The Breakdown - Introducing: Inflection Point | The Crypto-TradFi Convergence

Episode Date: March 5, 2026

In this first episode of Inflection Point, we explore the accelerating convergence between traditional finance and crypto as institutional adoption begins reshaping the foundations of global financial infrastructure. The conversation examines ETFs, DeFi innovation, market structure shifts, institutional flows, and how evolving investor behavior is changing Bitcoin and digital asset markets. Along the way, we discuss regulation, credit markets, technology limitations, and the broader implications of finance moving onchain. Enjoy! — Inflection Point: Apple 🎙️: https://bit.ly/3QKdX5a Spotify 🎙️: https://bit.ly/3YhGJy3 YouTube 🎥: https://link.blockworks.co/46Cee2q — Follow Matt: ⁠⁠https://x.com/Matt_Hougan⁠⁠ Follow David: ⁠⁠https://x.com/dlawant⁠⁠ Follow Michael: ⁠⁠https://x.com/marcryptonio⁠⁠ Follow Marc: ⁠⁠https://x.com/marcarjoon⁠⁠ Follow Inflection Point: ⁠⁠https://x.com/BWInflection⁠⁠  Follow Blockworks: ⁠⁠https://x.com/Blockworks_⁠⁠   — Join us at Digital Asset Summit 2026 in NYC March 24-26th! Use code INFLECTION200 for $200 OFF! ⁠⁠https://blockworks.co/event/digital-asset-summit-nyc-2026⁠⁠ — Timestamps (00:00) Intro To Inflection Point (06:48) The Convergence Between TradFi & Crypto (22:20) Crypto's Biggest Advantages & Hurdles (36:15) Crypto's Changing Market Structure (41:00) Prices, Sentiment & Long-Term Allocators (46:00) Evolution Of Crypto Options & Yield (51:30) Is The 4-Year Cycle Dead? (01:02:00) Final Thoughts — Disclaimer: Nothing said on Inflection Point is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only, and any views expressed by anyone on the show are opinions, not financial advice. Hosts and guests may hold positions in the companies, funds, or projects discussed. #Crypto #DeFi #Bitcoin #Blockchain #DigitalAssets #CryptoPodcast

The most important financial regulator in the world says all assets will move on chain in the next five years. And there are people who are like, ah, whatever, defy's dead. Any rational person looking at that string of facts would say, boy, are we accelerating up the curve? As soon as I used AVE, I knew it was fait accompli that the institutions would eventually come into the space. We have all these frictions. There's definitely a lot of problems to solve. But we are pretty much on our way to at least have. a roadmap for most of them. Tread-fied people, they work very hard, but they don't know what's coming at them when their assets all start to trade 24-7. BlackRock has tokenized treasuries.

J.P. Morgan is setting intraday repos on blockchains. Apollo announces a giant partnership with Morpho. Franklin Templeton, Fidelity, Cracking, Coinbase, every major name in finance is building on these rails right now. I believe we are at the most consequential moment. There I say the inflection for institutional crypto since the asset class was born. This is the path to integration and the evolution of financial infrastructure. This is Inflection Point. Everyone, welcome to Inflection Point, a weekly podcast for professionals navigating crypto's institutional era.

Each week, we break down the drivers reshaping digital asset markets. In a space that's typically dominated by retail narratives, We're going beyond the price action to analyze the mechanics driving this adoption. Our goal is to deliver the analytical depth of premium research in an accessible format for busy professionals. This is the path to integration and the evolution of financial infrastructure. This is Inflection Point. I'm Mark Arjun, senior research analysts at Blockworks. I come from an equity's background across buy-side, sell-side investment banking,

but today our focus is on digital assets and their institutional adoption. I'm joined by operators and investors at the forefront of institutional crypto. I'll let each of them introduce themselves and then we'll share their perspectives. Awesome. Wow. Happy to start. Excited for this first episode, Mark, Matt, Michael, really looking forward to the conversations. So I'm David Lawan. I'm head of research at Anchorage Digital. Encourage one of the leading players in crypto institutional infrastructure, providing services that go all the way from custody to spot trading. derivatives trading, lending. Also, we have, we're home to the first crypto bank federally charter, and we have a lot of presence there on the stablecoin side of things. Before Anchorage,

I used to do, I used to be head of research at Falcon X, which is one of the larger crypto prime brokers slash trading desks. Before Falcon X, I had the pleasure of working with and being mentored by Matt Hogan at Bitwise. I was head of research there for quite a few years. And before that, I used to work in traditional finance. I used to be a sell-side equities analysts covering just traditional equities. Amazing. I can jump in here. David, it's great to be back together again.

We are welcoming you here, despite the fact that your name doesn't begin with M. So you're the special one in the group. I'm Matt Hogan, Chief Investment Officer at Bitwise Asset Management. I've been a Bitwise for eight years. Bitwise manages about $15 billion across ETFs in U.S. and Europe, staking vaults. SMAs and other strategies. I think the two unique things that I can bring to the podcast, one, I just have a lot of touch points with institutional investors.

Bitwise does about 15,000 meetings a year with institutions around the world so I can provide some firsthand knowledge of what they're saying and thinking about the crypto markets. And two, my own background before Bitwise is in the ETF market. I was the CEO of ETF.com, created the first ETF data and analytics and ratings. system in the world. And so the intersection of crypto and ETFs is a space that I know well. I'm really excited to join the pod. My name is Michael Mark Antonio. Thanks, Matt, for that. Thanks, David. Thanks, Mark. I'm the head of Defied Galaxy Digital. Galaxy is a crypto AI, publicly traded financial services company. And if that's a mouthful, we are very focused on the

intersection between crypto and AI, and our entire business for most of its history has been predicated on how do we bridge crypto to institutional investors and institutions all throughout the United States and globally. And my focus at Galaxy is on building out our decentralized finance division. And what we focus on primarily is the bleeding edge of technology and the bleeding edge of on-chain, these on-chain primitives that are going to power the entire financial system. And so I believe we are at the most consequential moment, dare I say the inflection point for institutional crypto since the asset class was born. For years, the conversation about institution and crypto was always theoretical, right?

Will they or won't they? How much should they invest? How much should they allocate? Is it real? Where's it a fad? That conversation is over, right? BlackRock has tokenized treasuries. You know, J.P. Morgan is setting intraday repos on blockchains.

Apollo announces a giant partnership with Morpho. Franklin Templeton, Fidelity, Cracking, Coinbase, every major name in finance is building on these rails right now. They're not studying them anymore. They're not piloting them. They're building in production with real money. And yet, and this is the part that I think matters the most and for our viewers, most of the institutional world still hasn't fully caught up with what is actually happening on the ground.

They see Bitcoin solely as a portfolio allocation decision. They see Ethereum as a speculative asset only. They're debating whether to put 2% or 5% in digital assets, while completely missing that the technology underneath those assets is a generational upgrade to the infrastructure underneath any. everything they already do. Execution, settlement, custody, compliance, fund administration. This is what we're going to talk about.

We're going to bring this to you every week. I'm very excited. And let's get started, Mark. Lovely, lovely passion. And thank you, everybody. We have the Triple M and D team here. Let's get started. I mean, first where, you know, as the first podcast,

we're just going to kick it off with, when did each of you realize the convergence between Tradfai and Crypto was actually happening. When did that light bulb moment happen for you? David, kick us off, man. Oh, yeah, I'm happy to start. I think this Treadfire convergence and this idea of the institutions are coming, I think it's honestly been happening for a long time. Sometimes we think about the institutional market as this monolithic group of investors.

But that's not true, right? We all here know how a terrestrial. a genius this kind of group is. We had some folks who have been engaged with this industry until very early, like we see investors, even some endowments have been engaging with crypto in the past at pretty early stages. But if you like a few things have changed, probably the first moment when this thing started to become very real. And I'm sure Matt can talk a lot about this is when the spot Bitcoin ETFs launched for the preparation to that. And then, the moments after that and the few years that we have been to that, that has definitely been

a watershed moment. But for me specifically, and maybe I can speak a little bit to the lens that I bring to this conversation, which is the cell side lens, right? So I've been working for the past many years at prime brokers and trading desks. And maybe one day we can do an episode on what is a crypto prime broker, how prime brokers are different from OTC desks or market makers, why are these guys so heavy? heavily used, how are they different? But basically, that's the seat that I'm on.

So basically, when a company like Bitwise or an institutional manager wants to engage in the market, they are not going to do the same thing that we do, just like open an accountant and an exchange. They will usually have onboarded as a counter party to a prime broker or some sort of liquidity provider. So that's the type of lens that I see. I see a lot of trading action. I talk to a lot of these guys.

So I'm bringing kind of the cell side lens and hopefully it complements both the buyside vision and the defycross over here. So just to put that into context, because I'm one of those guys who are looking at volumes and order books. I spend a lot of time on derivatives. So I spend a lot of time trying to understand the Bitcoin price formation process and just trying to help our clients and counterparties navigate this world. And for me in that realm, the moment it really hit that TreadFi was not only a player and then a player that was probably bringing most of the new capital into the space, right, after the spot Bitcoin ETFs launched. But also at some point, I think DFI started to lead, I'm sorry, TreadFi started to lead in the Bitcoin price formation process. And for me, that hit in early mid-20205. Like folks like me, when they see the market,

they have a few kind of flagposts. They look at a certain pattern in volumes. They look at certain pattern across exchanges. And after Liberation Day, Bitcoin was just trading weirdly. And it wasn't doing the things that it was supposed to do. All the indicators were kind of off. And then I was talking to a client, actually a VC, and he's like, David, that's right, but you're only looking at the Bitcoin spot volume.

What if you add the ETFs? And I never bothered to add the ETF volume to look at the Bitcoin price section because ETFs are obviously very large and bringing a lot of capital. But in terms of volume, traded volume, they were like 5 to 10% of Bitcoin spot volume. So they were not very meaningful. And I was like, yeah, let me do that. I did that. And then it turned out that spot ETFs were trading 30, 40, 50% of the Bitcoin spot volume.

And then if you add like micro strategy, which is a Bitcoin proxy, you're kind of rivaling that whole volume. Just a few weeks after I was looking to the options market. And then I saw that IBIT options was on its path to overtake derivative Bitcoin options, both in terms of open interest and in terms of volume. So for me, it was probably about a year ago that I started to see that TreadFi was not only a player, but it was the leading player. And many times it's actually has been kind of dictating what's going on with the Bitcoin price. And then, of course, we had all the regulatory unlock and just so many good news flow that I think stands behind a lot of these reasons.

but those that was the exact moment when I was like, okay, this is an inflection point. Now TreadFi is really, really driving the bus here. So it started with the ETFs and then it put it a deep end up the liberation day. Matt, I feel like it's going to be something similar for you. It's something similar, although I would point to sort of three moments, one of which was last week. So I can make this maybe even more current. I absolutely agree the middle moment was the ETFs. launching and just being by far and away the most successful launch of all time.

I mean, they were six times bigger than the most successful ETF launch previously. It's not, it's not an outlier, it's not like a two sigma outlier. It's like an absurd thing. So that definitely told me that this was going to be a big deal. My personal story, since I mean, as soon as I used AVE, I knew it was fait accompli that the institutions would eventually come into the space. The UX there is such magic that I've yet to find someone who I've walked through lending into Abbe who didn't just assume everything was going to be defy.

So there's a little bit of backstory there. But I actually agree with what Mike said. For me, almost the tipping point because I was slow to recognize it was BlackRock moving, buying uni tokens and putting Biddle on uni. and Apollo doing the same on Morpho. And the reason for that is I think I, like many people in crypto, have sort of boy who car-eyed wolf syndrome about this institution moving into the defy space.

If you step back and look at what's happening, you have the most important financial regulator in the world saying all assets will move on chain and announcing project crypto. You have the CEO of the largest asset manager in the world saying every stock bond and ETF will be tokenized. You have his CFO saying they're going to tokenize all of their ETFs in the next three to 12 months. And now you have the largest credit manager

buying 9% of a DFI protocol. Any rational person looking at that string of facts would say, boy, are we accelerating up the curve? It's clear that it's all going in this direction and it's going much faster than we anticipate. But because we've heard this institutions are coming story so many times and for so long, I think many of us sort of dismissed or didn't take seriously these items. I mean, they're sort of ridiculous. The most important financial

regulator in the world says all assets will move on chain in the next five years. And there are people who are like, ah, whatever, D-Fi's dead, or L-1s are dead. It's sort of ridiculous. So for me, it was the Apollo and Black Rock Union Morpho moment, actually more than anything else. that said it's right here right now. It's accelerating sort of like AI at that kind of pace. And the world is going to look completely different in two years. So Matt and David gave a little contemporary history. I might want to give a little actual ancient history here,

what seems like ancient history. And that is to understand from my perspective what Defi truly is and the potential for institutions and why institutions should care about it. You have to go back to the moment that made it necessary, which was in September of 2008. So Lehman collapses. Within days, the entire financial system is in free fall,

not because one bank failed, because the entire system failed. And the institutions at the center have become so interconnected that when one went down, it threatened to drag the entire system with it. Bear Stearns, AIG, Merrill, City, webs of counterparty risks

no one fully understood. no one knew who was solvent. No one knew who was holding the toxic assets. So much so that if you recall, the Treasury had to capitalize even solvent banks to rent further contagion. They called this systemic risk. Institutions that were so large and so interconnected

and so opaque that failure, you know, would take down the whole system. But, you know, they were called also too big to fail. That's what we call them. And the lesson we all learned then was that interconnectedness and an opacity. The opposite of decentralization and transparency was the nexus, was the prime event that created the absolute collapse of our financial system.

So in 2008, you know, I was looking at the financial system and I was just trying to figure out what the hell went wrong. And, you know, we had Dodd-Frank that came out. Basel 3 came out, SIFI designations, stress testing, you know, resolution planning, serious efforts by serious regulators. And they all work, they all, you know, all those regulations kind of fell short because the system had gotten so complex that regulators need the banks. The regulators needed the banks themselves to explain what they were doing. The quants had to walk the examiners through the models.

This is actually in Basel 3. Like the quants, the banks have to explain their own. own rules to the regulators. The institutions being supervised were the ones that, they were the only ones that understood it was being supervised. And I realized in this time while I was in law school that rules are not going to solve this problem. Laws, you know, are just on paper.

You need programmatic, systematic rules that actually are built into the very fabric of the system. And that's where DeFi comes in. You know, that's why I'm so focused on defy and why I think institutions are going to adopt it at scale. Because, you know, the purpose of DeFi is not to build casinos. It's not to build, you know, speculative tokens, NFTs being coins. The original thesis behind DeFi was a response to the failures of the Great Recession. Building a financial system whose architecture structurally eliminates the conditions that made 2008 possible. So when that happened and when DFI summer came in 2020, I knew that the entire institutional fabric was going to move on chain.

And I jumped right in. I love that. I mean, it's a great thesis. I want to build one more piece of history on that, Mark, if that's okay. So I'll take 2008 and raise Mike 1993. The other piece of interesting fabric that I can join here is I've been around long enough to see finance make significant changes. Right. So like I remember going from floor base trading to digital trading.

I remember going from mutual funds to ETFs. And the reason I raise that is a mistake. I see a lot of people making VisaV defy is assuming that like finance is sort of at the end of history. But the way we do this now is the way it will always do it forever. It will only ever be ETFs. There will never be another asset management primitive. It will only ever be traditional brokerage, intermediated, floor-based, or digital trading. There will never be another version. And that's just not true of financial history. It's just most people haven't witnessed one of those big changes because there really hasn't been one outside of crypto. Since 2008, crypto was sort of the next

new thing after ETFs. They don't come along very often. But if you scale back through history, you do see these apoccal changes in how finance works. It does happen, right? That is actually what Atkins was calling out with Project Cryptos. We've seen four of these in their history. This is the fifth. And I think what Mike is talking about is it's a necessary fifth. But you can see the entire financial ecosystem and how it works change. It has happened in the past. It's happening again now. So in law school, I took a class called Big Bank Regulation. And the takeaway from that class, which we just studied Dodd-Frank, and we studied the financial crisis, was that interconnectedness of financial institutions was the cataclysm, was the event that caused the entire systemic collapse. And I really started studying decentralization.

Like, how can we structure a decentralized system? This was before Ethereum. Bitcoin was out at this time, but I think that the three core pillars of DFI, self-custody, transparency, and decentralized networks. Those three things combined, when applied to the financial economy at large today, will make it safer, will harden it, and will actually make it scale faster. And so I'm so excited about it. The thing that makes this all very exciting is that I don't think there is a broad recognition in the market that this is going on.

I have a bunch of friends who were if Denver last week feels like because just maybe prices are not reacting and maybe we can talk a little bit about market conditions. But maybe because prices are not moving much, the vibes are kind of not great in certain crypto circles. I'm right now at a very threat, I'm at a global outside connections. This is a big kind of cap-intral trad-fi conference. And crypto has a presence for sure. But I think that the amount of people in the broader market, especially like in the institutional, maybe more, let's say, allocator institutional vertical of the market, I think the realization that all these things are going on,

they're still relatively circumscribed among people like, us who maybe have a foot on Tradfai, but also follow crypto very closely. Maybe that's because there's a lot going on in crypto, beyond crypto, in macro and all of that. But I feel like it's a very exciting moment when we see these strands developing, but it does feel like we're, we have a glimpse of the future here, that the overall market is not paying as much attention as they should. Yeah, 100% agree. I think it's, I think, like you said, the prices being down kind of people in some kind of mood.

But then also, you know, there's so much good news coming out. There's so much regulatory clarity, so much projects moving from pilots to actually launching within the institutional space. Like, I don't know how if you're following these things, you are not the most optimistic you've ever been in this space. And then outside, even people not in the institutions, I think they don't know what's going on. I remember, I mean, to kind of put it back to the first time I really thought that this was going to be big was, I remember when I was purchasing a house and I had to pay some legal fees. I sold some stocks and the legal fees were due a little bit earlier than I thought. And my stocks didn't sell. It takes T plus three settlement days.

So I was waiting. And I was like, okay, so what can I do? So I just went on to Avey like Matt mentioned. I took out a loan. I paid illegal fees with off ramping wasn't too difficult back then and then by Monday I had repaid back the loan and it cost me 36 cents

and I was like this is amazing technology and the only problem with this is that it took me like eight different clicks to do and so I figured once we solve that which is just now we can get this technology being adopted a lot faster I mean I think I was a little bit too optimistic on reducing the clicks in this space, but I think we're closer than ever.

I mean, it's, Mark, it is, it's such a good story because it is so patently obvious how much more efficient decentralized markets are than traditional financial markets. And it's not necessarily traditional financial markets fault. They were built during a time when if you were in California and you wanted a buy a stock on the New York Stock Exchange, you ought to make a phone call, you had to send a letter, a stock certificate was mailed, right? These systems were the product of the technology of their era. And then when new technology comes out, new technology often has to be, is met with great skepticism because it could create instability, but oftentimes what it does is it displaces

middlemen. Blockchains are the ultimate displacers of middlemen. And that is, that should be met by capital allocators as a, like with open arms. But from regulators, it's met with a little skepticism, a little fear. And so we have to really, we've had to do a really, like, we've had to climb a mountain over the last couple of years. In working with, with regulators and educating policy members in DC to really get them comfortable with the efficiencies that blockchain technology provides. And it's just was so refreshing to hear, you know, Chair Atkins say that exactly what we have been preaching for so long with Project Crypto and how all securities will be traded on chains. So I'm just, I think it's,

it's incredibly bullish. Yeah, that's right. I'll just add one more maybe note of, of, of Realism to your story, Mark, a mistake people make with these new technologies is they expect them to be better at everything on day one. The reality of defy is it's better on a few things and then way worse on a lot of other things. And we in the industry should accept it's way worse on a lot of other things. You just raised that there are eight clicks. That's one example of something that's way worse than you would encounter in Tradfai. There's also a huge number of DFI protocols, some of which have obscurity bugs, some of which have been around for a while and work really well, that's worse than the protections you get in the traditional market.

But when you try to find a disruptive technology that's better on every metric, you'll just never encounter it. It's always better on one or two metrics, and that allows it. The question is, can it get better on the things it's worse at? And I think what we're starting to see in DFI is it's getting better at the things it's worse at. And I think people make the mistake of like, yeah, but it has these problems. Of course, it's a new disruptive technology. It's like the oldest story of all time. Classic innovators dilemma. I guess the other thing I would say, Mark, is you probably not only paid less fees, you probably got a better rate. And this is still today. If you try to access capital in defy, it's cheaper than doing it in most.

traditional finance venues. To the point that I think just today we saw a mortgage lender better, trying to announce access to defy at scale, I think 500 million and then scaling up to a billion in order to get better rates for their clients. So we're starting to see some folks identifying some of these advantages that Matt has announced or has alluded to, and being willing to go over all the hoops to integrate defy into the more traditional system. I think this is all very exciting. Yeah, 100%.

I mean, not only did I get a better rate and it was cheaper, it probably happened a lot faster than the bank would even reply to my email. So I think it was a win all around. But I do want to ask, we are highlighting a lot of the advantages of this technology. but like as Matt said, it's not perfect in everything. What do we think of some of the current structural disadvantages and do we see them changing? Oh, man, where do we start? For the most part, the U.S. is terrible. It's gotten better, but it's still pretty darn bad.

There's no easy way for non-native consumers to know which protocols to trust and which protocols not to trust. The regulation is uncertain. So large institutions that care about AMLKYC don't have an easy way to access the space and its full permissionless nature. We've probably only scratched the surface on the primitives. We haven't solved things like under collateralized lending. That remains like an uncracked problem, and that's the bulk of lending in the world. So that's a real issue. But if I had to tick off what we're going to solve next, it's regulation.

it's UX and it's some version of AML KYC or solving the permission versus permissionless problem that will unlock trillions of dollars of scale. The other stuff will come along, but those are the three that I see as sort of big challenges and impediments right now. Yeah, I would echo that, Matt. I think the number one issue actually is the last one touched on AMLKYC. And it's ugly cousin, which is the accredited investor standard, right? So as long as RWAs, which are securities, right, as long as they can only be traded behind a walled garden, you sort of undercut, not fully, but you sort of undercut the power of permissionless systems, decentralized networks, right?

you sort of undercut the composability of smart contracts and decentralized finance. And when you do that, you make it a little awkward, a little weird. There's some issues when buying a cred or buying a RWA, what can you do with it? Well, nothing, because you can't trade it anywhere because nobody can receive it because it's restricted to only accredited. investors and there's not a lot of accredited investors. So there's some issues there. I think, I think that needs to get solved. But that's a regulatory issue about lowering the velvet rope, so to speak. On the AML KYC, though, we should have decentralized identities. If we can get decentralized identities, that will be a tremendous benefit. And frankly, we need decentralized identities

because I just don't think we are going to onboard billions of people through a sort of regulatory apparatus that requires AML KYC formally. It should be done almost informally through a decentralized identity. But once that happens, we finally get what we need. And what do I mean by that? What gets me so excited is this. We actually have all the infra. We have all the programs. We have all of the core technology ready to go. They just need assets and volume and liquidity to trade, right? So vault products are already superior to funds. A vault is effectively just a programmable fund.

It's like, I remember when when I was a kid and my mom brought home a, she brought a brand new washing machine and it was intelligent, it was an intelligent machine, right? It would talk to us. that's what a fun I mean it's a silly analogy but funds are dumb pieces of paper right I used to do fund work as a lawyer

and when I was before I was a lawyer I was a paralegal and the reason I became a corporate lawyer instead of a litigator is because the head of corporate law at Kravath-Swain and Moore where I was a paralegal said to me and I'll never forget this he said litigators

are are ministers and the corporate lawyers are legal engineers. And I said, that is the coolest thing I've ever heard. I don't know what that means. That is the coolest thing I've ever heard. Turns out, no engineering at all. It was just pure pushing of paper.

So when you see all these complex legal structures, a fund administrator, a fun wrapper, all these, these are just contracts. They don't actually exist in the world. And they're not, nothing happens unless a trustee or a fund or a lawyer actually reads the documents and enforces the rules. That is archaic. We now have smart contracts that can execute these things programmatically. And so, you know, there's a lot of benefits, but not to sound too bullish. KYC is a big problem. The other problem, and I'll hand

this off to David, is we always talk about how T plus one is a problem, and it is. But like, it is a problem that it has a lot of benefits to, namely being able, you know, T plus one is the cost you pay for extending credit, right? Extending leverage throughout the existing financial system. And if there is no T plus one settlement and the current financial system completely migrates over to decentralized rails, we do have to figure out how to provide leverage, how to provide credit to purchasers so that that transition is seamless and they don't have to buy everything on collateral at the point of sale. That's also great.

I think the thing I would add, and I agree with everything Matt and Mike said, but perhaps the thing I would add, and then I'll bring it back maybe the discussion a little bit to Bitcoin because Bitcoin has been integrated into more traditional rails for a while. And I guess the interesting thing is that this transition period doesn't come without friction. I think one that has been very interesting and kind of now maybe patently obvious, is that when you start to bring this new cohort of investors that now hold a sizable amount of Bitcoin, Bitcoin starts to trade a little differently. So like a lot of these folks want to get a yield on their Bitcoin holdings. So you know what they're going to do? They're going to sell covert call strategies.

And this has been done to an extent that I think it's fair to say that it has capped some of Bitcoin's upside volatility. Now every once in a while you have weird things like CME market open gaps on Mondays or a hedge fund blowing up somewhere because they were doing an exotic bet that involved Bitcoin. So now Bitcoin is trading in a different way than the one we were used to. And of course, things will be different for defy and tokenization, but whenever you bring such a large participant, you can always have these short-term frictions that they can happen over time. And I think that's totally fine. I think that's part of the game and the market works those out. The other thing I like to say is that trad-fied people, they work very hard, but they don't know what's coming at them when their assets all start to trade 24-7. They're all going to be as stressed as we are.

And that's going to be fun. But I think overall, I mean, we have all these frictions. There's definitely a lot of problems to solve. And I think Matt and Mike covered a lot of them. But we are pretty much on our way to at least have a roadmap for most of them. That was not true two or three years ago, right? If you talk about the regulatory environment in crypto two or three years ago, that was a major risk. That was a big question mark.

We didn't know what's going to happen. So I feel like we have pretty clear roadmaps that will obviously take some time to be navigated. And that makes me think it's a very interesting phase. It's a lot to unpack there. Thanks, guys. I mean, first of all, I'm surprised that KYC AML was ranked higher than regulation. I thought maybe it would be maybe a bit the other way around. and then makes me wonder if you all are fans of Sam Altman's world network, decentralized identity solution.

But then I think, David, you brought up a point about this new market structure that Bitcoin is trading in because of the different types of investors. Do you see this changing anymore? I mean, you know, NASDAQ and ICE have recently removed the up to the 25,000 options contract limit on the ETF products. And some people are really think that the recent downturns and prices. Are you saying there's a correlation between them? How long do you see this supposedly like new soft cap going on for?

Yeah, I think it's cool to see some of the shackles kind of getting cleared up a little bit. The other probably big one that I think it's not, it might be a little bit understated, is that I think the CME will start trading cryptocurrency, including Bitcoin Futures 24-7, starting in a few months. So that's interesting. I feel like crypto is becoming a little bit more trad-fi, but in a few aspects, Thread-Fi is also becoming a little bit more like crypto,

and we are seeing these worlds kind of getting mixed and interconnected in a more smooth fashion. But I think, yeah, no, I think the market structure will change. I think we're going through a period where it's changing. It's probably going to change more. I think actually another kind of still, this is still probably a much longer trend. But the idea, when you start to see crypto integrated, for example, into 4-1Ks and things like that, you're going to bring another very different demographic that's going to be very large.

there is the rise of derivatives that has been really growing in the Bitcoin space and the crypto more broadly, even though prices are kind of flat. If you look into what's going on, for example, options markets, there are certain leaves that are growing very significantly in crypto. So, yeah, no, I think there's still room for the market structure to change quite a bit from here. It's definitely going to be a few exciting years of that. Lovely. I mentioned ETS and Matt.

You look like he were itching to C. something. Well, I was just, I was just jump on the question of like, has unlocking a broader derivatives market been the reason that Bitcoin is down? I definitely agree with David that it's changed the market structure and changed how things trade. But the reason Bitcoin is down is because people are selling Bitcoin. They may be selling physical Bitcoin or they may be writing covered calls against Bitcoin positions that they hold. Those are functionally the same thing. When you write a covered call against a Bitcoin position that you hold, you are selling away the upside of Bitcoin. It is mechanically the same thing as selling Bitcoin itself.

So I do think that the enormous growth of the options market has changed sort of the way Bitcoin trades for sure. But the reason prices are down 50% is because people who held Bitcoin at the start of 2025 have been selling it and writing calls against their position. And that's like, that's the 100% of the story. And I worry, I worry I hear like talk of paper Bitcoin and these sorts of things. No, it's like people are selling. They may be selling through options. They may be selling through futures. It's all the same.

It all boils down to people selling away their Bitcoin. And that's why the price is down. So that was the simple point I wanted to make. I think that's, yeah, maybe not people try to make it complex. It's actually pretty simple. Price is down because people are. selling. That's what I mean. Yeah, there's no conspiracy. There's no like magic. It's people are selling. Basis is compressed because retail traders aren't taking on leverage upside

position. And that translates into sale of physical because the way basis is hedged out or sales of ETFs. The outflows we've seen from ETFs since October 10th, we've seen $10 million of outflows and Bitcoin ETFs. The vast majority of that is from hedge funds that were running the basis trade and are no longer running the basis trade. But it's not because the hedge funds don't want exposure. It's because the other side of the trade, which was retail speculation that created the basis, doesn't want exposure. That's what's been squeezed out of the market.

And I think it's just important for people to realize that they're all, they all boil down to demand for Bitcoin. That's like the ultimate driver. So, I mean, we've had historic weeks of BTC outflow. I think it's five net negative in a row right now and probably maybe nine ultimate. of the past 11 have been net negative. And then, as you mentioned, the basis traders, you know, those yields are compressing. It almost seems like it's a reflexive cycle.

You know, do you have any thoughts in that? Do you see anything stopping it? Oh, yeah, for sure. Yeah, you have, there's sort of three groups of Bitcoin ETF traders. They're hedge funds running the basis trade. They're attention investors. And then they're long-term allocators, financial, advisors, endowments, sovereign wealth funds, family offices, etc, that are buying Bitcoin for the next 10 years.

And the reason we've had outflows is those first two have been pulling money out of the market. As mentioned, basis collapsed. So the hedge funds who hedge their basis by buying the ETF because it's regulated and they feel comfortable with it, have been redeeming as they unwind that trade. The attention investor has migrated entirely to precious metals or to AI, and they're no longer interested in crypto. The third component, which is the long-term allocator, the institutions, the family offices, the financial advisors, they're still buying and holding. That's why we've seen 10 billion out of like $100 billion come out of the market, because the long-term allocators are

still buying and holding. When I go visit them, I was on the road last week in Miami. I met with 40 advisors. They were all allocating, and they will continue to allocate. So, you know, I really think if you keep in mind these three groups, hedge funds, attention, and long-term allocators, they move at different paces. And that's probably the reason I'm optimistic long-term is that last one is still aggressively buying. They're actually buying the dip. They're allocating more. You can see that if you really analyze the flows and think about which category is using which ETF, you can tease out some incremental wins on people who are focused on that long-term allocator space. But I think that's actually what's happening in the market.

I think one indicator that helps contextualize that is just looking at overall liquidity trends. And I think this year we saw some pretty remarkable things. So like take, for example, Bitcoin spot volumes. Bitcoin is obviously a very liquid asset, but its spot volumes have actually been very low. And all this trend, all these things that matter saying, they're very meaningful. and they impact the price. But we're talking about these down moves coming on very low liquidity. Just yesterday, Bitcoin trade at $6 to $7 billion.

That should be a weekend for Bitcoin, not a regular weekday. And this is like a third of what Bitcoin would normally trade before the October 10 crash. On the other hand, when we had some of those major sell-offs, like, for example, the early February, the February 5th crash, Bitcoin spot volumes were exceptionally high. We're talking about while Bitcoin usually has been trading $6 to $8 billion a day. During those days, Bitcoin was trading $18 to $20 billion a day. So what this kind of gives me is a sense that there is some strong support around certain price levels.

And I think certain folks are seeing certain price levels as very interesting. interesting ant-tri-points, probably the 60K level is a big one. Whenever Bitcoin gets to that 60K level, even the amount of trade activity that we see at our desk from these like institutional, longer-term, fundamentally driven investors actually starts to become kind of a little bit off the charts. You can also see that in overall trading volumes. So I feel like a lot of these basis trading, a lot of these attention investors that met, mentioned, I think these guys are broadly out of the market. It does feel like positioning is light. Of course, we can always have a few pockets of leverage, accumulated leverage,

especially in the Perth's market. But overall, it does seem like positioning is light. And it also seems that there is relatively strong support at key price level. So that, I mean, I don't want to do a price call or anything like that. We can obviously go one way or another. but he does feel like the setup now is rather interesting. David, guarantees we're not going below 60. That's what I heard. Not at all, not at all. I agree with that, David.

I would also add there's probably caps on the upside. The reverse of that is probably also true. I think it would be behaviorally hard to blow through 80 and then again at 100. I think those are still levels with my gut feel is significant supply willing to sell, at least in this market environment. We talked about how, you know, these investors are, you know, the yield is being compressed on the basis trade, but, you know, they don't just want to hold Bitcoin. That's why they do these kind of trades. And the volume, the volume that ETFs make up as a percentage of Bitcoin volume as a whole continues to grow over time. And this demand for yield, we're seeing, you know, other ETFs with yield, stake ETFs like Solana, maybe Heath coming in the future. But then even with Bitcoin, we're seeing ETFs in the form of Bitcoin yield through that same, you know, going, you know, short futures, long spots, you know, the contango trade. If that ETF starts to become more popular, will that further change this market dynamic and possibly also put this kind of soft cap?

I mean, yes. I would say, Mark, most of that you're not seeing in public. reported data because it's actually taking place in individual SMAs, individual one-to-one client relationship. So there's already a lot of that activity in the market. I think it's been one of the primary reasons it's been so hard to rally is there's much more Bitcoin than you can see on-chain has sold away its upside over the last year. If that continues into public products, and there are public products, folks like NIOS and others that are accumulating real flows, it has that same.

effect, right? Again, that's not net demand. That's selling away the upside. So I think, I think you will see it. I think you're already seeing it. You just don't see it in public funds because SMAs aren't reported, right? They're private one-on-one relationships. But that's a big, a big business that's really grown over the last year. For what it's worth, this is why you saw people who were skeptical of like the Bitcoin IPO theory and they pointed on chain and said not that much Bitcoin has been sold, but probably 2X what was sold was sold away in option overlay strategies. And the market just didn't see that because underlying Bitcoin doesn't have to move. It actually stays at the custodian and then the options are written against it. And so that's

like an underreported corner of the market. It's very real. It's pretty ironic that we're making this transparent system more opaque as it gets more integrated into the system. So I guess would a counter measure to that be these same investors looking for a source of yield. If we had, for instance, you know, if they were to experiment more with regulated products, maybe vaults, maybe maybe BTC lending, you know, maybe these alternative options to generate the yield, maybe not at a delta neutral way or risk neutral. but you know what would this kind of counteract the basis trade do you think um i think this all makes sense mark uh we do probably need though a little bit off market maturity here i feel like btc credit markets they're still kind of still one way so like very one way markets in that everybody has bitcoin everybody wants to lend their bitcoin not a lot of people wants to have their

liability in Bitcoin. So I think we need a little bit more market maturity here, but I think the direction is right. I think one of the things I'm very excited about is this adding complexity and further sophistication of Bitcoin credit markets, perhaps overall on-chain credit markets. This doesn't have to be a Bitcoin specific discussion. So I think there's something that we'll probably see more and more. But the reason people do these covered call strategies is because the rates that they would get by lending their Bitcoin are relatively low. So if you go to a prime broker, if you go to a landing desk and you say, hey, I have all this amount of Bitcoin that I want to lend and get an yield, the number you're going to get is that the rate

you're going to get is not super high. And you can get probably three to four, maybe five times, on how aggressive you are of that rate doing call overlay strategies. They're not the same thing, right? They have very different risk profiles. Call selling overlays are much more active strategy. It's something that you have to monitor and kind of harvest that yield over time. But historically, it has been more attractive than just simply lending BTC. But I think we'll get there.

I think the market will definitely call. I think that's right. I think the primary thing that will shrink demand for the covered call overlay strategies is getting past the historic down year of the four-year cycle. I think a lot of those people will look to reallocate as we move into the end of the year and they start looking for, you mentioned the word reflexive. I hate that it's this simple, but the reflexive nature of people speculating that will be in another bull cycle, I think you'll see those compress. And I agree that the lending market is interesting, but the yields are really, really low. I think it's fair to say. You know, you brought that up on. Just for my curiosity, I want to open this up to the floor.

Do you all believe the four-year cycle is dead? Do you all still believe in the four-year cycle? Or do you all still believe in the four-year cycle because you believe other people believe in the four-year cycle? I think the four-year cycle is alive and well, but every cycle it gets less steep. It is more shallow. and the bear this time around I think will be no different

I frankly am scratching my head about what the main catalyst is for like for example we're talking about the basis getting flushed out like okay well directional is still out a little bit as well and on top of that I see macro conditions not they don't seem that much different than they were six months ago to me, right? And I'm scratching my head about the following. How do I explain? I mean, this is what I have to talk about with institutional counterparties every day for

last month. Is the Bitcoin thesis on a as a store of value? Is the Bitcoin thesis, is that accurate? Is it in fact a store of value? Because gold going up, Bitcoin going south. highways are down, we always have to explain that. And while, I mean, I would love to hear what Matt and David think on this, but from my perspective, it is a little concerning to me that Bitcoin right now is at least not trading in a way that would reflect a store of value and a safe harbor

for global instability. I think I'll take a little bit the other. side here, but not entirely, but a little bit. I usually joke that due to inflation, the four-year cycle became a three-and-a-half year cycle because it's actually not matching exactly the calendar years that we have mapped. But no, my real belief is that I'm not a believer in the four-year cycle sustaining. I do think that even the last four-year cycle, I think we kind of lucked out because you had a major macroeconomic stimulus that happened at that year. I think that was a factor in driving the Bitcoin price, orders of magnitude more important than a halving. I've done some analysis in the past of the halving as a percentage of how much Bitcoin trades per day,

not necessarily the amount of Bitcoin standing, but how much Bitcoin trades. And that comparison is even more dramatic at how fast the halving is becoming irrelevant from a flow standpoint. Of course, there's psychological aspects and market psychology has a role. So maybe there is some of that. But I think it's kind of a little bit of a coincidence. And I think all these kind of macro trends, I think a lot of two mats earlier point, there's definitely, I think, I think some market structure topics. There's definitely some folks selling.

But there's also some big macro shifts, right? Over the past six to 12 months, macro has been uncertain for a long time. Maybe it has not changed much, but I feel like there's a lot of uncertainty and a lot of moving parts, right? Sometimes we're concerned about the, I don't know, Fed independence.

Sometimes we're concerned about a geopolitical issue. Sometimes we're concerned about fiscal policy. Sometimes we're concerned about inflation and growth. if there's just too many moving parts where there's a lot of uncertainty, and they're kind of taking their terms in grabbing the market attention. So I also think that the macro environment turned out to be relatively unfavorable for Bitcoin over the past six months. If that was not the case, maybe we would be seeing very different trading dynamics. So, I mean, what I want to say is, I think market psychology plays a role and a lot of people believe in the four-year cycle and that's the thing. But I think that over time, I'm not a huge believer in the four-year cycle.

And just to finish, I feel like I'm talking for too long. I think Bitcoin's investment pieces as digital gold is still in place. But just sometimes we have to be a little patient because, Bitcoin is an emerging digital goal. It's definitely not there. And what I would say is I'm actually makes me kind of exciting because that's where the upside is. If Bitcoin behaved exactly as it should in its more mature phase, the upside wouldn't be there. I remember like five years ago when it was a bitwise, a lot of folks were like, oh, I don't want to get into this because I have regulatory bidders.

I said, fine. And at the time, Bitcoin was traded at $5,6K and say, fine, if you want to wait for the regulatory concerns to be cleared out, you're probably going to buy Bitcoin at $50,000 to $60,000 each, which at that time sounded absolutely outrageous. And that's where we are. And I think if you want to wait for Bitcoin to behave exactly as this asset that we all imagined it to be at its full maturity, fine. But you're probably going to pay $400,000, maybe more. per BTC. So the reason why it's not zinging and zagging exactly as we think it should, I feel like it's one reason to be excited about this asymmetric upside still being in place. So we're a couple of ground

there, but yeah. No, this great commentary. I'll add two thoughts because I can't resist, Mark. I know you want to keep us going, but this is like my favorite thing. I feel like everyone wants Bitcoin to go up whenever gold goes up except for go up 10x more, which is, of course, insane because if that happened, you would only own Bitcoin and then gold would never go up. So the logic actually breaks in that argument. I think that the way I would answer your question is if gold weren't at $5,000, if gold were like flattish, would we be raising any questions about Bitcoin as a store of value? Definitely not. All the long-term trends look awesome, right? It's at $65,000. thousand dollars it's following the four-year cycle sovereign wealth funds are buying it endowments are

buying it uh all the fundamental characteristics are true so then you isolate the question of why is gold up so much and the reason gold ups is so much is very obvious if you look at the data it's all central bank buying right central bank buying upticked after russia invaded ukraine it's maintained there and accelerated in recent years uh there is no retail based buying out actually out outside, at least in the U.S., gold ETF flows are very weak. There's some speculative future, but it's mostly central bank buying. So actually what you're seeing is central banks are buying gold, so the price went up. Are central banks buying Bitcoin? No, right?

And so Bitcoin is doing Bitcoin things, which is following the four-year cycle. But the fundamental, like, 20-year thesis is still incredibly intact. The world is more digital. Bitcoin allows self-custody through settlement. It has statistical advantages over gold. It'll just be fine. You just have to isolate. The reason there's this narrative violation is gold is up and Bitcoin is doing a following

its normal four-year pattern, which is down. But you have to ask why is big gold up. And there's a really specific reason that just today doesn't apply to Bitcoin. So I think it'll be fine. I think it's an incredible opportunity. The fundamentals are way ahead of where the price is right now. So I think it'll be fine. It's hard to complain about Bitcoin at, you know, above 60,000, right?

Obviously, a lot of people are underwater. They probably bought much higher than that. But I remember the days when, you know, could only dream it was going to be 60,000. I mean, we all do, right? So it is, it is holding its value in that sense. And that's a very good point, Matt. I haven't looked at that data, but that's actually, that would explain a lot, right? if you've got central governments that are that are buying gold,

then that explains the entire or explains largely the divergence between the two. Yeah, I mean, I'm really, I'm really quite bullish right now on the entire landscape. And, you know, whether it's 65 or 85 or 100, like the fact of the matter is, is that we are going to see, what I focus on my day to day is sort of moving my clients, moving our partners away from overly focusing on price action and focusing instead on the underlying technology and what the underlying technology can do and how they can fit the underlying technology into their existing businesses right now to completely obviate some of the most costly and bureaucratic parts of this. their businesses. Lately, we've been talking a lot with structured finance. Structured finance is ripe for disruption. It is almost perfectly, almost like, laughably obvious that structured finance should trade

on blockchains, right? It's this corner, opaque corner of the market. It's hard to structure. And the majority of it is paying lawyers to figure out how to structure these things. And the lawyers, the dirty little secret is they take the, legal agreements off the shelf that they'd used 50 times before, 100 times, 500 times, change the names, change some of the numbers, and there we go. But it slows the process down.

And we can automate all that with on-chain. So I'm really excited about it. And Bitcoin will serve as collateral in those structured financial products. Yeah, 100%. I love it. Yeah, I tend to say this is probably the lowest price, the highest price has been, with the most number of people upset. You know, like this is, it's such a weird dynamic going on now if you just zoom out a little bit.

But I think Michael, that's a great point on structured finance. I think I think that's perfect for probably the topic that we'll discuss about next week because, unfortunately, we're out of time now. So, I mean, this has been great. Obviously, we could continue talking for another hour. Thank you all for joining me. If anybody wants to reach out to you, where can they find y'all? let's start with David yeah I'm on Twitter D Lawant D-L-A-W-A-N-T you can find me there

or you can also visit Anchorage's website at anchorage.com there's a lot of stuff there and and our Twitter account too at Anchorage yeah same on X Matt underscore Hogan it's got the U-N-I-N-H-O-U-G-A-N no I don't know why it's there you can also find me on bitwise investments I write a weekly memo called the CIO memo you can look it up and subscribe You can find me on Twitter. Mark Cryptonio is my D-Gen Crypto. M-A-R-P-T-O-N-I-O. And also find me on Chain if you know how to look.

Love it. And you can find me at Mark Arjuno on Twitter, I mean X, and LinkedIn. So thanks, guys. Thanks, everyone. And be sure to tune in next week.