EXCLUSIVE: An Inside Look at RV Pro Crypto's Expert Analysis ft. Jamie Coutts & Kevin Kelly from Delphi Digital

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0:44Hi, I'm Raoul Pal and welcome to my show The Journeyman where I explore that journey to the nexus of macro crypto and the exponential age of technology and my role is to take you with me on that as we go and learn together. Now I've been in crypto since 2013. I wrote the first ever macro strategy piece on valuing Bitcoin in 2013 and started investing when Bitcoin was at$200. I've been on this whole journey. I've spoken to all of the greats in the industry. I've been privileged enough to be part of that Real Vision journey where we started in 2014 interviewing people about crypto and educating people.

1:28And we've had literally everybody on the platform. Now, back in 2021, we launched Real Vision Pro Crypto, which was our more deep dive research service, where we really get to the grips with what's happening. We have Jamie Cootes writing incredible kind of macro crypto nexus plus on-chain analysis. We have people from the community giving us analysis of technical analysis and what is going on in markets and how they're thinking through things. We have a lot of contributors within that tier to give you that wisdom. And that's what the pro tier is all about, that wisdom to succeed in your crypto investing journey and to find those gems, to find the opportunities, also to filter out the narratives and make sure you're armed with all of the tools, network and knowledge that you need to thrive and survive.

2:19You know, this whole crypto journey is all about not fucking it up. And ProCrypto is really our way of getting it right. This, I think, is an invaluable tool. Now, I join ProCrypto every month to speak to Kevin Kelly and Ash Bennington to shoot the breeze. And this is where you get to hear me talk more freely about how I'm thinking about crypto markets. I bounce off Kevin from Delphi Digital. Kevin is both a thought leader in space and a thought partner for me. He's given me some of my best ideas and we flesh them out together. We've even been in business together. So I always love speaking to Kevin.

2:58And I think you will enjoy this conversation as much as I enjoy participating in it. So anyway, I'm still in the jungles or the bush of Africa. And so I thought you'd enjoy this while I was gone. Talk to you afterwards. Join me, Raoul Pal, as I go on a journey of discovery through the macro, crypto and exponential age landscape. In The Journeyman, I talk to the smartest people in the world so we can all become smarter together.

3:30Welcome to Pro Crypto Insider Talks. I'm Nico Bruga filling in for Ash Bennington. And I am joined by our guest, Jamie Coots, Real Vision's chief crypto analyst, filling in for Raoul, who's off on Savark, and Kevin Kelly, who's stuck in New York City with me. Before we get to it, Jamie, Kevin, how are you two doing today? Anything particular on your mind before we get to the questions? Kevin, let's start with you. Not as good as if I were on safari right now. No, I mean, I think this is going to be a great conversation. I've been following Jamie's work for a long time, so excited to hop on and finally exchange some notes.

4:09I think just to level set based on where we were last month, a good amount has happened. But if you look at price action, you just look at the charts, you would assume that we're just kind of in this choppy, eternal kind of choppy phase. And I think that had you taken a step back and said, OK, in that time, you've got stocks that are back up near all time highs. You got treasure yields down on expectations of pretty rapid Fed rate cuts at this point. Global central banks looking like it's a shift from tightening to easing policy, global equity backdrop. Well, it looks like it's improving, you know, with a lot of the central major central bank balance sheets, like we talked about last time, PBOC, Fed, Global M2 now breaking back to new all time highs.

4:55The dollar has seen some weakness and the Dixie looks like it's on the verge of a potential breakdown. Gold's at new all time highs. If you lay all that out, you would think, OK, naturally, Bitcoin has to be trading higher. Right. but the sad reality is it's not. And so that's, I think, what's puzzled a lot of people, especially over the last several weeks. Jamie, what about your big picture thoughts on what's going on at the moment? Yeah, look, I mean, exactly. Crypto is trading heavy at the moment. There's been quite a few positive catalysts, which I think would let a lot of people to believe that it should be trading high, especially in line with other risk assets.

5:35but it's sort of I think people in crypto get very focused on the short term you know the things that drive crypto long term are things like liquidity and that certainly has improved so you know short-term durations aside unless there's something that we're not seeing and there is a lot of geopolitical risk that we can maybe get into a little bit but there's you know this election cycle more than others seems to be a little bit more volatile. And I think that could be weighing a little bit on crypto. But I think that you saw a massive move in the Dixie. It was 104 just really a month and a half ago.

6:16It's 101, which is a pretty big move for the US dollar. And so S &P has sort of topped out right near the old high. The Dixie has basically collapsed in its terms in a pretty significant way. And it's hitting a support level where you'd expect to see a bounce back from oversold levels. And crypto is caught in between at the moment, looking forward and then looking at what's happening in the price action right now. So zooming out, I think the conditions are there for a pretty strong Q4. September is always pretty shitty when you look at Bitcoin over the years. But it is the Q4 period where Bitcoin tends to do rather well.

7:03So I could trade heavy from here. Barring any major escalations or unforeseen geopolitical things, I think Q4 will still be a pretty strong quarter. From your lips to God's ear, I hope so. But yes, brace yourselves. September is always a tough month in crypto. and hopefully then we're right into the banana zone. All right, let's kick off with our first question, which comes from Bamboo. Sui is currently a hot topic on the Discord. Some think it could be the next Sol. What do Jamie and Kevin think of Sui and its prospects to outperform Sol over the next six months or a year? Jamie, let's start with you.

7:44Yeah, so Sui, I think it's definitely building. The narrative is starting to pick up for the network and we're seeing it in the numbers that I track anyway. I tend to focus more on the usage numbers more than anything else because I think that's the best signal that we can go on rather than just really the narratives in the space. And this is a high-performing third-generation blockchain built with a totally different tech stack and a newer programmatic language for blockchains. It's been ported over from Web2 by the developers of that very language. So I think the use case for blockchains is a powerful one.

8:29And what we're seeing in the numbers is the start of what I would say is really the network effects that you want in an emerging blockchain. And what I mean by that is, you know, Zui was really doing sort of 20 ,000, 30 ,000 daily active users last year until sort of Q4. And then it just went on this meteoric rise. So this massive spike in daily active users. Now, you have to sort of dig below the numbers to understand how they got the massive spike, which went from that$30 ,000 up to over$1.2,$1.25 million in Q1. And that was through a ton of incentive programs so that the foundation was out there using funds to basically bring people into the ecosystem.

9:17What is most important when blockchains do that is to look at the aftermath and to see where usage settles after the sort of mercenary activity takes place, whether it's around gaming or other sort of DeFi protocols that bring people into the ecosystem. And I think what we're seeing with Sui is that that spike, that massive run up has leveled off. And we're seeing a plateauing of the number of daily active users in the vicinity of sort of 400 ,000. So from virtually nothing to 400 ,000, if it continues like this through what is pretty much been a bear market for crypto, I think it's a decent one-year performance in terms of growth.

10:01in terms of growth that actually outstrips a lot of the other blockchains in terms of the one-year percentage change in daily active users. So that has the effect of actually bringing in and seeing users stay in the ecosystem. And the other thing which I think is interesting is that one of the major drivers for blockchain valuations is DeFi and the amount of DeFi activity within the ecosystem. If you look at DEX trading volumes, stablecoin transfers, depending on the ecosystem and their level of DeFi activity, it tends to strongly correlate with price. And so the SUI had in its price a decent run-up as well with all that activity starting from Q4, but it collapsed about 50 % over the past 3-4 months as the whole space pulled back.

10:53And what's interesting is that TVL is only down about 25%. And so TVL is very correlated to price because the assets are usually priced in the native token or the amount of capital invested is priced in the native token. So it fluctuates with price quite a lot now. TVL has actually outperformed price during this pullback. And it suggests that there is the emergent science of a pretty strong sort of DeFi community that's building up in the ecosystem. More trust is being assigned to the chain for capital, which is reflected in the TVL. And the fact that it's been less volatile than the price during this past sort of three months is a positive sign.

11:36So look, everyone sort of can get caught up in the technology aspects and the finer details of which blockchain is faster. But it's definitely a scalable... In their words, they say it's infinitely scalable blockchain. So in terms of speed and cost, it's right up there. it just needs to build that ecosystem if you start to see more dApps coming in revenue generating dApps not like vaporware but actually productive dApps within the ecosystem then I think you do have a chance that Sui will do rather well whether it outperforms Solana the only way to really I think objectively determine that is just put them on the ratio chart and wait for the breakout of Sui versus Sol.

12:25So we're still... It's interesting because I did have a look at it a couple of days ago. And there is signs that there is potential reversals happening in the Sui price versus the leading protocols, Bitcoin, Sol, and a couple of others. And so yeah, it's starting to look interesting. Maybe just a little bit too early for me to make a large call though. okay heaven what are your thoughts that on uh soul pot uh suey possibly outperforming soul yeah i was just looking at the the suey soul cross pair too um i think uh agree with a lot of what james said and also just the the approach or how he thinks about these types of things right i think it's it's very easy like you said to get it caught up in all the technical jargon which is certainly very important because it underlines these chains but at the end of the day trying to evaluate these on really a handful of things or factors that matter for driving usage to these chains and actually driving their valuations or having to grow into their valuations, which is around, again, speed, cost, latency.

13:35And then the next big aspect is better UX and, quite frankly, things to do. And I think SWE is definitely in that early emerging SWE spot if progress continues where, and you've seen those with most chains they've gotten built out, right? You initially have the actual underlying infrastructure, the chain itself. Then you basically have to have a growing DeFi sector and the actual protocols and the ability to trade these assets, lend these assets on chain for you to then kind of create the base layer that a more robust economy can be built on top of, right? And SWE is just in the much earlier stages than a more mature chain like SOUL.

14:20The reality is, I mean, when you look at just comparative market caps and the size of these things, SWE obviously is much smaller than SOUL is today, right? It's about one-tenth the size of SOUL on an FDV basis. So it doesn't take as much firepower to move price there as it would a larger market asset like SOUL. So if we do get this more favorable Q4, we start to see this market run, could you see SWE outperform? Certainly, I think so. When it comes to how I'm positioned or how I think about this stuff, I still think Solana has the highest probability right now of long-term success as the front runner.

15:01And so SWE could be something where you add in maybe a small allocation to, not financial advice, obviously. So you could add a small allocation if you think that it has a decent chance, you know, of outperforming, but really kind of stacking that against, again, the probability that Solana currently has is that front runner. The other big thing, and we'll see again if this matters, because historically during bull markets, token unlocks can actually create liquidity rather than detract from it. But SWE does have some pretty sizable unlocks, you know, coming up over the next really six to 12 months.

15:35that'll be important to watch for, because that obviously can have some pretty important supply-demand dynamics. But I'm still in the Solana camp, but I'm excited about seeing the excitement around SWE because it gives us more stuff to talk about and more things that I think are going to be built out on it. Have you ever wanted to trade Bitcoin but haven't dared try? With Plus500 Futures, you can trade crypto without the hassle of opening a wallet. With just a few clicks, you can register and start practicing with their free and unlimited demo. See a trading opportunity? You'll be able to trade it in just two clicks.

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16:55So speaking of Solana, we got a question from Pinata Boy. Could Kev Kelly please give us an interview of Ceteris' Solana Part 2 paper, please? What are your thoughts, Kevin? Also, the Delphi report on Eclipse. We'd love to hear about it. And Kev has a view on its wider implications for both ecosystems. So what do you say, Kevin? Yeah, so I won't give everything away, but I'll give a kind of high level on what my takeaways were from it. If you remember back, this was early last year, really, towards the middle of last year, we put out this long-form deep dive on Solana called Solana the monolith.

17:33And this was, again, at a time, it seems kind of crazy now, but this is, again, remembered a time when Solana was very still out of consensus. And the thesis around at the time was basically talking about the potential that Solana had and comparing, again, how it was being built to the approach that that ecosystem was taking towards scalability and actually attracting and bringing on new applications versus the inherent incumbent Ethereum and the kind of roll-up centric model that it seemed like it was starting to move towards. And so this recent report that we put out, it's kind of a follow-up to that or building off of that, was really focused around, we call it Solana the modular.

18:14And the key takeaways, at least for me, was if we think that we're getting to this world where it's going to become increasingly important for any of these chains to be able to actually handle a sizable increase in transaction activity, and much larger than actually some of these current chains kind of tap out at. Things like AI, autonomous agents, evolution of IoT, all these different potential drivers of on-chain activity that we think will be coming in the next few years. Solana, interestingly enough, even though it's positioned more as a monolithic chain or integrated chain early on, it's starting to see some parts of it, it's stacked, so to speak, actually become a bit more modular.

19:03So not only do they focus on the vertical scaling aspect, which you'd think of as scaling the actual base layer, right? There's been a lot of activity on trying to horizontally scale Solana in some ways. So what we've seen is, you know, the rise of, starting to see the rise of L2s and roll-ups that are there being built on Solana or using the Solana virtual machine for execution. So, and that's also transpired across into other ecosystems, like Eclipse was mentioned in the question, Eclipse is a general purpose SVM roll-up on Ethereum. And so the whole point is, or the kind of takeaway that I took from it was the roll-ups approach kind of ties us full circle to some of the things we talked about, you know, 18, and 24 months ago on the app chain thesis and scaling and why this stuff is all important.

19:51Solana is actually starting to see a bit of that itself now. And parts of its stack are becoming more modularized. And what it presents is an interesting question around value capture and where does this value actually wind up occurring to, right? Because if you take Eclipse, the way I kind of think about it is you've got Ethereum with its EVM, you've got Solana with its SVM, right? And then you have these L2s or rollups that potentially can sit on top and settle to these base chains. And so what you're seeing is a bit of kind of cross-pollination where Eclipse, again, is using Solana's virtual machine, but it's actually built or settles to Ethereum.

20:29And so it's creating these questions of what does the future of rollups look like in terms of using the SVM over the EVM because it's much faster? What does that mean for actually the base layers, What does that mean for Ethereum? I think it still doesn't, even if you saw very robust SVM L2 networks start to be built on top of Ethereum, I still don't think it necessarily moved the needle because one of the things that's really plaguing Ethereum is the fact that a lot of this execution has gotten moved off the base layer, which historically was a really sizable portion of the fees that were driven to the Ethereum L1.

21:08this really doesn't change much of that at all right it's still these these ropes are still only paying those settlement costs back to the base layer um so it was really kind of a deep dive into how solana's parts of solana stack are becoming more modular where we're actually seeing that show up what you know projects or teams are are actually building things live with these types of modular components and then the impact of things like you know um zero knowledge technology right zero knowledge compression how that's going to help scale solana So it was a long, long form deep dive around what the future of Sonic can look like with a focus on originally being more vertically, vertically focused.

21:47And now I think, you know, an interesting horizontal approach starting to take shape, which gives us a little remnants of some of the prior cycles. We were talking about things again, like the app chain thesis and all of that. But yeah, those were my kind of, I guess, big key takeaways or things that I walked away with. Thank you, Kevin. I'm sure the audience really appreciates that. And speaking of Solana, Lorena is up next and wants to know, can you give a short description of the points of differentiation, differentiation, there we go, between different L1s, in particular Sol versus Sui versus NIR?

22:25Jamie, I know you recently just spoke with someone from the NIR protocol. You want to kick us off? Yeah, sure. So, I mean, these are all very high-performance chains pursuing sort of the most scalable way to bring millions and millions of people on chain. So, you know, Solana's got their methodology. Sui's got, you know, this sort of infinite scaling through parallelization in the specific tech stack. Nia's got horizontal sharding, you know. So, they all are very high-performance. Maybe the subtle difference between the three is that NIA with its technology, I think, is maybe slightly slower in terms of settlement times, but we're talking milliseconds.

23:12So I think the difference here when you think about these ecosystems is that Sol and really Sui are pursuing high-velocity financial transactions. I mean, Sui, in a recent interview on Real Vision, actually, discussed about becoming the NASDAQ or doing NASDAQ-like transaction volume. And obviously, Sol was the first one to really come onto the scene on the premise that they could handle traditional finance market activity on their chain. But more likely, once FireDouncer and certain upgrades take place. Nia's real point of differentiation is that Nia is, I think, pursuing a different track towards consumer social applications.

24:00I think it flies under the radar as just how successful they have been. Number of daily active users in the ecosystem for Nia is around 2.5 to around that number. By that metric, it is the most used blockchain in the ecosystem. And most of that activity is coming through from consumer retail and social applications. So they've got this application, which is pretty widely used in Asia, but in other parts of the world as well. But it's essentially just a consumer retail app where you can earn credits and buy things using effectively a stablecoin on the platform. But the important thing here is that the users of that particular application have absolutely no idea that they're using blockchain.

24:53So they've had the success in that realm. And I think they're going to continue to push very, very hard with more applications from the consumer space. Whereas Sui and Sol have, I think, a much more vibrant DeFi community. and I think with Sui, a major point of differentiation is the emergence of gaming applications on that network. So you can think about these as all next-generation, high-performance chains. They seem to be pursuing different types of users. Sol is also really the home of Deepin at this point. There are a lot of Deepin projects within the Ethereum ecosystem, but I think the most successful applications so far have been on Sol and it tends to be the network, which is a lot of these deep in projects are gravitating towards.

25:47So I think it's going to come down to the type of user that's on these platforms. And that's going to impact, I think, valuation as well. I mentioned earlier that at least for now, being the crypto casino that it is, DeFi activity drives a lot of value within the underlying token. And so that puts these ecosystems, I think, at a slight premium in terms of the value extraction from their customer. But if you're looking for a new path for blockchain that is less volatile or cyclical, then I think the strategy that Nier is pursuing is worthy of attention. i would say on um on that point too around the high performance chains you mentioned in terms of we're talking about you know milliseconds or hundreds of milliseconds here right but when it comes to certain applications especially in defi every millisecond really matters right so one example we're just talking about slot l2s one example is some of the uh burp perp dexes right that are being built on, you know, Solana are, and one of these examples is Zeta.

27:06They recently were talking about how, I forget exactly what the number was, but it was something like if they were going to continue using Solana 1, the fastest they could get their transactions down to, right? In terms of just getting these, not even waiting for them to be confirmed, but just getting them kind of round tripping to the base layer was something like, you know, a few hundred milliseconds. And then when you compare that to some of these off-chain centralized exchanges, like a Binance, for example, I mean, we're talking about 5 to 10 milliseconds, right, in terms of what they can offer.

27:39And so if you want to have a perp dex that actually competes with the likes of some of these centralized incumbents, milliseconds don't seem like they matter, but they matter immensely, right? Because that's also what winds up attracting, you know, market makers and really is what kind of fuels the engine of attracting, you know, volume and growth to, you know, your, your, to your exchange, which then by nature kind of can filter down to valuations for the base layer. So that point around, again, it sounds like a nuanced thing, but it's really, really important. And to that point, we'll see whether or not this race plays out where we're starting to get really, really low latency, trying to find solutions to make that latency even less on some of these big chains and the ways in which you can try and scale that.

28:24because this is a pretty big pie. If you think about longer term, if eventually we're going to have a lot more assets that are tokenized and a lot more trading activity, and you're actually going to have professional market makers and professional investors in this space, these are the things that really, really do matter to try and put yourself in the front running slot for having the most robust DeFi ecosystem. All righty. Well, from Solana to Matic, we got AABKK asking, we've seen some very recent outperformance from Matic, finally. And we have the migration from Matic to POL coming up in September.