, it needs to all be in this one single integrated system that trades 24/7. So that architectural change might take a long time as well, even if, like, the regulatory landscape was, was clear.

And then I think the last thing is, you know, we always like to talk about, oh, like, what if, you know, some random old financial institution says they wanna go do what we’re doing in crypto? It’s like, dude, good luck. Yeah. Like, these people have been building this for years. They’re the smartest people doing this.

Why are we as- assuming, like, some random guy who’s working in CME, who’s not even, like, the founder, is just all of a sudden gonna go disrupt Jeff? Like, it doesn’t make any sense. Like…

[00:37:19] Luke Martin: There is no second best.

[00:37:20] Ryan Watkins: There isn’t. I mean, and also, like, these aren’t even the A teams that they’re sending.

[00:37:23] Luke Martin: Right.

[00:37:24] Ryan Watkins: You know, those…

They… Dude, if this guy was, like, that good, he would not be trying to do this at CME. He’d be, be Jeff.

[00:37:30] Luke Martin: Yeah. That’s true. I wanna think about how you apply this, uh, to maybe some areas outside of Hyperliquid and, and some other sectors of crypto. I really like that idea where you said kinda maybe it’s not as helpful anymore to categorize these things as this is an L1, this is an exchange.

So kind of taking that into account, what are you structurally bullish on as you move into 2027? I don’t know when people are listening to this. Maybe it’s the end of the year in 2026. Uh, but things are exciting again in crypto, right? We had, uh- Yeah … Bitcoin’s moving up again. I don’t know, when someone’s listening to this, maybe Bitcoin’s moving down, but it’s exciting again.

It is, yeah. And we, we have some trends which seem a lot more sustainable with traditional finance coming on chain, tokenized equities, uh, perps going into finance. Th- A lot of these trends are a lot more, yeah, just sustainable. I think they can survive longer than some of the, the flashes in the pan we’ve had over previous cycles.

As you think about that, like, what else are you structurally bullish on, right? Like, the investable universe is small in crypto, but how do you, like think? And even if it’s not singular assets, if it’s not Zcash itself, but, like, how do you think about some of the other exciting things that are happening in crypto?

Like, what else, uh, has your eye?

[00:38:34] Ryan Watkins: So you know what? I think there’s actually, uh, a, a positive development, let’s say, over the past few months, is that I think earlier this year it was really hard for me to say that there were any good ideas outside the majors and Hyperliquid, really just Hyperliquid. Yeah. I think now, I think there’s many more good ideas and maybe a small number of great ideas.

And to me, the, the way to distinguish those two is, again, if you didn’t have a mandate to invest in this asset class, would you even bother looking into this- Mm-hmm … and putting your money into it? And most of the time the answer is no. Like, if you’re just someone who… Like, I don’t know, maybe we’re just cooked because we’ve been here for so long.

Like, we feel like we need to do this. Don’t say that. But, like, a lot of people, they just, they, they don’t need to do this. Right. Like, they only need… Th- There’s no reason why they need to put their money in this asset class. It has to be worth it.

[00:39:15] Luke Martin: Especially now that AI’s interesting. I mean, there’s- Yeah

another asset class which is giving you those returns for- Yeah … kind of the same risk-adjusted profile. Like, I don’t- Exactly … like, we’ll see how, how some of these AI bets pan out, but it’s, it’s, it’s comparable. It’s interesting.

[00:39:28] Ryan Watkins: It’s very interesting. So, uh, I think with that in mind, it always starts from, okay, what are, what are secular themes or secular trends?

And, uh, are there any ideas, uh, within those categories that are executing on bringing this vision to life? And- Uh, these are themes like tokenization, stable coins, obviously perpetual swap, spot trading. I think social trading is one that’s interesting. Uh, and then from there, I think we could just… We always wanna identify who’s the, the category leader.

Mm-hmm. Because that’s, that’s just our thing. Like, we always wanna make a contrarian bet on who we think could be the, the biggest winner in the category. Uh, and that’s where we found the most success.

[00:40:09] Luke Martin: Some of these ideas might be too small, uh, for your fund, which is a nine-figure fund now, uh, to invest in, but I am curious because you mentioned it, social trading.

Yeah. You’ve talked a lot about, uh, everyone being a trader- Yeah … and, uh, I mean, just watching some of these guys now. I think FOMO having a leaderboard is probably one of the most, uh, one of the best decisions they ever made. Yeah. Of seeing there’s 10 people this month that have made $5 or $10 million.

Like, that’s just the best marketing for- Yeah … for people to, to check out an app. What are your thought? Like, have you been experimenting personally in, in some of the memes that have taken off? Because it feels like a, a new era, I guess, of, of on-chain. I- it’s much closer to, like, what was happening in 2017, 2018 of new protocols coming out that actually had a vision, as opposed to this is a, a cute dog people are buying, and it goes to 50 million because it’s a very cute dog.

It seems like some of the stuff coming now, it’s like we’re attaching… Like, some of them are, like, a half-baked idea attached to a meme. You get a stock. Some are, like, actual new primitives that are launching. We’re, like, at an exciting time in crypto. Like, have you… Even if it’s not for the fun, like, personally, are you, are you buying some of these things that are popping up on FOMO?

Like, what’s your thoughts on just the new wave of experimentation, I guess, with, uh, with Robinhood chain and everything else?

[00:41:15] Ryan Watkins: So I, I always pay attention, and, and one of the reasons why is, you know, may- maybe these aren’t positions for, for Syncracy. Yeah. But why… The reason why I always pay attention is that what I’ve observed over time is that- Memecoins as a sector, uh, tend to be the earliest adopters of new technologies or primitives.

So example of this is social trading. Social trading, in theory, could be applied to any asset class, but the one that’s found most product market fit in first is memecoins. And what is one of the reasons why? It’s like the barrier to entry is so low. You can onboard with Crossmint, you just, like, use your credit card, you put $50 on there, no KYC, you’re buying memecoins, onboarding takes, like, a few seconds.

Anyone in the world can do this, and it kinda just has this flywheel where as you get more people to go onto the platform, you just mark up everyone’s bags because there are always new people buying the same things, and they’re following the people who are on the leaderboards at the top that’s, like, buying their assets.

And then they have these big P&Ls, they share it on TikTok, and then it’s like this flywheel. Like that… So that, that’s why it’s, it’s, it’s working. But long term, I actually am not convinced that this is the thing, which is just you just lead people into the zero-sum game, which is memecoins. Right. But I do think it’s showing you behavior that’s going to persist in financial markets, which is social trading.

So people will social trade equities, they’ll social trade perpetual swaps, options. Maybe there’ll even be social finance, which is not trading, which is, okay, I… There’s this interesting credit opportunity that I’m sourcing on, like, Morph or Aave. Yeah. And I wanna go find that, and I’m gonna create a community around that of, like, finding these credit opportunities.

Because there’s gonna be this long tail of credit opportunities coming on chain, like asset classes that retail never had access to, like reinsurance and GPU-backed loans. I mean, there’s so many things that a normal person would never get access to. So that’s one example where I think memecoins t- uh, are, like, early adopters of a new primitive.

[00:42:57] Luke Martin: Yeah.

[00:42:58] Ryan Watkins: The other one is, you know, just, just looking at, you know, uh- The meme coin paired stocks Yeah Uh, those I think it’s so silly, but, uh, what is true is that, you know, what’s interesting about tokenization is not so much that, like, anyone can trade it on a blockchain. Like, if you’re in the United States, you get zero…

In fact, you get negative value from trading a blockchain- … ’cause you have all these fees where you can trade on Robinhood for free. Uh, in many cases you don’t even have, like, a direct claim on the, the actual underlying. Uh, but then, like, the other thing is may- may- maybe it’s better if you’re in a developed market or developing market and you don’t have access to these assets.

Okay, fine. Like, you now trade these with no KYC. Okay, great. But the other thing about tokenization is that you have composability, and composability is, I mean, that’s maybe one of the most important f- things, period, about blockchains, is that all these applications are composable. So again, who’s gonna be the first person to lean into the composability of tokenized assets?

It’s probably gonna be the meme coin guys. So they’re always trying to find new ways of, like, spinning this game so it looks like it’s different. So that’s another example. A third example is maybe more recent, but, you know, there’s, like, this new trend of people, uh, directing the creator fees on pump.fun to- Oh

people on Twitter, and, like, it’s, like, this huge controversy. And I look at it and I’m like, “All right, this is also kind of stupid. It’s just, like, you’re just giving a bunch of rich people more money. Like, what are we doing? We’re just giving people away money for free.” But I th- I look at it, I’m like, “Huh, you know, that’s interesting.”

You know, now we can just permissionlessly, like, send money to anyone in the world. Um, we can also not just send it from, say, like, I have USDC, I’m just gonna give this to someone, you can literally redirect the fees of a protocol- Yeah … to anyone in the world permissionlessly, and that’s, like, very interesting as well.

So there’s probably so many more examples of this over time where meme coins, uh, are just preceding everything else, and that’s why I pay attention. Because I do think there’s, like, good ideas that will come from this and good ideas that have come from this.

[00:44:47] Luke Martin: That, uh, token you just brought up, Pay It. I was, um, I think I bought it the first day, going back to social trading.

It’s because Frank or, or someone bought it.

[00:44:54] Ryan Watkins: Yeah.

[00:44:55] Luke Martin: Put it on my radar, and over the past month or two, you know, there’s been so many, uh… The cool thing about meme coins is anyone can launch these things and it’s exciting. Anyone can build. The bad thing is that leads to, like, thousands of people that are launching fake versions or, uh, a scam version.

But this coin comes around and as you said, it lets anyone launch a token and then you can direct the fees to anyone on Twitter. Which is… It seems simple. It’s like we’ve, we’ve done this in the past. It gets annoying. But what was exciting about this protocol specifically, I bought at a million, um, it runs to 30 million.

I think I sold way too early at, like, 15 mil or 20 mil. Um, who knows what happens to it by the time people are listening, but it was cool because- In the past, like even thinking of charity as an example, like you could launch a coin and then anywhere in the world you could just direct it. You, you know for certain the money is going to that person on Twitter.

And so, like, you know, uh, there was a coin that got launched for Jason of the All In podcast, and it’s like, in your head it’s like, all right, how high is Jason coin gonna go? And then you start to think it’s like, well, if we send him $50,000 on Twitter, he’s probably gonna notice, he’s probably gonna talk about it.

And it’s like that gets interesting of we’ve never been able to verifiably send money directly to someone anywhere on the planet and you know it’s going right to them. So like there’s cool charity implications. There’s, you know, I’m not shilling this to- who knows what the hell happens to this token, but like these ideas, you strap together like two kind of dumb ideas and it’s like, that’s interesting all of a sudden.

Yeah. Even, uh, with the memes, like there was a protocol, Ansem talked about this one, NetNet. Yeah. Yeah. Where they, they built almost, you know, I don’t wanna, um, maybe they’re doing more now, but when I first looked at it, al- almost was like a casino for tokenized stocks where you could put down Nvidia shares and then go play roulette, which is like, that’s kinda dumb.

You know, it’s not, I’m not saying people should be gambling with their, with their tokenized Nvidia, but all of a sudden it opens the doors of like what people can do with tokenized stocks. Like it’s not so simple as, all right, I can buy Nvidia, I can tell my friends about Nvidia. It’s like now you can maybe play poker and win Nvidia shares.

Like some of these ideas, it’s early, like that might not seem crazy yet, but like, think of all the games that people are gonna make. It’s exciting, man.

[00:46:51] Ryan Watkins: Yeah. You know, I, I, uh, I think like maybe it’s Chris Dixon has this concept of weak form technologies and strong form technologies. And, you know, example of this is weak form would be something like the, like a, an intranet in the ’90s versus the internet.

Yeah. And oftentimes a weak form of technologies is what gets adoption first before the strong form ends up winning. And I think an example of this in crypto is like maybe like a weak form of the technology would be stable coins and tokenization winning first before we get to like crazy alternative stores of value and decentralized money and, and all, and all this stuff.

And I think one of the reasons why it’s important to pay attention to the trenches and all this experimentation is that i- in one sense, I think we are all, we’ve all become rightfully more skeptical of the promises people have here because, I mean, dude, we’re-

[00:47:45] Luke Martin: It’s hard not to.

[00:47:45] Ryan Watkins: How many years into this industry, like, give me an application I can show to my friends and be proud of, you know?

Yeah. You know, like we… I, I, I get why people are so skeptical. Um, a- and like, listen, I, I do think it’s important to be skeptical as an investor, too, and like you get paid to be, I think, skeptical in this environment. Like, you’ve lost a lot of money if you weren’t skeptical. But what I will say is I’m still sympathetic to the view that when we invent something that is genuinely new, we don’t always know what we’re gonna create with it.

Yeah. And I think a good example of this is what’s happening with, like, all this composability, all these different, sometimes stupid applications just using as building blocks. It looks silly. Maybe, you know, we’re, none of us are smart enough to figure out, like, how this is all gonna come together. Mm-hmm.

But you kind of just have to be optimistic enough, be open-minded enough that something new or novel will come out of it. Yeah. And I think that’s maybe a good, like, longer term foundation to keep you optimistic.

[00:48:40] Luke Martin: 100% agree. Before we wrap here, you’ve been the individual investor in, in crypto and now running this, uh, this large fund, have s- had some success, early to a lot of ideas, and what I wanna do for people watching and listening is they’re kinda thinking about, like, uh, you know, we’re getting so many new entrants, as you said.

Like, people are entering FOMO with a credit card, and they’re buying a meme coin, and then maybe they make money, maybe they lose money, but then they’re like, “All right, what, what else should I buy here?” And they kinda get, like, this different on-ramp than I think a lot of us experienced where it was like, “Let’s learn about Bitcoin,” then you learn about Ethereum, then you figure else, uh, everything else out.

Now it’s like, “Let’s buy a meme coin. If you make money, what else do I buy?” And so I’m trying to think, like, uh, from your perspective, someone who’s been very calculated and, and kinda thinks about this. You’ve seen a lot. You’ve learned a lot of lessons. How do you think about if you see an idea that you find interesting, how do you know when it’s, like, the time to size it or, like, the time to buy in, right?

‘Cause there’s a, a new idea I see every single day where it’s like, I don’t know, he bought it. He makes a lot of money. He’s… That’s interesting. Should I buy? But there’s, there’s clearly, like, a difference of this is interesting, or as you said, a good idea versus a great idea. Mm. Like, do you have a framework for deciding when it is time to, to size in or to buy?

[00:49:47] Ryan Watkins: Uh, so I think we’re, we’re always, we’re, we’re always doing thematic thinking- Mm … so that when we see an idea, it’s not the first time that we’ve seen it. Mm. Uh, if that makes sense. And I, I do think, like, Hyperliquid was a great example where we, we did that work for years just exploring different architectures to build an everything exchange, different architectures to build a perpetual swaps exchange, so then when you finally see it, you’re like, “Oh, that’s it.

Like, I n- I need to actually, I need to actually go g- get long.” So that is, that is one thing. Uh, the other thing is, uh- You know, I don’t even know how to describe this. Like, it’s, it’s like this balance of, like, being in a superposition of skepticism and, like, being a dreamer . And it’s one of those things where, like, you have to be almost cynical to a fault about what can actually work in this asset class because there’s so much nonsense here.

[00:50:43] Luke Martin: Yeah.

[00:50:44] Ryan Watkins: But then you still have to be willing to believe when you find something, like, this could actually be the thing. And I think what helps to ground it is, is the data, and this was one of the first things I, I did when I joined Messari in 2019. There wasn’t really that many data providers at the time.

There really wasn’t anything to do on chain. But I do remember, uh, the first report I ever wrote at Messari was on stable coins. And then I remember as I was writing it, I started to use, uh, this, this data provider, um, Coin Metrics. Mm. Uh, it was like Nic Carter’s- Yeah … like, data, data company. And they had data on how stable coins were being used on Ethereum, and I looked at the data and I was like, “Oh, wow, like, these stable coin things, this seems kinda real.”

And I remember maybe four months later, I, I was looking at the numbers and I was like, “Oh, shit, like, the stable coins are actually doing more transaction volume than Eth on Ethereum.” Yeah. Dollarization is happening on Ethereum. Yeah. What is that actually gonna mean for Eth long term? And so the data is always what’s grounding.

So then we think about, like, when is the right time? It always has to be at this fundamental inflection. It has to be that, ’cause if there’s no fundamental inflection, you might be sitting an idea for years before it actually takes off. Yeah. Or you might just be waiting an idea and it never takes off because you have this beautiful thesis in your head, and then reality doesn’t give a shit.

Yeah.

[00:52:00] Luke Martin: That happens, uh, too fre- that’s, it’s brutal One of the themes that’s just been so big and, and it’s almost a meme, but it’s also true, is, is people are only investing in ideas now that have revenue, which is we’re just entering a new era of crypto. We’ve matured. We, we can’t look at some of those big ideas that might never materialize.

You wanna say, “Look, is this thing making money?” Um, which is kind of a funny thing now we’re, like, focused, all right, does the thing make revenue? That probably should’ve been, like, uh, square one, uh, a couple years ago. Is there anything, like, as you look at that idea as, like, now everyone’s bought into that, right?

That’s, that’s consensus. Is there anything else that’s consensus in crypto or feels consensus where you’re like, “I don’t know, we’re avoiding that”? Like, we’ve talked a lot about some of the things you’re excited on. You were early to Hype, early to Solana. That was a big play you guys made as well, and, and also Perps and seeing how that will influence, uh, crypto.

Is there anything, like, people are excited about where you’re like, “I don’t know”? And it’s okay if you don’t have one. I’m just kinda curious if, if there is something that you maybe structurally avoid, uh, in crypto. Like, I don’t know, some people… Everyone loves privacy coin. I love Zcash, but I don’t really have a good reason on why I avoid Monero.

I just… Zcash goes up.

[00:53:04] Ryan Watkins: Yeah. Uh, well, I’ll comment on that first, and then I’ll- Yeah … and maybe in the background I’ll be thinking about- Yeah … the things I’m skeptical of. So I think what’s happening with, uh, with Zcash is that there’s, like, this rare window that opened up for Bitcoin where people are- have structural concerns, or, or the, or they have structural concerns, and that’s, one, at first it was Michael Saylor, which people don’t really talk about as much anymore because, you know, he res- so he resold his Bitcoin, he raised the cash, fine.

But people don’t like his influence in, in, in the Bitcoin markets. That was one. The other one is, like, this quantum overhang. Like, h- what is the timeline that we can actually get Bitcoin being quantum resistant, and what is the path towards actually doing this? Because there is, like, some logistical challenges in- Right

in, like, migrating all these coins. Yeah. And we still don’t know the answers. Um- And then the third is, you know, if we’re now entertaining these longer term structural issues with Bitcoin, then, like, what are we thinking about the security budget for Bitcoin? Uh, uh, that’s also a concern. And, you know, Bitcoin has taken the point of view of let’s ossify, and that provides people with stability and confidence, and if you close your eyes, Bitcoin looks the same 10 years from now, and that’s great.

Although maybe for the first time it’s not gonna look the same because they need to make this, this one big transition. Now, I think because there’s all these structural concerns people are talking about, it kind of has, like, opened up the Overton window for people to entertain alternatives as a hedge.

And I think that’s where Zcash enters the picture, whereas, like, do I really think people care that much about privacy? Probably not. Like, I think one, uh, one data point I always, uh, latch onto is you look at, uh, say, like, DuckDuckGo versus Google, or you look at Signal versus, say, WhatsApp. It’s like 1% of the users that even touch these private options.

People say they care about privacy, but their real preference is that they actually don’t. Right. There’s this… These products are too convenient, and most people, they don’t really have anything to hide. Now, you could say it’s li- maybe a little bit different when it comes to money, but maybe this is a problem just for, like, wealthy people.

Or maybe, like, this is a problem, but the privacy that people want is actually m- for US dollars or just more stable assets. And then that’s where something like, you know, long term, like Ethe- or Vitalik’s been posting a lot about adding different obs- obfuscation protocols or, uh, or privacy protocols to Ethereum, and then you can get privacy for maybe some assets you actually want to own.

So that’s where I get most skeptical on the thesis. But at the end of the day, like, it’s one of those things where if people are gonna entertain this and the Overton window has shifted- Yeah … then, like, the expected value is probably just to be long, and it’s just one of those things that, you know, you just gotta get over.

Uh, so that’s, that’s like Zcash and they’re gonna be these, like, alternative source of value. Yeah. Uh, as far as, like, one sector, maybe it’s not surprising based on some of the comments I’ve said, shared already, but I think the meme coin stuff. Yeah. I’m still, like, structurally a skeptic, and, like, I’ve been surprised how resilient, um- Me

[00:55:59] Luke Martin: too

[00:56:00] Ryan Watkins: Pump has been. I’ve been s- uh, like the Pump revenue- Yeah … uh, not necessarily, not necessarily the token. I’ve been surprised how this keeps on coming back to an extent. I’m still, uh, skeptical that we’ll make new highs across the board as far as volumes and how large these meme coin gets, but I am, like, more open-minded that it could go higher from here- Yeah

as we get in this bull market. But I just think that this game has been figured out at this point, and I look at all the new iterations of this game, stock paired memes, like whatever, like there’s always a new Ponzi, and I’m like, “People get it.” People know what this is already. No one wants to bid these things up that high.

They know they gotta get in and out. It’s tough. There’s, there’s too many, like, sharps in there that are extracting all the money. Like, the take rates are, like, way too high now. Yeah. I mean, you look at some of the take rates for some, like, like it’s like Stonk Fun, for example, this guy’s charging 3% per swap.

So you think like round trip, round trip if you wanna include like FOMO fees, like Solana, like Jito fees for like MEV, and then you include like the Stonk Fun fees, you’re probably paying like 4 to 5%- And the FOMO fee … and the FOMO fees. That’s like 4 to 5% each way. So complete trade, it’s like 10%. It’s like predatory.

I mean, and really- Well, when

[00:57:13] Luke Martin: the asset’s going up 20X, it’s not, but yeah, when the-

[00:57:15] Ryan Watkins: Exactly. That’s, that’s the thing … when it

[00:57:16] Luke Martin: slows down at all-

[00:57:17] Ryan Watkins: Yeah …

[00:57:18] Luke Martin: it starts to get really slow.

[00:57:19] Ryan Watkins: Exactly. So, so maybe what it, it shows you is that t- to date, like maybe, maybe we haven’t been charging enough for these meme coin stuff- Right

because people just don’t care when they can make 20X. But I think at a certain point, people are just gonna lose so much money if they’re losing 10%- Oh, yeah … a round trip trying to trade these. So I’m, I’m like very skeptical, and maybe I’m like holding out hope that maybe these can evolve into something more interesting, like maybe like social tokens or personal to- I, I don’t even know what that means, but some- someone might figure it out.

I

[00:57:47] Luke Martin: think they can. I think they … Yeah. I was probably too skeptical for a while on, on, uh, on the meme coins coming back. Um, I credit Threadguy in, in that stream and a lot of guys like that for kind of challenging my view on that, on how s- you know, pumps still making this money. I was in the camp of it has to be fake revenue.

Like, I was so … I was strongly in that camp. Like, what are… what’s going on? I’ve come around to the idea that, like, there’s just a lot of people that aren’t on Twitter, and there’s like a lot of people on TikTok and young kids. Uh, Eric Balchunas has been on the show several times, uh, ETF analyst at Bloomberg.

He was talking about his kid is investing in stocks now and, like, putting more money at it and probably, you know, figuring out finance, whatever it is. I don’t know how old his, his son is, maybe in, in high school or college, but he’s like, “Yeah, he gets his info from this guy TJR.” And you know, he shows the little TikTok and it’s TJR talking about meme coins go up because of this or here’s a Bart pattern.

And you, you kind of realize, like, there’s a whole world out there that has no idea about what’s happening on Twitter and no idea about us saying it’s sustainable or not. It’s just some kid with 100 bucks or 500 bucks and you realize there’s probably a lot of those people. Like, and, and it’s also like the world we’re living in.

It’s a K-shaped economy. A lot of people are, “How do I climb the ladder?” And so maybe the game is more sustainable than I thought. I still don’t know really how to How to like profit from that other than like gambling in the meme coin casino myself. But, um, it is inter- I’ve, I’ve been like, you know, admittedly wrong.

I was like, “Meme coins aren’t gonna come back, and if they do, it’s not gonna be as big.” It’s been surprising, like how strong it is, how resilient it is. Again, maybe, maybe, uh, by the time people are listening, the trenches are already down again, but it’s like it keeps coming back, man. I’m surprised.

[00:59:17] Ryan Watkins: Yeah, I mean, shout out FOMO for making it so easy- It’s surprising

to just get people to go and onboard and, and, and buy. You know, y- y- you mentioned like the, the K-shaped economy dynamic, ’cause I actually, I’ve been thinking about this so much. I’m like, I’m simultaneously… Like, th- there’s like this structural trend, like, like macro trend, which is like inequality, K-shaped economy.

Yeah. Like, all the reasons people always talk about for why people wanna like hyper gamble. Like, “Oh, AI’s gonna take my job, so I need to like es- escape the perma-” Like, some of this is like nonsense.

[00:59:49] Luke Martin: Sure.

[00:59:49] Ryan Watkins: But I do think there’s so- there’s some merit to this. But then I think about that stuff and I’m like, “Well, how sustainable is that really?”

Like, I don’t think we can be in a K-shaped economy forever, otherwise there’s gonna be revolutions and, dude, all the AI CEOs, this me fucking guillotine for these people. Yeah. Like, th- th- this is not gonna be, uh, forever. But what I do think might actually be a permanent fixture of financial markets is just increased retail participation.

And why does that exist? It’s because we now have mobile phones, and it’s now easy for anyone in the world to now put money onto a pla- uh, a platform and trade. And that is actually maybe the thesis for blockchains, is that it just makes it so easy, like as easy as someone tweeting, as easy as someone sending a message, to now do anything in finance.

That is not going away, and I think that is actually the trend that maybe sometimes gets overshadowed by hyper gamble that I’m actually most bullish on long term, and that’s the one that I think I’m most long, uh, just like intellectually and even like financially right now. I mean, that kinda is the thesis for like all this trading stuff that we’re building, is that like that, that is going to be the case long, long term.

[01:00:48] Luke Martin: Yeah. Before we wrap here, again, I’m just trying to think for, for someone who’s watching this and whether they think they’re late to hype or they’re trying to figure this out, there’s like this new, along with crypto, uh, resurgence and also just AI becoming interesting, more retail investing, there’s like just always this new cohort of investors that are, that are trying to understand the space and, and where do they invest, where do they allocate.

Uh, for a young person who’s kind of like thinking about this or listening to this conversation, how do you think they can maybe instill some habits or, or have some kind of framework that helps them maybe find the next Hyperliquid? I’m not saying there’s gonna be a next Hyperliquid, but it’s, uh, you clearly have a system in place that’s, that’s led to the fund finding new opportunities.

It’s led to you personally finding these new opportunities. What’s something that someone can do today, a habit that compounds, that helps them find the next opportunity or find something to be bullish on? Like, uh, even something you do for yourself.

[01:01:37] Ryan Watkins: You wanna spend time on what’s real. I think oftentimes when people onboard, they onboard through a friend, and who knows what that friend ends up putting them into.

It could be a meme coin, it could be some random altcoin that they just fell in love with for no reason, and they end up losing money, and then they end up churning out. And I think what’s important is you wanna understand the basics of how blockchains work, what is valuable, what value this provides to society.

It sounds like more philosophical, but it’s practical because if you understand this, then that allows you to navigate all this world of chaos and scams and potentially amazing products that are being built and actually have something that’s grounding as you do it, so that you’re not just hearing things from different influencers or reading things from different founders that’s actually not true.

And when you think about like the earliest generation of people that came into this asset class, uh, whether it be 2013 era or before, or 2017 or 2021, we first started by learning about Bitcoin. Yeah. And from there we learned about Ethereum, and then that’s a foundation so that now when we see something new, if I see some new L1 coming out and it’s saying it can be quantum private AI Ethereum, I’m like, “Dude, that’s bullshit.”

Like, no way. Um, but if you don’t know because you just, the first thing you learned about was- It sounds good … I don’t know, something, something else, like, then it sounds, it sounds like it’s real. Yeah. So that’s one. The other thing is, I think this idea that you’re late, uh, everyone has felt that point, uh, felt that way at some point.

I mean, I rem- remember even in 2017, I was, I was worried like when I f- this was like when I first became obsessed with this stuff. I had like near misses in 2014, like some frenzies in the Silk Road, or 2016 I go to a conference, uh, Consensus at the time, and it was enterprise blockchain. I’m like, “All right, this is boring.”

And then 2017 comes around and I feel like I’m late. I’m like, “Damn, I’m buying the top.” Yeah. I was like, “Damn, I’m buying the top, man.” That was like the generational bull market. And then we actually were not late at all. Yeah. In fact, we’re so early that when I’m joining Messari in 2019, I’m wondering to myself like, “Dude, that might be 10 years before this stuff becomes real.”

2021 comes around, 2022. Again, you kinda feel like you might be late if you’re joining. Some people would ask me like, “Oh, am I late?” I’m like, “No, we’re not late.” What percentage of finance is any of this? The answer is, like, basically zero. So then I think you fast-forward today, and what can- kinda keeps you grounded is just think about how many people that you know, how many financial institutions use this on a daily basis.

The answer is, like, almost none. Look at the volumes, look at the open interest, look at the, you know, TVL, whatever metrics you wanna do, loans outstanding, what stable coins. Like, this is so s- even stable coins, which are the most successful product that we built on chain, it’s, like, 1% of, like, the, uh, US dollar M1 money supply.

It’s so small. It’s so small, and if you’re actually playing for, like, the growth of this asset class, which to me is, like, one of the most exciting parts, this is still, like, as close to day one as possible. Yeah, you might have missed, like, the, the, the craziest speculative era where we were just slinging ICOs back and forth or we’re like, you know, forking Bitcoin and we’re sending it up to 10 billion.

But you’re here for the actual, like, change the world, like, segment of the, of the, of the market where you can actually build a real business. And for some people that might be a deterrence because some people just want to come in here and they get rich, and that’s not the mentality anymore. But- Yep … if you actually wanna build something real, you actually wanna invest in something real, this is the best time ever to do that.

[01:04:58] Luke Martin: Ceilings are going up. Ryan Watkins, thank you very much for doing this, man.