Author: The Rollup; Compiler: Vernacular Blockchain

In the wilderness of cryptocurrency, some people are busy chasing the hundred-fold myth, while others are quietly changing the rules. When a former angel investor took off his suit and bluntly stated that "most tokens are no longer investable," was this paranoid arrogance, or an in-depth analysis of the truth about the industry?

An in-depth restoration of the latest interview with legendary investor Santiago. Not only did he reveal why AI is "robbing" the brains of cryptocurrency geniuses, he also disclosed for the first time his ambitious "reverse investment" plan: instead of developing projects from scratch, he will transform tens of millions of real users with stablecoins and DeFi by acquiring traditional telecommunications and financial groups. The explosive tokenization of commodities, field research on the streets of Latin America, this is a storm of thinking about "dimensionality reduction attack" and "value return". If you want to see through the true bottom line of institutions entering the market, this 4,000-word article is definitely not to be missed.

1. Role growth: from angel investor to crypto “chameleon”

[Host]: Today we have invited an old friend of the show who is also a legend in the crypto investment community. To be honest, we feel very honored every time we can have him by our side.

[Host]: Yes, he is Santiago. Santiago, long time no see, how are you doing?

[Santi]: I’m not dead yet. Aren't you tired of my old face yet?

[Host]: Of course not. But today our marketing team has prepared a very shocking title for you - "Isn't Santiago the biggest crypto bear on the planet?" I heard that because you didn't invest a single angel investment check this year, it was even said that the performance of the first generation will not be as good as stocks. Look at you now, you don’t even have iconic clothes. What happened?

[Santi]: I would rather turn myself into an invisible dragon. In the financial market, you must constantly accumulate yourself so that others cannot simply label you. I've certainly lived long enough to see a few cycles, but I'm not a "super bear." I am still positive about encryption technology, but I think that the current Tokens are also in a state that cannot be "invested".

But this does not mean that the industry is consuming. Instead, adoption is growing like crazy. When I came to the venue yesterday morning, the queue of people reminded me of the TSA security check at the airport. What's more, the agency's growth is real. Looking at the people in this room, how many do you think are attending a cryptocurrency conference for the first time?

[Host]: Indeed, there are many things in life.

[Santi]: This is a sign of the times. Many people come here, no longer to find out which junk coin to buy, or to pursue a hundred-fold explosion. They show up here because their CEO has given an order: "Guys, you have to figure this thing out, otherwise we will be behind."

We just finished listening to the speech by the CEO of Western Union. You know what I've said about them in the past - it's an old company with great value to protect. But I asked him: "How serious is Western Union about stablecoins?" If you listen carefully to his tone on stage, you will find that this time is completely different from the previous "symbolic disagreements." I predict they will reflect the future power of stablecoins in their one-year P&L statements.

By paying in stablecoins, they could potentially save billions of dollars in float every year. This is absolutely crazy because just a few quarters ago during a conference call, the CEO publicly stated that he didn’t believe in stablecoins.

[Host]: What makes him spin so fast?

[Santi]: Competitive pressure and institutional FOMO (panic entry). He's seen Visa jump in, he's seen MasterCard make big related acquisitions, and he's seen BlackRock come in. An analysis I made at the time: Observing the listed companies that mentioned cryptocurrency in their earnings calls and actually implemented their strategies, most of them were companies with relevant founders. The performance of this basket of stocks significantly exceeded the S&P 500 Index. This is the power of reality.

2. 24/7 Trading Narrative: Hyperliquid and the Tokenized Future of Commodities

[Moderator]: When it comes to assets with outstanding performance, the S&P 500 has performed reliably recently, but there is a very interesting consolidation case in the crypto market - Hyperliquid. It seems like you've been thinking about not having the items in the "bear basket". What do you think of the growth of this 24/7 tokenized transaction?

[Santi]: As I said before when I chatted with you in Brooklyn, I am essentially a “long volatility” guy. I still hold this view. The desire for trading of the younger generation is engraved in their genes, and they want to trade anytime and anywhere.

Desire comes in several forms. The first is prediction markets, such as Polymarket. Second is more macro asset trading. The reality is, not everyone is interested in the new generation currency you issued, but they want to trade commodities. When macro partisan Stan Druckenmiller says to go long copper, or geopolitics causes oil to surge, traders need an outlet.

Super Liquid made that money. Although I have not seen the final audit figures, I dare to say that its open position (OI) of commodities may increase 10 times or even 100 times within a year after breaking through a certain critical point. As tensions rose in the Middle East last weekend, I sat with a group of hedge fund managers, some of the smartest microprocessors, worrying about what would happen when the market opened on Monday. I just pulled out my phone and gave them the real-time chart of Super Liquid, where oil and related indices were already moving. Their eyes almost popped out at that time, and they shouted: "What the hell is this?"

It feels like I have only been through it six years ago when stablecoins were first born. There is no word DeFi yet, and I tell potential investors: Just try investing in a stablecoin like this, and you will see the dawn of finance. Now, Hyperliquid is letting people see the light of day in trading.

[Moderator]: We have seen that the SEC and CFTC have recently begun to cooperate on guidance on tokenized securities and commodities. Do you think Token economics will modify the stock structure in the future? For example, are there “growth tokens” and “dividend tokens”? If there is a regulatory voice, is paying dividends to Token holders through on-chain income the right way to capture value?

[Santi]: I am not a regulatory expert and cannot predict every detail of legal compliance. But I think Hyperliquid’s narrative sequence is powerful because it’s so pure and easy to understand.

The human brain can only understand one core concept at a time. If a Token has too complex logic, people tend to stay away from it. What does superliquid do? They have real trading volume, they spend their revenue on atonement, their compensation fees - it's the most "stock"-like token out there. Hidden behind it are those metaphysical narratives whose direct implications are anchored in the controversial nature of global commodities.

And you have to note that commodity fluctuations are more persistent than individual stocks and are affected by geopolitics. When this demand is combined with a 24/7 on-chain infrastructure foundation, its explosive power is staggering.

3. Investment blank period: when all the geniuses went to work on AI

[Host]: You said that you almost never invest in angel rounds now, but your previous company ParaFi just raised US$450 million. If you were given hundreds of millions of dollars to deploy in the current environment, where would you invest them? Is it market prediction, AI or pure encryption infrastructure?

[Santi]: This is indeed a difficult problem. Sometimes I want to just say: "There's nothing to invest in right now."

Although projects like Polymarket, Kalshi or the encrypted credit card project Rain are still undergoing large-scale financing, these are upgrade projects that have already been completed. In the early stages when I was most active - when I was making my first and second paychecks - there were indeed fewer high-quality projects.

I reflected on it, was it because I was too bearish that entrepreneurs stopped looking for me? Or has my reputation gone sour? But I asked other top VCs and the answer was the same: high-quality deal flow (project flow) is indeed shrinking. I think my most core opportunities will be at the intersection of fintech (traditional fintech) and DeFi.

[Moderator]: Are these boundaries disappearing?

[Santi]: Yes, they are becoming one. If you look at the institutions investing in Rain, in addition to traditional Fintech VCs, there are also crypto-native VCs. In the future, if you don’t understand Fintech’s compliance, issuance and account systems, it will be difficult for you to survive in the crypto investment field.

Another key reason is the siphoning effect of AI. The smartest people in our industry are now attracted to AI. In previous cycles, we didn't have this competitiveness.

I'm fascinated by AI. As an investor, I once suffered from severe "imposter syndrome". I felt that since I did not have a technical background, newspaper companies must first find a CTO. But now with AI tools, if you saw my tweet today that I was trying to hire someone, I probably wouldn’t write “CTO needed” or “chief employee” anymore. AI significantly reduces construction costs.

However, the side effect is that many encryption projects are now "tinkering", which makes people look innovative. Many teams just make some adjustments to the existing L1/L2. While Agentic Commerce – or AI agents using stablecoins to automate transactions – is an inevitable trend, it’s still very early days and many projects look like they’re just a flash in the pan.

4. Inversion Project Logic: Acquire traditional mining and inject crypto soul

[Host]: Let’s talk about your new plan - reversal. You mentioned that this is a brand new path, not to build an encryption project from scratch, but to acquire traditional companies that have distribution channels and traffic, such as telecommunications companies (Telco) or traditional financial institutions.这听起来非常像伯克希尔·哈撒韦的风格。

[Santi]: That’s right. One of my core rules is: I want to buy things that already have distribution rights. I didn’t build a distribution franchise from scratch because that would be too slow and expensive.

The whole point of inversion is "Don't do anything stupid." Buffett's first transaction was a textile factory, which was a bad business, but he later bought an insurance company and laid the foundation of his empire. I'm just as paranoid that I don't want to buy a company that will "die" me.

[Host]: You have recently done a lot of research in Latin America and even hired 20 interns to do street work?

[Santi]: Yes. If you want to become a better investor, you have to do things that "don't exist online." Nowadays, everyone relies too much on AI dashboards, confusion or data analysis tools. I know an investor who makes beautiful analysis charts, but he has never called the founder of any project.

There is only one thing that AI cannot replace: sitting down, looking into each other’s eyes, reading their body language, and feeling human.

Our research in Mexico found how 18- to 25-year-olds use their bank accounts, how much data they consume each month, and how much they rely on WhatsApp transfers. This is data you will never get while sitting in an office in Silicon Valley.

But I found that the average valuation given by the market for fintech users in Latin America is US$1,000 per user. But I can spend less than $300 million to buy a traditional company with 21 million users that has not yet been "fintechized". If I can embed stablecoin payment and DeFi, this value difference will be a huge profit potential.

5. The end of on-chain credit: reject “ladder leverage” and embrace real assets

[Moderator]: The "embedded finance" you mentioned, especially the credit part, may be the most controversial at present. DeFi’s TVL is rising, but hacking incidents are also emerging one after another. What do you think about the future of on-chain credit?

[Santi]: This is my most objectionable point of view. The current DeFi borrowing is mainly "borrowing leverage" - everyone circulates borrowing between different mines in order to obtain that reward. This results in extremely short loan terms that are very large.

We lack true "fixed interest rate, fixed term" on-chain credit. Why? Because no one is bringing high-quality real-world assets (RWA) to the money chain. Many RWA platforms now have serious "adverse selection" - people who can borrow money from traditional banks will not come to the chain to borrow high-interest loans. The result is that the assets on the chain are all high-quality junk that cannot be trusted in the real world.

[Moderator]: So how does reversal solve this problem?

[Santi]: We have to underwrite it ourselves and put ourselves in the "First Loss Piece". Take telecom companies, for example, they have accounts receivable for smartphone financing. We can bring these assets to many chains. You're doing a credit assessment on a real smartphone and a monthly-paying user, which is more skeletal than those ethereal token hosts.

We are not in it, we are the owners. This approach of “buying the business first and then carrying out encrypted transformation” is, I think, the true form adopted by wave institutions.

[Moderator]: Finally, Santi, please give a summary of this meeting. What exactly do you think about the current state of institutional adoption?

[Santi]: Very excited, but this excitement is calm. I remember the way others looked at me when I resigned from JPMorgan Chase and wore a suit to buy my first Bitcoin. What now? If you don't wear a suit, you become an alien here.

Institutional adoption will continue to grow 10 times or 100 times, but it does not mean that you can double your token simply by buying it. The real beneficiaries will be entities like Robinhood, Western Union, or what we’re building, Inversion, that are able to leverage crypto to dramatically improve their business efficiencies.

For many teams, my advice is: don’t rush to issue coins. Wait six months, wait a year, and watch the regulation evolve. If you don’t have real users and scale, issuing coins will accelerate your death. We're building this out in the open, and while it's a hard road, it's really fun to see this convergence happening.

[Moderator]: Very insightful investor update. Santi, thank you for sharing today and see you in the next cycle.

[Santi]: Thank you, I hope I can still be alive by then.