As we enter the new era of crypto and assets bifurcate between those that are money & those that make money, returns should concentrate into a smaller more relevant selection of assets with more reliable lifespans. In this environment options start to become more liquid and their advantages over perps start to emerge: selling options to collect yield on longer date positions, buying tail risk insurance (important in crypto cc 10/10), expressing more nuanced bull cases like KoolKrypto's ETH call spread It's an interesting case study why have perps been the preferred instrument of crypto vs why options finally work now? & why the Lighter & Pump markets are positive signal Given perps are a single liquid instrument based on an oracle, it's relatively easy to spin up a new market & fill the books with liquidity. This is great in crypto where there's typically some hot coins to chase: list pnut, list monad pre-ipo, list prove (remember that airdrop lmao), so on, and so on For this reason, perps dexes can move more quickly than options dexes to get assets listed. In crypto this is obviously a competitive advantage given how quickly the attention moves from one asset to the next. It's not the only reason, but is a big reason Hyperliquid has been able to stay in the conversation no matter the market conditions (esp bc this works for stocks too) Options books are harder to effectively build because you need to support many strikes at many expiries for both calls and puts. For Bitcoin alone there's 38 markets for just the Oct 5th expiry. I'm not gonna count it up, but across all expiries for just Bitcoin there's a comparable number of markets to what Hyperliquid offers in total Options dexes naturally reached the conclusion they can't go chasing short term listings otherwise they'd fragment liquidity across too many markets Additionally from first principals it doesn't even make sense to have long dated expiries for a lot of these random coins. Maybe I do want 5x leverage on pnut while it's trending, but do i want to express any opinion about what the price will be a year from now? not really. Does any Market Maker want to provide quotes for that duration? not really either. So why are PUMP & LIT options so bullish for Derive? Simple, there's finally good coins to list. After all it's been through, I imagine most of use are willing to bet PUMP will exist in a year. In fact, the fact the market needs to rerate the longevity of pumpfun makes long expiry calls more interesting and relevant for portfolio construction. The same goes for LIT tldr: Derive ethereum:0xb1d1eae60eea9525032a6dcb4c1ce336a1de71be

My mom asked me how work was today, what am I even supposed to tell her

Thanks for the shoutout @Blockworks

I normally don't respond to this kind of stuff but this is incredibly off-base. Without SP500 the ratio is 59x ($20.6M / $349k). Derive's September ratio is 49x ($3.82B / $77.7M) Why leave out SP500 Options? You're comparing one of the lowest vol risk assets in the world to BTC/ETH and Hype at the start of a bull market when vol is crazy. Even if flow composition was *identical* VIX is at 16 and BVIV is at 37 But this understates things for a few reasons: Flow Composition: For crypto assets most options trading is structural vol selling for yield. For RWAs its the opposite, most volume comes from shorter dated options. What's important to understand is because of the square-root-of-time rule, the effect of volatility on premium/notional on shorter dated options is compounded Let's use a fixed 16% (SPX) and 37% (BTC) vol to show the affect on premium/notional under the rule: 30 days: SP500 - 55x BTC - 24x. 7 days: SP500 - 113x BTC - 50x 1 day: SP500 - 300x BTC - 133x 4 hours: SP500 - 730× BTC - ~325× So, given these numbers, why are both Hypercalls and Derives premium/notional so high? Spreads. This counts spreads/multileg premium each way on both. Spreads (on a % of trades basis) are actually less common on Hypercall so this drags the number down. Finally - I want to address "cheap metric pumping activity" These aren't "crazy OTM options". Some hit and some don't. If you look at Hypercall we don't even offer crazy low delta options (although this is something we're working on) so these are fairly likely to hit and they do Good example is the spread trader we wrote about here: insights.hypercall.xyz/sp500… He lost $6.4k on a 0dte spread, then $13.5k on a 0dte spread, then made $53.6k. He thought the vol was underpriced so he traded it. If you think he's wrong you're able to sell him the vol yourself. I'll personally onboard you. The last thing I want to address is "cheap metric pumping activity". This is true on other options exchanges. But we don't have our own perps. Every single one of these options is hedged on Hyperliquid. In September alone (just for SP500) that meant: $204.6M of Volume on the SP500 perp $16,869 in Fees $40.7k total cost of execution (including slip from mid) Why? Well- like we said: Variance is higher on shorter dated options so hedging costs is also higher We broke down the costs of one of these trades, fill by fill, here: insights.hypercall.xyz/sp500… Hypercall is early. I've tried to be honest about where we're strong and where we're weak. But this comparison is just bad.

Derive has a notional leverage (notional/premium) of ~50x. This is normal, ie healthy. Hypercall by Synapse has a notional leverage of ~1075x, lmaooo This is basically cheap metric pumping activity like when a perps dex has $100M in washed volume but only $1M in OI because nobody using the dex actually wants to hold positions there Nobody actually wants to buy/sell premium on Hypercall, they just want to inflate notional so they're just buying the most idiotically cheap out of the money options they possibly can. Also there's a DAT 🙃

Remember when hyperliquid won perps by being quick to list new/trending pairs? Derive is on top of it even before V3 is live. I think they’ve got their eyes on the ball

Fear not the man who makes 1,000 tik toks one time, fear the man who makes one tik tik 1,000 times

More evidence of the Tulip King thesis. These smart contract L1s are not money. They cannot dilute holders ad infinium and simultaneously collect monetary premium Expect all the serious L1s to follow Solana's example like NEAR is in a general push towards sustainable economics. Basically they're becoming more like businesses (good because that's what they are) Apple goes up because while they issue ~$60M/yr in share compensation to employees, they buy back ~$400M/yr a year. Compound this reliably for many decades (include a good dividend although we don't really do that in crypto, it's fine) and viola the stock price goes to the moon Your downstream research should be on the following: Do staking rates go up or down as yield falls? What's the impact on price in either situation? Lowering inflation is only one side of the equation, fees generated also needs to go up. Which, if any, of these networks can get to break even and eventually profits? What profits are required to sustain the valuations these coins need to hit for your bags to make money? Is it possible to get there? It's obviously up for debate but my opinion is that: 1. staking rates fall with yields. My suspicion is most PoS yield is just capturing some inefficiency between those who stake & those who don't. As this arb closes, so should the incentive to stake. More supply will effectively become liquid and have a generally negative impact on price 2. To make things doubly bad, I also doubt the smart contract networks can ever become super profitable. There's too many flaws in the business model: * Fees do not scale with txn value. I pay the same fee to send you $10 as $100k. If I'm sending $100k perhaps I'm willing to pay more to send the txn in a private way or faster, but i'm not willing to pay 10,000x more. At BEST, fees scale extremely sub-linearly with value > I'll re-iterate my post office example. Just because I mail you a trillion dollars, does not make the post office worth a trillion dollars. A smart contract network can facilitate a huge amount of value and commerce without actually capturing a relevant amount of that value itself * Blockspace is a commodity. Just look at gas prices & total fees. The median gas price on Ethereum is like $0.04 and transaction fees on solana are down ~80% YoY DESPITE the total count of transactions going up ! Pick your favorite chain, it doesn't seem to be able to extract fees either way Btw all of this is GOOOD for other coins. The money the comes out of sc l1s (bad money) can go into the select l1s that are good money. The money can reallocate into onchain finance protocols and send them higher than any of you can imagine. More mature & wise capital allocation is good, just don't hold bad bags !

Hype 1T is only a 20-50x from here (depending which measure of supply you want to use). Do some math: There's ~150 stock pairs on hl today. Across America, EU, Asia, etc. there's ~32,000 stocks. So there's 200x+ more stocks to be listed. & hl can keep growing volume on stocks. I don't think it's insane to say they can do a 1,000x+ on stock volumes without even starting to eat into the major exchanges (now imagine the scenario where they do?!) You should probably also assume crypto gets bigger. whether you think Bitcoin wins, or Zcash, or Ethereum, or Solana, or Pumpfun, or NEAR, or whatever - I kinda assume we agree crypto will be bigger than it is today 10 years from now. That will drive an insane amount of volume, and as crypto matures and more coins become real investments, volumes should grow and get healthier since the investable scope of the sector grows Then you should also consider all the priority fees they make (non-zero revenue already today) with all this future trading activity coming onchain Then you should also consider all the USDC on platform paying them yield to support all this OI Then you should also assume they'll probably figure out some other ways to make money: maybe prediction markets, maybe options, lending/borrowing as they white-label the risk engine, maybe HyperEVM starts to work Long story short, hl at least has the potential to 1,000x their business. Say the token needs a full 50x. They only need to capture 5% of that potential. This is absolutely a bet on their continued execution but given the track record, I'm fine making that bet until I see otherwise. > Ask yourself, can Jeff capture 5% of the full opportunity available to hl? I think probably This is what I mean by buy & hold good coins, If literally all of finance is coming onchain, these numbers can get ridiculous. My analysis is quick & dirty here, if you want real stuff go read @defi_monk, but it's just to remind of the true scale available to GOOD-WINNING projects like hl (which won't be the only one)

Buy and Hold good coins

A good follow up to the original Pearl thesis in response to many of the public critiques, if you want to get deeper into the rabbit hole read this

Derive has 87%+ marketshare for onchain options in the same year options premiums have gone up ~4x. Hyperliquid & Lighter are both locked in on perps (as they should be) with subpar options products (binary rather than vanilla options) If this is the next financial instrument to come onchain, then the opportunity in front of Derive is huge. btw Derive V3 coming soon which should help them scale & integrate with even more partners, wow !

my full interview with @kelxyz_ 1:11 welcomed to crypto by Iron Finance 2:25 the tech finally caught up 4:40 the edge is the crowd's bias 9:19 making it without leverage 13:23 everyone underestimated $HYPE 16:17 building the conviction to hold 18:00 the full $ZEC bullcase 30:37 onchain asset quality isn't there 41:11 betting on decentralized AI 58:58 alpha is hard to find

What are the implications of every big tech co launching the same product, ai assistants on models they train? In the past there was actually some pretty big differentiation between the techcos: Apple does consumer hardware, Google does search and software, Microsoft does operating systems, Amazon has a massive retail footprint, etc... Given their sheer size there is natural overlap: Google org vs MS office, AWS vs Azure vs GCP - but the core money makers that bootstrapped their massive growth cycles were differentiated. But now their plans for 10x growth as identical, ai assistants Surely we don't think they're all going to win? Can the winner do so with sufficient margins to justify the cost? What happens to the losers? What if everybody uses these products but nobody makes any money selling them?

Feels like a good time to bring this one back. Fuck it, Tulip mode.