The Breakdown - Meet the $10B Asset Manager With a 10,000 BTC Treasury, feat. NYDIG’s Robby Gutmann

Episode Date: November 13, 2020

Robby Gutmann is the co-founder of Stone Ridge Holdings Group, a $10 billion alternative asset manager and co-founder and CEO of NYDIG, the group’s bitcoin subsidiary.  In this first-ever podcast conversation, Gutmann discusses:  Buying his first bitcoin from Craigslist in 2010 The personal and professional experiences that drove his team to bitcoin Why bitcoin fits the firm's founding principle of financial security for all  A set of key trends driving institutional investors and fiduciaries/asset managers into the bitcoin space  Why the coming year is poised for even more aggressive expansion of the investor market for bitcoin

The systems don't always work, and historically, evidence suggests they more often don't work than do work in the long run. And so the idea of having an open source technology-based alternative that an individual can proactively opt into, can vote with his or her day's labor, that's just an idea that's never really existed before in human history that we find fascinating and we think has huge implications, certainly for investment portfolios, been in a lot of ways that's the smaller of the two topics and the much bigger is what potentially it means for human freedom. Welcome back to The Breakdown with me, NLW.

It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by crypto.com and nexo.io and produced and distributed by CoinDes. What's going on, guys? It is Thursday, November 12th. When the Bitcoin story of 2020 is written, one of the most defining features will have been the rise of corporate treasuries as a demand source for Bitcoin. This is, in many ways, simply the logical course of action for treasury officials in a world where the macro narrative of Bitcoin as a hedge against what feels like a secular shift to a world of unfettered money printing has become ascendant. In August and September, the company that broke this wide open was, of course, Michael Saylor's micro-strategy, who shifted ultimately $425 million from

cash into Bitcoin, as we know that investment is worth much more now a few months later. Square followed suit moving 50 million into Bitcoin in their corporate treasury. In October, yet another of these announcements came. Stone Ridge Holdings Group, a $10 billion asset manager, announced a few things. First, they announced that more than 10,000 Bitcoin would constitute their primary reserve asset. Second, they announced that their Bitcoin-focused subsidiary, Nidig's current custody, asset management, and financing balances exceeded $1 billion, and that they had raised $50 million in growth equity. So who is this $10 billion asset management firm that has a deep conviction around Bitcoin,

a more than 10,000 large Bitcoin treasury, and more than a billion in custody and asset management business? That's what you'll discover this show in my conversation with Stone Ridge co-founder and Nidig co-founder and CEO, Robbie Gutman. We discuss where their Bitcoin conviction came from, the changes Robbie and Stone Ridge have seen this year in terms of investor attitudes, and most importantly, why Bitcoin is a key part of their larger mission of financial security for all. This is one of the singular most exciting conversations that I've had all year, and I know that you're going to enjoy it. All right. Welcome, Robbie, to the breakdown. It is great to have you. Thank you very much, Nathaniel. It's great to be here. So this is a really exciting conversation for me.

I've been kind of watching the drips and drabs of information coming out about you guys and what you're up to. And it's going to be really fun to dig in a little bit more. But I guess just to set up, Maybe you could tell me a little bit about what is Nighting and what is Stone Ridge Holdings? Sure, absolutely. And again, I am very grateful to be here. I've been a longtime fan from afar also, a frequent listener. And this is actually my very first podcast appearance. So please be gentle. We'll do. So I think probably best to start by describing Stone's Ridge Holdings Group, which is a financial technology holding company founded in 2012 by a guy

named Ross Stevens, who is still today the founder and the CEO. And he invited two people, myself and a woman named Yenzau, who I used to work with, to be co-founders with him in 2012. and the big picture idea is a financial services company dedicated to the idea of financial security for all. That is our mission. That is our watchword. And within the Stone Ridge Holdings Group ecosystem, we have several operating companies. The first and the largest is the Stone Ridge asset management business. The second and the one I look after on a day-to-day basis is called Nidig,

which is our Bitcoin-focused subsidiary. And we actually have a third operating subsidiary called Long Tail Re, which is an offshore reinsurance company based in Bermuda and the Cayman Islands. And we run all of the businesses on a common set of principles, three of which we've had since the very beginning of the company, founding principles, which are first and foremost be kind, second. be humble, and the third is focus. And along the way, as we started and operated these businesses, we've added a fourth principle, which is really more of a mindset called anti-fragile,

which is totally inspired by and cribbed from the Tullab book of the same name, which is really just a way to go through life, trying to set yourself up to not only be resilient in the face of shocks, but actually gets stronger in the face of shocks. Interesting. So let's talk about just before I kind of divert you into the crazy world of Bitcoin, this idea of financial security for all. What does that mean, I guess, you know, kind of as a mission or an orientation, but also practically for you guys? Sure. So I'd say as a guiding principle, it's both a reaction in some way. to the things that we had experienced in our careers up until the founding of Stone Ridge,

as well as an orienting principle around each of the businesses. And so I'd say, you know, speaking for me personally, I've been on Wall Street and financial services my entire career. And I've always found everything I've done intellectually fascinating and intellectual, intellectually fulfilling. But at least up until Stone Ridge, there had always been a little something missing of what was I really doing it for, who was I doing it for, why was I doing it? And for us in Stone Ridge, remembering that mission of trying to create financial security for all is something that we live with every day. And so, for example, as we talk about our Bitcoin

is subsidiary Nidig, one of the things I think we'll talk a lot about is how and why we got interested in Bitcoin. And it's absolutely within this framework of financial security for all. And in other parts of our business, in often financial security for all means in some contexts, financial security for mass affluent Americans, which is they are all too. Bitcoin really, for us is much broader than that. Is financial security potentially for, you know, billions of people on earth who are not fortunate enough to be part of functional fiat monetary systems? Love it. Yeah, we're definitely going to dig deeper into that. I'm interested, I think these origin stories are really important and fascinating, particularly in the financial industry where

there is a perception that these aren't conversations that funds and firms and people have with themselves, which I think couldn't be further from the truth. And, you know, it's interesting to me that you started this firm a few years after the great financial crisis, and you had this founding principle in mind. You wanted to add that context to the work that you were doing. I mean, it feels very intentional. Absolutely. Very, very intentional. Sometimes we talk about Stone Ridge being as much a experiment in running a business based on these principles as it is anything else. So just the last question about Stone Ridge before we maybe, I mean, it's all going to be about Stone Ridge in part two, but before we segue in kind of the Bitcoin origins is what are

the other, so for the parts of the business that aren't focused on Bitcoin, what are the types of things that you invest in? Just again, context setting for anyone who's listening. Yeah, absolutely. So in the Stone Ridge, asset management business that is in form and function of fairly traditional alternative asset manager. We manage a little over $10 billion on behalf of about 100 institutional allocators. We have a variety of strategies in that business. The first and the largest is a set of reinsurance strategies, which range from a daily liquid strategy that invest primarily in catastrophe bonds. all the way to a three-year locked private vehicle that invests in private bespoke reinsurance

transactions. We also, within the Stone Ridge Asset Management business, manage a marketplace lending fund. So we are, to our knowledge, the largest marketplace lending fund in the world. There, we partner with firms like Square and SOFI and Lever and Lever. Lending Club to provide capital to the borrowers on their on their platforms. And we, the third strategies that we run are a set of volatility strategies. So we sell options in listed in OTC markets to generate a return for clients. And the last and the most recent strategy that we launched is a single family residential

real estate strategy where we, um, we. We purchase homes and single family homes and fix them up and rent them out to families. Man, we could actually have a whole conversation probably about that, how the landscape of real estate is poised to change dramatically as more people move to the suburbs, to rural areas can work from home. I mean, you know, I was just mentioning to you, we're kind of in the middle of a move right now. And it's been a fascinating process. And it feels like there's a lot of opportunity. to transform the landscape of available homes for people that don't follow a traditional model necessarily of even just regular homeownership.

Absolutely. And if you look, hopefully I do a good job and maybe you have me back and we can talk about this. I would say at a high level, if you look at the U.S. landscape today, the vast, vast majority of homes that are owned, that are rented out are owned by. people that own one or two homes, and not any more than that. And there are pretty dramatic economies of scale available. Once you own, call it about 100 homes within an easily drivable radius. And so that just creates the opportunity to create a much better experience for a tenant in a home

like that, cut a lot of the costs out, shorten the time to deliver, fixes and services, as well as the opportunity to offer additional services as part of the landlord-tenant relationship. Yep, absolutely. Okay, well, that we definitely, let's put a pin in that for later, because I am super interested. But let's talk, let's move into Bitcoin. So, you know, you've got this variety of strategies. You've got this founding, this founding set of principles all kind of bannered under this financial security for all. When do you, I guess, you guys personally start looking at Bitcoin, what's the sort of origin story there? And how does it start to creep into the actual business? Sure. And I would add some high-level context here. I'm sure you've had the same

experience in your travels through time and space as I have. You start to develop a nose for the different flavors of crypto-nerd. And I would say, you know, at Stone Ridge, we, what you tend to find is the intersection of three particular flavors of crypto nerd, and I count myself amongst all three. And so the first flavor is really those that have a personal or family experience with collapse of a regime or a monetary system. So for me personally, my grandfather escaped Nazi Germany after hyperinflation, destroyed his wealth, then fascists murdered his family. And so that has, that has created, for me, a fairly deep cultural, for me and my family, a pretty deep cultural appreciation of

the freedoms embedded in the American project and also a real sense of what happens when they, when they go away. And the second flavor, so that's a cultural flavor, the second flavor, the, is often a timing flavor where just sort of accident of timing of birth placed me at a timing in the world to get a pretty deep appreciation of the transformative power of these open source networks. So I have dim but specific memories of life before the internet. I wanted to learn how to program my graphing calculator. I literally wrote a letter to the Xilog Corporation. and they literally shipped me back books about assembly language and the Z80 processor.

And that's a crazy thing that would never happen today to like, okay, now I'm playing, you know, and I rode my bike around as a little kid playing with the kids in my neighborhood, but then started to play trade wars on BBSs. I don't know if that's something that resonates with you. Oh, man. Yep. We were from the same time period. Exactly.

And then, you know, okay. I haven't thought about that for a minute. Right. And then sort of staying up all night playing diabolics. on BattleNet and say, oh, you know, you can you can dupe this armor. What does that mean for the economy? I'm going to go, you know, search for gold, but do I really need to? Or can I just trade for the things I need? And, you know, sort of remembering social life before Facebook and then after Facebook. And so a real, I think, time and place of how the world got networked in our

lifetime in ways that was really powerful and transformative. And then, you know, the final flavor, and I'd say this chronologically is really where the light bulb goes off is the Wall Street or financial services, career-informed appreciation for better or worse of the made-upness of the Fiat monetary systems. You know, the fact that the Fiat systems are a shared illusion that we all buy into. And again, I say that without any value judgment. Like that shared illusion is very powerful. I pay lots of taxes. I take the M train over the Williamsburg Bridge. Like, that bridge is real. That train is real. And it exists because we can issue dollar denominated debt. But at the same time, going back to the, you know, visceral experiences with what happens when the systems collapse, you got to be

careful about managing those shared illusions. And so for me personally, I first heard about Bitcoin very early on in the wake of the financial crisis. I lived in New York City with two other guys in a small apartment. And we all worked on Wall Street and we all had these front row seats to the financial crisis. And I sort of remember thinking like, oh, that's what my grandpa always met when he said it's all made up, which is that it's really all made up. And so I actually bought my first Bitcoin on Craigslist,

you know, on a shady street corner in New York City. Sometime in late 2009 or early 2010, I actually went back and tried to find the, interaction in my Gmail, I couldn't find it. But, you know, I did it totally terribly. It was just a private key on a USB stick. I didn't do anything to make sure that, you know, the guy hadn't spent it anything before. And actually took me a couple of days to even figure out how to move it on the, on the blockchain. But I did eventually. It was legitimate. The guy had not kept a copy of the key. Or if he had, he hadn't used it. And so I think it's really, at least for me, it's the

intersection of those three things, the timing, the culture, and the professional experience, that really just yields this absolute fundamental fascination with the idea of an open source monetary system. As an alternative, at least for me, from my perspective, not a replacement for any of the Fiat systems. We have today the U.S. Postal Service and private solutions like DHL or FedEx and email. They all coexist. They all have different purposes. In my mind, the idea that you would continue to have government-backed Fiat systems, at least the larger ones, as well as an open source system, makes complete sense and is just an extremely powerful idea that we just can't let go of. And honestly, we just love Bitcoin and feel like

we're at the dawn of the internet and getting up to work every day on moving that idea forward is just very powerful, very exciting, and what drives us. Super interesting answer. I think, you know, in terms of that flavor of crypto nerd answer, for me, it absolutely took connecting the dots between sort of the Bitcoin that I was being introduced to when I was living in San Francisco, when I was working as a VC with actually my previous experience where I thought I was going to be in post-conflict reconstruction, and it spent my early 20s in Uganda, Rwanda, the Balkans, the Middle East. It was really that sort of was what triggered it for me as something more than just an alternative payment system, right? A competitor

to square, which is how a lot of Silicon Valley treated it at that time. So I think that that's super fascinating. Okay, so you clearly have this interest around it, how. How does it move into the stage of conviction? And then how does it infiltrate what you're doing at Stone Ridge? Sure. So I'd say, you know, different, different weightings on each of the three factors. But a lot of us at Stone Ridge have some flavor of that same genesis of personal interest in Bitcoin. and as the Stone Ridge business was developing, if you look today at the Stone Ridge Asset Management

business, that didn't burst forth all at once. It was actually the result of trying lots of different things and most of them not working. And so my role early on in the Stone Ridge Asset Management business was head of product development and execution, which basically meant it was my job. I worked with Ross and Yen. We had a long list of crazy ideas. And periodically, we would take a crazy idea off the list and do some work on it. And most of them didn't work. But occasionally, some of them did. And we got big funds or other big, big businesses. And actually, given our personal interest in Bitcoin, the idea of launching a cryptocurrency fund or a Bitcoin fund had been on the list from the very beginning. And it hadn't really gotten prioritized. And before it did,

actually, I'd say late 2015, early 2016, we found ourselves just talking a lot about it. And I think by that point, the landscape had changed a little bit. It wasn't just Bitcoin. There were some other things going on that we're starting to percolate up into our conversation. And what we really found is there was a mismatch between how much we were talking about it and how much exposure we had to the idea. And so we really challenged ourselves. You know, one or two things needed to happen to close that gap. Either we should stop talking about it so much or we should have a lot more exposure than we did. And so we did a round of research and thesis challenging and what we ultimately decided is that we should have a lot more

exposure. And so that that really kicked off at first the project of allocating some of the Stone Ridge Holdings Group treasury to Bitcoin. And so what happened there was in my role at Stone Ridge, it was my job to find third-party service providers around which we would build. things. And it actually never occurred to us early on that we wouldn't be able to find third-party service providers to facilitate what we wanted to do. So I have this very distinct memory of calling the big custodial bank that we used at the time and still using the stonerage asset management and saying, hi, I want to put some Bitcoin in our custody account. You know, can you walk me through the process? It shouldn't be too hard, right? Yeah, exactly. And the guy said, bit what?

So, huh, that's weird. And, you know, I think just a little window into the kind of people we are, rather than saying like, oh, I guess we can't do it. We said, oh, I guess we have to build that ourselves. And there were really three parts of the initial projects internally, which was, number one, how do we turn our dollars into Bitcoin in a way that satisfied us? we weren't laundering money for ISIS and satisfied other stakeholders as well. Second, once we had done that, how were we going to store the cryptocurrency in a way that both satisfied us that it wasn't going to get hacked and stolen as well as facilitated audit by our auditors?

And third, there were some particular accounting challenges of how Bitcoin fits within existing accounting literature that we had to work through with our accounting advisors and ultimately with our auditors. And so it was really those three pieces of work product that we did, that we ran, that we managed that ultimately we completed. And so what then kind of the next thing that happened was as we were building our position using this infrastructure, we were talking about it with our clients in Stone Ridge Ascent Management. And I would say, you know, I don't want to overstate it, but something like 10 to 15 percent by count of the client base wanted to express the same thesis

that we did. And again, at that time still for us, it very much that thesis was long-term development of an open source monetary system. And so we made some enhancements to the infrastructure to be able to use it to support a commingled vehicle, which just has some additional considerations, but was all stuff we knew how to do in the Stone Ridge asset management business. And really the third part of the process was, okay, making the observation, you know, we're not going to be the last people that have this challenge that show up and want to do either dedicated cryptocurrency things or have a piece of a fund that

they manage in Bitcoin. Maybe there's a business opportunity to make the actual underlying infrastructure available to third parties. And so that kicked off the process for us. We contributed all the existing IP into a separate subsidiary. And we approached the New York State Banking regulator, the NYDFS, about getting a pair of licenses, both a bit license for one entity and a New York Limited Purpose Trust Charter for another entity, roughly mapping to that execution workstream and to the custody workstream. And finally, we did something we had never done before, which is we raised, equity at a subsidiary level. We do have some outside equity investors at the Holdings Group level,

but vast majority employee owned and 100% employee controlled. And so we raised $50 million worth of equity at the NIDIG level, an absolutely fantastic team at Bessemer Venture Partners, PVP run by a guy named Rob Stavis, another partner, Alex Ferrara, led the round. And then there were three other strategic investors who tend not to like to be identified by name, one global investment bank and two large global insurance companies, all three of whom we have existing, had existing relationships at the time, and with whom our partnerships have only expanded since then. Love it. So, I mean, there's a lot to dig in here. I think one of the things that I want to go

back to, though, is obviously for the last couple months, there has been a huge news cycle in Bitcoin around the idea of treasury holdings moving to this asset, right? And in many ways, it makes just a ton of sense. If people start to see it, it's like, this is a place where it would be natural for people, for firms, for corporations, to express their conviction around concerns of, you know, inflation or whatever it is, right, in this sort of process, but it was presented or it has been presented as something new. But it sounds like in many ways that was the genesis of this for you guys, you know, three, four years ago.

Yes, that's right. And, you know, for us, I think since the financial crisis, the observation of the expansion of the money supply in the U.S. has been something we've been paying attention to. Certainly, it hasn't shown up in growth in CPI really in any measurable way. But I think where it's really shown up for us is in kind of other measurements of inflation. And it's really something we pay a lot of attention to is the cost to get $50,000 of annual. income in retirement. And so if you look at the cost of that over, you know, certainly over the last six months and certainly over the last year, but even stretching back over the last 10 years or so,

there's been a pretty dramatic change in that. And it was observations like that that led to our wanting to diversify our treasury holdings into Bitcoin and frankly to things like exploring the single family residential real estate space and ultimately launching a strategy there, very similar observations and similar conclusions. Yeah, it's interesting. I mean, this is a place where I think we can clearly connect the line between your interest in Bitcoin and that overarching mission or guiding principle of financial security for all, right? Looking at inflation in terms of the cost to live the type of life that you had expected to, for example. That's exactly right. And I think for us, you know, there's an additional aspect where, again,

if you look at the clients we serve in all our businesses, frankly, there is a particular definition of financial security that we're focused on, which is exactly. exactly right, how to lead a first world life of dignity in retirement. And I think that's something we've been very focused on in the creation of our products and who we market them to and how we offer them. One thing that I'd say is particularly unique for us about Bitcoin is the idea of financial security is much broader in Bitcoin, in that if you look at, you know, there, if you're not fortunate enough to be part of the, you know, arguably really just single digit number of functional scale fiat monetary systems, you know, you have a really different set of concerns than

can I, can I lead a retirement in dignity in the U.S. or the U.K. or Japan? You have a much more fundamental. Can I save my day's labor in something that I can spend tomorrow or next week? And we're not the kind of people that can care cancer or drive world peace. But to the extent we can move the Bitcoin project forward, it really does feel like we can do something measurable in society today around this idea of financial security for people outside the first world. Yeah, and I think that it's, to me personally, viewing those things not as not as the same sort of, you know, challenge, but but as contiguous is incredibly important, right, to see the struggle to preserve one's wealth in that sort of far

away context, at least to most of us, as part of the same struggle as wanting our parents to kind of be protected, you know, is I think it creates a different level of commitment to trying to build the best system possible. It sort of de-individualizes things in a way that is really potentially powerful, I think. Absolutely. I totally agree. And it also, it speaks to one of the challenges we've had over the last few years in trying to talk about this prior to call it, you know, March, April of this year, which is there, there tends to be among the investor base that we speak to a fairly first world perspective of, I don't understand, my visa card works just fine. Why would I ever need this? And, and, and, and, and, and,

That's totally right. And I'm the same way. I'm probably 99th percentile in terms of personal allocation to Bitcoin relative to dollars. But it's still mostly dollars. Like I save to send my kids to college in dollars. And I buy my groceries in dollars. And I'm, you know, all the things being equal, pretty sure that when it's time to send my kids to college, I'm going to pay the bill in dollars and will still be buying my groceries in in dollars. But it's important to remember that actually most people by kids, count in the world are not that fortunate, are not able to live their lives in one of these systems that's actually at scale or functional, even leaving aside actively corrupt. This episode is brought to you by crypto.com, the crypto super app that lets you buy, earn, and spend crypto all in one place and earn up to 8.5% per year on your Bitcoin. Download the crypto.com app now to see the interest rates you could be earning on BTC and more than 20 other coins. Once in the app, you can apply for the crypto.com metal card, which pays you up to 8% cashback instantly on all purchases. Reserve yours in the crypto.com app today.

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on the thing that I think that we don't talk about very much, which is the likely pressure that small country developing world fiat regimes are going to face. I think Lebanon right now is a really good example of this. Because it's not, you know, this is not a bottom of the wrong thing. This is right. There's a banking center for the entire region for most of its modern history that is just, you know, flailing from a fiat perspective. But it is, it is, you know, the interesting note or kind of, you know, adjacent piece to what you just said is that, in fact, many of the places where people aren't that fortunate, dollars are also what they're trying to get into, which is, I think, part and parcel of a larger reorganization of the monetary system where it's

very clear that the idea of, in general, these fiat regimes as just, you know, fixed and good and working for people is being challenged in a big way. I think that's exactly right. And, you know, listen, I'm not there trying to run the Lebanese central bank in exactly the same way that I, you know, wasn't there in the depths of the financial crisis trying to save the financial system. And so I'm very conscious that, you know, I can't be sure that I wouldn't do exactly the same things when presented with the same data and decisions, let alone ever dream of claiming that, that I could, I could do something better. but just empirically, the systems don't always work.

And historically, evidence suggests they more often don't work than do work in the long run. And so the idea of having an open source technology-based alternative that an individual agent, as a human, as a citizen, can proactively opt into, can vote with his or her day's labor, that's just an idea that's never really existed before in human history that we find fascinating and we think has huge implications, you know, certainly for investment portfolio, has been in a lot of ways that's the smaller of the two topics and the much bigger is what potentially it means for human freedom. Absolutely. That's pretty much what drives me in this whole space. But I want to go back to your comment that there were, as you started getting into this on a kind of structural level, thinking about doing this from an infrastructure perspective, 10 to 15 percent by count of the client base wanted to express the same thesis. What was the composition of that 10 to 10 to 15 percent? Did they reflect a common type of perspective, a common type of institution? Basically, what I want to do now is maybe get some behind the scenes,

perspective on how things have changed. And so to do so, let's start with where they were when you guys set out on this journey. Sure. So I would say over the last couple of years and really accelerating in the last six months, we have observed a pretty distinct, what we think of as the one-two punch. And so in our business, we almost entirely, or, you know, rounds to 100% across the Stone Ridge ecosystem, deal with fiduciaries. And by that, so in crypto landscape, the term institutional investor tends to be a fairly overused term. And so we mean something pretty specific, which is somebody who professionally makes, investment decisions about other people's money and has a mix of a legal and ethical obligation to consider various risks as they make those decisions.

And so with crypto specifically, the one-two punch that we've observed is people in those professions, CIOs, financial advisors, CEOs of financial services companies in investing personally with their own assets to get comfortable both with the investment experience. It can be a volatile experience, as well as get comfortable with the operational constraints because there are lots of narratives out there of,

oh, exchanges get hacked, and I can lose all my money. And certainly those narratives are true, and we've, but a big part of what we do is build the operations and infrastructure to not have those challenges. And so then the two is as those people get comfortable, they transition from investing just their personal assets now to investing on behalf of the pools of capital that they manage, whether those are hedge funds or insurance company general accounts or financial advisors making allocations on behalf of their clients on a one-off basis or on a systematic basis or the sovereign wealth fund putting an allocation into place or the university endowment putting an

allocation into place this pattern of people investing first personally to gain comfort followed on by an allocation from the pools of capital if they manage. So there's been this shift in kind of you mentioned over the last, you know, period. I guess what, you know, what have you seen as causal for that shift? Is it all kind of macro narrative? Is it structural, infrastructural? You know, like, I mean, I spend every day on this podcast thinking about that type of question. And you are having these conversations and actually watching the transatlantician.

happen. Yeah, absolutely. So at least our experience, which is all I can I can speak to in our market. So huge, distinct, effectively 180 degree shift in the last six months, driven in our experience almost entirely, or I would think entirely by the macroeconomic backdrop set against the public health backdrop. And I would say, at least for us, nothing has really fundamentally changed about our infrastructure in, call it three years. Obviously, we do work on it to improve it, but the idea that there is a regulated custodian with a cold storage solution that can withstand a big four audit with insurance and reasonable pricing. That's been true since 2018 and is no more true today than it was then. Really what's changed, I think, is the macro backdrop that's driving people, at least in our context, towards making the investment. And so I would highlight, I think, for us, three really observable, distinct trends that we see.

So the first is really what I already highlighted of fiduciaries making allocations on behalf of their clients as distinct from making personal investments. That's really, again, at least in our business, picked up, you know, somewhere between 10 and 100 fold. The second trend is for both existing and new investors in the asset class, a demand for a more sophisticated set of financial products. So beyond the basic, I want to buy some Bitcoin and hold on to it. Certainly we see lots of that, but interest in more sophisticated products. I have a big holding and I want to sell calls to generate yield at scale in the $100 million and up range. Like, oh, that's interesting. That's not something we saw before 2020.

Or, you know, I want to accumulate a position, but I have a specific target entry price. And so I'm going to sell put struck at my target entry price so that while I wait for it to get there, I'm going to collect some yield. or I have a big position or I want to enter a big position, but I want to manage the volatility. So I'm going to do a collar around the position to have a less volatile experience on the book. These are all conversations that we're having and implementing for clients that really feel new this year. And the third thing I'd say is a pretty dramatic shift in the tone of, of existing financial institutions, looking to offer Bitcoin or Bitcoin adjacent products

to their clients, looking for integration solutions, white label solutions, or partnerships to be able to offer those products or accelerate their time to market in those products. And that ranges all the way from your kind of traditional asset servicers, looking for sub-custisers, looking for subcustody solutions. We're having a bunch of those conversations.

And again, we were having those conversations before this year. The tone has really shifted, in our experience, from kind of idle conversation until we're really going to do something, all the way to banks offering consumer products. And I think, you know, you asked what drove that shift for the banks, at least, I would certainly highlight the recent OCC guidance about their removing doubt that banks that they regulate can offer certain kinds of cryptocurrency and cryptocurrency adjacent services to their clients. And I really applaud the OCC for issuing that guidance and removing that doubt because that really has spurred a lot of action from the banks. legally. It's fascinating. We're having this conversation actually hours after a memo or some letter from a bunch of Congress people to the OCC about how they needed to chill out on the crypto guidance and do things in conjunction with Congress.

So it's just, I mean, this is the way of the world, I suppose, is the, you know, the tension between moving fast and moving slow. Absolutely. And these are, you know, going back to a previous part of the conversation, these are important checks and balance. in how the American system works. And so the executive branch and the legislative branch having that check on each other, that's important. That's how we get a vibrant functional democracy. Yeah, absolutely. So I think I want to ask one more question about kind of this shift, because in many ways, it feels to me like just based on even hearing your experience and talking to other folks. The groundwork has been laid for so long that this almost this kind of narrative catalyst was able to come into such fertile ground that it looks like punctuated equilibrium when behind the scenes there was so much percolating and getting ready for this moment. I wonder how much from a narrative perspective, though, how much has it made a difference to see highly kind of visible figures come into this space to articulate their thesis? at Paul Tudor Jones earlier this year, Druck and Miller just earlier this week.

Are those things meaningful in terms of reducing perceived career or social risk? Or are those just kind of the icing on the cake of lots of conversations happening behind the scenes? Certainly my opinion is those things are absolutely helpful. And I think you hit on a really key idea when you talk about the career risk. And I think that that is both why up to this point we saw, again, at least in our business, relatively little movement in, you know, sort of relative scale to things like our Stone Ridge Ascent Management business and why you've started to see that accelerate. And I, you know, thinking a little bit about what what I would expect on a going forward basis, I would actually expect that to accelerate because I think for every Paul Tudor Jones, or Stan Druck and Miller that you have, you have a life insurance CIO that makes the allocation

or a university endowment CIO that makes the allocation. And just the more air cover that the other professionals in those seats feel that they're not being the first to do something, just the more confident they're going to. kind of feel in expressing their thesis. And I think that really comes in two parts. I think one is seeing the people making the allocation, but also at the same time, seeing the kinds of organizations that are allocating and drawing by extension conclusions about

comfort with the level of the infrastructure. So really saying, like, aha, if those guys got comfortable with it, it's not that I don't have to do my own work and I am going to do my own work, but they must have done the work and they must have gotten comfortable. Absolutely. I think that this is such a key point, too. We talk about where different institutions, firms, whatever, exist on the risk spectrum, as though those firms weren't made up of a set of people who have their own different risk spectrums. And so often when it comes to trying something new like a disruptive open source money system or a totally radically differently organized asset class, you're going to have internal champions. And really, it's how well and how able are they to kind of chip away at the set of concerns that others have to convince people to take that risk? That's absolutely right.

And I think that that gets to, you know, the heart of one, one of the things our clients are. really value about a relationship with NIDIG is just by way of our background, we're very familiar with those organizational dynamics generally, if not specifically within these organizations. And so we're able to arm the internal champions with the information that they need to drive it internally as well as be patient. And, you know, something that that we say internally that I think it's a lot of traction and positive feedback from our clients is, you know, we're, we're not really in the, in the Bitcoin business. We're in the financial services business. It just so happens that we offer financial services around Bitcoin. And when when you're dealing with a sovereign wealth

fund or an insurance company general account or a university endowment, offering them financial services of the kind that they are used to consuming has a huge advantage for those internal champions because they can present it within a framework that they're used to dealing with. Absolutely. It's an interesting mindset shift. I'll make a parallel that's not exactly accurate, but I think is sort of reflective where I think about this show as a macroeconomic show as a big picture power shift show. And I think that if you are interested in macroeconomics and big picture power shifts,

you can't not have Bitcoin as part of the conversation. It's the one, it's the part of the conversation that is most acutely a part of this show and the one that I focus most on. But I kind of don't think about different crypto issues as somehow segmented. When they make the show, it's because I think that they're a part of that conversation. And in some ways, it sounds like that's kind of. of the mindset shift that you are both seeing and encouraging where it's like, look, this is not some kind of radically out there thing. If you want to do financial services in the world that we are

going into, the world of 2021, the world of post-COVID, the world of MMT and whatever is going to come next, you have to be prepared to at least have the conversation about this set of systems, this set of assets that are very different, but are going to have a seat at that table. That's exactly right. I actually think that's a very apt analogy of your show, A, because I really like your show, and B, because I think it really functions. And I think it's a good analogy in a couple of ways, back to something you said before, which is, yes, we are, while I, from our perspective anyway, the infrastructure to facilitate these kinds of investors, making these kinds of invest is, investments has really existed for three plus years, the macroeconomic backdrop that caused them to rethink their portfolio allocations in certain kinds of ways, that's really what's shifted in the last six months. Super, super interesting.

So, okay, so let's come to your news, Nighting announced a couple weeks ago, a new equity round, just a further expansion. I mean, tell us where the business is today, what you guys kind of revealed to the world a few weeks ago. Sure. So I think, you know, it really is all along the lines of what we've been discussing here today, which was, you know, in a lot of ways, we've spent, you know, the last 10 years intellectually interested in this. and the last five years really challenging ourselves around the narrative and the thesis, and then the last three years pretty acutely building the kind of infrastructure that would facilitate fiduciaries allocating to the space on behalf of their clients.

It was just that for the last two and a half of those years, there wasn't a lot of interest, frankly, in what we had built. And that's shifted pretty dramatically. And we see a pretty, pretty big opportunity ahead of us to facilitate investment in the space. And so in terms of where we are today, so we have a pretty robust platform around this idea of financial services. facilitating investment in Bitcoin. And so the platform components are things like the custody solution, the execution technology, our proprietary approach to AMLKYC, our research and advisory practice. And then our asset management platform and more recently are our ability to do OTC derivatives,

as well as our ability to do financing. in the asset class, lend dollars versus Bitcoin collateral. And it's, so that that platform is extremely robust, battle-hardened at this point. And, you know, the way we offer it into the market, I'd say is really in two parts. So the first part is in what we think of as branded investor solutions. And it's all the same platform. underneath it. It is just going back to things we talked about before, different kinds of investors are used to consuming different kinds of financial services. And so we really make a pretty

specific effort. And this ties to some of the new hires in terms of people that are, have been in the business their entire careers of offering these kinds of products to these kinds of investors. So that's things like our fund and separately managed account solutions for institutional allocators, your pensions, your sovereigns, your endowments, your insurance company general accounts. They're used to buying funds and SMAs. And so we package our solution in terms of funds and SMAs, and we have lots of credibility based on our background as in the asset management space.

The second kind of branded investor solution or package that we offer is effectively a prime brokerage solution for primarily for macro hedge funds, but for other kinds of hedge funds we're starting to see as well. So this is a package set of custody, execution, financing, and reporting that looks like the kind of prime brokerage solution you would get at a Morgan Stanley or a Goldman Sachs or a JP Morgan. And again, just based on our personal backgrounds or personal and professional backgrounds, we have lots of credibility in, in sort of what those solutions actually look like for those kinds of fund managers. And the last one I would highlight is the corporate treasury solution, where again, there's just a kind of specific set of accounting and valuation and management and liquidity things that go into those solutions. that we've been using on our balance sheet for some time now and that we're really seeing an acceleration of implementation at other corporate treasuries. Again, it's all the same platform underneath.

It's just that a corporate treasurer doesn't buy a fund usually. He buys a different set of things and vice versa. The insurance company's CIO doesn't buy commercial paper. She buys funds and SMAs. the other half of our business where we see a lot of growth this year is really using that platform, the component parts in various ways, to do white label or integration solutions. And this is really where some of those things that I talked about before, the big asset servicers looking for subcustodial relationships rather than try to build this infrastructure

themselves in-house as a quicker time to market or banks wanting to offer consumer products. So we're in pilot now with a bank here in New York that's offering, frankly, an awesome product. I'm using it in the pilot. I love it. It's a Bitcoin debit rewards card. So you have a checking account at the bank. You swipe your debit card instead of getting one and a half percent cash back or a toaster

or whatever you might get from your bank. you get one and a half percent Bitcoin. And so just every time you swipe your debit card, you accumulate one and a half percent Bitcoin. And so we do all of the back end for that. We buy the Bitcoin. We custody the Bitcoin. We do the reporting.

We help them work with the OCC to describe the program to the OCC, to really manage all the customer protections that are really important for doing a program like that. So those are the kinds of things we're really focused on on a go-forward basis as we grow the team. Well, I think that the thing that just really stands out hearing you kind of rattle this off is what a Cambrian explosion moment this industry is having in terms of the ways that you can interact with this new open source monetary system. right? I mean, it's zoom back out two, three years ago, and it's, you know, I mean, a lot of people fathomed it, but it's unfathomable in some ways just how, how much it's all coming together. Yeah, we're, you know, frankly, I pinch myself some days. I mean, they're, you know, we're working with some investors to accumulate Bitcoin for their portfolios, where if you had asked me in February,

would investor XYZ buy Bitcoin this year, I would have said 0.0% chance. Like literally, I would bet you any amount of money that the answer to that question is no. And then, you know, here we are mid-November and I would have been flat wrong. And yeah, I think more generally, I think for us, the big things that we focus on or excited about are on. on ways to build the bridges between the existing financial services industry and Bitcoin, sort of making Bitcoin available through banks in ways that matter via their consumer products or their subcustodial offerings and really helping people make allocations in their institutional portfolios in ways that just require.

knowledge about how those companies work. It's all happening. It's very exciting and we're just grateful to be a part of it. Well, the one other thing that I wanted to mention from that set of announcements, which I thought was really fun, is that you guys did the old school hair club for men thing when it came to the treasury offerings. I'm not just a customer. I'm a client. Yeah, exactly. Yeah. So, you know, was that treasury holding? I think the official announcement was 10,000 Bitcoin on the Stone Ridge books. Was that something new or was that just kind of the, you had been at this for a few years?

We've been at this a few years. We have accelerated our accumulation over the last six months. And so we have a mix of been doing it for a while as well as renewed vigor about how much it makes sense for us. us. You know, you hit on a really interesting point that that is is something that we really draw on from our Stone Ridge asset management business that really shows up kind of across the board in the Stone Ridge ecosystem, which is really a principal, not agent mindset. You know, and we really try to approach the market with solutions that were designed.

and battle-hardened, based on real-world usage by us. And it really does change the conversation when you are speaking to a corporate treasurer saying, yes, not only is a significant portion of my personal net worth stored in this custody solution, but in fact, the accounting that I am describing to you has been through three EY audits. There is just a different, there's a different tone to that conversation by being able to say, we use it ourselves than not being able to say that. Absolutely. No, I think that that's huge. And, you know, it's one thing to have evangelists. It's another thing to have evangelist entrepreneurs. So I think it's very exciting to see what you guys are doing. I've had you

here for an hour now. And I want to be respectful of your time and let you get back out to building products and then evangelizing them. But I want to maybe end on this macro note as well. Obviously, we are in the midst of a highly contested election cycle. We're looking forward to a next year trying to figure out what that's going to be. You know, you use the phrase the made-upness of the Fiat monetary system. What do you guys see as the big picture trends that you're expecting over the course of the next, I don't know, year? We pick your time period, right?

Yeah. So I think it, you know, I don't have a crystal ball. I'll give you my opinion, you know, which is worth exactly and completely the paper it's printed on. You know, I think it's a question of will we get like a lot more or a lot, lot, lot more stimulus? And again, with no value judgment about what's kind of quote unquote correct or right or what I might do when presented with the same hard choices, I think that that just seems pretty clear. And so I think that sets up a continued macro backdrop that continues to be very consistent. for allocations to Bitcoin.

And then when you layer on top of that, the kind of self-reinforcing cycle of the air cover provided by the kinds of people that are out publicly talking about it, as well as the kinds of people that won't be out publicly talking about it, but do speak privately within their professional circles of CIOs and financial advisors. Yes, I have done this. yes, I used these providers. Have you talked to the guys at NIDIG or any one of the providers out there?

Because they really helped me and they got it done. I think you're just going to continue to see an acceleration of what we've seen. Awesome. Well, Robbie, thank you so much for hanging out today. Let's definitely have you back some time to talk, obviously more Bitcoin, but also this real estate thesis. I'm super fascinated. And keep up the good work. Financial Security for All is a is a no BS. important mission. So I'm glad to hear that you guys are on this journey and doing what you can. Well, likewise, thank you so much for having me. Great to be here today. Would love to continue the conversation. And same to you. Keep up the great work. I'm a long-time fan, you know, first-time guest. And I really appreciate the work that you do, putting high-quality content out there every day. So thank you very much. Cheers, sir. Have a good one.

that conversation, the thing that I wanted to point out for just a second is this idea that they have been building for years. They've been exploring themselves for years, but they've been building and offering these institutional services for three years now. Robbie was saying pretty clearly that there had been a dramatic shift in the last six months, driven by this macro narrative and just the clear-cut view of Bitcoin as a hedge against what people see as a new type of monetary regime that feels inevitable. This is one of those classic moments of punctuated equilibrium where things that have been percolating and brewing and preparing for years all come to the fore in a short period of time because the last cog has clicked in and everything

makes sense. I think that we're just at the beginning of a massive acceleration period for Bitcoin in the context of these types of institutional and corporate players. And I'm thrilled to see more people out there like Stone Ridge and Nidig getting ready to service that market. Anyways, guys, I hope you enjoyed that conversation. I know I did. And until tomorrow, be safe and take care of each other. Peace.