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

PodcastUnchainedLourenco ValenteOct 14

The guest describes a crypto industry consolidating around established protocols, with AI weakening technology moats and future use cases still facing major throughput gaps. He sees institutional adoption and tokenization as growth opportunities, while arguing that user access, security, regulation, and stablecoin switching costs shape which businesses can compete. He also questions token buybacks as a use of early-stage capital and says Bitcoin's long-term security needs to be addressed.

Crypto Markets Tokenization Stablecoins Bitcoin Investment Strategy Cybersecurity

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Key Takeaways

The guest describes crypto as entering a consolidation phase, with many projects closing as investor focus shifts from discovering new primitives to scaling successful protocols from “zero to one” to “one to 100.” He argues that AI is pushing technology development and integration costs toward zero, weakening the moats crypto businesses built over the prior five to ten years.

The guest says Ethereum needs to choose between scaling its L1 to attract activity and supporting a franchise model centered on L2s, arguing it is currently doing neither well. He also says Ethereum could, in a small-probability scenario he would not bet on, hold $5 trillion in assets in five to ten years while generating little revenue, though he would prefer it to generate revenue.

The guest sees crypto moving toward institutional adoption, particularly in payments, cross-border payments, and trading, while saying stablecoins currently fit best as a way to export dollars to emerging markets; he views remittances as a possible future use. He forecasts stablecoins could keep growing at probably more than 40% CAGR over the next few years.

The guest says stablecoin startups face formidable competition from Tether and Circle, given the businesses’ scale, compounding growth, licensing needs, and regulatory obligations. He also points to Binance’s roughly $45 billion in USDT holdings within about $50 billion of stablecoin holdings, arguing that ecosystem ties and trading liquidity create switching costs that even a share of net interest margin may not overcome.

TECHNOLOGY

Industry Consolidation — The guest says crypto is undergoing massive consolidation, with a record number of projects, protocols, and applications closing or sunsetting. He views that shift as positive overall.

“I think we're seeing just massive consolidation in the industry, massive…”—

Protocol Growth — The guest says crypto investing is shifting from discovering new on-chain primitives to assessing how much successful protocols can grow. The focus, he says, is moving from “zero to one” to “one to 100.”

“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…”—

AI Erodes Moats — The guest argues that AI is driving the cost of integrating and developing technology toward zero. That weakens crypto-industry moats that were stronger over the prior five to ten years.

“Because you have some of these companies with big balance sheet, with, you know, very good technology that are integrating crypto…”—

MARKETS

Institutional Adoption — The guest says crypto is moving beyond its primarily retail-focused phase toward institutional adoption. At scale, he identifies payments, cross-border payments, and trading as finance-adjacent use cases that matter.

“And clearly, like that phase of the market is completely is just ending. Right…”—

Stablecoin Competition — The guest says stablecoin startups face formidable competition from Tether and Circle, which he describes as large, compounding businesses. Building a stablecoin business is complex, he says, and requires licenses in many countries and regulatory compliance.

“And so obviously, right now, if you're a stablecoin startup and you come and you say, hey, like we're doing this product in stablecoin, like now you have Tether and…”—

Tokenized Assets — The guest sees growth in equities, fixed income, RWAs, prediction markets, and compute, and asks whether crypto and DeFi building blocks can unlock value in these larger asset classes. He sees tokenization as an opportunity beyond crypto assets alone.

“I think the bigger part of the market right now and where we see like a lot of growth is just like stocks, equity, you know, obviously equities, fixed income…”—

FORECASTS

Ethereum Scenario — The guest says it is possible, though a small-probability outcome he would not bet on, that Ethereum could have $5 trillion in assets in five to ten years while generating little revenue and still be valuable. He says he would prefer Ethereum to generate revenue.

“I don't see it impossible, a world in five to ten years where there's probably like $5,000,000,000,000 worth of assets on Ethereum and Ethereum is not making a lot of…”—

Crypto’s Institutional Shift

Valente sees crypto moving from a retail-led discovery phase toward established protocols, institutional users, and financial applications that can scale into traditional markets.

AI Weakens Crypto Moats

Valente argues that AI is lowering development costs and weakening technology advantages, making established businesses, distribution, and the ability to connect crypto with real-world assets more important.

Quantum Risk And Custody

Valente says quantum and AI threats concern institutional investors, while rushed signature changes and slow governance could complicate protocol security and accelerate the shift away from self-custody.

Bitcoin’s Quantum Response

Valente believes Bitcoin’s community is taking quantum risk more seriously and can agree on a transition, though the fate of Satoshi’s coins remains unresolved.

Ethereum’s Value Accrual

Valente says Ethereum’s base layer captures little value as activity moves to layer twos, and argues the network must choose whether to prioritize L1 activity or support its franchise model.

Token Buybacks And Capital

Valente criticizes early-stage projects that spend revenue on token buybacks instead of growth, arguing teams need resources to expand and compete rather than promise automatic burns.

Tokenized Equities’ Growth

Valente expects tokenized equities and other real-world assets to grow as blockchains expand access to financial assets, while noting that secondary trading and market infrastructure remain early.

Agentic Commerce Throughput

Valente sees potential for blockchain payments in AI-driven internet activity, but says current networks are still orders of magnitude short of the throughput such use cases may require.

Stablecoin Network Effects

Valente argues that Circle and Tether benefit from deep liquidity, regulatory reach, and high switching costs, making it difficult for new stablecoins to compete for institutional use.