Why the application layer is crypto’s next $10T opportunity, with Richard Galvin, CIO of DACM

[on hold music] Welcome to another episode of 51 Insights, today with Richard Colvin, Executive Chairman and Chief Investment Officer at Digital Asset Capital Management. Richard, welcome to the show.

Thanks for having me, Marc. Good to be here. Yeah, it's great to have you here, Richard. You're a veteran. You were previously- [laughs]... Head of Equity and Derivative Capital Markets of J.P.

Morgan Australia, you were Executive Director at Goldman Sachs, you were in banking for over twenty years, and then you switched to crypto. Why did you switch?

So my journey in banking, you know, at, uh, uh, I'm a veteran in crypto, I'm a veteran in life as well, unfortunately, Marc, so I've been around a while and I started in banking back in, um, mid-90s and, um,

for some of you younger listeners, that was the time when the internet sort of started coming to public markets.

So my first job in investment banking was as a telco, tech, and media M&A banker, and so I got to work in that sort of mid to late 90s watching the whole sort of internet boom of companies coming to capital markets, doing M&A, raising financings, IPOs, those sorts of things, and got to work with some really cool entrepreneurs that were, like, disrupting traditional media and technology spaces, and then got to also work with some traditional media companies and they, as they tried to defend their, you know, previously monopolistic type businesses from these new tech, tech attacks, and saw how interesting and dynamic that sort of disruptive tech space can be.

And so when I left banking in two thousand and sixteen, twenty years later, randomly found my way to crypto. It wasn't a, a... I, I didn't leave banking to join crypto.

I, I le- left banking to try and find something new to do and found crypto and could just see the same kind of movie repeating again, disruptive tech, some crazy entrepreneurs with what, what we're seeing as like hugely, hugely left field ideas, but massively disruptive and a space that was very underowned or underinvested in from an institutional perspective and just thought, "This is great, get to do the same thing all over again."

You previously described crypto as the canary in the coal mine for macro liquidity, often signaling weakness before traditional markets do.

Given the current macro environments and the headwinds that we, we've seen shifting expectation around rate cuts, what is the canary telling us right now about the next six to twelve months?

Yeah, I think we need to be careful to split it into kind of, you know, partly macro features, partly idiosyncratic crypto features at the moment driving the market.

I think there has been, um, a drop in kinda risk appetite generally across a bunch of growth assets, and I think crypto's the most exposed to that.

I would say, however, that crypto's probably acting very much on its own to a degree over the last three to four months.

In particular, it's been way weaker than most other asset classes, which I put down to specific crypto factors, and I think the key ones driving that are, firstly, we've seen a, you know, a drop-off in DAT buying or digital asset treasury buying, which was a key theme sort of through the mid part of the year as we saw, you know, listed equity companies raising, you know, tens of billions of dollars to buy and hoard crypto, which is obviously very demand creating.

And as that buying dried up, um, we saw sentiment weaken a little bit as people got a little bit more bearish on, on the ra-rate outlook, and then people start to have the argument that crypto has around, oh, are we in another four-year cycle, and if we're in a four-year cycle, two thousand and twenty-six should be a terrible year, and we've seen people effectively capitulating the front, front-running that view as well into a pretty illiquid or, or pretty benign sort of demand market.

So that selling's just overwhelmed a scarcity of buyers. Where do you think we're in the cycle right now?

Do you believe in that argument that we are still in a four-year cycle, or do you think this will be a prolonged cycle? Uh, I don't believe in it, but I'm wrong so far, so [laughs] let's see what happens next year, Marc.

I think cycles perpetuated when you have the same people operating in the same market over an extended period of time, and, and clearly, you know, the, the owners of crypto today are very different than the owners of crypto four years ago.

So the behavior, the, um, the returns they're looking for, the way they invest their assets across different asset classes is very different to the cohort of people that have been in crypto, I would argue pretty much for the entirety of crypto's history.

And, and, you know, with that institutionalization of the space, I think we've weakened that view around the four-year cycle. Now, that would be my personal perspective.

So far, the market's kind of tracking there, although I would say two thousand and twenty-five's weak enough to kind of break the cycle in itself, given that, you know, it's a way weaker year than, say, twenty twenty-one, which would've been the, um, cor- the corresponding year if you're looking on a four-year cycle view.

So we're not a believer in that. We think next year will pr- hopefully prove us right, but let's see.

One thing that's also different compared to previous cycles is that usually we had a wealth effect from Bitcoin that eventually trickled down into altcoins, and we saw usually Bitcoin rallying first and then altcoins followed.

In this cycle, altcoins has, have been subdued, and gains- Mm-hmm... have mostly not yet materialized. Do you think we'll ever see an altcoin cycle again?

I think our general rule is that crypto volatility will gener- will, will, will slowly lessen, which means that the ups and downs will be somewhat muted compared to previously.

So will we ever see some of the craziness that we saw in late twenty twenty-one again? I'd love to, but I think it's unlikely.

I think the, um, I think the, the, you know, one of the most frustrating and one of the most interesting thematics we've seen this year is the underperformance of altcoins.

So if you look at crypto, you know, market's off, you know, it's a pretty bad year. Market's off circa thirty percent now. You know, Bitcoin's off, uh, I think close to double digits. Ether's off a little bit more.

Um, and if you look at sort of outside the top ten assets, um, you're generally seeing it perf- underperform it, like Falls of sort of seventy to eighty percent year to date in the indices, you know, GCI, small cap index, S&P broad index minus the big caps, I think it's down about seventy percent.

That's a very, very poor performing year. Now, need to sort of dive in, you know, why, why is that the case? Surely activity and revenues and those sorts of things must have plummeted. Well, it's actually not.

So I think that's one of the most frustrating things we've seen this year that, you know, unlike previous cycles, if we're gonna stick to that kind of terminology, that, you know, we've seen altcoins underperform as we've seen a lot of the speculative premium come out of those coins, and we've seen the performance of them at a fundamental level either be nonexistent at the time or pretty weak.

We've actually seen the opposite through this year, where we've seen revenues grow, we've seen user bases grow, we've seen, you know, user, you know, revenues, you know, triple digit, mid-triple digit gains for a bunch of apps and that across the space, yet their coins are down, their tokens are down sixty, seventy, eighty percent.

Uh, so we have been in a what I'd say is a very different environment to the past, where you've actually seen speculation premiums come out, um, and fundamental performance drop.

We've actually seen a massive devaluation of the broad crypto space this year because, you know, fundamentals have increased, earnings have increased, users have increased.

All those sorts of metrics that should drive value longer term have been super strong, yet prices are really weak.

Um, so we have seen, you know, I guess if you're looking at crypto with a value lens, we've seen the value of crypto, uh, look much, much more attractive to investors at the end of the year than it was at the start.

Richard, let's take a step back, um, and help our listeners understand what kind of funds do you have with Digital Asset Capital Management, and what are your different thesis for those funds?

Yeah, so we work across the spectrum. When, when we launched the firm, we were most attracted to the, the highly disruptive tech part, which is, you know, as I mentioned in the introduction, what attracted me to crypto.

And so we specialize in the native asset class, so the coins and tokens that make up crypto.

To be the best investor in this space, I think you need to work, work across the breadth of where the activity is, and that's working with the founders at the venture level, and that's working with,

um, founders as they take those businesses effectively public into the listed crypto space. So we run a specialized venture fund, which we've run since August two thousand and eighteen.

We run w-what our, what our flagship fund is, our digital asset fund, which is a liquid fund that we started back in January two thousand and eighteen, which is a portfolio of liquid crypto assets.

Um, so a little bit more mature than the venture assets, albeit still obviously very high risk, high re- high rewards.

Within our, within our portfolios, we're also extremely active users of on-chain trading and on-chain yield generation. Across our portfolios, we use the coins and tokens we own to generate extra returns.

And so we launched a third fund in January twenty twenty, where we effectively take those income strategies and hedge them to generate yield.

So we effectively, you know, generate yield through DeFi activity, hedge the price volatility and effectively just get the yield to generate sort of, you know, mid-teens to high teens to low twenties through that fund.

So we work across the whole spectrum of, uh, I guess the life cycle of crypto, so we get to see everything that's happening across the space. Mm-hmm.

One thing that I hear a lot is that unlike previous cycles where a lot of value accrued in layer ones, this time it might be different, similar to how it was when the internet came along and you first invested in the underlying protocols like THP or ISPs network hardware, and then suddenly applica- the application layer was built on top of it, and you had the Googles and Amazons and Facebook coming out, and they accrued most of that value.

How do you think that is gonna play out f- in crypto? Will we see a similar development? And if yes, what does that mean for you? What does that mean for investors?

Yeah, so we-- That, that is our key fundamental investment thesis for the next two to three years at DACM, and that's how we're positioning both our venture funds and our liquid fund, that we think the application layer is the next leg of growth for crypto with the attractive attribute for us as an investor that it's grossly undervalued.

So to your point, having lived through those early days of the internet where we saw the infrastructure stocks, uh, which are kind of the equivalent, albeit I'll get to that a little bit different to crypto, but kind of the equivalent of the protocols, you know, the protocols like the Ethereums, the Avalanches and those sorts of things.

You know, Ciscos, the Nortel Networks, um, you know, the Qualcomms, the builders of the infrastructure, the building blocks that people were using to expand and accelerate the internet.

Uh, they had a massive run-up into that sort of the, you know, the historical dot-com boom, as I would talk about. So-- And they were the key drivers of that sort of price growth.

And then as you mentioned, that space got a little overinvested, probably got over, it got overvalued. Um, massive competition came into that space.

Um, and then we saw with that capacity, as we saw that sort of the supply of the internet, so to speak, broadband and the other applications, uh, uh, broadband and the other functionality getting faster and faster, allowing people to build more constructive, more user-friendly apps.

Um, to your point, the application layer came o- took over and, you know, people started to build sites where people could share cat videos [chuckles] and you start to see kind of viral growth out of those sorts of applications, and you start to see the value transfer from those people that originally built out the supply, um, to those that were using the supply to actually monetize it to users.

And we think we're in the same stage of crypto. And so we've been a very active investor in what we'd say is that underlying protocol layer, um, through the first kind of five to six years of our firm.

You know, we've been significant investors in protocols like Avalanche, Solana at very early stages, as we've started to see that that's where the original investment needed to be made in crypto to build out that supply of block space to make it cheaper, to make it faster, to make it easier for people to build applications on top of that could attract broad sets of users.

We think that build-out's now largely done, and we think block space is very much available, um, to any application that wants to build on it. We think it's fast, and we think it's pretty cheap.

You know, things like Solana now, where you can do transactions of microfractions of a cent for, you know, all sorts of different applications. We think that, you know, that functionality and the speed is there now.

So we think the The space now moves to a growth phase where some of those key protocols continue to grow, and we still think some of them, a very small number, but some of them can still be good investments given the growth they've got.

But that value really shifts to that application layer, and we've seen that happen particularly over the last twelve to 18 months.

If you look back, I mean, the, the, the simplest stat we look at to sort of drive our thesis and why we've positioned our portfolios very much in that application layer and just for your viewers, you know, we make the-- the application layer for us is applications that sit on top of protocols, and protocols are

Ethereum, Solana, effectively blockchains. Applications are things like Pump.fun, Uniswap, Aave, that sit on top and use protocols to effectively drive their transactions and settle their transactions.

If you look back probably 18 months, revenue to applications was close to zero.

Um, and application in the scheme of things was close to zero and represented about six percent of the total value of the crypto ecosystem, so the total market cap of the space.

Um, we sit here today, application revenue today is around about mid-sixties to, to almost seventy percent of the entire revenue pool.

So it's become a dominant revenue pool in crypto, but it still represents only seven percent of the space, and to be honest, probably represents less over the last week or so given the performance we've seen.

And so we've seen a massive uptick in revenues, um, you know, triple digit type growth in revenue, yet we've seen no value, no relative valuation appreciation, if anything, absolute value depreciation through that period.

We think that's a massive mispricing in this market, so we think that's where we're, that's where we're positioning our investors' funds with a three to five-year view.

We don't think that rights itself tomorrow, next week or the month after. Like, generally to make the super sized returns in any asset class and in crypto, you need to be patient.

So we don't think this is a thesis that straight away has a catalyst that corrects it.

But we think longer term, if you're taking exposure to crypto and you can buy seventy percent of the space's revenue for only seven percent of the value, that seems like by far the best risk-reward bet we can see in crypto today.

Let's assume for a moment that this thesis plays out and we're largely done with the build-out of layer ones. Looking at layer ones today,

uh, 2025 was also the year where we saw a lot of corporate chains coming to the market. Ark is one of them. Tempo is another one.

How do you see those permission corporate layer ones compete with existing open permissionless layer ones? Does that change your in-investment thesis?

No, I think that probably, if anything, backs our investment thesis because it, it starts to show you that, um, block space, that sort of protocol layer is somewhat getting commoditized, right?

Like, if anyone can spin up a blockchain and add block space and attract users, then the value clearly of that protocol layer starts to get diminished as you start to see more and more competition.

Now, there's investment angles you can take, like, you know, uh, uh, projects like Arbitrum that can benefit from those sorts of rise of what I'd say is, you know, corporate chains in terms of them using stacks like Arbitrum to build on.

But we think that's just a, a sign of, you know, where the space is going in terms of, you know, block space becomes commoditized, and it's, it's the applications like a Circle or a Robinhood that can attract the users and effectively bring that value to their chain that hold the value.

Now, do I see a, a, do, do I see the world with, you know, three thousand corporate chains competing and, a-a-and, and doing their own sorts of things? Probably not.

And do I think that doesn't leave a space for a, a, a neutral chain like a Solana? Absolutely not.

So I still think there's very much a place in the market for an Ethereum and Solana and those sorts of, you know, open sourced, open access chain protocols that are out there.

But I do think they will be competing against somewhat permissioned chains that are spun up by people like Robinhood. And you can see why someone like Robinhood would do that, right?

They, th-th-they've got the clout to effectively build their own chain or effectively use their own, uh, th-their own chain and potentially attract other applications to that and keep some of that value for themselves, which is what they should do, given that they're the ones that are driving the users and the activity to that.

So I think this is an interesting point, but I think, I, I think this is an interesting kind of competition point that will play out over the next few years.

But to be honest, I think that reinforces our view that the applications are the ones that effectively will ultimately have the value because they're the ones that can attract the users. Mm-hmm.

So let's talk a little bit about that application layer. You already mentioned a couple of those applications, like Aave, one of the biggest lending protocols, Pump.fun.

What are the applications that you are looking at that you find most interesting? Yeah, I think we, um, we think in crypto, there's product market fit for a bunch of different verticals now. And,

yeah, our view would be that we've kind of gone through a pretty significant testing phase in crypto of trying to work out what works, what doesn't work, what can attract revenues, what will people pay for.

And through the last five years, kind of since the DeFi summer, we've found a bunch of products that can scale, can generate substantial revenue, and people wanna u-- and people will pay for, right?

And so we don't think you need to overthink it too much at this point. We think now that we've tested those products, we've found a good product market fit.

The next few years is really scale those products to mass user adoption, as opposed to the kind of the sandbox environments they've probably been in for the last few years of that sort of real crypto native user.

And it's expanded a little bit, but the real sort of core crypto user.

So we like the verticals that make sense, trading applications, lending applications like Aave that you mentioned, social applications like a Pump.fun, where you can see a real kind of new, new media layer being built.

Um, and we positioned our portfolios in those applications that offer those sorts of core DeFi or social, social uses.

Now, within the stratification of that, we actually see the Solana application layer is probably the most undervalued in crypto.

It's by far the highest growth, highest rene-revenue generating layer in crypto, but trades at a- A material discount to most other applications.

So from a relative perspective, we're very much focused around that Solana application layer, albeit we do across our portfolios also own some other chain, some other applications like Aave and Morpho, which we think are pretty compelling investment opportunities as well.

Mm-hmm. Why do you think Solana applications are undervalued? I would argue Solana's undervalued itself. I think the market probably sees the volatility in those applications as higher, which is probably fair.

The competition on Solana has probably been a little stronger than in some other ecosystems.

We've seen a pretty aggressive competition, which I think is great for that ecosystem longer term, means it's the most sort of dynamic and thriving.

Um, but we think the market's probably wrong in terms of underestimating the durability of some of these applications. We don't think meme coins go away, right?

So I think there's a, I think there's a pretty compelling business case for Pumped Off Fund over the next three, fi- three to five years as meme coins remain a pretty key use case of crypto.

Um, you gotta remember when new technologies come out, new things get launched that completely kind of recr- co-completely create new kind of verticals and industries.

And, you know, whilst lending is a much easier thing to get your head around, and probably from an investor base lending to, you know, buying a application like an Aave that...

And, and we own a bunch of Aaves, so don't get me wrong. We're, we're big supporters of what they're doing.

But lending applications are much easier one to explain to an investor, a much easier one to understand than, you know, a, a launchpad for meme coins.

It doesn't mean a launchpad for meme coins, which is a completely new vertical, um, is an, is a, is a less compelling use case. It's just a more, you know, it's a more nascent one.

It's a more, it's a, it, it, it's a more volatile one. But, you know, the upside there, as we've seen with Pumped Off Fund's execution's been incredible.

And, you know, I try to make sure we keep an internet type lens on it because, you know, we've kind of seen this movie before.

You know, a lot of the things you think should be durable or should just transfer to a new technol-technology layer aren't always the winners.

Like, you know, for example, you know, I mentioned before, like if you'd spoken to me in mid-nineteen nineties and said, "What's gonna be the killer driver of viral act-acti-activity in broadband internet?"

I wouldn't have said cat videos. [laughs] But, you know, through a very weird new use case, you basically drove growth of whole lots of application layers, right?

And so we try not to be too, I guess the word is snobbish around, you know, what, how people are gonna choose to use crypto.

We look at where people are willing to pay and where we can see durable long-term sort of use cases, and that's where we put our investment dollars. Yeah.

And one of the great examples of how those applications will reach the mass consumers is Aave's new consumer app that they launched three weeks ago.

It's basically an app, um, on the Apple App Store where everyone, including my grandmother, can- [laughs]... launch or connect to the Aave protocol,

put some cash onto that app, and just earn a yield up to nine percent right now on, on her cash. In the back end, the Aave protocol, you don't have to interact with wallets. You don't have to interact with DeFi at all.

And I think that's a very, very good example of how this mass adoption might play out.

What's your view on how these applications will enter mainstream, and also how will they start connecting to traditional finance rails? Yeah.

I think the, um, you've kind of hit the nail on the head for why we like the application layer in particular, you know, one of... why, why Aave is one of our key holdings.

Um, you know, this is a thematic I'm talking about in terms of crypto moving from the sandbox to the mass adoption, right? So

through the D- the, through the DeFi summer at the start and then other Degen-type use of crypto, we've put it through some pretty interesting stress tests, right?

You know, Aave's withstood some incredibly violent market moves, and it's proven that its business model, its liquidation model, and the way it generates yield is sustainable through some extremely violent market moves that would probably decimate most traditional crypto lenders if they had similar business models, anything like that kind of volatility.

And so, you know, we see that as a sort of sandbox. And I don't mean it, I don't mean to be flippant about the scale of that sandbox.

It's still a big business that where, where, you know, something like an Aave can and other DeFi protocols can generate hundreds of millions of dollars of revenue.

So it's a big profitable sandbox, but it's not that mass market that you're talking about where your grandmother hits a button, and she's suddenly, without knowing it, um, lending liquidity onto Aave.

So we think that's the period that we're at, and we think Aave is ahead of the curve there in terms of taking its business model that's been battle tested, been proven to work in crypto, and now taking it to that mass adoption level.

And you gotta remember, it takes a while for the technology both to be tested, but also to grow in maturity in terms of usability.

So for Aave and app developers to develop the skills to actually integrate crypto in a much more seamless way.

I mean, you and I might be there willing to bang around on keys on a ledger five years ago to test out some of these applications, right?

But that's, you know, with the greatest respect to your grandmother, that's probably not what she's gonna do, right?

She wants something to be point and click and to be easy, and it takes time for technology to get more functional. Um, and I think that's one of the, the most exciting thing about the app layer.

We've definitely made a lot of progress in that regard over the last few years, and we are at that level now where something like an Aave, and we would see other apps as well, like Morpho and those sorts of things, can start to get integrated into that more traditional fintech layer.

Now, a key piece of that and the key building block that allows that to happen, or one of the key building blocks, is clearly, um, stable coins. You know, the ability for people to take

typical cash investments, seamlessly move them into stable coins, and monetize that value through the DeFi layer that we've been working on and using for four or five years now.

And so I think, you know, the interesting thing is the maturity in the apps, the developers, the ability for them to integrate Into traditional financial models or fintech models, and the bridge that stable coins have built that allows those, much more easily allows those fintech existing businesses like a Revolut or like a Robinhood to start interacting with more on chain activity.

Uh, 2025 was the year of stable coins. They exploded to over three hundred billion in total supply. What do you think is gonna be the year of 2026?

I think stable coins still have a lot more growth to go, so I think that's only, we're in only in the early days of that.

As we start to scale from crypto users to mass market, you know, you start to add multiple zeros to everything, right? In terms of the user, user space and, and, and the size of the market.

Now, you obviously get a lot more competition, uh, but the general size of those markets should continue to grow super strong.

So we don't think, you know, stable coin supply at three hundred, three hundred plus billion is anywhere near the end. Um, so we think that continues.

We think that we're at that app-- We, we think we're at that sort of sweet spot of that application layer where the Aaves and those sorts of things start to scale to that sort of bank type level, where they start to go from tens of hundreds of thousands to users to tens of millions of users, and they start to get

integrated into those applications that have hundreds of millions of users, and they get integrated in a way where it's just point, click, done.

And we really see that sort of the infrastructure that those applications have built really scale across a global sort of user base now.

So that's the, that's the thing we're most excited about for the next twelve months. Actually, it's probably the thing we're most excited about over the next three years. And then

looking at the next year, twelve, eighteen months, what are some of the catalysts that you have on your radar that you're looking at?

Yeah, I think, um, just continued build-out and growth and proving up of revenue streams. I think, you know, you asked me earlier why the applications trade at the sort of values they do.

It's, you know, they've got relatively short time frames, albeit, you know, track records, although, although we think they're getting more robust by the day.

So each month that goes past and, you know, someone like an Aave or a Morpho or Pump Dot Fund continues to earn millions of dollars, um, you should see some of the discount for that, for that, uh, value they're creating start to come out of their value, out of their tokens, right?

And people get a longer track record. They get more comfortable that it's more durable, it's more defendable, um, and you'll start to see better value ascribed, uh, to those cash flows as they start to go forward.

I think also as crypto starts to scale to more and more users, and it becomes clear that it is making that migration from being crypto applications to global applications, I think we start to see the, the, the playing field that people start to ascribe to crypto start to grow exponentially, and you should see the sort of growth come through to drive what we'd see as a revaluation as people start to sort of see the upside as much more than they're probably factoring in today.

At a macro level as well, we think the Clarity Act in the US, should that pass, will be extremely helpful for the space in terms of just providing certainty around, uh, how investors can invest, where they can invest, and how that can flow through things like their audits and their disclosure statements to their investors and their insurance and all those sorts of things that sound pretty boring, but just mean that crypto is much harder to access for a whole bunch of different investors as it stands today.

So we think that's a really good catalyst, as well as people just getting more comfortable with, you know, the current changes in the regulatory regime we've already seen in the US, which are, you know, super popular and super helpful.

If you had to advise a family office as a manager, a traditional investor coming into the space, never touched crypto before, how would you describe them what's currently going on in crypto?

How would you divide the market, and what would you recommend them they should allocate in? Is it just a Bitcoin, Ethereum buy and hold strategy, or is it a little bit more complex?

Yeah, I think, um, Bitcoin's still obviously such a large part of the space. From an investment perspective, it still needs to be a part of people's portfolio.

Like, to not-- to make an investment in crypto and have no exposure to Bitcoin in any way, if you're looking for that broad

sort of crypto part of your portfolio, then clearly Bitcoin at circa sixty percent of the space needs to be part of your portfolio.

And, you know, one of the interesting things we've seen over the last eighteen months, or one of the helpful things we've seen is, you know, there's a very readily, easily, easy way to access that through super liquid and pretty cheap, um, ETFs on US exchanges and European exchanges.

So that's an easy part of their portfolio to fix. I think we're in the middle of a much broader disruptive technology phase, though, much broader and bigger than Bitcoin. And Bitcoin's, uh,

you know, the, clearly the leader and the, a-a-and the most valuable asset, but we think there's a whole bunch that are gonna follow, follow as well.

So we think, you know, if, if, if you're taking a view that I want that exposure to this d-disruptive tech, um, and I want a long-term exposure to make sure that I capture all the different ele-elements of growth and disruption that this technology can hold, then you need a broader portfolio than just Bitcoin.

Um, and we think investors need to sort of take that view that I'm investing in a high-risk space. I'm investing in a...

It's still the, the highest volatility asset class, so returns are gonna go up and down a lot if you look at it on a monthly basis, and so they need to allocate to it accordingly.

And we've generally seen investors making relatively small allocations, as they would to, say, a VC or high tech, high risk investment, which I think is the bucket, um, that's most sort of suitable, or the sleeve that's most sort of suitable for family office to look at crypto.

And then look at managers that they trust and look at them, look at managers that are running strategies that fit with the exposure and the risk that they want.

Do they wanna take, uh, uh, uh, do they wanna take high risk, high rewards that you can get from venture investing, but that comes with a longer investment ho-horizon and generally a pretty long lockup, right?

You know, five-plus year lockup for investors, and so they have your liquidity for that period, which has its own risks when you're looking to allocate capital.

Do they wanna take just a broad, sort of more, more sort of broad portfolio approach to listed crypto assets and buy a manager that's buying a portfolio of those assets to give them that broad exposure to different thematics, and probably have much higher liquidity than they'd have in a venture portfolio, so allow them to take capital out, um, when they choose or where they may need?

Or do they wanna monetize some of the inefficiencies in crypto through market neutral type funds? Mm.

We can effectively take out a lot of the price risk, but then still generate pretty good double digit returns on a very consistent, much lower risk, much lower reward of course, but much lower risk basis than other exposures to crypto.

So there's a whole bunch of different ways to invest in crypto depending on your time horizon, depending on your risk profile. Yeah. Yeah.

And let's assume for a moment that thesis of digital asset capital management plays out. Can you just paint us that vision of that crypto end state scenario in, let's say, 2035? I think that- How will that look like?

I think it looks similar to how the internet looks today, that, you know, I'm old enough to remember when people used to talk about the online edition of a newspaper and when people used to talk about online shopping and all those sorts of things, whereas now it's become so ubiquitous and so integrated into everything we do that you don't even think that way.

Like, I bought something on Amazon, you don't go, "I'm going online shopping." So... Or I'm gonna go and look at the online version of The Times. Like, it's just,

it's just so integrated into our world that you just, it just becomes an underlying layer or an underlying functionality for everything we do.

I think that's the success that crypto needs to strive for, that, you know, someone goes into their banking app and they hit earn, and somehow there's a transaction that swaps that dollar for a stable coin and puts it on a lending market like Aave.

I think that's where we are in 2035, where it's not like, "Oh, I'm gonna use a crypto lending app." It's like, "I've got some dollars, I want to earn some income, I hit that button.

Whatever happens in the back end, I don't really care. It's a trusted front end that I'm using, and I'm generating a yield that, yield that's giving me utility, so I'm gonna do it."

And I think that's where, you know, most technology needs to strive for. You don't want people to use technology 'cause it's a technology.

You want people to use technology 'cause it's actually delivering utility to what they wanna do. It's, you know, adding more value than they could do before that technology existed.

I mean, newspapers, I say it flippantly, but newspapers are a good example. You know, newspaper was a great medium, added a lot of utility to people's lives for, you know, hundreds of years.

But that business model disappeared pretty much overnight when broadband came around, and all of a sudden you could have a newspaper that was online that could deliver photos much better, could update, you know, by the second now, and could then start delivering video content, and it made that paper version look extremely obsolete.

And the utility from the online version was exponentially higher than you were getting from the paper version.

And so you made a transition from an old business model that just basically disappeared overnight or largely disappeared overnight to a new business model, and it wasn't because I wanted to use the internet version, it's because the internet version was way better, right?

And so the utility of it was ba- way better. The value I got as a consumer for that product was way better. And that's where we've always seen crypto going.

Like, it's interesting tech for us at the venture stage, all these new applications, they're interesting. It's great to think about how disruptive they could be.

But where it gets super exciting is when people start to use it, and they don't even know that they're using crypto. They're just getting, they're just getting value from something, and so they use it. Yeah. Yeah.

And, and it definitely feels like we're just at the beginning of that transformation.

I mean, if you look back, this only happened in the last twenty years, what you just described with newspapers, and in crypto it's gonna be similar most likely in the next ten years, twenty years.

So we're gonna see huge transformations. I think, Marc, just on that point- We're almost at- Like just on that point- Yeah... I mean, even the internet's had phases, right?

Like you've gone from dial-up, the initial phase, then you saw massive growth in terms of apps and users and utility when it went to broadband. I could still remember the old ugly dial-up phases, right?

And then when you went to broadband, all of a sudden you started to get video quality, those sorts of things. And then even with the iPhone, right?

Like when you had the launch of the iPhone in the late 2000s and the, and the teens, you saw another step in kind of integration of internet applications into your life through that mobile application.

Now, crypto's trying to rebuild, in large part, financial rails, right?

Like, and rebuilding financial rails is much harder than rebuilding media rails or some of those initial rails that were getting disrupted by the internet, things like, you know, real estate markets or media markets, those sorts of things.

You know, they're still hard to disrupt, but financial rails come with a whole unique level of complexity and risk. So it is a hard thing that crypto's trying, trying to disrupt.

It'll take time and, you know, to your point, we're starting to see some early rewards for that, but the prize is huge.

The prize and the scale and the revenue opportunity of remaking the financial system is, you know, just hard to comprehend in terms of the upside that's actually available there. Mm-hmm.

Uh, Richard, we're almost at the end of the show.

Uh, last question before we do a short lightning round is, from your perspective as an investor, is there anything outside of crypto that you're looking at, that you have on your radar?

Look, I think with crypto and the volatility and managing a bunch of people's money at a fiduciary perspective, [chuckles] I don't have much other time to think about things, to be honest.

I, um, the volatility in crypto, managing my business, making sure we're doing everything possible to maximize the returns and keep the capital that we're managing safe is more than a full-time job, um, is extremely stressful, but kind of fun.

I think outside of crypto, I think just the whole, the whole, uh, kind of disruption we're seeing in the financial space and the remaking of a financial layer, I think is one of the most exciting things from an investment perspective.

I think the changes we're starting to see in social media I think are also exciting. I mean, the good thing is crypto plays a part, a part, plays a pretty key part in all of this.

I think the remaking we'll see of social media over the next five to ten years as well, particularly as new generations coming through, um, and new use cases emerge there is super exciting.

But from my perspective, my, you know, investment p- portfolio is, uh- Irresponsibly overweight crypto, as you would hope from your manager, and pretty conservative on the other side.

The only other investments I've really made of any size is around metals and, and I'm obviously a bull around Bitcoin, and with that I've also quite bullish around precious metals. Yeah. [laughs] Great.

Richard, uh, a quick lightning round. Those are short questions, short answers. Sure. First one is, which layer one are you most bullish on, and why? Solana. And you already explained why before.

It's the highest growth, most undervalued chain. Allows for what... Where, where we see the growth of application layer going is largely built on Solana. Mm-hmm. Then next one.

What's the best approach you found in your over ten years in crypto to valuing a layer one? It's a hard one. That's a hard one to answer in a lightning question.

[laughs] We think Bitcoin's the anomaly, 'cause it's created such huge monetary value, so you kinda gotta put it in its own category. We think it comes back to revenues.

Like, these chains have to generate utility, which is measured in revenue in some way. Yeah.

So we think, yeah, there, there's not much monetary value left outside of Bitcoin to be created in crypto, so it comes down to revenue and growth. Mm-hmm.

Then what is one application or protocol that you're most bullish on but is most misunderstood? Um, there's probably more than one, but we'd probably say Pump.fun.

We think people think, uh, are much too bearish on the outlook for meme coins, and also too bearish on the breadth that they can grow that business across other media layers. Then

which on-chain and off-chain s- signals are your top sell triggers? Um, so we're a long-only investor generally, so we're generally long.

So it's a matter of how bullish we are versus whether we're, you know, um, we never liquidate our portfolio. We, we're always sort of eighty percent long for our liquid funds.

The signals that we look at, um, much more idiosyncratic, um, crypto signals, I think, than macro figures, although macro stuff obviously plays a core.

Um, so we look at things like stable g- stable coin growth, user growth, revenue growth across the space to see the underlying, um, activity.

Now, the problem with that is the correlation to price movements, as we've particularly seen this year, can, can, can always not be great.

So we do look that with sort of a more of a qualitative, uh, sentiment overlay as well.

Um, just, you know, looking through different channels to see where, you know, the penetration is we can see around sentiment, um, how we can see fundamental versus what I'd say is, uh, speculative value in the space and making a call on whether we think it's a little overdone or underdone.

And then what has been the hardest lesson you've learned managing crypto capital that doesn't show up in a P&L? I think the patience and the ability of the market to stay,

uh, to cause pain longer than you would expect, which is I think a general lesson of investing, full stop, but crypto is extremely good at it.

I think crypto can stay inefficient much longer than most people can stay patient, and, uh, that goes... The good thing is it goes both ways.

Like, crypto can get exponentially exuberant, uh, but can also get terribly, terribly bearish and can stay bearish for longer than a lot of investors can hold patience.

Now, the good news is, uh, for those that can hold the patience and see through some of that volatility and not do silly things at the top and silly things at the bottom, that's where we've seen through our journey excess returns have been generated.

What is one thing that your former banking colleagues still don't understand about this asset class? [laughs] There's a lot more than one thing.

I think the, the most frustrating thing is they don't understand at this point how real it is.

I think stable coins has helped a little bit because it's given a, a very user-friendly, very bite-sized, kind of digestible use case that people can understand that generates revenue.

But when, you know, when we talk to traditional investors or, or bankers about the revenue that some of the applications in crypto are generating, they've got, they've got no idea, right?

They've never heard that concept of crypto actually being a huge utility type, uh, generator before.

I mean, the stat that, um, you know, the majority of the world's fastest startups, so startups to a hundred million in revenue, the vast majority of those have come from crypto. The vast majority.

Now, the majority of those are also on Solana, which is another reason why we like Solana.

But that concept, people don't understand that, you know, the, the fastest companies in the, in the history of the world to ever generate a hundred million dollars, I think the top seven are crypto.

And people don't understand the actual revenue capabilities of applications that find real product market fit in crypto. And the last one. The biggest surprise in crypto 2026 will be?

I think the resiliency of the space, the ability of the space to continue to generate real user activity and revenues- Yeah... and the realization that it's way less cyclical than people think at a fundamental level.

Okay. Yeah. Richard, that was great. Thank you so much for coming on the show. It was super interesting to have you. Where can people learn more about you, about Digital Asset Capital Management? Yeah.

So, uh, I'm active on Twitter under the handle richwgalvin. That's richwgalvin. Um, I like to put a lot of, um, ideas we have there or commentary around things we have.

We also run a, a weekly newsletter, and people can subscribe through dacm.io to that, uh, where we also give, you know, a bunch of analysis and ideas and interviews and podcasts that we do as well.

Uh, so we try to stay active across the space.

And for anyone who wants to read, uh, reach out to us, we're available through [email protected] as well for any questions they've got around the investment products we run and those sorts of things.

That's great. We'll link all of that in the show notes. Richard, thanks for coming, and all the best. Pleasure to be here. Thanks for having me, Mark.

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