Why Crypto Buybacks Are 'the Wrong Way to Allocate Capital'

Lorenzo Valente (0:00)

I made the point with Robinhood, like Robinhood was making several millions of dollars a day, and basically Ethereum base layer was accruing $100, like literally $100 to $200, right?

Laura Shin (0:17)

Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shin. Thanks for joining this live stream. This episode is brought to you by Nexo, the premier digital assets wealth platform, earn daily interest on your crypto or borrow funds all through one platform trusted by more than 10 million clients. Find out more at nexo.com. Geo-destrictions, eligibility and terms apply. Before we get started, I want to ask you for something. We're making a bunch of decisions right now about Unchained. What we make next, when we go live, what we should be doing more of, and I'd rather hear from you before we make them than after. So we put together a survey. It takes just a few minutes, it's anonymous, and there's a box where you can tell me what we could be doing better. I read all the responses. The link is in the show notes, or you can snap the QR code on-screen, or go to unchainedcrypto.com/survey.

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Today's guest is Lorenzo Valente, Director of Research Digital Assets at ARK Invest. Welcome, Lorenzo.

Lorenzo Valente (1:22)

Hi, Laura. Thanks for having me. Excited to be here.

Laura Shin (1:25)

Yeah. Excited to chat with you. It's a very interesting time in the industry.

We're, hopefully, I think, coming out of this bear market, and you sit at this intersection of investing and frontier tech. Of course, being at ARK is probably one of the best known investment firms sitting at the intersection. Everyone's talking about how we're in this era of crypto adoption and how the previous speculative periods of crypto will at least be tamer, if not go by the wayside. How are you thinking about it? What era do you think we're in and what's investible this time around?

Lorenzo Valente (2:06)

Yeah, it's a good question. Just to preface, we're obviously more of a trade-fasted manager and we have the ETFs.

We're more like late-stage investors, I would describe probably, and so I think as we look at the space right now, it's going through, I think 2026 is going to be a pivotal year, regardless of what happened with Clarity. But I think it's definitely marking the end of an era and the beginning of a new one. And I think there's a few big trends. I think we're seeing just massive consolidation in the industry, massive. You have like a record number of projects, protocols, applications that are just closing and sun setting, which I think is good overall.

I think from the investment side, the first part of the era was more, you know, we were in the pioneering and discovery phase. And I think the winners were really the ones setting kind of new standard or discovering or tweaking some of the primitives that, you know, the AMMs, the money markets, a lot of what built basically the successful protocols. I think that is changing right now, right? I think we've kind of discovered most of the primitives and things that we can do Unchained. And basically the second part of this era, at least for us, it's not so much about underwriting net new applications or protocols, but more so seeing, hey, the ones that are working, like how big can they get, right? Like what are the modes that they have and how big can they get? And so it's not really like the zero to one part, but more like the one to a hundred, right? Like which are the protocols, which are the companies that can grow kind of exponentially and that can continue to grow and merge basically with Treadfy. We'll talk about tokenization, which is a market much, much bigger than crypto. I also think was mostly a retail focused market. A lot of the wins in terms of layer ones, applications, like pretty much any company was mostly like a retail facing product. And the people using the protocols and applications and products were more than DGEN's early believers in the industry. And clearly like that phase of the market is completely, is just ending, right? And I think now it's much more institutional and seeing like how we can inboard, you know, tread by institutions and people that are really like the persons that move real money and use cases that actually matter at size, right? Which is like payments, cross border payments, trading, all basically adjacent topics around finance, which is I think after basically 10 years, I think Ethereum launched in 2015 It's kind of the core use case and best PMF for crypto right now.