Ari Paul of Blocktower on maximilism, decentralization, and investing
UpOnly: Chats with Crypto Experts
The Value of Buying Bitcoin Options
Implied volatility is the price of an option, and realized volatility is how much the asset has moved around in the market./nMarket makers or professionals can convert one to the other with constant algarithmic trading./nYou can buy a straddle if you think the asset will move in either direction, and make money if it does./nThe realized volatility for assets like bitcoin is usually higher than implied volatility.
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Show Notes
Introduction
– Ari bought first Bitcoin in 2014
– Really dove into crypto 2016
– Friend emailed him in 2011 asking to check out crypto, Ari said it won’t retain value, not backed by guns like fiat
– Ari: “For crypto you kinda gotta know a little bit about a lot of things”
– Got involved with crypto through crypto twitter
– Cunningham’s Law – “The fastest way to get an answer on the internet is not to ask a question, but to state something wrong”
Ari’s Headspace
– Long term mostly thinking about the future of crypto
– BlockTower bets on where the world will be in 1-3 years, not 10-20 years
– Fascinated by the big picture
– Huge believer in giving people defensive tools for overbearing states
VC Stuff
– BlockTower is a trading firm by nature, so they invest in projects that they can actually be power users in
– Ari: “Evaluating seed stage teams is its own skillsets, very different from evaluating something like Microsoft”
– Cobie skeptical of a16z’s success in crypto, followed like 4 deals they did and got crushed
– A lot of the time, timing is much more important than vetting skill
– Ari: “If you were trading NFTs 2 years ago, it almost doesn’t matter if you were good it just matters that you were doing it”
Privacy
– Ari: “There’s a whole tech stack for privacy that’s missing”
– Countries can control the internet very easily
– People think the internet is super hard to control – there is literally a bundle of wires that delivers the internet to an entire country
– Ari: “zk-rollup chains where you can shield the mempool… there is some super cool math we’re building into the system now that could change everything”
– You could fork Ethereum and add it as a rollup chain to Bitcoin
– Ledger: “Is there really a market for that?”
– Ari: “It seems likely in the next 2 years that we’ll get a soft fork to implement this”
– Ari: “There are bitcoiners who are pitching this as humanitarian technology but against adding privacy technology that exists…borderline unethical”
Making ETH Maxis Mad
– Ethereum is a risky startup competing on tech
– The odds it is a market leader in 10 years is under 20%
– Facebook didn’t need a single Friendster user or dev
– If you have an industry that’s going to 20x, you don’t need to take existing users
– Ari: “Solana has something like more than 10,000 active developers now”
– Ethereum does not have much of a moat, it has a little bit of brand recognition, a little bit of regulatory head start, some dev moat, but largely the moat is very small
– Ethereum cannot move as fast, cannot take as much risk. It’s hard to maintain its lead
– Cobie: “Do you think Ethereum should have a canary network, kind of like Kusama?”
– Ari: “(pause) I actually haven’t thought about that”
– Seems to be a real, good idea
Solana
– Ari has been recommending Solana for the last 2 years
– Well intentioned team, real project, very cool innovation at the communication layer
– *Ari still has a long Solana position to be clear*
– It’s quite centralized, depends on the team to stay up, has a real path to decentralization
– It’s a highly speculative early stage bet
BNB
– Exchange coins are basically sold as equities
– There are tons of regulatory actions which could likely be negative for $BNB
– Would not hold the coin
Cardano
– Ari: “Cardano I actually know very little about”
– The only thing he really believed would stick around for 5 years was Bitcoin, DeFi and NFTs
– Ari: “I worry that in 5-10 years the winning metaverse will be Facebook or Fortnite, some centralized entity, which scares me because I want a decentralized world”
– Ledger: “so Cardano” lol
– Ari: “I am deeply skeptical of Cardano”
– Ledger: “Dump it”
2017 Bull Market
– Ari bought $50k calls in 2017
– Did it to maintain upside exposure while not keeping material risk on
– Went onto CNBC to talk about it, they mid-curved his thinking
– Ari: “Options are a bet on volatility, not the direction, because you can always hedge the direction with the underlying”
– Ari: “If you can’t define skew and kurtosis then you probably shouldn’t be trading options”
Crypto Investing
– Ari: “If you’re investing with a lot of small bets in alts, it almost acts as a call option”
– Ari thinks vol is about fair today
– Basically every time Bitcoin vol gets below 60, Ari buys it
– Ari: “The crazier the bull market the crazier the retrace”
– Ari: “My basic thesis now is DeFi 5-10x’s here and then retraces 80-90%”
– Ari: “The biggest value add from crypto over the next 12-18 months is connecting DeFi to real world lending”
FINAL ALPHA
– Ari: “It doesn’t matter how much money you make, if you don’t keep yourself healthy you won’t enjoy it”
– Focus on your health!
Notes by Kevin
Music by GiovanniPickle
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