Compiled edited by TechFlow
Guests:
Haseeb Qureshi, Managing Partner, Dragonfly
Robert Leshner, CEO Co-Founder, Superstate
Tarun Chitra, Managing Partner, Robot Ventures
Tom Schmidt, General Partner, Dragonfly
Podcast source: Unchained
The LA Vape Cabal vs. Millennials - The Chopping Block
Air Date: February 7, 2025
Background Information
Welcome to The Chopping Block! This is a show hosted by crypto industry experts Haseeb Qureshi, Tom Schmidt, Tarun Chitra and Robert Leshner, focusing on discussing the latest hot topics in the crypto industry. In this episode, we analyze the market turmoil caused by Trumps trade war, which caused Ethereum and altcoins (that is, other cryptocurrencies besides Bitcoin) to plummet, while Bitcoin remained strong. Why are altcoins performing poorly? Is this a flow of funds to high-quality assets, or is there another deeper reason?
In addition, we also explore the unique impact of the Los Angeles Vape Cabal on Meme culture, discuss whether the new leadership of the US Securities and Exchange Commission (SEC) will truly change the rules of the crypto industry, and analyze the Binance scandal. Finally, we examine whether the meme cycle is really over, or if this is just another stage in the endless casino of the crypto market.
Market volatility and trade wars
Haseeb:
Trump launched a trade war against US allies and China, and the trade war against allies was suspended for 30 days. However, the crypto market fell sharply due to the impact of tariff policies. The price of Ethereum once fell to $2,100, a single-day drop of more than 20%. The price of Bitcoin hit a low of $91,000, setting a record for the largest single-day liquidation in the history of cryptocurrency.
What do you think of the current market situation? Is this situation short-lived? Are we entering a new phase? Does this change your view on the trajectory of cryptocurrencies under the Trump presidency?
Robert:
I don’t think the trajectory of cryptocurrency has changed significantly under the Trump administration. David O. Sacks held a press conference to make it clear that the cryptocurrency industry will continue to move forward at full speed. Meanwhile, Hester Peirce spoke about the SEC’s future role as a cryptocurrency regulator in a major SEC policy statement.
The only change is the unexpected tariff policy, which has triggered a lot of market speculation and liquidation. But from the overall macroeconomic environment, the situation has not changed fundamentally, and the Trump administrations tariffs are seen more as a negotiation strategy than a long-term policy.
Bitcoin Dominance and Altcoin Downturn
Haseeb:
But altcoins still performed poorly. In contrast, the NASDAQ index fell 2% on the day due to tariffs, but quickly recovered most of its losses as Canada and Mexico lifted tariffs. The crypto market rebounded only 50% of its losses, indicating that market sentiment is very fragile.
Robert: I’m not sure that technology-driven cryptocurrencies really crashed. A lot of the declines happened in Meme, and those who held Meme were in a panic.
Tarun: People who hold Ethereum are also panicking.
Haseeb: Bitcoin once reached 103,000 when Ethereum was close to 4,000. Every time the price of Bitcoin retested its highs, Ethereum performed worse and worse. Now Ethereum is back to 2,500, but the market seems to be comforting itself by saying Its okay, Ethereum is fine.
Robert: From the current situation, most of the capital is flowing into Bitcoin. The current market atmosphere is that investors are selling underperforming assets and turning funds to Bitcoin. The macro narrative of Bitcoin is very attractive. Todays press conference even mentioned that the United States may set up a sovereign fund to invest in Bitcoin, which may be a key path to mainstream Bitcoin as an important asset.
Memes and Market Sentiment
Haseeb: Tom, what do you think about the overall market sentiment?
Tom: I think the market is a little bit depressed overall, especially when faced with uncertainty. If you look at Polymarkets forecast for tariffs, you will find that the market is very volatile. Its not just a standard wave of liquidation, but a general sense of unease. Although you mentioned that the stock market is recovering, it is actually still concentrated in MEG 7 stocks. In this case, investors are choosing quality assets. In this uncertainty, investors risk tolerance is reduced.
Haseeb: Do you think this is the new normal for the market? Will this situation improve only after the macroeconomics stabilizes? I thought the current governments policies were favorable for Bitcoin, but now it seems that all assets are falling.
Robert:
That is, why are they going down? The tailwinds are so huge, the overall market is so market driven, random and unexplainable that yes, there is a huge tailwind right now that should be coming from the policy side. Except almost all assets go up after the election, almost everything goes up after the election, most of the other assets except Ethereum. You know, Bitcoin has gone to $100,000, Solana has gone to about $215. For the most part, thats whats going on.
Haseeb: But even strong tokens like Solana havent performed well since the election, and now its really only Bitcoin thats supporting the entire market.
Robert: Almost everything is based on Bitcoin.
Haseeb:
I think we can all agree that the market is going down. Toms point about the move to quality is very accurate. This phenomenon is not only seen in the crypto market, but also in the stock market. If you only look at the overall data, you might be mistaken for thinking that the market is doing well. In fact, the total market value of the crypto market looks stable, but in the daily market value changes, Bitcoins performance masks the plunge of many altcoins. For example, Bitcoin may only fall by 1%, but many altcoins may have fallen by 15%.
Maybe my thought is that once the macroeconomic story settles down, probably after we get the strategic bitcoin reserve, youll see this atmosphere shift towards higher risk tolerance, towards more tech crypto. Because in a way, the market is waiting for the strategic bitcoin reserve, this is the big news that everyone is waiting with bated breath. Every meeting, every announcement from Trump or David Sachs is waiting for clarity on this big event. Once we get that, then its like, oh, theres no other really big event happening now.
Tarun: An interesting thing I’ve noticed is that there are so many altcoins to choose from right now that it’s hard to see a single coin skyrocketing.
Haseeb:
I disagree. There have always been many tokens in the market, and this is not a new problem. Good tokens will attract funds, while bad tokens will be eliminated by the market.
If the theory of “too many altcoins leads to a weak market” is true, then the coins on the front page of CoinMarketCap (the top cryptocurrencies by market cap) should perform well, while the coins further down the list should perform poorly. This is what you call the “diversification effect”. But in reality, what we see is Bitcoin performing strongly, while all altcoins as a whole are performing poorly. In contrast, in previous cycles, all coins usually rose and fell together, rather than diverging as they are now.
In fact, the idea that there are too many tokens in the market has always existed. There has never been a shortage of tokens in the crypto market, and I never think the number of tokens is a problem. Just like the stock market will not only allow good stocks to get funding because there are too many stocks, this theory does not explain the operation of the market at all.
Tarun: I think one possible reason is that many new users entering the chain are more inclined to participate in Meme transactions because the rotation speed of these coins is very fast.
Haseeb:
Totally agree. Therefore, some people believe that Pump.fun’s involvement caused the market’s poor performance. Now there is a chart circulating on the Internet that shows that after Pump.fun entered the market, the market started to go down.
Typically, when Bitcoin performs strongly, altcoins will follow suit after a while. We have experienced Bitcoin seasons (periods when Bitcoin leads the market rally) and altcoin seasons in the past. But in this cycle, there doesnt seem to be a real altcoin season, except for a short-lived altcoin rally after the release of the Bitcoin ETF last year, which quickly faded.
I think this is a more reasonable theory, to say the least, this phenomenon is new because it has not appeared in previous cycles. The overall scale of Pump.fun and Meme is obviously far beyond the speculation in previous cycles. Although there was indeed an NFT boom in 2021, in terms of absolute data, the complexity and influence of NFTs are far less than Meme. In terms of total capital and the benefits extracted from the market, if you look at the revenue of Pump.fun and Photon, and the operation of the entire Meme supply chain, you can find that a lot of profits are being extracted from the market.
Robert:
This is one of the reasons why I believe that mining tools are more valuable than other investable asset classes. As you said, the list of tradable assets is endless, and it will still be endless even in 100 years.
The infrastructure that supports the trading of these assets accumulates a lot of value, while the value of the assets themselves is random. That is, how assets accumulate value is unpredictable. If you have an endless list of assets, some of them will be given value, they will be traded, and become a tool for speculation. But in the long run, the median or average value of these assets will not be very high. So, the infrastructure is the part with more long-term value.
Haseeb:
However, I noticed that many people think that memes are outdated, and almost all memes have performed poorly recently. People feel that the opportunity to make money by trading memes is rapidly decreasing. When the casino effect of the market changes, such as people suddenly feel that slot machines are no longer attractive, this change in sentiment can be very rapid.
Tom:
The complexity of memes is gradually becoming professionalized. Memes used to be a creative and community-driven field where someone could launch a meme with a good idea and possibly be successful and even build a community around it. But now, it all seems to have become very organized and industrialized, which may be one of the reasons why people are tired of memes.
However, regarding the argument that exchanges like Pump.fun extract value, similar criticisms can be made about centralized exchanges, which are also slowly extracting value from the system. However, people don’t usually make the same criticisms about exchanges, with exceptions like listing fees. I think exchanges do reinvest some in the ecosystem, such as incubating projects or investing, but the scale of this reinvestment is obviously not comparable to the value they extract.
Robert:
All this reminds me of a classic quote from Warren Buffett: In the short term, the market is a popularity contest; in the long term, it is a trade-off mechanism for value. In the field of cryptocurrency, this popularity contest is particularly obvious. People often speculate based on the cuteness of icons or the novelty of memes, relying entirely on short-term imitative social consensus rather than judging based on the potential value of assets.
However, in the long run, the market will eventually return to the value trade-off mechanism. For example, Bitcoin is a typical case. It continues to attract a large amount of capital inflow and become the dominant force in the market, which shows that people attach more importance to its intrinsic value in the long term. Therefore, we can see that in the crypto market, the short-term popularity effect and the long-term value orientation have formed an extreme polarization.
Cultural Phenomenon in Crypto
Tarun: I want to look at this from another angle. When you discuss Meme users, it seems that their goal is just to make money.
But I think theres a cultural validation to being the first to launch a meme. This reminds me that one of the most failed and continuously failed investments in the crypto space is blockchain games. Although these games can quickly become popular in the short term, users will churn out and the gameplay will disappear. I think memes may start with financialization and then add some gamification elements through these live broadcasts. If you watch these LA Vape conspiracy group live broadcasts, you will find that this is completely different from traditional investment behavior. A lot of people buy memes not to make money, but because they want to fit in and be part of a group. Its a weird subculture, and I think some people dont even mind losing money.
In the context of the rapid increase in the number of assets, there is indeed a peculiar phenomenon, that is, the value of I am the first in this asset. This phenomenon is completely different from the rest of the token economy. I think the significance of this behavior has gone beyond Can I make money from this coin, but I dont know how to describe it accurately for the time being.
When you watch these live broadcasts, you will find that some people are facing huge losses, but they are still smiling happily and even seem to enjoy it.
Haseeb: It reminds me of the scene in a casino with drunk people playing blackjack, there is a parallel.
Robert: Yes, they are cheering, but only if they still have money.
Haseeb: As long as you have a bankroll, you can have fun in a casino, right? But eventually you get kicked out, and the free drinks are gone.
Tarun: I think one thing missing from your casino analogy is that the rate at which new slots are introduced is not in line with the rate at which the number of players is growing. This is odd because the number of playable games seems to be growing as the number of users grows.
Haseeb: Its like a game with a different skin. For example, you walk up to a slot machine and its Robin Hood themed, and another one might be something else. Youre still playing the same game, but with a different skin.
Tarun:
Recently, the Los Angeles Vape Conspiracy Group has also been posting memes, where they launched and traded coins in live broadcasts. And some people are actually buying them, even though they say Im losing money, I will lose money, but they still buy them because the group told them to do so. I think people are not participating in this just to make money, but have other motivations.
Ive been trying to understand it. Obviously theres a strong social element to the launch of these coins, like You have to live stream for me or Make a TikTok, which is completely different from the way other cryptocurrencies are promoted. I think this may be the key.
Haseeb:
This also happened during the NFT craze, when a larger cultural phenomenon was formed, not just there are NFT traders, and they only care about making money. But some cultural symbols make people highly tribalize their NFT collections and even form a strong sense of belonging. In any huge craze, there will always be these cultural attachments. But I dont think these cultural phenomena are the root cause of the current Meme craze. The real causal basis is that people want to make money.
The data I saw showed that during the Meme craze, about 60% of traders lost money, and only about 3% of traders ever made more than $1,000. So, most people didnt make money in this casino. Its the same as in a real casino, its just mathematical law. But for most people, this is not their subjective experience. By the end of the NFT craze, the general feeling was I cant make money from this. Once a meme also gives people a sense of low expected value, your subconscious mind will also begin to adjust your judgment of it.
Robert:
This reminds me of the ICO craze in 2017. At that time, everyone was making money in ICOs, so the number of ICOs grew exponentially. But when the market began to shift and there were not enough buyers to support the sellers, ICOs quickly collapsed. This also happened with the NFT craze. Every cycle is like this. Memes will end in a similar way - when there are more sellers than buyers in the market, the whole system will collapse.
Tarun: Its like the rational agency model assumed in economics, but the people involved are not rational. And you will find that everyone in the comment section is talking about pump and dump, and they even openly admit it.
Haseeb: If someone is intentionally buying these pump and dump coins just for fun, then these people will end up losing their money very quickly. Its like a primitive law of the jungle, and eventually these people will run out of money.
Tarun:
I don’t disagree with that. But when you go into these livestreams, you’ll find that the ratio of participants is completely different from the NFT scene. NFT people will try to convince you that this is art, or the future of culture, and there’s no such pretense here. People simply say, “Oh, a certain KOL (key opinion leader) said X, so I’ll give it a try.”
Haseeb: It sounds like this is a culture, a subculture. Obviously, most people don’t identify with this culture and don’t understand how it works. But those who do understand find it hilarious. This is how you show yourself as the alpha in this new economy.
Tom: It sounds like the Gen Z version of Wall Street. Why do people post screenshots of themselves betting $50,000 on options and losing it all? Its like a voyeuristic thrill, and you have fun with it.
Tarun: Thats exactly my point. Its more like a social network interaction. Losing money can also bring a strange sense of satisfaction, such as you can brag about your painful experience on social media.
Los Angeles Vape Cabal
Tarun: Everyone is talking about how they discovered memes through live streaming, and this culture is completely different from before.
Tom: I see your point, but I think there are some unique elements to the meme craze. For example, how many venture capital firms are buying memes or talking about using memes as community launch tools? They are trying to build great products with memes. Everyone is trying to intellectualize this market, but in fact the market is reverse causal. People equate price with product. Maybe Im wrong.
Tarun: Memes have certain unique properties that allow them to last longer. I think the speed and volume of asset growth is closely related to this phenomenon.
Haseeb: We seem to have reached a consensus that we are in the late stage of the meme cycle. But what I am not so sure about is that the sentiment in the meme market is indeed very depressed right now. In fact, the sentiment in the entire altcoin market is very depressed. Except for Bitcoin supporters, everyone seems to be pessimistic. So, if the macro economy reverses and altcoins start to rebound, memes may also rebound with them. At that time, we may completely forget about these depressed sentiments. Do you think this will happen? Or is the meme cycle over and we need to look for the next hot spot?
Robert: I dont think this is over. Because every day there are new memes that soar to a market value of 500 million or even 1 billion US dollars. When you find something that can reach a market value of 1 billion US dollars in a short period of time without any real value in itself, this phenomenon continues.
Tom:
I feel like Trump is almost the ceiling for memes, just like punk is the ceiling for NFTs. As these trends progress, peoples mental calculations will change. In my opinion, this is an indicator worth watching. However, in the crypto world, the only constant is peoples endless desire for new games. I believe there will always be someone who creates new games that attract people to play.
Tarun:
Meme is somewhat different from previous crypto assets in some ways. Meme is easier to exit, but the complex structure of NFT is very unfriendly to novice users. However, I agree with Toms point of view that there are indeed some indicators in the market, and everything is linked to these indicators. If this key indicator falls, the entire market will fall with it. But this is not quite the same as NFT. The NFT market is more volatile. If the key asset falls by 20%, other assets may fall by 40%.
In contrast, the current Meme market is more liquid and easier to exit. Therefore, I think the Meme market will not collapse as quickly as NFT, but will gradually decline in a slow manner. At least thats what it looks like now.
Haseeb: You make a lot of sense. I dont think the meme cycle is over either. If the market rebounds, the game will still be very attractive to people who dont care about the technical details. I feel like were not at the end yet. Although everyone is saying that the meme is over, in my opinion, this is not the way the market ends. The sign that the market really ends is that people stop participating completely.
Millennials and the Meme Craze
Haseeb: Can someone explain the story of JellyJelly?
Tarun:
Sam Lessin is a partner at Slow Ventures. They tried to promote a new video chat app through Meme. But the app was barely usable, and it was clear that the gap between users expectations and the actual experience was too big. And the way they promoted it was very awkward. It looked like something designed for old people and there was no way it would attract Meme traders. I think it was a complete failure.
In the case of JellyJelly, when the price dropped, Sam Lessin, an early Facebook employee and a prominent VC partner, was clearly not used to the pressure and even tried to bring the price back up through a board meeting of the audio streaming company. The whole thing was one of the most embarrassing moments I’ve ever seen.
Robert: He ended up having to come out and apologize and say, “Oh, I launched a meme, but I have no idea how it works.”
Tarun: I must admit that this is one of the most embarrassing venture capital moments in history. But it also shows that Silicon Valley venture capital simply cannot withstand the pressure of fighting and can only fall on the battlefield in the end.
Binance interacts with the Chinese community
Haseeb:
The focus of recent discussions in the Chinese community has been Binance, specifically Binance Labs. Binance Labs was rebranded as YZI, and now YZI is apparently the family office of CZ (Changpeng Zhao, founder of Binance). Many have criticized Binance for alleged insider trading, kickbacks, and high listing fees. Some claim that if you want your token to be listed on Binance, you must pay a fee, and if the token price falls below the offering price after listing, this fee will be considered a margin. In addition, the inner circle of Binance Labs, including employees, affiliates, and family friends, seems to be making quick profits through some low-quality projects. These projects can easily pass the review even when Binance has a high threshold for listing.
As a result, there are a lot of angry voices in the Chinese community. They are very angry because many projects listed on Binance have dropped by almost 80% to 90% in the past year. These projects not only performed poorly, but even became worthless. Whats worse is that the teams of these projects disappeared and never delivered on any of their promises. Many of these projects are random gamification projects that may have been popular in the Asian community, but are now in very bad shape.
At the heart of the story is this anger. What Ive learned is that there may be some questionable behavior at Binance Labs. The allegations may or may not be true, Im not sure. But theres an overall antipathy going on in the crypto space. From criticism of Pump.fun to dissatisfaction with Sam Lessin, now its directed at Binance.
Haseeb: Robert, what do you think?
Robert: I don’t find it surprising that offshore entities have always had more freedom in how they interact with the ecosystem. The real question is, will this still work in the future? I doubt it.
Haseeb:
My point is that Binance’s executive team usually doesn’t respond to these rumors head-on unless it’s a major event like FTX. Their attitude is usually “keep building and ignore the noise.” However, this time CZ and his team responded to these allegations on Twitter Spaces.
While I cant judge the veracity of these allegations, it does reflect the change in the overall atmosphere of the crypto industry. Now everyones mood is like turning on the lights after a party, suddenly realizing how much money they spent, and starting to complain What the hell is this? Where did my money go? This is terrible. However, once the market price rebounds, these complaints may decrease. As long as the market is good, people dont feel so strongly about being exploited. But now the market is bad, so everyone has grievances.
There will always be some unfair things happening, but now the pressure seems to be greater. I think this is a good thing, this pressure can motivate people to clean up their behavior. For Binance, as one of the largest crypto companies in the world, they obviously dont want these things to happen.
New regulatory developments in cryptocurrency
Haseeb: Finally, lets talk about the latest developments in cryptocurrency regulation. Hester Peirce published a blog post titled The Journey Begins detailing the SECs new crypto policy platform. The post is full of positive signals and basically expresses the attitude of We are ready, although the details are not perfect, we will be more supportive of the crypto industry.
Some of the important changes we have learned about so far include: first, the SEC now requires committee approval to initiate any new investigation; second, the SECs enforcement lawyer team has been reassigned tasks.
In the article, Hester Peirce mentioned some key points, such as: We will not tolerate fraud and deception, but if someone wants to buy tokens that lack clear long-term value, they should be free to do so. Of course, they should not be surprised if the price plummets. In the United States, people have the right to be responsible for their own choices, rather than relying on the government to tell them what to do or not to do, let alone expect the government to rescue them when things go bad.
She also mentioned that the No-Action Letter policy will return. Simply put, a No-Action Letter is a formal statement from the SEC that if a project follows certain requirements, the SEC will not take enforcement action against it.
However, under the previous SEC administration, no-action letters were almost never actually issued. It was more of a trap - they would say, If you want a no-action letter, contact us. Then you submit all this information, and then they use it to investigate you.
But now, Hester is hinting that no-action letters will actually make a difference. While theres no guarantee that every application will be approved, she encourages everyone to try.
Another important change is that the SEC may provide retroactive relief to projects that issue tokens in good faith. She mentioned: If some projects are willing to provide transparent information, such as disclosing the ownership of tokens, open source code, etc., and agree to accept SEC supervision, then we may agree that these tokens are not securities and allow them to continue trading.
Overall, these policies provide more flexibility and clarity to the crypto industry, which is what everyone has been waiting for.
In addition, the article also mentions some policies on lending and staking, and even proposes the establishment of a cross-border sandbox to cope with the reality that many crypto activities take place in multiple jurisdictions. To me, this article is like a long-awaited roadmap for the industry. Robert, what do you think?
Robert:
I agree with this. This is a very good roadmap that shows the regulatory direction of the SEC in the next four years. I think it touches on many issues that have been discussed for a long time in the past but have not been implemented. However, during Hester Peirces tenure, because the committee was led by Gensler, she did not have much actual power. Concepts such as safe harbor have long been proposed, which aims to provide a clear rule framework for tokens that meet good behavior standards, and society is gradually exploring whether relevant legislation or policies are needed.
In the past, it felt like there was always a threat behind it. I think this announcement is a call for everyone to interact directly with SEC staff and figure out the rules together. What I find most encouraging is that this mentality has changed 180 degrees. Before, dealing with the SEC meant huge risks and could even threaten the survival of the project. Now, this interaction may reduce the risk and even make the team feel that this is something to look forward to. This is really a very big change.
I think the most significant change is that the SECs attitude has changed from we have a gun in our hand and we want to force you to register to we have a pen in our hand and want to work it out with you. This is a very healthy shift, and I applaud it.
Haseeb:
This statement makes me think that maybe in six months or a year, we wont talk about the SEC as much or pay too much attention to them. In the past, our industry has been almost overshadowed by the SEC, and I think this will change. In the past, going to the SEC was like dont talk to them, as people often say, less trouble is more trouble. You are worried that if you open your mouth, you will get in trouble. So everyone chooses to avoid the SEC and dare not ask their opinions or suggestions.
But now the situation may be different. You can go directly to the SEC and ask, I want to do this project, is this okay? They may tell you the answer, just like getting free legal advice from the law makers. This is indeed a positive change. Of course, the SEC will still file cases and enforce laws, and there will still be fraud and some reverse cases.
These are all part of the normal operation of the market, and I believe that the SEC is no longer a terrorist presence that looms over the entire industry, but a more normal regulatory agency. In the end, we may only need to pay some lawyer fees, fill out documents, and disclose information, and as long as we do not violate the rules, we dont need to worry too much about the SEC.
Tom:
I think Hester sets the tone very well in the first sentence. We are not the first line of defense, but we should move to more disclosure systems, and people should be free to trade the assets they want to trade. This reminds me of the concept of stupid investment certificates proposed by Matt Levine. Matt Levine is a writer for Bloomberg, and his point of view is that the SEC can provide something called a stupid investment certificate. After signing, the SEC will clearly tell you: You may lose all your money, are you sure you want to do this? If you answer yes, they will symbolically remind you and then issue you a certificate allowing you to make any high-risk investment. If you complain later, the SEC will reject you mercilessly. The core of this concept is to give investors freedom and rights, rather than overprotection.
Haseeb:
Speaking of freedom, I actually admire Meme. A lot of people have issues with Binance because they charge listing fees as a gatekeeper. But I think if you are going to be a gatekeeper, you should do it well. If you don’t do it well and charge fees, you deserve to be criticized. And the charm of Meme is that it has no gatekeepers at all. Everyone knows the rules: no one will protect you, and if you get scammed, there is no one to complain to. This is the concept of zero gatekeeping.
Hopefully, the downturn in the market is only temporary, but I am actually very optimistic about the overall trend this year. From a fundamental point of view, many things are moving in the right direction. Whether it is Trump or external issues such as tariffs, there will be fluctuations and chaos, but they will eventually be resolved. For the industry, what we really want is basically in place.
