Trading CLARITY, Bitcoin Bottom Signal, Are Vaults Securities & The Onchain Revival

[MUSIC] Nothing said on 0x research is a recommendation to buy or sell securities or tokens. GMGM, welcome back to another episode of 0x Research. Join today by Mark and Ryan from the Blockworks Research Team. Are the vibes today, guys? Bullish or bearish? >> All good, always bullish. >> Vibes are a little sus today, but I remain bullish as usual. >> Yeah, they're a little mixed as the NASDAQ is kind of selling off hard. You're kind of getting more smoked on equities than you are in terms of the past few weeks. But if you need some positive vibes, want to give quick shout out to two conferences we have coming up. Digital asset summit in Singapore, October 7th, and then another one, DAS London, November 10th through 11th, the Hilton Park Lane in London. The Digital asset summit series is consistently my favorite conference in industry. Incredibly high caliber speakers and attendees and just great room to mix yourself in. I know Mark was at DAS London last year. What was your read on that conference? >> Yeah, it was good. It was interesting because last DAS in London, it was kind of when we now started to talk about tokenization and now it's like this whole massive trend. So it was kind of like an early signal on that. And also the location is kind of fire because it's like these old buildings, next three river, but inside is very modern. So you do get that London vibe. So it's kind of like almost the architecture is blending, tried by with crypto, the historic with the modernization. So yeah, I mean, I'm not going to go on too much about the actual quality because you've done a good job there. Look, but yeah, definitely don't miss. >> Yeah, certainly. Want to look out for coming Q3, Q4, great events to attend, particularly if you're looking for optimism around. Tokenization theme, the historic market, is what brought out RWA is just being like a bear market narrative. But what we see now, I mean over 10X growth and like tokenized assets supply, and then on chain volumes ripping across spot and perps like that narrative has legs clearly, not just a bear market one. Last week we had some movement on clarity act odds as there was an agreement on ethics provision language. We saw odds spike up to just short of 50% on polymarket. A bunch of names in both like crypto equities and crypto kind of rallied with that news. But this has since retraced back down to 35%. So despite that movement, it didn't really stick. And the bill's huge. It's very consequential for the industry. But kind of the window to get this over the finish line is shrinking. And like there's not much time left before the recess. So Mark, I know you've been looking at this bill pretty deep. And what's your read on whether or not you think this can get over the finish line? Is 35% like fairly priced odds or would you price this differently? Yeah, I mean unfortunately me reading the text in depth doesn't give me a great great description of what's happening outside in Washington DC. But to be honest, I'm going to lean towards what the polymarket odds are saying. I'm talking to people who are familiar with people who are actually the decision makers. And I think right now it's almost like you're pricing in like a futures in in buck quotation, whereas the time gets closer to that recess date. And this next month in August, those odds are going to continuously drift lower. I think it'd be a huge upside surprise if we do get clarity passed. I think it in my head for the months I've been following it, it needed to be done this month, July and we only have a couple days of this month left. And so I've kind of, you know, normally I'm optimistic about things, but I've kind of lost hope on this one. And my mind is going to what will SEC and CFTC and OCC regulations be when this doesn't pass. And I'm going to say that because hopefully I'm wrong, you know, hopefully I have ego in my face and clarity passes and when I hold the front dynamic come next month, but for right now I'm not feeling it. If they can't get it over the finish line before the recess, do you think this bill gets revisited in 2027 or is that really just downstream of how midterm elections resolve and who controls the House and Senate? It's going to be, I think it's going to be latter. And I try to do like, you know, I can't say whatever single, you know, Senate members thinking. So I just try to do like a quick search on previous bills that have headed up to recess when at least one is Senator the House flips. And when it does flip, I think there's new priorities that come into place. And so the bills preceding that event just aren't as important anymore. And so and most of them actually end up dying. So you, if I think even 2027, even then, I'm sorry, I don't want to be a downer, but even then I don't even, I think if it doesn't pass or when it doesn't pass, that's it for now. And I think we're going to have to lean on those triple letter agencies for any kind of clarity. Yeah, so I like the framing of like the odds kind of decay into zero, like a futures expiration. So like as they drift down the the bear case kind of gets increasingly priced in as the base case. But if there's an upside surprise here, like who do you think wins the most? Or if you're to put on a trade to get long the upside surprise, like how would you structure it? What would you put on? Not financial advice, of course. I think it's it's definitely beneficial to I mean, it's beneficial to so many different asset types. I mean, it's you know, so it's like which one is the most beneficial to and it might probably be T-fight tokens because you know, it explicitly says that you know, just because you have any kind of value-cruel direct linked up blockchain doesn't inherently make your security. I think existing the fight tokens, the ones who already had an ICO, those ones that are already generating revenue, those ones that are already doing buybacks. I think those benefit massively because those those things are more or less allowed. I also think that method thou would have would have been a good one because it explicitly allows for for raising of funds without necessarily being classified as a security up to 200 million, 50 million a year. So I think though like method on, but maybe even because of that the tokens that launch on that platform, but you know, inversely, I think even if it doesn't pass though some of those tokens also could do well because I'm still going to I'm still leaning on or expecting that SEC, especially specifically, will have some more rules around this and possibly even like exemptions like innovation, exemptions tokenization, exemptions, defy exemptions, these kind of things that you know, they're working on one right now. It got some pushback because it was about tokenization and people will consume whether they were talking about the synthetic tokenizer assets, which is actual one to one bucked. So that's getting reworked, but I you know, I'd expect them to have others on the plate as well. And so that's my long-winded answer saying it's hard for me to name a specific asset, but I do, you know, even meta, meta thou, but I do just like all coins E5 really for the clarity. I think they're probably clearer winners from it. Yeah, good shout. Ryan, you have any views on how to play it or her wix side of odds you want to be on? Well, I definitely don't think it's passing just for the simple fact that like I don't think Republicans are in a good spot for the midterms and I don't think like passing crypto regulation really improves their positioning. If that's like their whole mark success for this year, like I think people are just going to be like what the hell. So yeah, I'm bearish on clarity passing. I also don't think like we need clarity for a bull market. So I don't really think it like it'll have short-term impact because it's like seen as a good, but like long term, I don't think it really affects the the bull case for Bitcoin. With that said, like if I was to put on like a trade like if I did think clarity was going to pass. I think you just kind of read the room. Like every time we get positive news about clarity, it's like crypto equities pump really hard. So like coin, circle, hood. I think those are probably your best points of trade. DeFi tokens, like I do agree in the sense that they should benefit, but like I still think there's way too much capital that's like risk averse to like bidding on chain stuff. So maybe like some of your bigger cap DeFi tokens that like are already well integrated to maybe like the unies in obvious of the world. But the thing is like they've already, they said screw clarity, we're gonna start like driving value back to the token anyways. So I'm not sure how much of an impact it is. Maybe there is like an impact in the sense like there is an amount of certain amount of capital that wants to bid these assets and there's just not able to under the current regulatory regime. If that is true and again, I really don't have a read on that. If that's true, I think they'll pump it like if the capital that wants to bid these tokens already can, like I don't think it matters that much. I think though ultimately like I don't think clarity's passing so I don't think it really ends up mattering all that much. - Look, look, I wanna take back my answer. I'm gonna go with Ryan's. I like, I do like the crypto equity play for this specifically. I mean regulations affect regulatory companies, right? So I think that makes sense. That was a good show. - Yeah, so the way to play clarity passing is registered securities. It's interesting angle there, but I kind of agree. One thing I'm open to is the scenario that we kind of saw play out in July of 2024. I think it was with the polymarket odds on the ETH ETF getting approved. It was the line with something like, will this get approved prior to the end of July 2024? It was priced at 9% at the start of the month. And then there was huge momentum in a three day window. All it's went to 100%. It got over the finish line and ETH ripped. It was like over 20% in a day and had a huge move. I'm kind of open to something similar playing out for clarity act, not to say it will or that it's likely, but markets can move that way. And I'm in agreement, I think, like when we saw the movement on clarity act odds last week, it really was your coin base circle hood that kind of led the leaderboard on that day. And particularly circle and coin, those have sold off a good bit from their bowl market highs. Coinbase in particular is kind of holding a major level on the chart. So how would I play it if I wanted to play the clarity act line? I certainly wouldn't be playing the polymarket odds. I'd much rather play something like coin base equity. And probably how I'd structure it is like a options risk reversal. At this level, I wouldn't mind selling in at the money put for six months out, particularly if I have a bullish bias to crypto from this point in time. And then I'd take that premium to buy some shorter dated call option exposure. Because if those clarity act odds move from 34 up to 100 and a few weeks, I wouldn't be surprised to see coin base over 50% higher in a few months period. So I remember that those odds on polymarket. I think it was a little bit different back then because one polymarket didn't really have as much liquidity and the types of traders, let's call them speculators, were different because I remember thinking I thought ETFs were going to get the green light despite the polymarket odds because I was looking at Twitter profiles for like James, I'm gonna miss pronounced his last name, but I'm not even gonna say it. He's a Bloomberg ETF guy. A very Italian last name begins with B. I was looking at some other ETF pursuers as like ETF analysts as well. And they were saying that they thought the odds were higher. They don't even know about polymarket odds back then. They were just giving their own takes on it. And so I was kind of like leaning with them, but now I think the market's a little bit more mature and they're probably participants in it as well. - Yeah, just to add to that, I think it's a bit different because like the ETF stuff was purely just like legal questioning and like basically, Gensel or just capitulese, like I don't, he knew that he was in the wrong, like denying these assets ETFs. I'm like just figured it wasn't worth the political juice to try to do that and they more where this is completely different. Like there's no political backlash to really saying no to clarity, like you're not gonna get caught up in the court battles and whatnot. So I don't think that scenario is very likely. Whereas I grew up Mark, like I thought the chances of Ethereum, the Ethereum ETFs passing back to, and what was it, May 2024 significantly higher than the 9% just because did Gary want to risk going to battle again and ultimately losing because he was in the wrong. So yeah, I don't think it's a likely scenario, but it's the Trump admin like anything could happen. So maybe it does have that wild card effect in. - Yeah, and they didn't have Elizabeth Warren going around saying don't like the ETFs fast, like she's doing with clarity right now. So that's another wedge. - Yep, good shouts, good critique. Perhaps more news coming out of DC and SEC in particular. Hester Perce, Crypto Mom released a statement on vaults with an interesting title, headstands and summer vaults, a statement on crypto vaults and lending strategies. And basically this kind of red is like a warning to some of the activities and the DeFi lending space vaults in particular related to curators and their activities and some of the key language here. Vaults and lending strategies may implicate federal securities laws in several ways. A vault that holds securities or allocates assets to investments and securities could fall into investment company territory. So kind of despite as you know, pro crypto as this regular has been and how pro crypto the administration and environment has been, she's still pointing out that you know, there's some red tape here that does apply to some of the products in the on-chain financial system. So curious if you guys have any interpretation on what this means or how it could implicate particular activities in vaults and the curator space. - To be honest, not surprised because I had Hester Perce on as a guest a few weeks ago on a different podcast. And she when we brought up vaults, she said something very similar. And at the end of the podcast, after the goodbyes, me and my me and the other panelists were talking about it. And I was like, this doesn't sound super bullish for vaults. Like everything else was a clear example, but for vaults, she used a lot more careful media trained language around it. And we wanted it. We wanted if it was you know, a sign of something to come. So you know, this is that sign and you know, I get it because you know, even with some, I'm not going to get a lot of love for this, but even with some crypto tokens, they appear to be securities. Some of them to me or a security like, you know, whatever that's not meant for us. But you know, if it looks smells and quacks like a security as some vaults do, you know, I'm not, I'm not mad at, you know, it's the SEC. This is their job, you know, you can't just put it on a chain and try to get around it. You know, that's a massive loophole. You could, you could start to see a lot of companies like large of fintechs and banking institutions of using this almost for their, you know, even for their retail customers, especially maybe not the banks, they're probably a little bit too regulated, but more of like the fintechs, the Robinhoods, the new banks, et cetera. And this is why I think, you know, you know, if clarity doesn't pass, this is why I think we need some exemptions. We need these regulators to put all some exemptions like they've done in the past. So this is what I'm banking on. And I, I don't think anything is going to happen anytime soon because it's not like this administration is in an extreme rush to put this, you know, they're foot down on any of these crypto protocols, but I think it's something to be reckoned with. So maybe, maybe next year when post midterms after parities get realigned again. - Yeah, not just vaults and lending strategies, but many tokens and structured products across the board, certainly at least from my read. Look a lot like unregistered securities, looks and quacks like a duck. Just, like you said. So my read is like as these products see maturity and adoption, growing traction, like as they have, they're going to need to be carve outs or exemptions or at least a clear framework for how curators can offer these products, whether that looks like certain mandated disclosures on kind of the strategy, architecture or certain curators need licensing to engage in the certain products or at least a degree of like transparency and disclosure. In the same way, we want to see that for tokens. That's kind of my read on what we're going to need for vaults as well. I think this is bearish bullish or kind of just just more more news at a DC at the moment. Luke, can you bring up the Ave Morpho chart? The Ave Morpho pair? Yep. I actually don't know if it's moved at all, curious. But I do think that this is probably net slightly bullish. It just shows that it's on the regulators' mind. And like I said, it's not like they want to stamp these things down. So for it to be on their mind this early probably means they're already thinking about how to regulate it, how to do the disclosures, the ratings, whatever's necessary. And then by the time that kind of clarity comes, hopefully the large institutions can get in and step in. Let's put up a chart. Yeah, here's the Ave Morpho pair. Of course, Ave had brutal sell-off post all the service provider departures and the fallout from the kelp exploit. Meanwhile Morpho's had incredible resilience and deposits and active loans, particularly from like the RWA sleeve of listings. So Ryan, what's your read on what this chart's telling you? Nothing much really. In relation to the SEC comments, seems like the market doesn't really care too much about it because in my mind, this would be bullish. They bearish Morpho, correct? Like, Morpho, do you agree with that? I would be, I think, in kind of an infrastructure layer like Morpho in particular sits somewhat insulated to the comments, whereas it's much more so the curators. Yeah, but like now if curators start falling off like or whatever, does that not affect Morpho? Like I understand Morpho infrastructure. Like Morpho is not the target of this, but like, if now all of a sudden every curator on Morpho is a security or whatnot, does that not like impair their overall bull case? Yep, in practice though, I don't see the work of Ave service providers being that distinct from a Morpho curator. That's my read. At least what the market says now is like, it's kind of a nothing burger. Yeah, that's definitely my takeaway. It's nothing burger. Would you be long or short this pair, Ryan? I wouldn't touch it. I don't really have a read either way. If you zoom out, I'm sure this pair has at least on the Ave side has gotten destroyed. Yeah. Yeah, that's a tough one. I don't know. I think Ave is probably being overly discounted, but like, they had a really rough year. I'm not sure I want to long them yet. Yeah, bad year for Ave. That's for sure. But if I were to trade the pair, like I'm ultimately incredibly constructive on Morpho's bulk architecture, at the same time with like large token overhangs and whatever it is, a 100 to 140X price to sales on implied basis, assuming a 10% take rate compared to Ave that's been in the 10 to 20 range. It's a bit more compelling to me. At the same time, we had Morpho midnight launched recently with fixed rate, fixed duration, bulk products, which I've been the long time gigaball on kind of on chain fixed income products with Pendle Principle Tokens. And given the work we've done there over the past year and a half, like you can get on chain term structures of significance with fixed yield, fixed duration instruments. And you're starting to see the beginnings of that on Morpho midnight, which I think in the long run is going to matter a lot more than what the market appreciates it to be right now. So ultimately, I'm pretty constructive on that. I've been waiting a long time for fixed rate sales in crypto. I may be expected it too early. I remember 2017 getting into Sapphran, ICO because they did risk tronching and then for the senior, you can senior tron, you can get fixed yields. I was way too optimistic on yield market structure back then. But we finally have some sevens of it. I'm looking forward to everything else that comes with that. Credit spreads, you curves, you know, the whole works. And I think it's a vital first step or maybe second step for for more institutional risk capital to move on chain use with that as a benchmark. Absolutely. All right, we we open with some some commentary on the NASDAQ. Equities have been selling off pretty hard this past week. They've kind of made new range lows. This of course comes off the back of like one of the strongest stretch in equity price action history from April through early summer. Meanwhile, like most crypto majors are above their lows and kind of like showing some some relative strength to equities. You've kind of been yeah, more smoked in equities than crypto over the past few weeks here. So I put out this research report last week titled bottom signals kind of looking at some high time frame metrics that are pretty characteristic of cycle lows, particularly for Bitcoin. And show this chart. I think it was end of June, but yeah, the the top panel is the 14 period moving average of the weekly RSI of the NASDAQ Bitcoin pair. And the bottom panel is the price of Bitcoin in dollars. And what you see is that whenever this smooth RSI kind of eclipses 66 as in arbitrary level that tends to coincide with major cycle lows on Bitcoin or at least as own. And what we saw over the past few months is this is the NASDAQ Bitcoin pair blew out to the upside like NASDAQ was incredibly overbought against Bitcoin with pretty high reading on that smooth RSI. And you know, it's a 14 period moving average on a weekly chart. So it's pretty high time frame stuff. You don't get a signal like this often. You get it basically once every once every four years. I'm looking at what what historical returns look like from that point in time is it's it's overwhelmingly positive across the board. This is the price of Bitcoin in dollars on the left here from that signal. And then this is the NASDAQ Bitcoin pair over the next three years from that signal. And the red line is where we are now from from that signal. So cherry, cherry picking this metric alone. It kind of suggests that Bitcoin might be near major cycle low and that outperformance against the NASDAQ is from the likely scenario here. If the current context resolves to how similar situations did historically. And we've been talking about realized price for for quite some time. Certainly if you're a newsletter subscriber, we've written about it a bunch, but it historically kind of represents the downside target. or deep value for a bear market. And it currently sits around 53K. It kind of estimates like the on-chain aggregate cost basis. And in a bull market, you know, paper Bitcoin from centralized exchanges and perpetual futures, that drives spot price up to significant multiples above realized price. And that creates downside risk. But in the bear, we see it retrace to the realized price level, which we're just a bit above not much more downside to go. So taking all this together, I kind of try to paint a range of potential paths for Bitcoin both into year end, but also out through 2029. And I actually kind of think it's only like coin toss odds if the low is in at this point in time. I mean, the year could end up that 80,000. We could draw down to mid to low 40,000s before then. But regardless, I think most of the downside of the bear is behind us. And for the patient and initiated and optimistic, like the suggested return profile for Bitcoin for 2027 and 2028, is in my opinion, like quite favorable from here. And likely a better spot to be, than to be in the NASDAQ at this point in time. So a little bit of bullish optimism here. Hope the people can dream again. But curious, you guys have any takes on this? Do you disagree or agree on any of the framing? Think the lows in or we'd be looking to the upside again? - I guess I'll start. You know, I definitely agree. I think the low has to be close, if not already, if the low isn't by the end of this year. Like I think you seriously have to start questioning the Bitcoin thesis. So like to me, if you are still long, the overall Bitcoin thesis, you still think it makes sense in today's world than yes, I agree 100%. If the bottom is not in any time soon and NASDAQ and gold keep ripping against Bitcoin and those are size get even more overbought, then like you might actually have to start questioning the Bitcoin thesis at that point. And like actually asking yourself, like is Bitcoin doing something wrong? And I think you can actually make a convincing argument that maybe the case, right? Like quantum will come eventually. People can debate about timelines, but there's eventuality and the current high priest of Bitcoin seem more concerned with like, ordinal spam, which isn't even spam at this point. No one's doing anything ordinal related on Bitcoin. This hasn't been an issue in a year. Like it just naturally died off on its own. So yeah, I think bottom is near for sure, like just purely from what you said and what your report says. I'd be concerned if it was. So I don't know what to do in that scenario. I am very much like I am willing to go down with the ship if that's what it is and Bitcoin fails. I will fail with it. I'm comfortable with that. - Yeah, I'm gonna jump on your bound wagon here. That was a great report by the way, Luke. And it's very interesting that that RSI NASDAQ to BTC's signal comes once every four years. That's a very, very odd thing that keeps happening, it seems. I'm hoping that it's at least from the model that it's more about any short to Bitcoin arising than it is NASDAQ falling like it's been doing recently. And you know, this AI bubble stuff might be getting a little bit stretched. Hopefully the things can catch up. Because I don't want both sets of my portfolio to be feeling at the same time, never a good feeling. I did feel the four years cycle last year. I think it was like September October. I was like, yeah, I think four years cycles are dead. Look at the ETFs, look at the dot cores, like external pressure and like the wheels influence and the BTC miners influence are having less and less over time. It all made sense in my head. But then I forgot it was Bitcoin. And so I'm not going to make that mistake again, you know. I believed in it last cycle, this cycle I didn't. Next cycle, I'm a believer again. I repent it for my sins. And I think that history as well as the grade data that you put out in the report is pointing towards that the bottom is there. Or hopefully already gone past us. Yeah, so it's like we're at or we're at or near a low on a pretty high time frame. And we should be looking for one. And if it's not set or we continue to drift lower like after your end, this time would be different. And that would invalidate with these. But I kind of think whether it's to the upside or to the downside related to the four year cycle. Like the four year cycle is going to be innocent until proven guilty. There was a lot of narrative, you know, back in the top Q3, Q4 of last year that, you know, this time is different because of institutional adoption, the holder base ETFs, treasury companies, whatever it might be. And the four year cycle thesis was kind of treated as like a useless left curve. Frequently it was called like a dumb ass on the podcasts for we're still believing that it might be in play. But then everything gets cut in half. And the four year cycle thesis is validated almost to a T. So I'm kind of looking to the upside here that like this time's not different. And we should be looking for a low in accordance with the cycle in the same way like we should have been looking for a top back then. But like Ryan said, this is one we'll take to the grave. Captain, we'll sink with the ship. And if the low doesn't hold before your end, then a lot more bigger problems at play. I'm just wondering how much lower can it get because we've had the believers in the four year cycle help push you price. We've had record levels of ETF outflows. I mean, when I say record, I mean since ETFs even existed, right? We have my Michael sailors selling BTC. We have talks of implosion that goes selling down. We have geopolitical events happening. We have high inflation. And Bitcoin is still not even at realized price. So I'm like, what quantum fears? I can keep going on. At this point I'm wondering, what is actually going to push this can something push just to realize price or have we actually seen the bottom? That's all that's going through my mind. Yeah, the last low was much more chaotic. The world was on fire in crypto and burning down at the low. Post-Taroluna, three arrows, BlockFi Celsius, and then FTX as the big one right at the bottom. This low, much less so. It's kind of a bleed from ETFs, treasury companies just largely suspended their buying and their support. No major bankruptcys are failures at scale. This low just feels much more apathetic and disinterest. So perhaps we need more time for the time-based capitulation rather than price-based downside. Do we think the BitMex collapse? I don't know what's equality. The ending of BitMex, the OG of the Poops, unrelated. That's where my head is at. But what do you think? I think time and place makes sense. Business isn't good right now across the board. And they've been out competed by Binance Hyperliquid, OKX, Bybit, whoever it might be. And yeah, it's a pretty reasonable point in time to close up shop for them. Moving on to perhaps zooming in from the high time frame cycle chart, moving to some other charts that are going up into the right deeper in. in the trenches. Ryan, you've been looking at a new project, Bake World Assets, which kind of plays in the Gacha space similar but different to, you know, Collector Crypt or something like that. So at a high level, like, what is Bake World Assets? What's their angle and what are the traction they're seeing? - Yep, totally. So I think it helps to kind of first start looking at like the existing Gacha's and like where they're at. So basically how like, Collector Crypt, Courtyard, Beasy, Figital, tell they basically all operate is, they go out and they buy Pokemon cards, and then they stock their own Gacha, and then you pull it. So this is good for curation, right? Like they get to pick what goes into the Gacha, and I think that is an important part of any Gacha's, like curating the Assets. Like if you just stack it with like high value stuff, like it's not really a desirable high value stuff, like it just becomes another slot machine. But the downside to this model is it's very like capital intensive and time consuming. You can't just be like, hey, I'm gonna go stock my Gacha with, you know, PSA 10 like first edition, Charizard or whatever, like those are very hard to come by, you need to have the right connections, like these are not easily attainable Assets, and they cost you shit ton of money, right? So, Bake World Assets basically opens up that model to anyone, right? So how it works is they have white listed NFTs, and if it's white listed, you can then go and deposit into the Gacha. You can't do that on any of these like Pokemon ones. Like it's strictly courtyard, it's strictly collector grip. They're the ones stacking or stuffing the Gacha with items. You can only rip it, you cannot stack it up, put your own Assets in there. So, Bake World Assets is basically like kind of like the Uniswap V2 moment for Gacha's where now anyone can become a liquidity provider. So that's like the real appeal of it to me, and then obviously like at the end of the day because this all just operates on blockchain rails, like you can technically put anything into the Gacha, anything that is an NFT contract really. So the initial stuff has been like a theory of NFTs. They just announced something called token packs where you can like put tokens into an NFT and now put that in there. So like, Punxter tokens, Pepe, Magtokens, I'm going to put in there. They're working on a way I'm pretty sure to like get the Pokemon cards in there because like right, all these existing Gaches, they basically tokenize these cards and then like they're now NFT. So if you bridge those NFTs to Ethereum, whitelist them, you can throw them in there. But yeah, I am personally really interested in Bake World Assets because I think the open Gacha model will ultimately win out. I'm not sure if Bake World Assets will be the one to, you know, do it right? Obviously they pioneered it so like their first. But it's just a much more compelling method, right? Like it's not easy to spin up these Gacha yourselves they're very capital intensive. I don't have the exact numbers off the top of my head but like the value of the items in Bake World Assets eclipsed seven figures in like the first day, right? Like to do that, if you're starting this on your own, you need to have a million dollars cash. Like, Bake World Assets was able to do this with just token incentives like they didn't spend any money of their own. So I think this is a much more compelling method. I think what they need to figure out though is the curation aspect. Like like I said before, a big appeal of the Gacha's and I think like you have to kind of be in the nitty gritty. Like from the outside it just kind of looks like gambling and it's like people just want higher numbers to spin for, right? I think that's wrong. I think the reason why the NFT or like the Pokemon Gacha's I've gotten super popular is like there are a lot of cards in Pokemon but there are very few like grail cards in the sense that like there might only be like 500 of them and there might only ever be one for sale at a time and like you probably have no way to get that. So for a lot of these like top cards, the only way to actually get them is like go spin the Gacha and whatnot. So I think Bake World Assets kind of needs to figure out that curation aspect. So like right now because you can pair with ETH, right? Like you can just take a really shitty NFT and pair it with 100 ETH. There's no Oracle. It's not like reading the prices of these NFTs and then it now just like how it interprets it is that NFTs worth 100 ETH even though it's really not. So like you could have a scenario where there's just like devulges into like an ETH slot machine or you're just spinning for ETH. I think that's bad. I think they need to figure out a way to like curate and like actually make it so that like when you win the top rail, you're winning a crypto punk. You're winning, you know, 0.1% of this apply of Pepe. You're, well, that actually be too crazy. You're winning like 100K worth of Pepe. You're getting like a first edition Charizard. So I think that's what they need to solve. But if they are able to solve the curation aspect, like I do fully think the open Gacha model will beat out the close Gacha model. I think it's just a much better way. It like actually taps into like crypto rails and like technically you can run a Gacha entirely off chain. Actually, I think the biggest ones in the space are off chain. Like arena club and RIPs or whatever. Like they don't use the blockchain at all. They operate the same ways like collector crib. I think they probably do more revenue as well. I'm not sure on that, like their financials are obviously their private companies. But this is like how you actually like tap into what makes blockchains great and like what makes this tech rate to like truly beat out those competitors. So I don't know if FWA is the one to win this. But I think they're onto something here and I would definitely not discount the innovation. You said prior to the pod, you said you spent your whole weekend playing around with it and farming it. Yes. I'm curious like what's the strategy? And are you having fun on chain again? Yes. Well, I'm definitely having fun on chain again. I actually, I was only doing it for the weekend like because I have to work. Like this was literally taking up my time. I'm sure I could look like one of my buddies who like drew up the whole script to do this. I guess I'm lazy and just not that proficient or trust myself to like build something that works. But essentially what I was doing. So right now they're in like the emissions period. So for the first 15 days, 1% of the supply daily goes to depositors and pack purchasers. So obviously it's, you know, it is being incentivized right now. So basically what I was doing was I would take my eith, buy packs, whatever I pull, then relist with eith, so deposit that. Then from the eith fees I was earning, buy more packs, get those NFTs deposit. So I think, I'll pull up my stats right now just to give you a sense of how time consuming this was. And mind you, this is all in Ethereum and maintenance. So you know, this isn't like fast. But so over the weekend, I ripped, let's see, 305 packs and deposited 785 assets. So yeah, I played around with this quite a lot. It is actually like very enjoyable. I do like it. It was more fun in the beginning when people didn't figure out the ways to game it. Like I said, you can just like pair. The NFT itself doesn't matter. All that matters is the each side. So like in the beginning, when I first started, like not a lot of people are like industrial farming the shit. So like there was like some variety to the NFTs that I was pulling. And I was like, oh shit. I just pulled a Opepe, Opepe, or whatever. And like that's cool. And then like now people have kind of realized the game. And now I just keep pulling like TTTs and friendship bracelets, which are just like valueless NFTs. But you know, sometimes they'll be paired with like a high etham out. So yes, gotchas are fun. But they're only fun if like the items you're pulling have value outside of just like whatever the monetary value is. So again, that's what they need to figure out. I think they're onto something. I like being able to also be the depositor because I like collecting cards. I would say there's probably 80% of my collection. I wouldn't care if they sold. I got the money value for it where like, you know, there's 20% that's like I'm holding this regardless of the price. And I like to put stuff to work. And I like to try out new stuff. So it is an enjoyable experience. Can be improved. If this is like the final version of it and like there's no further improvements, this probably dies out pretty quickly. But I don't think that's the case. I think they realize there are, I think Adam realizes he's onto something here and they're going to push forward. I think in the docs they have like a teaser about like V2 or something where it's like deploy your own. So that'd be cool because like if it's all just one big pool, like technically you can now like build like mini gotchas. So maybe you build a gotcha that only pulls in like the token packs. Like you have a token gotcha that it's a unified liquidity pool between the main one and the token pool. And maybe you have like a Pokemon specific one. You get really creative with this. Like this is like the power of DeFi. This is the power of crypto. So I'm curious to see like where the experimentation goes. The possibilities like in a sense truly are endless. But it's just a question of like, do they want to pursue that or not? I don't know. That sounds really interesting. I do like this open concept behind this. I think I agree with you. I think that gives it a leg up versus some of the others. But then like we saw a bit max being the founder of a model doesn't necessarily mean that you will be the winner. So if we move advantage isn't really a thing in crypto except for BTC. I just have a question. How does how would it work with the Pokemon cards? Like how do I you know what the others one was as a single entities in your creation. And I can I'm trusting them essentially. How does it work in this model if they were to do that? Yeah. [BLANK_AUDIO] They would still need to rely on courtyard or collector crypt to tokenize the Pokemon cards. Because they do that. Their business model is twofold. Not only do they run gotchas, but they run the tokenization side of stuff. So I don't know if deposits are open for them, but in theory, let's say I have a PSA10, Pikachu or whatever. I send it to them. They costate for it. They now issue me an NFT that is a claim on that asset. So what fake world assets can do is basically that NFT, they can now put into or whitelist it. So now if you have, because I'll take courtyard because they're EVM, it's a bit more familiar with how they work. All their NFTs are a part of one big courtyard collection. So you just have to whitelist the courtyard collection. And I guess in a sense, also find a way to bridge it to a theorem because it operates on polygon. But once you do that and whitelist it, now anyone can deposit that. And how fake world assets works. There's no oracles. The value of your NFT is determined by-- so when you deposit, you have to deposit an amount of ETH. So in theory, what you should do, let's say your Pokemon card is worth 500 bucks, you should then deposit it with 500 bucks worth of ETH. So that's how it works in the sense like if you have Pokemon cards in their whitelist, all you just have to do is like determine what you think the value is and deposit a corresponding amount. Because basically the only scenario where you lose money in this, let's say I have a $10,000 Pokemon card and I pair it with 500 bucks of ETH. That card is going to get pulled very quickly because the odds on it are pretty high. It's deemed low value, even though it's not because the system only reads the each side of stuff. That's the only way you really lose out or like guaranteed to a minus EV as a depositor. And then obviously because you're playing the house role in the casino, you can lose money as a depositor as well. If you don't have the bank role to overcome variance and whatnot. So if you do decide on doing this, don't just do one NFT, one position because the odds can go against you and you get picked off. If you do plan on doing this, make sure you do it with a quite large bank role and a lot of positions to eliminate the variance. There is positive expected value on the depositor side, but that doesn't mean it's guaranteed. And then if I put my charizard in a sessis with 10,000 and I match it with 10,000 worth of eth but then eth declines in value. I know the odds won't change because eth is a kind of value across the board. But then you're OK. You answer my question. Yes. OK. Yeah. So I guess that's something they'll have to figure out as well. The current system works well for eth entities. It's all priced in eth, but it obviously should expand to assets that are not just priced in eth. And I guess you could run into a scenario where-- because it's also tough to withdraw. If people are ripping packs, you can't withdraw. Basically, it has to be a dead period for you to withdraw your deposits. So there could be a scenario where, let's say, I buy a very rare PSA 10 first edition-- well, not PSA 10. Let's say a PSA 7 or 8 first, this, and charizard. There are not many of them. Let's say overnight, these things go up 2x and I can't get my deposit out. Yeah, you could do's out. So that is something to consider. And it's not free money being a depositor, like I said. But I think that's more of an edge case than this breaks the system if that makes sense. Yeah, makes sense, folks. So average Joe's crypto is the competition and the fake world asset trenches. Not anymore. I've won down my operations for the week as I've worked to do. This was becoming a full-time job. But if it's still attractive, come Friday night, maybe I'll spin it up again. Yeah, if the listener needs some fun to do on the weekend, that's on chain might be this. But yeah, pretty fast rise since launch. Few days above a million in fees. Start to Eiffel Tower a little bit. But also today's the 28th, this candle's not done. That could see up for there. Ryan here doing his part to the paint of these. The one last thing I'll add and it's more of a meta thing is I think we need to be supportive of projects like fake world assets again in crypto. I feel like over the past year or so, crypto's kind of lost this like experimentive feature of itself as we just tried to submit to our track file overlords. And I think the bear market is a great time for the experiments. Like last bear market, we have like front tech and front tech got super popular. Obviously, it didn't pan out. But that doesn't mean you stopped trying. So yeah, if there's ever anything that's like unique and fun on chain, like always go try it out. You never know. The people that tried this out first day did quite well, nerd doing quite well. But this is like one of the best features of crypto is like you can take Adam right, the guy that built this completely independent dev. I think it's a team of two spun this up and like found PMF almost instantly for it. So tap into that crypto culture. That's like super important. That's why like I was initially drawn to fake world assets. It's like this is what makes crypto fun and unique is like you can't do this outside of crypto. But yeah, that's kind of like a meadow view on all this, I guess. Yeah, it's an important one too. Because certainly like a lot of what we're here is crypto very much seems like the frontier of innovation and experimentation in financial markets. However big, however small, which includes things like certain gotcha games or fake world assets. So I agree all for experimentation and innovation across the board. Of course that comes with some costly lessons at times. But ultimately that just better informs the future. So I think takeaways, it's early cycle for the initiated and optimistic plenty of reasons to play around on chain again. And yeah, mixed picture into year end. But as we look out in time, plenty of reasons to be optimistic. Yeah, I want to thank Mark and Ryan for their thoughts and coming on the show. And we'll see you guys next week and enjoy the weekend playing around on fake world assets. Nothing said on 0x research is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only. And any views expressed by anyone on the show are solely our opinions, not financial advice. Luke and our guests may hold positions in the company's funds or projects discussed. [MUSIC PLAYING]