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Crypto Overleveraged?🔥Maple Finance CEO INTERVIEW · The Paul Barron Crypto Show

0:07
Speaker 1: Is the crypto market over leverage. Today we're going to
0:10
Speaker 1: dive into that and give you some answers. I think
0:12
Speaker 1: you'll love it. My name is Paul Barren. Welcome back
0:14
Speaker 1: in the tech path. Let's get started. I do want
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Speaker 1: get some discounts. All right, let's get into it today.
0:45
Speaker 1: I do want to kind of go into a scenario
0:47
Speaker 1: that's happening right now, more from a macro side of things.
0:50
Speaker 1: If you just kind of look at the pressure that's
0:53
Speaker 1: being put on Americans in terms of just what these
0:56
Speaker 1: tariffs are looking at. Here's a good example where timu
0:59
Speaker 1: is zach Exit is actually exacting some import charges. You
1:05
Speaker 1: can kind of see it right down there, and this
1:06
Speaker 1: is on a very small amount, like a twenty two
1:10
Speaker 1: dollars total, but starting to see imports coming in, so
1:13
Speaker 1: that in itself is putting some pressure onto Amazon, and
1:17
Speaker 1: Amazon possibly would display tariff cost for consumers. Now, this
1:22
Speaker 1: was kind of, you know, floated out there, and immediately
1:25
Speaker 1: Amazon retracted it back. I think it was in reference
1:29
Speaker 1: to this clip. Take a look.
1:31
Speaker 2: So isn't that a perfect crystal clear demonstration that it's
1:35
Speaker 2: the American consumer and not China who is going to
1:38
Speaker 2: have to pay for these policies.
1:40
Speaker 3: I will take this since I just got off the
1:43
Speaker 3: phone with the President about Amazon's announcement. This is a
1:46
Speaker 3: hostile and political act by Amazon, and I would also
1:51
Speaker 3: add that it's not a surprise because as Reuters recently wrote,
1:55
Speaker 3: Amazon has partnered with a Chinese propaganda arm. We'll tell
2:00
Speaker 3: you that this is certainly a hostile and political action
2:03
Speaker 3: by Amazon.
2:03
Speaker 2: And Secretary I wouldn't think that we would have supply
2:07
Speaker 2: Chaine shocks, and I think retailers they have managed their
2:11
Speaker 2: inventory in front of this. They know that President Trump
2:15
Speaker 2: is committed to fair trade and have planned accordingly.
2:20
Speaker 1: So what you can kind of see there is is
2:23
Speaker 1: the market maybe in a bit of an over leveraged position.
2:27
Speaker 1: So we wanted to bring an expert on coming in
2:30
Speaker 1: from Maple, and we've talked a little bit about before,
2:33
Speaker 1: but Sid Palsy and co founder, great to have you said.
2:37
Speaker 4: Thanks for having me on pul Glad to.
2:39
Speaker 1: Be here, all right, So we're talking a little about
2:41
Speaker 1: in terms of is the market over leveraged? Obviously we'll
2:45
Speaker 1: talk a little bit about Maple and how that might
2:47
Speaker 1: play into this here in a second. But when you
2:50
Speaker 1: look at just the pressures that we're seeing from these tariffs,
2:54
Speaker 1: here's just another example of this where some Amazon sellers
2:57
Speaker 1: are now pulling out a prime day that's clearly going
3:00
Speaker 1: to have some impact on retail consumers, which is most
3:04
Speaker 1: likely going to have some impact on the markets in general.
3:07
Speaker 1: When you look at tariffs as a whole and where
3:10
Speaker 1: the market is right now, because bitcoin's holding it ninety
3:13
Speaker 1: five fairly decently over the last seven eight days. What
3:17
Speaker 1: is your opinion on this? Do you feel like this
3:18
Speaker 1: does affect the markets or do you think we've started
3:21
Speaker 1: to see a little bit of a everything's normal kind
3:25
Speaker 1: of scenario.
3:29
Speaker 5: I definitely wouldn't wouldn't say everything's normal, But I do
3:32
Speaker 5: feel like we kind of hit peak fear and pessimism
3:35
Speaker 5: a couple of weeks back, and you can see that
3:37
Speaker 5: in the price charts on bitcoin that it has rebounded
3:40
Speaker 5: from when we were trading between that seventy five to
3:42
Speaker 5: eighty five K range. So I think people feel like,
3:48
Speaker 5: you know, we had that initial whipstower moment where the
3:51
Speaker 5: market's overreacted, and I think now people are starting to
3:55
Speaker 5: listen to some of the commentary coming from BES and
3:57
Speaker 5: coming from the White House that hey, we have deals
4:00
Speaker 5: in progress. But I think the reason that bitcoin is
4:03
Speaker 5: still sitting around the ninety five k mock and why
4:07
Speaker 5: we haven't seen more price action is that, you know,
4:09
Speaker 5: people are still conservative. We've seen a lot of you know,
4:13
Speaker 5: very abrupt swings in the commentary coming out of the
4:15
Speaker 5: White House and also just you know, in these these.
4:18
Speaker 4: Unilateral and bilateral actions.
4:20
Speaker 5: So I think the market is definitely still holding its
4:22
Speaker 5: breadth and I wouldn't look for it to break out
4:24
Speaker 5: until we see more clarity there. I think the terrorist
4:27
Speaker 5: is still definitely top of mind for.
4:29
Speaker 1: Everyone, something you never see at the market bottoms right
4:31
Speaker 1: now retail investors piling into leverage longs on ETF, So
4:35
Speaker 1: we've already started to see a little bit of movement
4:37
Speaker 1: right here. As these leverage longs start to escalate. How
4:42
Speaker 1: long do you think before? And I guess maybe the
4:45
Speaker 1: question is do you feel like we're going to see
4:47
Speaker 1: a bit of a market retracement before? Most people have
4:52
Speaker 1: been kind of pushing to a very bullish mid to
4:55
Speaker 1: late year. What is your position right now? Do you
4:58
Speaker 1: think we'll see a retrace or bitcoin to maybe an
5:01
Speaker 1: all time high.
5:05
Speaker 4: It's a good question, I think from here.
5:07
Speaker 5: I'm certainly not an expert in short term trading signals,
5:11
Speaker 5: but my sense is I don't actually expect us to
5:13
Speaker 5: see a retrace here.
5:15
Speaker 4: At the moment.
5:15
Speaker 5: I think the market is kind of pricing in that
5:17
Speaker 5: they may get quantitative easing coming from the FED over
5:20
Speaker 5: the course of the next few months, and that is
5:23
Speaker 5: that that would be the catalyst for more of a
5:27
Speaker 5: you know, for more more of an entry into a
5:30
Speaker 5: into a ball market. I think a lot of the
5:32
Speaker 5: traders I talk to a kind of expecting to see
5:34
Speaker 5: bitcoin push one hundred and twenty K over the next
5:37
Speaker 5: couple of months.
5:38
Speaker 4: And I think the.
5:40
Speaker 5: Catalyst for that is, as I said before, it is
5:43
Speaker 5: probably going to be quantitative easing off the back of
5:45
Speaker 5: potentially better than expected inflation numbers. And and you know
5:50
Speaker 5: some kind of trader courts coming through with major trading partners.
5:54
Speaker 1: I think you hit on two things there. Inflation, we've
5:57
Speaker 1: got the FOMC next week, we'll get a chance to
5:59
Speaker 1: see another inflation print soon after a down inflation print,
6:04
Speaker 1: which was good for markets in general. But yet the
6:07
Speaker 1: tariffs kind of thwarted that a little bit. But to
6:10
Speaker 1: your point, if we do continue to see a little
6:12
Speaker 1: bit of a slide or at least flat movement on
6:14
Speaker 1: inflation and we see some market I think release in
6:20
Speaker 1: terms of tariffs, do you feel like the rate cut
6:24
Speaker 1: could still happen this year because there's still people on
6:26
Speaker 1: the fence whether or not we would get a rate
6:28
Speaker 1: cut from the Fed. What's your call.
6:32
Speaker 5: I think the last shot I saw was that consensus
6:35
Speaker 5: and consensus expectations for inflation from a lot of the
6:38
Speaker 5: major research houses are coming down for the next print,
6:41
Speaker 5: and so I think from there I would say there's
6:44
Speaker 5: there's a there is actually a decent chance you could
6:45
Speaker 5: see a rate cut before the end of the year,
6:47
Speaker 5: and I know from having watched the from having watched
6:51
Speaker 5: the kind of the voting or the or the predictions
6:53
Speaker 5: when it comes.
6:53
Speaker 4: To rate cuts.
6:55
Speaker 5: You know, initially a lot of people were expecting that
6:57
Speaker 5: for Q two, and then the timeline for it has
7:00
Speaker 5: gradually been pushed out by the market to where it's
7:03
Speaker 5: kind of June and beyond. But I think if you
7:05
Speaker 5: do see a rate cut and some kind of quantitative
7:08
Speaker 5: easing this year, that would you know, that would be
7:11
Speaker 5: very a strong bullish signal for bitcoin.
7:14
Speaker 4: And no doubt prices and also equities for sure.
7:18
Speaker 1: Yeah, I think that would mark the beginning of possibly
7:22
Speaker 1: a very significant move in the market. If you look
7:24
Speaker 1: at kind of switching gears a little bit here over
7:27
Speaker 1: to a little bit about your platform. When I'm looking
7:31
Speaker 1: at your au M, I mean this has really started
7:35
Speaker 1: to accelerate. You can kind of see there's syrup U,
7:38
Speaker 1: SDC and then obviously Bitcoin. When you look at the
7:42
Speaker 1: explosion right now that is happening, this may indicate back
7:46
Speaker 1: to your point is that, well, there's two alternatives here.
7:48
Speaker 1: One is people with a lot of confidence in where
7:51
Speaker 1: bitcoin is going from here, so they're looking at more
7:54
Speaker 1: yield generating opportunities like with Maple, But could it also
7:58
Speaker 1: set up a potential retracement with a little bit over
8:03
Speaker 1: leveraging here in the market, especially with this kind of
8:05
Speaker 1: move just here in the last little bit in terms
8:08
Speaker 1: of assets under management right now, what are your thoughts?
8:12
Speaker 5: Yeah, I think it's a good call out. What I
8:15
Speaker 5: would say is we've seen a lot of inflows and
8:17
Speaker 5: assets under management, which which are because a lot of
8:21
Speaker 5: people are kind of keeping assets on the site. So
8:25
Speaker 5: when people deposit with us, aside from the bitcoin der product,
8:29
Speaker 5: it's usually stable coins, and that's because they want to
8:32
Speaker 5: keep their money working for them while it's not invested
8:34
Speaker 5: in the market in capital appreciating assets like bitcoin or
8:38
Speaker 5: ethereum or a solana. And so we've actually seen that
8:42
Speaker 5: pile up quite dramatically because folks are looking to get
8:45
Speaker 5: a yield, and a lot of folks have told us
8:47
Speaker 5: they're kind of still waiting on the sideline to see
8:49
Speaker 5: whether the market breaks bullish before they go and allocate.
8:52
Speaker 5: But what I can say is that leverage in the market,
8:55
Speaker 5: I would say is still it's nowhere near the levels
8:58
Speaker 5: that we once we're in twenty twenty two market in
9:00
Speaker 5: terms of crypto and lending and credit activity is still
9:04
Speaker 5: relatively it's still relatively unlevered. But what we have seen
9:09
Speaker 5: is that a lot more folks are now starting to
9:13
Speaker 5: request borrow against bitcoin because they don't want to sell
9:16
Speaker 5: at these prices. So I think in terms of like
9:19
Speaker 5: what would drive a retlacement, a lot of these folks
9:21
Speaker 5: are holding bitcoin, are choosing not to sell at these prices,
9:24
Speaker 5: and so that suggests to me that, you know, I
9:27
Speaker 5: don't know that we're going to see a retracement back
9:29
Speaker 5: into like the low eighties that we saw a month
9:32
Speaker 5: or so back, because instead people are choosing to hold
9:36
Speaker 5: borrow against it and use that for short term cash needs,
9:40
Speaker 5: if not to start to add leverage to their position
9:43
Speaker 5: so they can so that they can be well placed
9:46
Speaker 5: if we do enter a ball market over the next
9:47
Speaker 5: couple of months.
9:48
Speaker 1: I look at private credit right now, you guys are
9:51
Speaker 1: right there running in the top three. So congrats on
9:55
Speaker 1: that with Maples in terms of private credit, First of all,
10:00
Speaker 1: who are your clients? Who do you feel like is
10:02
Speaker 1: the perfect match for mapel right now?
10:05
Speaker 4: Well, it's been interesting.
10:07
Speaker 5: What I would say is that the diversity of our
10:08
Speaker 5: clients set, particularly on the borrow side has certainly grown
10:11
Speaker 5: this year. If I look back at who we were
10:13
Speaker 5: dealing with early last year, it was typically prime brokers,
10:17
Speaker 5: OTC trading desks and and on chain hedge funds or
10:24
Speaker 5: venture funds. And I would say now where it's expanded
10:27
Speaker 5: to we have clients who are exchanges that borrow from us.
10:31
Speaker 5: We also have clients increasingly who are high net worths
10:35
Speaker 5: or family officers, and they might have large crypto holdings
10:39
Speaker 5: because they were early investors in the sector, and they're
10:42
Speaker 5: looking to make significant real estate purchases, and so they
10:46
Speaker 5: come to us for the certainty of getting a fixed
10:48
Speaker 5: rate loan, a fixed rate loan with a fixed duration
10:52
Speaker 5: or fixed maturity, and they like the fact that we
10:54
Speaker 5: can Now we're now off the scale, as you point
10:58
Speaker 5: out from the AUM chart. On the other side of
11:00
Speaker 5: that equation, Paul, we have the yield product, and the
11:03
Speaker 5: folks who are approaching us about that are typically it's
11:06
Speaker 5: high net worths, yield funds, or on chain hedge funds.
11:13
Speaker 5: But then increasingly we're seeing corporate treasuries who are perhaps
11:16
Speaker 5: a little bit more conservative, and also we started to
11:18
Speaker 5: see traditional asset managers. I think a couple of months ago,
11:21
Speaker 5: we announced the partnership with bitco where they made a
11:24
Speaker 5: deployment to one of the pools. What they liked about
11:27
Speaker 5: it was it was non correlated returns, it was transparent,
11:31
Speaker 5: it was liquid because it was un chain and so increasingly,
11:34
Speaker 5: the change I would say that's coming through this year
11:36
Speaker 5: is there are more institutional and traditional finance players looking
11:40
Speaker 5: at the space.
11:42
Speaker 1: I'm looking at your website. This is you know, obviously
11:46
Speaker 1: you guys have the bitcoin yield product that's out there
11:48
Speaker 1: right now. Obviously this right here is Syrup, which is
11:51
Speaker 1: the US stable coin or the stable coin involved. First
11:55
Speaker 1: of all, how are you able to even get at
11:57
Speaker 1: these levels right here? Almost ninety percent in terms of
12:01
Speaker 1: APY on Syrup.
12:03
Speaker 4: Yeah.
12:04
Speaker 5: First of all, I would say that the eighteen percent
12:07
Speaker 5: shown there includes Syrup token rewards, so that is not
12:11
Speaker 5: an organic USDC or a stable point only yield. So
12:15
Speaker 5: I don't want to mislead people with their expectations. But
12:19
Speaker 5: what we do where the yield on the platform does
12:22
Speaker 5: come from is exactly as you said.
12:24
Speaker 4: Well, it's private credit.
12:25
Speaker 5: So if you look at the typical loans we would do,
12:28
Speaker 5: we would do loans against bitcoin or ethereum. They would
12:32
Speaker 5: usually be at a seventy percent LTV. So if you
12:34
Speaker 5: give me a million dollars in bitcoin, I give you
12:36
Speaker 5: seven hundred thousand dollars in loans. And we saw a
12:40
Speaker 5: pretty significant fluctuation or range in those rates. In December,
12:44
Speaker 5: I was lending that out at twelve percent, you know,
12:47
Speaker 5: a couple of months ago, I was lending it as
12:49
Speaker 5: low as six six and a half percent. And now
12:53
Speaker 5: we've seen this is another sort of indication for me
12:55
Speaker 5: that the market is kind of turning bullish. We've seen
12:57
Speaker 5: those rates pick up to around nine percent off today.
13:01
Speaker 5: And then the other thing we can do is to
13:03
Speaker 5: get higher yields for our clients. We can lend against
13:07
Speaker 5: what I would call higher volatility essence, whether it's Solana
13:10
Speaker 5: or XRP, and just because they don't have the market
13:14
Speaker 5: cap or the liquidity that a bitcoin has, we charge
13:18
Speaker 5: a higher rate on that. And that's where you can
13:19
Speaker 5: pick up, you know, anywhere from nine percent at the
13:22
Speaker 5: low to fourteen percent going back a couple of months.
13:26
Speaker 5: But those are the kind of indicative ranges. So today
13:28
Speaker 5: it would be six to seven on bitcoin back stuff,
13:31
Speaker 5: and it would be nine to ten on the higher yield.
13:33
Speaker 1: Stuff on higher year, So getting into Solana XRP, Lana XRP. Okay,
13:40
Speaker 1: all right, I'm looking at your kind of a comparison
13:44
Speaker 1: here on bitcoin is this of course is involving holding
13:48
Speaker 1: the core token. So if you've got one bitcoin stake,
13:51
Speaker 1: you're getting five percent, but that does require you to
13:54
Speaker 1: hold some core token. If I zoom that down a
13:57
Speaker 1: little bit.
13:57
Speaker 5: Twenty, that changes four one thousand core per bitcoin, So
14:03
Speaker 5: you do have to hold that ratio. And that is
14:06
Speaker 5: that is where in effect our customers are paying us
14:10
Speaker 5: to manage that or to you know, to administer that.
14:14
Speaker 4: You know, that's staking.
14:16
Speaker 5: So the way that that works, and that has been
14:18
Speaker 5: our most popular product recently, so we've now got about
14:21
Speaker 5: one hundred and fifty million managed in that product. It's
14:25
Speaker 5: providing The reason folks like it is that it's providing
14:28
Speaker 5: a bitcoin on bitcoin yield.
14:30
Speaker 4: It's not purely points. It's not a.
14:33
Speaker 5: Twelve month lock up. You put your bitcoin in, your
14:36
Speaker 5: bitcoin remains in a custodian. There's no slashing risks of
14:40
Speaker 5: the custodians. We use our bitco and copper and the
14:44
Speaker 5: role that we play as we aggregate the bitcoin so
14:46
Speaker 5: that we can hit the scale to get that top
14:48
Speaker 5: rewards rate, and then we source the core tokens from
14:53
Speaker 5: our network using our lending and borrowing platform, and then
14:57
Speaker 5: we hedge the core price using options desks and make
15:02
Speaker 5: sure that the rewards or the yield that ultimately comes
15:05
Speaker 5: back to our clients comes in the form of bitcoin
15:08
Speaker 5: and not in the core token itself.
15:10
Speaker 4: So we perform that for that kind of function.
15:12
Speaker 5: We take a small spread on it, but the clients
15:16
Speaker 5: like it because it's bitcoin on bitcoin yield. It's not
15:20
Speaker 5: it's not taking significant counterparty risk through lending it unsecured,
15:25
Speaker 5: nor is it locking it in smart contracts. So from
15:28
Speaker 5: that perspective, it's a fairly conservative product, and it is
15:32
Speaker 5: at the moment generating what I would say is one
15:33
Speaker 5: of the best risk adjusted yields in the space.
15:37
Speaker 1: What blockchain is Maple running on right now.
15:41
Speaker 4: We are on Ethereum at the moment, so.
15:44
Speaker 5: Ninety percent of the loans and the lending pools we
15:51
Speaker 5: do are currently on Etheroeum. We are actually in the
15:54
Speaker 5: process because, as you know, as painful as it can
15:57
Speaker 5: be to use other chains, I do recking that the
16:00
Speaker 5: future is kind of heading in that direction. So we're
16:03
Speaker 5: in the process of evaluating a providers who are in
16:06
Speaker 5: conversations with layer zero, with chain link around getting to
16:09
Speaker 5: other chains, and ultimately, particularly for the syrup USDC our
16:13
Speaker 5: DeFi product, we want to have that distributed on as
16:17
Speaker 5: many chains as possible. I think it can't be overstated
16:19
Speaker 5: how important distribution is for success in DeFi.
16:23
Speaker 1: No doubt, Yeah, no doubt. I think that's going to
16:26
Speaker 1: be one of the things that obviously is going to
16:28
Speaker 1: cause these markets to really get heated up, especially as
16:31
Speaker 1: people start to understand how to use them. If you
16:33
Speaker 1: look at ce FI lending in the market share over
16:37
Speaker 1: the last you know, several years, we saw a little
16:41
Speaker 1: bit of a dip in that. Obviously we know much
16:43
Speaker 1: of that. Right there was Celsius, which we know what
16:46
Speaker 1: happened there. What is different and maybe for some of
16:50
Speaker 1: you watching today you don't know what happened with Celsius,
16:53
Speaker 1: but Celsius was what looked to be a high flyer
16:56
Speaker 1: in the market. Obviously mismanaged funds ended up being you know,
17:01
Speaker 1: went after by the sec founder, goes to jail, all
17:04
Speaker 1: those kind of things. What makes this different, because this
17:08
Speaker 1: has a lot of markers, Explain to me how I
17:11
Speaker 1: would say, all right, Maple is clearly a completely different
17:14
Speaker 1: structure here.
17:16
Speaker 4: Yeah.
17:17
Speaker 5: Sure, I'll try and point out the most salient points
17:21
Speaker 5: from my perspective as to how we're different. And we
17:23
Speaker 5: indeed learned a lot of lessons from going through we
17:26
Speaker 5: were around in the twenty twenty two cycle. We survived,
17:29
Speaker 5: and we tried to take as many lessons as possible about,
17:32
Speaker 5: you know, what we.
17:33
Speaker 4: Should change as well as just what not to do.
17:35
Speaker 5: I think for folks who are listening at home who
17:39
Speaker 5: may not have been familiar with Celsius, what it was
17:41
Speaker 5: doing was it was taking in deposits, both retail and institutional,
17:46
Speaker 5: and it was ostensibly running a lending book and lending
17:49
Speaker 5: those out, So it had a mix of over collateralized loans. However,
17:53
Speaker 5: it also had under collateralized or unsecured loans. But then
17:59
Speaker 5: a third reductive had was also DeFi strategy, So we
18:03
Speaker 5: deployed money in uh, you know in Badger Dow was
18:08
Speaker 5: one of the ones where it unfortunately suffered a hack.
18:10
Speaker 5: So it was using a variety of DeFi protocols and
18:13
Speaker 5: in some cases was taking the pretty significant risks of
18:17
Speaker 5: hacks and loss of funds through that. But I think
18:21
Speaker 5: the core issue it had was taking trading positions, so
18:25
Speaker 5: it wasn't exactly hedging its liabilities. It would take in
18:28
Speaker 5: ETH and then purchase BTC thinking that BTC was going
18:32
Speaker 5: to out PERFOMTH. Whereas we try and run a matchbook,
18:35
Speaker 5: I take in USDC, I lend out USDC, I don't
18:38
Speaker 5: convert the USDC something else and kind of run a
18:41
Speaker 5: trading position. But the other thing we do that that
18:45
Speaker 5: is importantly very differentiated. All of our loans are on chain,
18:50
Speaker 5: so we try and provide transparent record of where we're
18:52
Speaker 5: lending the money, what the collateral is against those positions.
18:56
Speaker 5: I also don't co mingle unsecured loans with the few
19:00
Speaker 5: ad ones. What we try and do is we give
19:02
Speaker 5: very clear lending strategies, and if you are in an
19:05
Speaker 5: overclatteralized lending strategy against bitcoin, that's the most conservative thing
19:09
Speaker 5: we do. And I'm not putting Solana backed loans or
19:12
Speaker 5: unsecured loans in there. If you want to take the
19:15
Speaker 5: risk of more volatile collateral like Solana or XRP, you
19:19
Speaker 5: can go in that lending strategy. And again I don't
19:21
Speaker 5: commingle other stuff in there. And so by having these
19:25
Speaker 5: segregated SPVs. I also ensure that if something goes wrong
19:28
Speaker 5: in one of these lending strategies, it's like the engine
19:32
Speaker 5: rooms on a ship. They're all bulkanized and silos. So
19:35
Speaker 5: the entire entire yeah, the entire Maple platform doesn't go down,
19:39
Speaker 5: whereas a lot of those players, so Celsius Blockfire, were
19:43
Speaker 5: running singular entities, and so when when there was an
19:47
Speaker 5: insolvency or defaults or problems in one of those entities,
19:49
Speaker 5: it took or rather in one part of the loan book,
19:53
Speaker 5: it took the entire ship.
19:54
Speaker 4: Down with it. And so that's another lesson we learned
19:57
Speaker 4: in the risk management.
19:59
Speaker 1: Well, I think to your point is the mixture of
20:02
Speaker 1: assets is really starting to where it gets a little
20:05
Speaker 1: bit more shady. I think in the essence of what
20:07
Speaker 1: was happening at that period of time, which wasn't being
20:10
Speaker 1: you know, revealed, which is the other scenario is transparency,
20:14
Speaker 1: It just wasn't there, and.
20:15
Speaker 5: So you never saw that there was like a black box.
20:17
Speaker 5: You didn't know the equity capital backing the loan book
20:20
Speaker 5: exactly in Celsia's case, you didn't know what proportion were
20:23
Speaker 5: overcluralized or underclateralized, and you didn't know when a loan
20:27
Speaker 5: had fallen past you and was no longer performing, Whereas
20:31
Speaker 5: we show all of that on chain, so you can
20:33
Speaker 5: see if a loan has passed you, you can see
20:35
Speaker 5: what the collateral is against an individual loan. And I
20:38
Speaker 5: think that is why most asset management is going to
20:41
Speaker 5: continue to shift on chain.
20:43
Speaker 4: It just gives unparallel totally exactly.
20:45
Speaker 1: I'm one in belief that that is going to occur
20:48
Speaker 1: because it is opening up kind of a transparency layer
20:51
Speaker 1: that we have not had in many different financial instruments ever.
20:55
Speaker 1: So it definitely, I think is besuge. I think you know,
20:58
Speaker 1: all the smart money managers know that. Let's talk about
21:01
Speaker 1: Coinbase Asset Management launches their coinbas bitcoin yield fund. Explain
21:08
Speaker 1: to me, and again, this is outside the United States
21:10
Speaker 1: right now. You guys are of course mostly outside the
21:14
Speaker 1: United States as well. But how is this different than
21:16
Speaker 1: maybe what you're doing on your program versus what bitcoin
21:21
Speaker 1: or excuse me, coinbase is trying to do in terms
21:23
Speaker 1: of bitcoin yield.
21:25
Speaker 5: So Babel's program is staking in nature, so it's run
21:31
Speaker 5: on top of the core network. So that's a bitcoin
21:34
Speaker 5: at one that features proof of steak, but ostensibly What
21:38
Speaker 5: it means is we are effectively getting paid for securing
21:41
Speaker 5: that network, and we're doing so using bitcoin and core
21:45
Speaker 5: core governance tokens. What coinbase is proposing to do with
21:48
Speaker 5: this fund is primarily the basis trade. So that means
21:52
Speaker 5: you take a long spot position on an exchange, you
21:55
Speaker 5: take a short purpose position, and then the short purpose
21:59
Speaker 5: position is paid a funding rate for you know, for
22:02
Speaker 5: effectively financing loans, and the two net out because you
22:06
Speaker 5: are as long in spot as you are short in
22:09
Speaker 5: the purpose, and so you're you're you're not running a
22:14
Speaker 5: You're not running a position that will fluctuate with the
22:16
Speaker 5: price of bitcoin, and the idea is that you get
22:19
Speaker 5: paid a pretty nice yield from that. I think unfortunately,
22:23
Speaker 5: the issue with that is that the basis trade was
22:25
Speaker 5: very good years ago, and as it has been institutionalized,
22:29
Speaker 5: you know, now it's on CME, more people are participating
22:32
Speaker 5: in it, and those kind of return opportunities have been
22:36
Speaker 5: compressed in arbitraged away.
22:38
Speaker 4: So I think, you know, in terms of guidance.
22:41
Speaker 5: Do I think it's possible to earn four to eight
22:43
Speaker 5: percent yield in kind in bitcoin doing.
22:46
Speaker 4: The basis trade? I think I would struggle to earn
22:48
Speaker 4: that if I was kind of running that strategy.
22:50
Speaker 5: So I think that's probably an aspirational level, and I
22:53
Speaker 5: don't know that that's going to clear just given how
22:56
Speaker 5: institutionalized and mature the basis trade is these.
22:59
Speaker 1: Days, with with regulation coming down the pipe, likelihood as
23:04
Speaker 1: we're going to see each staking rolling out soon here
23:07
Speaker 1: in the US, probably a lot looser terms in terms
23:11
Speaker 1: of assets that you can earn yield on. What would
23:14
Speaker 1: that do for the strategy for Maple to possibly make
23:18
Speaker 1: a US based product.
23:22
Speaker 5: Uh So, it's a good question. We have products that
23:24
Speaker 5: are offshore. We actually do have products that are available
23:27
Speaker 5: on shore. However, like you know, like a lot of
23:32
Speaker 5: DeFi protocols, we have to limit those to accredited investors,
23:35
Speaker 5: so you have to go through, you know, show that
23:38
Speaker 5: you can meet the reg d hurdles.
23:41
Speaker 4: And the fact is that that was due to you know.
23:44
Speaker 5: It being nearer nearer impossible to register any any crypto
23:48
Speaker 5: investment products under the prior.
23:52
Speaker 4: Under the prior regulatory regime.
23:54
Speaker 5: I think that is opening up now and we're seeing
23:56
Speaker 5: a lot more you know, back and forth conversation and
23:59
Speaker 5: just a lot more sceptivity from the new regulatory leadership.
24:03
Speaker 5: So I think the big, the big unlock that would
24:06
Speaker 5: come this year, Paul, would be a market structure build.
24:09
Speaker 5: That is what a lot of us in the space
24:10
Speaker 5: are kind of looking at and uh, you know, waiting
24:13
Speaker 5: to see. Because if if it became possible to then
24:17
Speaker 5: register uh you know, DeFi or crypto based uh securities
24:23
Speaker 5: or similar investment products, then I think a lot of
24:27
Speaker 5: builders would would take that option, and then it could
24:30
Speaker 5: become available to US consumers. You of course want to
24:33
Speaker 5: provide it in such a way that's still going to
24:35
Speaker 5: ensure investor protections. That means appropriate disclosures. You know, what
24:40
Speaker 5: you say is happening is actually happening under the hood.
24:44
Speaker 5: But I think market structure bill and uh you know,
24:48
Speaker 5: and and guidance on you know, what makes a crypto
24:52
Speaker 5: you know, a crypto opportunity a security or or not
24:55
Speaker 5: a security so that you can know which clients you
24:58
Speaker 5: can serve it to. But I think it would be
25:00
Speaker 5: a massive unlock for the space if US retail could participate,
25:04
Speaker 5: because unfortunately, you know, whilst it does protect them from
25:08
Speaker 5: you know, fraud and malfeasant actors, it also locks them
25:12
Speaker 5: out of you know, very solid return opportunities. And limits
25:16
Speaker 5: those to only accredited investors. So you are, you know,
25:20
Speaker 5: you're unfortunately locking retail out of a lot of the
25:22
Speaker 5: gains that are going on in the market.
25:24
Speaker 1: And I think we're starting to see at least a
25:26
Speaker 1: little bit of light at the end of the tunnel
25:28
Speaker 1: there now. I think this administration is aware of these
25:33
Speaker 1: kind of situations. Now there's being bills floated out there
25:36
Speaker 1: that potentially could change the accredited investor rules, and that
25:39
Speaker 1: would be huge, not only just in crypto, but in
25:42
Speaker 1: traditional markets. That would be a huge and significant development
25:47
Speaker 1: for sure. Looking at DeFi, I want to get into
25:49
Speaker 1: the last couple of questions for you, DeFi, I'm looking
25:52
Speaker 1: at DeFi in general. Ave, of course holding out right
25:55
Speaker 1: now across sixteen chains. You kind of see Morpho and
25:58
Speaker 1: some others in here, Pound, et cetera. Then there's uh,
26:01
Speaker 1: you know, Maple right down there at two chains. Do
26:04
Speaker 1: you feel like AVE is undervalued right now? I mean,
26:07
Speaker 1: with that much reach into the market, AVE seems to
26:10
Speaker 1: be in the right point really at the right time
26:14
Speaker 1: as the market is starting to heat up.
26:17
Speaker 4: Uh. I've I've always been a big fan of AVE.
26:21
Speaker 4: I've you know, I've.
26:22
Speaker 5: I've been a user of the product for a number
26:24
Speaker 5: of years, I think, Uh, I think they they haven't
26:28
Speaker 5: gone as much publicity as as perhaps some of the
26:30
Speaker 5: other DeFi projects out out out there, and perhaps their
26:35
Speaker 5: their token has not received as much love as a
26:37
Speaker 5: result of that. What I expect to see this year, however, Paul,
26:42
Speaker 5: is that I am looking for DeFi to outperform other sectors, uh,
26:46
Speaker 5: in terms of in terms of old coins, I think
26:48
Speaker 5: I expect I've for a long time felt like meme
26:51
Speaker 5: coins were an inverse, you know, equal and opposite reaction
26:55
Speaker 5: to DeFi getting a very big clamp down from regulators,
26:59
Speaker 5: and that as that regulatory boot has kind of come
27:02
Speaker 5: off the throat of DeFi, that DeFi would would outperform,
27:06
Speaker 5: and that mean points would underperform.
27:08
Speaker 4: And I think some of the.
27:09
Speaker 5: Catalysts that I look for this year in terms of
27:12
Speaker 5: DeFi coins or DeFi tokens outperforming would be things like
27:15
Speaker 5: feet switches. Ave earns revenues, it earns fees, it is profitable,
27:21
Speaker 5: and so if it's able to turn on the feat switch,
27:23
Speaker 5: do buybacks of the token, I think that will start
27:26
Speaker 5: to get allocators, whether they be funds or retail excited
27:31
Speaker 5: about those tokens, and so I think that would be
27:34
Speaker 5: a catalyst for a rerate in AVE. But it's also
27:37
Speaker 5: it is just a tough one to value rate because
27:40
Speaker 5: it has thirty plus billion TVL, but the actual loans
27:43
Speaker 5: outstanding are much smaller than that, and I think it's
27:45
Speaker 5: it is tough for the average retail investor to kind
27:49
Speaker 5: of correctly value what it should be worth. But I
27:51
Speaker 5: think having cash flows come in the form of token buybacks,
27:55
Speaker 5: as Maker and Sky have been doing for a while,
27:59
Speaker 5: just makes it easier to kind of form a fundamental
28:01
Speaker 5: valuation of what these coins should be worth.
28:04
Speaker 1: One thing, you know, just without you know, warning everybody
28:09
Speaker 1: anytime you're going into platforms like this. Obviously, liquidations are
28:13
Speaker 1: the biggest fear that everybody has. I was looking at
28:17
Speaker 1: some data here when do liquidations happen because I was
28:20
Speaker 1: kind of curious why and when, And what surprised me
28:23
Speaker 1: was this right here, liquidations happen like almost why you
28:27
Speaker 1: sleep more.
28:28
Speaker 4: So, yeah, you know the reason for that. Why, I
28:31
Speaker 4: can give you exactly the reason for that.
28:32
Speaker 5: Yeah, it's it's because it's when the uh I'm assuming
28:35
Speaker 5: that is that is synced to Eastern time, so Eastern
28:40
Speaker 5: US time. Yeah, but what happens is that the Asian
28:43
Speaker 5: market comes online and they trade, and if it's a
28:46
Speaker 5: particularly volatile time let's say Trump tariff announcements, exactly, Asia
28:52
Speaker 5: comes online, trades everything down in their morning session and
28:57
Speaker 5: nobody's online trading in the US from Sunday evening and
29:03
Speaker 5: and usually it is in fact Sundays that this happens.
29:06
Speaker 5: I know, our last three biggest days where we've had
29:09
Speaker 5: to make margin calls have been it was Sunday. The
29:13
Speaker 5: biggest one in recent memory was the Sunday August fourth
29:16
Speaker 5: when the n carry trade unwhelmed. And then we had
29:19
Speaker 5: another one on a Sunday in late January early February
29:23
Speaker 5: when they were the tariff announcements, and that was exactly
29:25
Speaker 5: the reason.
29:26
Speaker 4: Asian Asia came online, sold everything.
29:28
Speaker 5: Nobody was online in the US and so people were
29:30
Speaker 5: getting liquidated.
29:32
Speaker 1: There you go, guys, There you go. Guys. Don't be
29:35
Speaker 1: sleeping on Sundays.
29:37
Speaker 4: Make sure make sure you have set up.
29:40
Speaker 1: Yes, stay close on your on your on your leverages
29:44
Speaker 1: out there. Uh, this is a good one. Listen, we
29:47
Speaker 1: really appreciate you just stopping in today. I think you know.
29:49
Speaker 1: One of the things is we see the markets move
29:52
Speaker 1: Forward said, it's always fun to kind of get an
29:54
Speaker 1: analysis of, you know, some of these other services that
29:57
Speaker 1: are out there, like Maple. So great to have you
29:59
Speaker 1: on the SHO show. Thank you so much for coming in.
30:02
Speaker 4: No, no, my pleasure.
30:03
Speaker 1: Thanks Paul, you bet all right, you guys. If you're
30:06
Speaker 1: not in the Diamond Circle, that's our own private member
30:09
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30:15
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30:17
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30:20
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30:25
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30:29
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30:32
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30:34
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30:36
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30:38
Speaker 1: Right here. A tech path