Latest / The Starting Block / Alpaca’s $435M raise driven by Wall Street’s tokenization push

Transcript

Alpaca’s $435M raise driven by Wall Street’s tokenization push · The Starting Block

0:07
Welcome back to the starting block.
0:08
Happy Wednesday to you wherever
0:09
you're joining us around the world
0:11
today.
0:12
Happy hump day.
0:13
You've made it halfway through the
0:14
week, so it's downhill from here
0:16
to the weekend.
0:17
It's been an interesting few days in
0:18
the industry.
0:20
Obviously, the biggest talking point
0:22
has been the cold card exploit,
0:24
which happened late last week,
0:26
impacting Bitcoin only
0:28
hardware wallet cold card
0:30
and seeing more than
0:32
one and a half thousand Bitcoin and
0:34
being stolen from devices that.
0:36
Had that issue.
0:37
If you missed our conversation on
0:39
Monday, right here on the starting
0:40
block, we dived into this in
0:42
depth on the show with
0:44
a couple of big name Bitcoiners,
0:46
namely, Casa, co-founder
0:48
and CTO, Jamison Lopp,
0:50
as well as Zach Herbert from
0:51
Foundation.
0:52
If you wanna go and watch that
0:53
interview, you can find it on the
0:54
block's YouTube channel.
0:56
We posted that up today,
0:58
so you can hear from them what it
0:59
means for Bitcoin self custody going
1:01
forward.
1:02
Bitcoin hardware wallet
1:04
manufacturers and a number of other
1:05
considerations a really great
1:07
conversation That I recommend you go
1:08
and listen to you can find that
1:10
once again on the blocks YouTube
1:11
channel while you're there And you
1:13
don't already please subscribe We're
1:14
putting out a load of great content
1:16
every day And we would love for
1:18
you to see it and interact with it
1:19
if you don't t already as well
1:20
Please follow us right here on X if
1:22
you're joining us on Twitter
1:24
for the live stream today, and if
1:25
you Don't know who I am my name is
1:27
Gareth Jenkinson I'm the host of the
1:28
show head of multimedia here at
1:30
the block It's been a fantastic
1:32
six weeks so far, hosting
1:34
the Starting Block since we launched
1:36
with our starting interview with
1:38
CZ. And again, if you missed that
1:39
conversation, I implore
1:41
you to go onto our YouTube channel
1:42
and check that out. Our full
1:44
conversation with C Z, 17 minutes
1:45
unfiltered, uncut, I asked him some
1:47
questions that no one else in the
1:49
industry has asked him yet.
1:51
So you definitely wanna go and check
1:53
it out. We've got a jam pack show
1:54
coming up today.
1:56
We're gonna have Luke Deans from
1:58
Bitwise Europe.
1:59
To give us a rundown of the markets
2:01
and the market pulse.
2:02
And then we've got Yoshi Yokokawa,
2:05
who is of course the co-founder and
2:07
CEO of Alpaca to talk about
2:09
their recent $435 million
2:11
raise and the big
2:13
tokenization push on
2:16
Wall Street to bring securities
2:18
on chain. So that's all we got
2:20
coming up in the show, but first
2:21
things first, we're gonna be giving
2:22
you the top stories you need to know
2:24
in the last 24 hours with the block
2:26
briefing.
2:27
And on that note, let's jump into
2:28
our first headline of the day.
2:31
Washington is turning up the heat on
2:32
the president's crypto play.
2:34
Senators Elizabeth Warren and
2:36
Richard Blumenthal are urging the
2:38
SEC to investigate Donald Trump's
2:40
meme coin pointing to reports that
2:42
nearly 1 million wallets
2:44
have lost money since the token
2:45
launched in January last year,
2:48
combined losses of around $3.8
2:49
billion.
2:51
The senators can go so
2:53
far as to call it a rug pull.
2:55
It all lands as the industry's
2:57
market structure bill enters
2:59
what would be its most pivotal
3:01
week yet on Capitol
3:03
Hill. So we'll have to see what
3:04
comes out of that.
3:05
Our next headline, Cloudflare, is
3:07
wading into agentic commerce.
3:09
The internet infrastructure giant
3:11
has begun rolling out programmable
3:13
wallets built to let AI agents
3:15
pay for APIs, data,
3:17
and online content using
3:18
stablecoins.
3:20
Step one, revealed on Tuesday.
3:21
Lets users claim a unique Cloudflare
3:24
wallet handle tied to their account,
3:26
funding it and authorizing agents to
3:28
spend is coming quite
3:30
soon.
3:31
There are two flavors here, an
3:32
account wallet for individuals and
3:34
organizations to add money and
3:35
control spending, and a virtual
3:37
wallet that runs through API keys so
3:39
agents can make purchases on
3:41
their own. So we're seeing agentic
3:43
commerce come to fruition in real
3:45
time.
3:46
Amazing times to be alive, really.
3:49
Our next headline BlackRock is
3:50
tidying up its Ethereum ETF.
3:52
According to an SEC filing,
3:54
the asset manager will run a one
3:56
for three reverse share split on its
3:58
Ethereum trust.
3:59
The ticker is ETHA
4:01
on the 6th of October.
4:03
Every three shares become one,
4:05
lifting the funds per share net
4:07
asset value, though the value of
4:09
your holdings doesn't change.
4:11
Bloomberg's Eric Balkunas says the
4:13
move should cut trading costs from
4:14
around seven basis points to roughly
4:16
two. As he puts it, ETF issuers
4:18
now treat a seven-bip spread
4:20
as a problem worth fixing.
4:23
Then a big plumbing change in the
4:25
wrapped Bitcoin world.
4:26
BitGo is moving wrapped Bitcoin,
4:28
an asset with a $7.4 billion
4:30
market cap onto Chainlink's
4:32
CCIP cross-chain standard.
4:35
It joins a broader exodus away from
4:37
layer zero, following this year's
4:39
$292 million Kelpdowel
4:42
Bridge exploit.
4:43
CEO Mike Belshi says security comes
4:45
first. And that CCIP offers
4:47
a proven institutionally adopted
4:49
interoperability standard.
4:51
And BitGo also confirmed it'll use
4:52
CCIP exclusively for all
4:54
future BitGo issued assets,
4:57
which is a notable vote of
4:58
confidence in Chainlink's
5:00
infrastructure. On that note, we did
5:02
have Mike Belshy from BitGo on
5:03
the show a couple of weeks ago.
5:05
Again, you can find that on
5:07
our YouTube channel or right
5:09
here on X.
5:11
Our next story, the fallout from the
5:12
cold card exploit.
5:13
Is reshaping where people keep
5:15
their crypto.
5:17
OKX says the breach, which is one of
5:18
the largest thefts ever tied to a
5:20
Bitcoin hardware wallet floor, is
5:22
driving what its chief compliance
5:24
officer calls record inflows
5:26
to centralized exchanges.
5:28
Jonathan Brockmeyer told the block,
5:30
it's the flip side of FTX.
5:32
Back then, everyone fled to
5:33
self-custody and now the money
5:35
is coming back.
5:37
OKX rather says it's leaning on
5:39
artificial intelligence to flag
5:40
risks, arguing self-custody.
5:43
Puts an awful lot on the
5:45
individual user.
5:47
Our next story, Trading Slump, is
5:49
exposing a real gap between
5:51
Robinhood and Coinbase, both
5:53
pulled in less crypto revenue last
5:55
quarter, but Robinhood had
5:56
other engines to lean on.
5:58
Its crypto transaction revenue fell
6:00
to $100 million in the second
6:02
quarter, down more than 37%
6:05
year over year, and crypto now
6:06
makes up just 13% of the company's
6:09
transaction revenue.
6:10
Volumes dropped another 23%,
6:12
quarter over quarter, the lowest
6:14
since late 2023.
6:16
Options, equities and prediction
6:17
markets picked up the slack and
6:19
Coinbase had no such
6:21
cushion.
6:22
So diversifying here, definitely
6:24
helping Robinhood out in
6:26
2026.
6:27
Tokenized stocks just took a step
6:29
forward to being mainstream.
6:31
Denari says it's the first company
6:33
to let eligible US investors
6:35
trade more than 700 tokenized stocks
6:37
using USDC straight from
6:39
self custody wallets.
6:40
Through a partnership with Circle,
6:42
individuals and businesses can buy
6:43
and sell every name in the
6:45
S&P 500 on chain.
6:47
The tokens called the D-Shares
6:49
are each backed by the underlying
6:51
security held in qualified custody.
6:54
CEO Gabriel Otter says
6:56
the launch finally brings digital
6:58
assets and traditional equities into
7:00
a single system, while keeping the
7:02
protections of regulated
7:04
markets.
7:04
A final story in the block briefing.
7:06
Ethereum's researchers are floating
7:08
a big change to staking economics.
7:11
A group, including Justin Drake,
7:12
has published a draft proposal for
7:14
a tapered issuance burn,
7:16
permanently destroying a growing
7:18
slice of validators' rewards
7:20
as more ETH gets staked.
7:22
The design sets a saturation point
7:24
around 60.25
7:26
million ETH, roughly half of the
7:28
supply, where the burn hits 100%
7:30
in net issuances for staking falls
7:32
to zero.
7:33
The goal here is to discourage
7:35
overstaking and keep participation
7:36
near 50%.
7:38
It's early and only a draft.
7:40
But it targets a long running debate
7:42
over Ethereum's
7:44
issuance.
7:45
That is it for the block briefing
7:46
today. We're gonna move straight
7:48
into the market pulse this afternoon
7:49
and it's a great pleasure to welcome
7:51
back Luke Deans from
7:53
Bitwise Europe to
7:55
the show.
7:56
Wealth of information.
7:58
Luke, first things first, how are
7:59
you? It's been a couple of weeks
8:00
since we last saw you.
8:05
By yourself.
8:07
I'm very, very good.
8:09
Yeah, I think first things first,
8:10
just wanted to get your general
8:11
sentiments on the markets before we
8:13
jump into a couple of other talking
8:15
points.
8:17
Obviously been a very interesting
8:18
few days following the cold
8:20
card exploit,
8:21
but I think a lot of people might
8:23
have expected Bitcoin to react
8:25
more negatively to such an event,
8:27
but it doesn't really seem like it's
8:28
had any overarching influence in
8:30
the price of Bitcoin right now.
8:32
What are you seeing?
8:33
In the majors?
8:34
Yeah, that's a really interesting
8:35
question. And when we look around
8:37
from our last conversation,
8:39
the price of Bitcoin hasn't really
8:40
moved at all.
8:41
And what we're seeing is kind of
8:43
complacency in volatility
8:45
expectations.
8:45
We see that the price is actually
8:48
becoming less reactive to
8:49
geopolitical shocks,
8:51
internal shocks, the
8:53
tightening of liquidity in the
8:55
macroeconomic environment, and
8:56
also the fragility
8:58
in the AI complex itself.
9:00
And we've seen how that's been
9:01
whipsawing recently too.
9:03
And we actually ran a study on this.
9:04
What we've seen is that downside
9:06
beta from Bitcoin price to sentiment
9:08
indexes is showing that Bitcoin is
9:10
actually becoming more and more
9:11
resistant to these changes.
9:13
And part of the reason we believe
9:14
this is the case is because that
9:16
Bitcoin being the canary in the
9:18
coalmine and reacting to liquidity
9:20
conditions and has actually reacted
9:21
in advance to the deterioration
9:24
in liquidity conditions has already
9:25
repriced 50% lower in
9:27
anticipation of this.
9:29
So to put it, Bluntly,
9:32
Bitcoin has already been beaten up
9:33
so much that a lot of the
9:35
tourists and the speculators who
9:36
were in the asset have already left
9:38
and we're left with a cohort
9:40
of investors who believe in the long
9:41
term valuation and they're much more
9:44
price insensitive.
9:46
So simply the moves are not having
9:47
as much interest because the
9:49
investor base has changed.
9:51
But when we look fundamentally under
9:53
the surface, what we see is through
9:55
multiple measures, that volatility
9:57
expectations are very complacent.
9:59
If we look at price and let's say we
10:01
take the high and the low of
10:03
price over the last 30 days on a
10:05
kind of percentage basis, or whether
10:07
that be 60 days, 90 days,
10:08
all the way up to a year, what we
10:10
see is price is extremely tight
10:12
and it's trading within this narrow
10:14
corridor.
10:15
And it's just Bitcoin has been
10:16
devoid of this price action.
10:18
It's just apathy and exhaustion and
10:20
boredom. And it doesn't really
10:21
matter what catalyst has been
10:23
probing it.
10:24
It's been unresponsive and inert.
10:26
But there's a contrarian view here.
10:28
When price.
10:30
Rarely moves, it's
10:32
expected to move down the line.
10:33
We move from periods of
10:34
consolidation into trending.
10:37
And right now we're in that
10:38
consolidation period.
10:39
And with such low percentiles on
10:40
this price tightness,
10:42
it is telling us that the market is
10:44
expecting some form of move.
10:46
And this isn't just isolated to the
10:48
price. We can see this across
10:49
options markets.
10:51
If we look at the IV term structure,
10:53
whether that's the one week or the
10:55
six months tanners, what we see
10:56
if we look at the three year
10:58
distribution.
10:59
We see that this is also in their
11:01
bottom 5% of percentiles across
11:03
all the tenants.
11:04
It's telling us that the options
11:05
markets view on forward
11:07
volatility expectations
11:10
is extremely subdued.
11:11
They expect the market to be
11:13
continuing to behave in a stable
11:14
manner. But we know that this not
11:16
the case. These are very contrarian
11:18
signals. And this trade is getting
11:19
extremely crowded in terms of
11:21
the short vol positioning.
11:23
In terms of market volumes,
11:25
we're seeing the same thing.
11:26
We're seeing spot market volumes.
11:28
Futures volumes options volumes
11:30
on chain has seen a bit of a tick-up
11:32
following the cold card exploit And
11:34
we are seeing the movement of funds
11:35
to new wallets and addresses So
11:37
we've seen an uptick there but
11:39
ETFs and that's as well completely
11:41
devoid of any form of
11:43
volume of Speculation of
11:45
animal spirits and it really
11:47
just complements this apathy that
11:48
we're seeing so when we
11:50
see this lack of volume
11:52
It tells us about these illiquid
11:54
market conditions and that small
11:55
changes in supply and demand can
11:57
have outsized effects.
11:59
And finally, within on-chain
12:01
markets, what we're seeing is
12:03
capital flows have become extremely
12:04
balanced.
12:05
So profit-taking and loss-taking
12:07
are almost in tandem with each
12:09
other. And what does that tell us?
12:11
It tells about a form of
12:13
market equilibrium.
12:15
There's no discernible trend of
12:16
whether there's capital inflows or
12:18
capital outflows.
12:19
The market is, by all intents and
12:21
purposes, at some form of turning
12:23
point. And this is where the trend
12:25
will confirm itself, whether we move
12:27
back into a regime of capital
12:28
outflows and remain in a risk on
12:30
environment, a risk off environment,
12:32
sorry, or that we turn to a regime
12:34
of capital inflows where capital
12:36
continues to enter the asset and
12:37
supports higher prices.
12:40
That's where we're at. We're kind of
12:41
at this turning point and all of
12:42
these are suggesting the same thing.
12:44
They're suggesting that volatility
12:46
expectations are way too complacent.
12:48
And that we do need some form
12:50
of regime shift to essentially
12:52
unlock some of this latent supply
12:54
and liquidity in the market, because
12:55
right now we're extremely starved
12:58
at that across all market sectors.
13:00
And it's actually this confluence
13:01
that gives us more confidence in
13:03
what we're seeing. We're seeing it
13:04
across every single sector telling
13:06
us the same story of the market.
13:08
All individual lenses, but looking
13:10
at the whole picture.
13:11
So looking at them in tandem tells
13:13
us that.
13:14
Volatility expectations are very
13:16
low, and we should probably expect
13:18
an uptick of volatility in the near
13:19
future.
13:21
Now, one thing to keep in mind with
13:22
that is that volatility is
13:24
direction agnostic.
13:25
So it's not saying that price is
13:27
going up or price is down,
13:29
just that simply price is going to
13:30
move. And it's an extremely hard
13:32
market to read.
13:33
So what we need to do is let price
13:35
guide us.
13:36
And to do that, we need look at key
13:38
pricing levels. And on the show.
13:40
I think three weeks ago now, we
13:42
spoke about some of these pricing
13:43
levels, one being short-term holder
13:44
cost basis, telling us about new
13:47
demand in the market, where are they
13:48
positioned, what is their average
13:50
acquisition price.
13:51
Because they're new price-sensitive
13:53
investors, they kind of tell us
13:54
about local market conditions,
13:56
how much profit they're in, how much
13:58
loss they're in, what their pain
13:59
point. And right now, their
14:01
breakeven is about $68,000.
14:03
We can also look at the true market
14:05
mean, which actually looks at a
14:06
broader spectrum of these investors.
14:08
It tells us about all investors who
14:10
are active on the network,
14:12
excluding Satoshi's coins and early
14:14
miners, where are they positioned?
14:16
And the same concept applies.
14:17
They're at $76,000.
14:19
And we can't expect them to turn
14:21
into a risk-on environment until
14:23
these investors are actually in
14:24
profit. Because what is risk-one?
14:26
It is when you are in euphoria, it
14:28
is when there is profit, it is when
14:29
capital is entering the market.
14:31
So we are really looking at decisive
14:33
reclaims of these levels to tell us
14:35
about the local condition, the
14:36
short-term holder.
14:37
Or the macro condition, the true
14:39
market mean.
14:40
So those are kind of the levels
14:41
we're looking above.
14:42
And if we get this upsided
14:44
volatility, these are the levels
14:45
that we want to be monitoring and to
14:47
see if there's actually some
14:48
durability in that rally.
14:50
On the downside, we see the
14:52
200-week move in average.
14:53
And that's around 62k right now.
14:55
And what's interesting from both an
14:57
on-chain and technical perspective,
14:58
we seen that there's large clusters
15:00
of volume at this level.
15:01
It's been a level that's been traded
15:03
quite aggressively.
15:05
And we saw that price actually found
15:06
some degree of support on that
15:08
recently before we've trended just a
15:10
slight uptick higher, but it's
15:12
clear that this is the delineation
15:13
level. We believe it to be the kind
15:15
of upper threshold of where we would
15:17
expect the market to bottom, and
15:18
we've already entered into this
15:20
range multiple times already,
15:22
so that's going to be the first
15:23
level that we look at.
15:24
And the second is the realized price
15:26
at around 53k now, which looks
15:28
at the whole spectrum of the supply,
15:30
including Satoshi's coins, and tells
15:32
us what the average price of
15:33
purchases there.
15:34
So that 53 to 62k level is
15:36
kind of what we're looking for the
15:37
downside.
15:38
The 68 to 76k is telling us
15:40
about our local and macro upside.
15:42
And as a tell risk, 48k,
15:45
which is our mature investor cost
15:47
basis.
15:48
And we don't expect this as a base
15:49
case to be something that is
15:50
reached, but it is a tell-risk event
15:52
that we should keep in mind.
15:53
And it also aligns with the 61.8%
15:56
Fibonacci retracement from the
15:58
all-time high.
15:59
That's what's pretty funny about
16:01
on-chain markets, options markets,
16:03
spot markets, technical pricing.
16:06
They're all partial views at
16:08
the same picture.
16:10
And when we see this confluence and
16:11
overlap, it's just different facets
16:13
of the market agreeing on what we're
16:15
seeing. So really, we can
16:17
see that volatility is expected to
16:18
come in the near future.
16:20
We don't know what direction it's
16:21
going to be in.
16:22
Nobody can tell you where price is
16:24
going to go.
16:24
We can only monitor where.
16:26
Price reacts to these levels
16:28
and how they react.
16:30
And that's going to give us critical
16:31
information on whether the trend is
16:33
durable, with moving into risk on,
16:35
or that we remain into risk off.
16:38
Beautiful, Luke.
16:38
Thank you so much for that very
16:40
in-depth breakdown and key
16:42
levels to watch both to the upside
16:43
and downside.
16:45
Very quickly, because we do have
16:47
Yoshi on the line waiting
16:48
to join us.
16:49
I wanted to talk to you very briefly
16:51
just about the AI trading
16:53
capital rotations here.
16:54
Can you give us a TLDR and your
16:55
thoughts on this one?
16:56
Yeah, I'll keep it really brief.
16:58
What we've seen over 2026
17:00
is the boom of the AI trade.
17:02
We've seen it started with initially
17:04
with the models, but now we're
17:05
seeing it propagate to components
17:07
such as semiconductors, memory
17:09
stocks, even down to the
17:11
construction of data centers, and
17:12
we've even seen copper catch a bid
17:14
in this environment.
17:16
So we're in this financial
17:17
environment where capital is
17:18
constrained, yet all marginal
17:20
liquidity is really revolving around
17:22
the AI complex and the Expending
17:24
is really keeping that up.
17:25
So we're just seeing liquidity and
17:27
momentum just completely and
17:29
kind of circularly revolve around
17:30
this environment.
17:32
But what we know is that all trends
17:33
don't last forever.
17:35
Markets just can't simply go
17:36
upwards. And we're seeing the first
17:38
cracks of this trade in
17:40
the volatility.
17:40
We saw 20% moves in the
17:42
SOX index with semiconductors
17:44
recently. And then we saw the move
17:46
back upwards. We've seen that
17:47
rebound in the rally.
17:48
But ultimately, what that's showing
17:50
is the whip-soaring in price action
17:52
is telling us volatility
17:54
is here and that there is some
17:56
fragility and instability
17:58
within this trend.
17:59
And that's because it's built on an
18:01
unstable macroeconomic platform,
18:03
which is still rife with tightening
18:04
of liquidity and geopolitical
18:06
risks.
18:07
So when this trade breaks down,
18:09
where will capital actually rotate
18:10
to? And that is a really hard
18:12
question to answer.
18:13
We can only kind of
18:15
just look out into the future and
18:17
extrapolate. But what we actually do
18:18
see if we.
18:19
Look at 2024, that was the
18:21
digital asset rally.
18:22
It was the onset of the US ETFs.
18:24
And Bitcoin enjoyed a very
18:25
impressive year, as well as the
18:27
digital assets complex.
18:29
2025, everyone forgot about the
18:30
gains. And it was gold and silver.
18:32
And that's all that everyone cared
18:33
about. And we saw a parabolic
18:36
run in assets with
18:37
a base of trillions of dollars that
18:39
went multiples higher.
18:41
And it's the bull markets that offer
18:42
the bear. So we saw that parabolic
18:44
one is now being digested by gold
18:46
and Silver in the bear market.
18:47
We've seen Bitcoin and the digital
18:49
asset complex had a much more
18:51
structured bull market, which is all
18:52
for the shallower bear.
18:54
So 2024, Bitcoin and digital assets,
18:56
2025, precious metals,
18:58
2026, AI, which is still in the
19:00
euphoric phase.
19:02
So if you look at that conceptually,
19:03
it looks like digital assets is
19:05
further along within that bottoming
19:06
process.
19:08
And market investors, everything's
19:10
a relative basis.
19:11
Markets are relative machines.
19:13
It's a relatively world.
19:14
And we need to look at relative
19:16
valuation. So if we look at price
19:18
in the 200-day moving average, which
19:19
tells us more about midterm
19:21
valuations from a technical
19:22
perspective, or the 200 week moving
19:24
average which looks at a more of
19:26
a longer-term trend of that same
19:27
valuation, we see that the
19:29
AI complex or leading equities,
19:32
they're at all-time highs across
19:33
both measures.
19:34
Gold and silver, they actually
19:36
quite undervalued on the midterm
19:38
measure. But with the 200 weeks
19:40
moving average measure, they're
19:42
extremely overvalued that they still
19:43
digest this parabolic move.
19:45
But Bitcoin and the digital asset
19:47
complex is the only one that across
19:48
both the mid measure and
19:50
the long term measure is undervalued
19:53
through this lens, through this
19:54
technical lens, this deviation
19:55
between the 200 day and
19:57
the 200 week.
19:59
So what does that tell us?
20:00
It tells us that not that
20:02
capital will rotate there.
20:03
It tells that the structural
20:04
environment is more conducive
20:06
for a relative risk to reward
20:08
trade.
20:09
And we're talking about momentum
20:10
traders in a capital constrained
20:12
environment.
20:13
They don't want to step in front of
20:14
the train. They don't want to step
20:16
in from Bitcoin when it's still risk
20:18
off and geopolitical risks are
20:20
still abundant and tightening
20:22
financial conditions on
20:24
the precipice. We see bond markets
20:25
rising.
20:26
So they're going to wait for
20:28
essentially confirmed momentum, in
20:29
my opinion.
20:31
And those are kind of those upside
20:32
levels that we just spoke about.
20:33
They want to see that Bitcoin is
20:35
confirmed and that the rally is
20:37
durable. They don't want to take a
20:39
risk on an asset that could still go
20:41
lower.
20:42
So I think once we see the
20:43
collapse of the AI trade and it
20:45
is inevitable at some point, we
20:47
don't know when that will happen.
20:49
Markets can remain irrational for
20:51
longer than people expect, but when
20:52
it does inevitably happen, the
20:54
digital asset complex seems to be in
20:56
a good position to receive some
20:58
of that capital flow.
21:00
A lot of that capitol is going to be
21:01
destroyed on the revaluation lower.
21:03
A lot are going to go into the
21:04
defense stocks, into safe haven
21:05
assets. Some are going to go into
21:07
digital assets.
21:08
And because that complex is so much
21:10
bigger, it only needs a sliver of
21:11
that liquidity.
21:13
But they're going to really wait for
21:15
that momentum to turn to get that
21:16
confirmation.
21:17
And then that relative risk reward
21:19
becomes attractive, especially in
21:21
an environment like this.
21:24
Beautiful.
21:25
Luke, thank you so much for taking
21:26
the time to join us.
21:28
If you don't already, Luke
21:30
up online is one of the best
21:32
market analysts out there with
21:34
Bitwise Europe.
21:35
Thanks again, Luke, for joining us.
21:36
We're going to take a very short
21:37
break and we will be back
21:39
on air with Yoshi Yokokawa from
21:41
Alpaca. Don't go away, we're just
21:43
going to take a short break.
23:12
Welcome back to The Starting Block.
23:13
Thanks for staying with us.
23:14
We're moving on to the hot seat
23:15
segment of the show and it's a great
23:16
pleasure to be welcoming
23:19
Alpaca co-founder and CEO,
23:21
Yoshi Yokakawa to the show.
23:23
First things first, Yoshi, it's
23:24
great to see you again.
23:25
We've met very briefly at Consensus
23:27
a couple of months ago in Miami.
23:29
Welcome to the Show. How are you
23:30
doing?
23:31
Great. Thank you for having me
23:33
here.
23:34
It's a great pleasure.
23:35
As I always do on the show for
23:38
our audience, I often ask our
23:40
guests to give us a quick TLDR of
23:42
how they got to where they are
23:43
today. I mean, you've built Alpaca
23:45
to be, I would say literally
23:47
the backbone piece of infrastructure
23:49
for tokenized securities in the US
23:51
already, but not everyone knows
23:53
your backstory, how you
23:55
got here, your journey through Y
23:57
Combinator. Can you give us quick
23:59
rundown for anyone out there that
24:00
might not be too familiar with your
24:02
story?
24:02
Sure.
24:03
We started this business
24:05
called Alpaca.
24:06
It really came from my personal
24:08
experience.
24:09
I grew up between the US and Japan.
24:11
And then if you are in Japan, you
24:13
don't have accessibility to amazing
24:15
trading apps, investing applications
24:17
that you can get in the US,
24:19
such as Robinhood or all other
24:21
things.
24:22
And I think that thing has
24:24
been always kind of frustrating to
24:25
me, that how we can contribute
24:27
to fix that unfairness
24:29
just simply because of the location
24:31
that you are in,
24:33
you have a different accessibility
24:34
to financial services.
24:36
So that's really backbone of
24:38
problem solving that we
24:40
are working on Alpaca.
24:42
Alpacas is basically building the
24:45
infrastructure behind the scenes.
24:46
So that access a
24:49
bunch of the financial assets behind
24:50
the scene, such as a compliance
24:52
regulatory framework, a lot of
24:54
memberships and then licenses in
24:56
many different countries, so that we
24:58
consolidate all those things by
25:00
ourselves internally, so
25:02
that all the businesses that's built
25:04
on top of that infrastructure
25:06
don't have to be really worrying
25:07
about those back office, middle
25:09
office operations, compliance,
25:11
custody, clearing, settlement.
25:12
But focus on the best
25:14
experience that they can provide to
25:16
the end customers so that we
25:18
eventually contribute to solve the
25:20
problem of unfairness simply
25:22
because of the locations that you
25:24
live in to have different
25:26
accessibility to financial services.
25:28
Obviously, in our industry, Alpaca
25:30
is very well known now for being
25:32
that backbone of tokenized
25:33
securities as we start getting all
25:35
of these different Wall Street
25:37
products on chain.
25:39
When you came up with the concept
25:41
here, did you think that this would
25:42
be a key use case was
25:46
essentially building the
25:47
infrastructure that would allow
25:49
blockchain protocols to bring
25:51
TradFi on chain?
25:53
Was that where your mind went?
25:54
Was it already a few years ago?
25:56
Yeah, even before the FTX
25:59
crisis, we had been
26:01
offering crypto products
26:03
alongside with all the
26:05
TradFi assets, such as the stocks
26:07
and options ETFs.
26:09
So we always believed in that the
26:11
future has to be on chain.
26:13
So we didn't know exactly
26:15
how that would turn
26:17
out to be.
26:18
However, we knew that someone
26:20
has to bridge between the TradFy
26:22
infrastructure at the
26:24
same time on chain infrastructure.
26:26
And we happened to have
26:28
been able to build both of the rails
26:30
as a one company.
26:32
And I think that allowed us to be
26:33
the backbone of all
26:36
those players who came up with
26:37
amazing solutions of the
26:39
tokenization of the TroutFi assets.
26:42
You guys call this like the AWS
26:44
of finance.
26:45
Can you unpack that a little bit for
26:47
us and what this kind of looks like
26:49
under the hood and just how much
26:51
heavy lifting you do for all the
26:52
companies that plug into the
26:54
services that you're offering.
26:55
Yes, I think when we talk
26:57
about the word of AWS,
26:59
there are multiple components.
27:01
I think one thing, first thing is a
27:02
very easy thing that people
27:04
think about AWS as the
27:06
infrastructure that
27:08
you don't have to worry about kind
27:10
of boring stuff, something that's
27:12
happening behind the scenes.
27:13
And then that actually
27:15
created the whole
27:17
numbers of the new
27:19
businesses, projects, and new
27:20
startups because of the startup
27:22
cost of the projects went
27:24
down significantly because AWS
27:27
consolidated all the boring stuff
27:29
of the storage and then
27:31
managing those things and then
27:32
security and then the
27:34
very importantly interface that
27:36
developers can build on top of, so
27:38
like an amazing API and API
27:39
documentation.
27:40
So I think that is the reason why we
27:42
want to call ourselves or like, you
27:44
know, we always look up to like what
27:46
the AWS did.
27:48
Consolidating all the infrastructure
27:49
in the financial services mean that
27:51
we need to get a lot of licenses
27:53
approved by regulators like
27:55
SCC FIMRA and then also like
27:57
DTCC and FICC, OCC,
27:59
and all other different countries
28:01
like in Japan, UK, Europe, India.
28:03
But at the same time,
28:05
we have to be really paying
28:07
attention to experience
28:09
for the developers.
28:10
So we really put a lot of resources
28:12
into how the API experience
28:14
is, and then API
28:16
documentation should be written.
28:18
So that's how we define as
28:20
we want to be something like AWS.
28:23
I mean, I was looking at some stats
28:25
online and there's a rough estimate
28:26
here that Alpaca is
28:28
clearing or custodying roughly
28:30
94% of tokenized US
28:32
equities.
28:33
And before we dive into that actual
28:34
stats and the implications
28:37
of that, can you talk a little bit
28:38
about how you built
28:40
this breadth and how you
28:42
actually managed to do all of this?
28:44
Because from the outside looking in,
28:47
I would think that you need
28:49
to have an amazing tech
28:51
book, you need to know all the right
28:52
policy makers.
28:53
You need to know all the right
28:55
people on Wall Street and TradFi.
28:58
Is this just years and years of
28:59
culmination of hard work, both
29:01
networking and building the
29:03
infrastructure in the background
29:04
from a software perspective?
29:06
Definitely, you are correct about
29:08
that.
29:09
We even don't make it
29:11
look like it because we want
29:13
to be something invisible as an
29:15
infrastructure.
29:16
However, since we launched
29:18
our first product in 2018,
29:21
we had to continue to learn about
29:23
how to run a custody
29:25
broker dealer, how we
29:27
understand the global basis
29:29
of the anti-money laundering.
29:31
And then how to make
29:33
it work for the
29:34
United States regulatory framework
29:36
because that is our anchor regulator
29:38
that we have to be extremely
29:39
compliant of.
29:40
So it's a continuous efforts
29:43
of speaking
29:44
with the regulators, speaking with
29:46
the policymakers, and then also
29:48
understanding where the interests of
29:50
the Wall Street players are going.
29:53
And I think combination of those
29:54
things allowed us to be where we
29:56
are. But it's really because we
29:58
use the word of the fintech
30:00
a lot.
30:00
But it's really a combination of the
30:02
financial services, which is a
30:05
very legacy framework
30:07
that we have to be compliant of.
30:09
We have to get regulated licenses
30:11
at the same time as we
30:13
have to own the technology,
30:15
making sure that we own the leisure
30:17
system, being able to connect with
30:19
all the other players'
30:21
legacy systems or new systems at the
30:23
same time.
30:23
So combining all those two things in
30:25
one company.
30:26
Has been something that we
30:28
have been building for close to
30:30
eight years now.
30:32
I mean, just looking at this number,
30:34
so, you know, the 94% sort of
30:36
clearing and custodying of tokenized
30:38
US equities, it's a huge number.
30:40
And last week, we saw cold card,
30:42
the exploit hit Bitcoin is
30:44
pretty hard.
30:45
It's not the same thing.
30:46
So I'm not insinuating that it is
30:48
the same. But when it comes to
30:50
custodying
30:52
securities
30:54
and these kind of products,
30:56
how does that work in the background
30:58
and would
31:00
some people be right in assuming
31:01
there is some sort of centralization
31:03
risk if Alpaca is
31:05
almost like 94%
31:08
of the tokenized US equities
31:10
are running on your infrastructure?
31:12
Do you have any thoughts on a
31:13
centralization risky or is that even
31:15
a thing?
31:16
I think you're hitting the very
31:18
right point.
31:19
And I think we're talking about
31:21
counterpredatory risk and
31:22
everything.
31:23
I started my career at Lehman
31:25
Brothers' securitization team
31:27
back in 2000s.
31:30
So I truly appreciate
31:32
systemic risk, how
31:34
important that is, and then
31:36
understanding the tail risk,
31:38
like what could carry out.
31:39
So like, you know, our focus has
31:40
been extremely cautious.
31:42
And that is the reason why, you went
31:44
so deep, gaining all
31:46
the licenses under the
31:48
SEC FEMRA, and then even getting the
31:50
membership of the DCC, which is
31:52
basically the deepest that
31:54
you can go to make sure that
31:56
you are approved to
31:58
do certain custodians things and
32:00
settlements, you know things,
32:02
activity by the government.
32:04
So I think like, that has been the
32:06
attitude that we have been always
32:07
playing.
32:08
And then I think like talking about
32:10
tokenization, tokenization
32:12
is actually becoming a very broad
32:13
definition.
32:15
There are many things happening, and
32:16
then many players are doing multiple
32:18
different ways of tokenization.
32:20
Currently, like, you know, that we
32:21
are heavily involved with the
32:23
tokenization of the Shopify
32:25
securities.
32:27
That has the one-to-one backing
32:29
of the Spotify securities.
32:30
So how we play the
32:33
role in the ecosystem is
32:35
that we're the custodian of the
32:36
underlying securities of
32:38
the tokenized assets.
32:40
So which means that we are ensuring
32:41
that there's a one-to-one backing of
32:43
the TrotFi assets that are traded
32:45
extremely heavily in
32:47
the NAIS or NASDAQ or other
32:49
exchanges that exist in the world to
32:51
make sure that that has been
32:52
custodied in the right way.
32:53
There's a thing called 15C33 account
32:55
on the SEC investor protection rule.
32:57
That's our job.
32:58
So, I think, yes,
33:00
there is a certain concentration
33:02
in a way, but that concentration
33:05
risk goes through
33:07
approved custodians like ourselves,
33:09
Alpaca. That is a membership of
33:10
DTCC, which is in a
33:12
semi-governmental format that
33:14
creates a lot of security and
33:16
confidence of the system right now.
33:19
Thank you very much for the for the
33:21
in-depth explaining there.
33:22
I think it answered a lot of
33:23
questions in my mind and I want to
33:25
shift the conversation slightly
33:27
towards sort of agentic
33:29
trading. We had that in a story
33:31
earlier today and it's something
33:32
we've been talking about a lot on
33:33
the show.
33:35
I think recently in an interview
33:37
you noted a four times growth in
33:39
your monthly active API users
33:42
and that was attributed to AI
33:43
agents.
33:44
How are AI agents plugging into
33:47
Alpaca's infrastructure.
33:48
And how are you dealing with this
33:50
explosion and speed
33:52
of innovation when it comes to
33:54
frontier LLM models
33:56
and what that might mean for the
33:57
infrastructure that you're building?
33:59
I think when we're talking about AI
34:00
and evolution of agents,
34:03
I think it always comes through how
34:05
humans as ourselves interact with
34:07
the systems and the backbone
34:09
infrastructure of any industries.
34:11
So when we think about us being
34:13
the, quoted AWS of
34:15
the financial services, we always
34:17
focus on building the backbone.
34:19
I think this MCP
34:21
or LLM or agents
34:23
is allowing regular
34:25
human beings who are not
34:27
developers to be able to access
34:29
that backbone system and
34:30
infrastructure directly without
34:33
looking at some kind of graphical
34:35
user interface.
34:37
And I think developers always have
34:39
had that kind of luxury because
34:41
they can code and that
34:43
accessibility happened with
34:45
the interface of API.
34:47
And that API has been the only
34:48
interface for the developers to be
34:50
able to use. But now, because of
34:52
the MCP, because of the agents,
34:54
because of the LLM, it doesn't have
34:56
to be API.
34:56
But because like we have been
34:58
building the API interface for
35:00
like, you know, more than close to
35:02
10 years, so like, you know that,
35:03
that we always focus on
35:05
how easy that human can
35:07
access to the backbone directly,
35:09
regardless of API.
35:10
Or the wrapper outside
35:12
of the MCP.
35:14
So that whole narrative is
35:16
actually continuation of
35:19
DIY people who can
35:21
connect to the real foundation
35:23
of what's happening in the industry
35:25
as directly as possible.
35:27
So that's the reason why we see
35:29
humongous growth when the LLM
35:31
and the AI expanded the
35:33
definition of the people who were
35:34
able to build by themselves.
35:37
I also read recently
35:39
on Bloomberg that
35:41
Alpaca was exploring becoming a
35:43
prime brokerage. Can you tell us any
35:44
more about these ambitions and
35:47
why you would want to go in that
35:48
direction when you've built the
35:51
backbone of your company on
35:53
infrastructure?
35:54
Definitely. So I think like, you
35:55
know, when we think about the world
35:57
of infrastructure in the financial
35:58
services,
36:00
I think like, offering some kind of
36:02
capital, offering some kind like
36:04
a settlement buffer, it's also part
36:06
of the infrastructure's role
36:08
in the financial services.
36:10
Unfortunately, I think
36:12
in the other industry, we may not
36:13
have to, but in the financial
36:15
services, we have to.
36:16
So we believe that that's one
36:18
of the natural evolutions that we
36:20
are getting asked by a lot
36:22
of businesses, a lot of
36:24
individual traders and funds who
36:26
need this kind of capability.
36:27
So we're continuing to build all
36:30
the features that we're getting
36:31
asked about by our partners and
36:33
users.
36:34
Yeah, for sure. I mean, if people
36:35
are asking you for new products
36:37
and services, you're not exactly
36:39
going to say no.
36:40
I mean just to tack on to that
36:42
vein, I think we've seen a
36:44
lot of people in the industry, I
36:45
mean mainly, you know, Brian
36:47
Armstrong and Coinbase talk about
36:48
being the everything app.
36:50
And my kind of long term thesis
36:52
on the industry is that all the
36:54
big main centralized
36:56
cryptocurrency exchanges will just
36:58
become these everything apps
36:59
where... They might have a banking
37:01
side of the business where
37:03
a retail person can actually have a
37:04
bank account and a credit card.
37:07
You can trade crypto, you can trade
37:09
stocks and shares in
37:11
being tokenized.
37:13
Do you subscribe to that view and
37:14
what's your timeline for something
37:16
like that happening?
37:17
Is five to 10 years too
37:20
short for this to happen?
37:22
I actually love this kind of
37:24
conversation because I love history.
37:26
And I try to learn like, you know,
37:28
what rhymes, right?
37:29
So I think about this,
37:31
like, phenomena, like how you
37:33
said that everything, everyone
37:34
becomes everything up.
37:36
It's actually like, we're talking
37:37
about a pendulum swinging
37:39
from unbundling to
37:41
the bundling.
37:42
And I think like we saw like, from
37:43
15 years ago to 10 years ago, that
37:45
was the worth of unbundling.
37:47
The existing financial services
37:49
including banking and then big
37:50
brokerage firms.
37:52
And that's the reason why Coinbase
37:53
started, like Robinhood started,
37:55
Wealthfront started, Chime started,
37:56
and now they're bundling.
37:58
So we're swinging the pendulum
38:00
back to the bundling phase.
38:02
However, what's also another
38:04
layer of the wave that we have to
38:06
think about is the evolution of
38:08
how humans interact with
38:10
any services including financial
38:12
services.
38:13
When we look back the history, it
38:14
used to be human-to-human in person.
38:17
You know financial services
38:18
transaction we had you shake hands
38:20
and we exchange the certificate of
38:22
the securities with cash And
38:24
then it became telephone and we
38:25
start saying it's done and done and
38:27
that confirms that you know trade
38:29
and it goes to the settlement and
38:30
clearing And now we're talking about
38:32
web browser, that's like, you know,
38:33
e-trade and like, all the online
38:35
banking started and then there's a
38:36
mobile first Robinhood won that
38:38
game. And then now we were talking
38:39
about agent first.
38:40
So like the interaction with the
38:42
financial services continued to
38:43
evolve as our lifestyle, the human
38:44
changes.
38:45
So like, and I think that trend and
38:47
then pendulum swing in between the
38:49
bonding and bundling continue to
38:51
correlate how that works.
38:53
So I think like we're going to
38:54
continue to see the bundling because
38:55
now it's a bundling phase and the
38:57
player that's going to win is this
38:58
like in first era to the
39:00
Asian first era how they're
39:02
going to continue to adapt those
39:03
things as quickly as possible while
39:05
bundling and I think they will be
39:07
the winner when they do that
39:08
successfully.
39:11
You've been working pretty hard at a
39:12
sort of global expansion effort.
39:14
I wanted to pick your brain a little
39:15
bit here and get a sense of
39:17
what's been the hardest jurisdiction
39:19
to break into.
39:20
What do you think represents the
39:22
most opportunity and where,
39:24
how you're kind of balancing your
39:26
time and energy?
39:27
Because I kind of, I think we could
39:28
draw some parallels between
39:30
you and someone like CZ from
39:32
Binance who's just really just
39:34
growing at an exponential rate and
39:36
how do you sort of figure out
39:38
where to put all your time and the
39:39
energy into a specific place?
39:41
Firstly, I love to see this book.
39:43
I read this book and I started
39:46
shortening up the meeting, not five
39:47
minutes yet, but like 15 minutes.
39:49
So a big huge good old to that.
39:51
I respect how he's been doing.
39:53
And then I think in terms of the
39:54
globalization of our business,
39:57
we work as the full remote
39:59
distributed company and we are now
40:01
around 450
40:03
people in
40:06
45 or 50 different countries.
40:08
So I think that has been allowing us
40:10
to work extremely different
40:12
time zones and different countries
40:15
very seamlessly.
40:16
So that has being easier
40:18
compared to other traditional
40:20
ways of the in-office
40:22
working culture.
40:23
So that's one thing.
40:24
And the second thing is that, of
40:26
course, each country has a different
40:27
challenges in terms of how
40:29
to get in, what kind of requirements
40:31
that we need to get, what kind
40:33
people that we needed to be business
40:34
develop, your business
40:36
doing the business development too.
40:38
So I think that had to
40:40
be extremely customized to
40:42
all the countries that we go into.
40:46
My final question after
40:48
that is just the regulatory
40:50
landscape in the US has been a
40:52
lot of talk about the
40:54
market structure bill, when that
40:56
might be passed.
40:57
Is that a big consideration and will
40:59
it have a significant influence
41:02
on Alpaca going forward?
41:03
What are your thoughts yet?
41:05
Definitely, we are very sensitive to
41:06
how the regulatory landscape
41:09
continues to evolve.
41:10
At the same time, we cannot bet
41:12
on certain outcomes for
41:16
all our business, how
41:18
it's going to go.
41:19
So we're continuing to have a lot of
41:20
hedges and a lot scenario analysis,
41:23
like what will happen, what will not
41:24
happen, and what we need to be
41:26
doing. This is all about risk
41:27
management, and the risk management
41:29
really comes from my personal nature
41:31
and paranoia, you know,
41:33
starting at the carrier at the
41:34
Lehman Brothers and going through a
41:36
bunch of the stuff that created who
41:38
I am.
41:39
So we're really thinking about that
41:41
multiple different lenses and to
41:42
make sure that our business continue
41:44
to grow and then continue to
41:46
achieve at least like 2x growth
41:48
year over year for a foreseeable
41:50
future.
43:13
Well,
43:15
since Gareth had some technical
43:17
issue, my name is Yoshi.
43:19
I'm the co-founder and CEO of a
43:20
company called Alpaca.
43:22
Oh, Gareth is back.
43:40
All right, do you want to take us
43:42
back live?
43:45
My apologies, everyone.
43:47
I had a quick camera issue there.
43:49
A big shout out to Yoshi for being
43:51
the guest and the host on the day.
43:52
Thank you.
43:53
I really appreciate it.
43:54
But Yoshi, thank you so much for
43:56
taking the time to chat to us.
43:58
It's often that big
44:00
infrastructure providers aren't
44:02
quite appreciated for what they're
44:03
actually doing in the industry.
44:04
And I think Alpaca is one of those
44:06
players that's like quietly building
44:08
an empire in the background
44:10
and people don't really realize it.
44:11
So we're very grateful that you took
44:13
so much time to talk to us,
44:15
If and when you've got any big new
44:16
announcements, including
44:18
a $435 million
44:20
raise, which you raised a couple of
44:22
months ago, please knock on our door
44:24
and give us the exclusive.
44:25
We'd be happy to have you back.
44:27
Definitely. I appreciate that.
44:28
And thank you for having me here.
44:29
It's been so much fun.
44:30
So thank you.
44:32
Awesome. Thank you so much, Yoshi.
44:34
And thank you to the audience out
44:35
there for joining us today on the
44:37
starting block. Sorry for the tech
44:38
issues right at the end there.
44:39
We will be back the rest of the
44:41
week, Thursday, Friday. I've got a
44:42
couple of big guests coming
44:44
on the show, but I'm gonna ask you
44:45
to keep your eyes peeled on the
44:47
block social media channels.
44:48
If you don't already, please go
44:49
ahead and follow us on X.
44:51
And if you've been watching us
44:52
today, on YouTube, go ahead,
44:53
and subscribe to the channel.
44:55
If you missed any of our big
44:56
interviews, you can find that on our
44:57
YouTube channel as well.
44:58
Please do go and check that out.
45:00
Yoshi, if you haven't watched that
45:01
interview with CZ, It's also.
45:02
There on YouTube.
45:03
Don't we watch it already?
45:05
Yes, definitely.
45:05
I enjoyed it, yes.
45:07
Awesome, thank you very much.
45:09
And yeah, that's it for today.
45:11
So, Sho, we'll be happy to have
45:12
you, the viewer out there, join
45:14
us again tomorrow.
45:15
We broadcast at 8.30 a.m.
45:17
Eastern Time, if you're in the U.S.
45:18
2.30 p.m., if you are in Europe,
45:21
set a reminder on your calendar,
45:22
come and join us tomorrow.
45:23
You'll have a great time.
45:24
Until then, bye-bye.