The Pomp Podcast - #1071 Murad Mahmudov On Why Bitcoin Will Be Worth Trillions

Starting point is 00:00:00 What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Murad Mahabdou is the founder of STFX, a brand new piece of technology that helps with short-term trades. In this conversation, we talk about Bitcoin, the rise to a global reserve currency, whether that transition will be peaceful or turbulent, and what he is building as he makes his return back to Twitter in the decentralized finance space. I really enjoyed this conversation with Murad, and I hope you guys enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. This episode is brought to you by Masari.

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Starting point is 00:03:28 any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. All right, guys, bang, bang. I've got Murad here with me. Murad is one of the only people I've ever talked to on the podcast, which after I had a conversation with him, I ran and I bought more Bitcoin going all the way back to, I think, 2018 is when we had our first conversation.

Starting point is 00:03:56 So, Murad, I'm happy to get you back. Maybe what we could do is just kind of do an update in terms of your views of the macro environment and Bitcoin. Obviously, there's a whole bunch of stuff that have transpired on kind of legacy financial system. How do you evaluate the current environment and the situation that we find ourselves in now about two and a half years after the pandemic started? So I would say that my bullishness didn't really change whatsoever.

Starting point is 00:04:20 I'm still as bullish as I was in November 2018 or October 2018, I believe it was when we kind of recorded our last podcast. The long-term thesis didn't change at all. If anything, the kind of boom and bust, yet another boom and bust that we've experienced since has only strengthened my result. I still think it's a matter of time before Bitcoin takes over. I still think it's a matter of time before sort of we end up with a slow hyperinflationary scenario. I think we've seen sort of inflations historically locally, but we are at a point in world's history where things are more interconnected and interdependent than ever and so because of

Starting point is 00:05:10 that we've never seen a global hyperinflation right and what i'm worried about is sort of a situation could be three years from now could be 30 years from now but i definitely think it's going to happen in our lifetime um and um it's hard to say whether the transition is going to be peaceful or sort of more violent. But we have to sort of be prepared for both situations. Now, of course, we're in the middle of the first quantitative tightening in Bitcoin's sort of 12, 13 year history. Now, there was a brief period, a brief similar of slight quantitative tightening in 2018, but nothing that we're seeing right now. And generally, I would say, yes, of course, Bitcoin isn't so much a direct inflation hedge as it is a proxy for monetary expansion and

Starting point is 00:06:03 sort of monetary basis like N2 and N3. But regardless of all of that, I'm still super bullish. I think we are in a beginning of a slow bottoming process right now. And it doesn't matter whether we're going to revisit 17s again or not. I still think we've sort of begun this wide, rectangular, multi-month period of bottoming across the entire space. And I think today, next month, two months from now, these are generally great times to sort of BCA back into the market. Tell me more about the global hyperinflationary type event. What would that look like? Or what would you be looking for to say, yes, it's happening now? Well, first of all, I think we're kind of in the early innings of it.

Starting point is 00:06:54 Of course, it's not going to be an overnight thing. It's more likely to kind of also come sort of in these waves of increasing and reducing inflation. But we're already seeing inflation at like 42-year highs. And personally, kind of the official government statistics that we're seeing in the world, I think those are further sort of artificially lowered. I think just by looking at the food prices and the real estate prices that I myself am experiencing, I would say things are kind of slowly getting out of control. Now, people think that it's because of supply side reasons.

Starting point is 00:07:36 I still think that the majority driver of that is sort of the insanely aggressive monetary expansion that we've seen sort of spring 2020 onward. But essentially, there's a kind of one of the less spoken about debates in the Bitcoin world is whether the transition from fiat to crypto, whether it's going to be a peaceful one. And there's definitely a path for that as well. Or it's going to be more turbulent. Now, in the last three or four months, we're already seeing sort of some civil unrest around the world, Albania, Sri Lanka, Tunisia, Kosovo, Serbia, etc. And in my opinion, sort of, if you look at history, rising sort of bread and energy prices have always been the biggest and the most frequent sort of causer of any kind of upheaval or unrest, right? So definitely just something to consider, definitely something to think about as we sort of move forward in this age of rapid change, I would say. Talk to me about the central banks around the world and their role through market intervention in creating some of these scenarios versus is it external shocks and external event developments that they're simply trying to respond to and you can't really lay fault or blame with the central banks for either the 40-year high of inflation that many countries are seeing or things like a potential recession, which I would argue is a recession in the United States.

Starting point is 00:09:12 So I believe that a fractional reserve-based banking system cannot survive without intermittent interventions of central banks into the economy. As I'm sure many other guests on your podcasts have alluded to in the past, this creates all kinds of distortions when it comes to sort of the correct pricing of goods. more importantly and something that's less talked about is i believe that the government intervention in the currency markets it makes inflation a lot higher than it has to be which in turn i believe is kind of the primary cause of mental health issues stress anxiety because essentially it forces you at the margin to prioritize short-term projects over long-term projects and because of that people essentially uh not just financially but also psychologically are essentially like living week to week if not day to day and that creates a lot of discomfort

Starting point is 00:10:26 in people's minds right and i think that this is like one of the one of the 12 13 things that is less discussed and something that hopefully will change for the better once we kind of move to a sounder system in the coming years. You've mentioned a couple of times that that transition could be peaceful or it could be a little bit more turbulent. What is your kind of description of both of those scenarios? What does the peaceful transition look like? Is it just people start buying something like Bitcoin and over time the percentage increases and then everyone starts using that? And then also, what does the turbulent time look like in your opinion, given the facts and information that we have today? So I guess I kind of described a similar metaphor a few years

Starting point is 00:11:07 back, but effectively both fiat and Bitcoin are just two balloons, right? And with every boom and bust cycle that we have in Bitcoin, effectively the peak of each of the bull cycles is essentially an attention wave, right? And with each of those attention waves, usually the majority of the majority of the participant the majority of new participants of each generation in bitcoin cycles predominantly comes at the top and it's designed to be that way right because with the top comes the greatest amount of hype news marketing attention right and each of these sort of heartbeats so to speak um brings more people from the fiat from the fiat balloon into the bitcoin balloon. And the peaceful scenario is one where that transition happens sort of gently, slowly,

Starting point is 00:12:05 gradually, and instead of a large number of people in the world being caught off guard by sort of the entirety of the current monetary paradigm sort of blowing apart, you have a relatively sizable chunk of them already in the Bitcoin system or in the cryptocurrency system. And the infrastructure to move from one to another is already sort of very well established. And sort of that movement of air, so to speak, from one balloon to another, it happens gradually, steadily, peacefully. And fiat, instead of exploding, so to speak, it slowly sort of fades into irrelevance instead, right? I don't know how realistic that is. Of course, that is the preferable way. But I think a darker pill, so to speak, is that the very existence of Bitcoin is probably

Starting point is 00:13:02 going to end up accelerating a more rapid and sort of explosive collapse of the current monetary system, in my opinion, right? Now, we don't know when that's going to happen. But like I said, I think is going to happen in the next several decades. But personally, I lean towards sort of a more turbulent scenario. And as that plays out, what is the role of Bitcoin in relationship to nation states or central banks? Is it something where the more turbulent it becomes, the more likely they are to kind of capitulate and purchase it? Is it something that they will avoid because there's a confidence game and kind of fractional reserve banking and fiat currencies? How do you see those relationships playing out? So we need to understand that governments at the end of the day

Starting point is 00:13:48 are composed of individuals, right? Let's say for simplicity's sake, a government is 5,000 people. We need to remember that what's best for the government is not necessarily what's best for each of those individual people. So the ideal scenario is one where a lot of the people around the world, including some of the government officials and government institutions, start sort of capitulating from fiat into accumulating Bitcoin themselves. And then it sort of collapses from the inside where the interests of the participants start to starkly diverge from the interests of the group as a whole. Right.

Starting point is 00:14:34 But like I said, both fiat and Bitcoin are effectively competing money products. And let's, if we just ignore governments for a second, as an individual, you're seeing one sort of hyperinflate away, while the other is steadily across sort of medium long timeframes is appreciating in value. And effectively, it's just a matter of time before people put both on the shelf and kind of realize that B is better than A, right. And I think it will only accelerate the process of sort of governments capitulating into it as well. Funnily enough, since 2017-18, people said that first it will be like savvy technological retail, then it will be sort of savvy VCs, then it will be sort of more established institutions, and then finally it will be sovereign wealth funds. But it's possible. Now, I don't know of any confirmed rumors.

Starting point is 00:15:32 Of course, there is sort of some things that we are hearing here and there, but we can't know for sure until official announcements. I wouldn't be surprised if there are a number of sovereign wealth funds that are sort of slowly accumulating already. And it makes all the sort of mathematical sense in the world to allocate 1% or even less than 1% to kind of this asset class already. But yeah, I think the governments will capitulate into it in due time. Talk to me about mining. Obviously, there's a number of nation states that are rumored to be participating in various forms, some kind of prototyping and testing, others openly doing it like a country like El Salvador. How do you see mining and nation state participation, kind of the level of importance there? I think China made a very big mistake by effectively letting a really big chunk of the market move to the United States, Europe and other places. We've really seen sort of a, we're seeing sort of a slight renaissance in American miners. And I think it's probably better for Bitcoin for the mining infrastructure to be predominantly existing in a nation with more established sort of property rights and freedoms. Now, of course, there's still mining going on in China, right? But the waves of official bans that we've seen from the Chinese central government and even the Chinese entrepreneurs themselves frequently posting pictures from Iceland, Finland, Sweden, and the United States itself these days on social media.

Starting point is 00:17:17 I think 10 years from now, China will realize that they've made a strategic mistake in this regard. When we talked back in 2018, Bitcoin's price was somewhere between $3,000, $5,000. It ran all the way up to $69,000 in the couple of years since then. We're now sitting somewhere in the $20,000 range. The price action for a trader obviously would be super interesting. But one of the pieces of our conversation back in 2018 was the demonetization of other stores of value. And you laid out an argument and a framework to see Bitcoin continue to rise in value and measured by market cap could reach hundreds of trillions of dollars or over $100 trillion in value as it demonetized these other store of value. That would lead to a Bitcoin price measured in millions of dollars per individual Bitcoin.

Starting point is 00:18:07 And I think a lot of people kind of said, wow, that's a pretty interesting thesis. It's a pretty bullish thesis, and they were drawn to it. What is your kind of analysis of the progress along that thesis from 2018 to today? So about four years, three and a half years after you kind of originally laid that out, do you feel like we're still moving along kind of that same thesis and generally believe the same thing? So I would say like, if the odds of it happening in my head were like 30% back then, they are like 50% now. So I would say it's even higher now. Every time Bitcoin grows in market cap, market cap is effectively symbolizing the amount of attention, the amount of eye bolt that are looking at this thing. And so the fact that we've went from 5,000 to 69,000, back to 20,000 right now in the last three years has only strengthened the bullet points that I was bringing up three years ago.

Starting point is 00:19:09 And the fact that there are so many more participants now, the infrastructure is even more mature, the amount of institutions is even bigger, the amount of sort of famous celebrities and financiers and other sort of individuals that are participating and supporting the ecosystem is even greater now. Essentially, the chances of everything I was talking about in 2018 have only increased since then. Simple as that. In my opinion, all the bullet points still stand. and the eventual market cap measured in today's dollars being over a hundred trillion is completely realistic. And when you see that a hundred trillion number, it's a big number. What is the expectation timeline wise? You said the probability of it happening has increased.

Starting point is 00:19:57 Do you still keep kind of a multi-decade view from a timing standpoint or has that been pulled forward at all given what we've seen transpire over the last three years? I think to manage the expectations, I think somewhere between 10 to 20 years is a realistic possibility. Could take a little bit longer, could even happen faster. But something to the tune of 15 to 20 years, I think is definitely possible. We need to realize that this is like a long term game and 400 year old currency paradigms don't collapse overnight. So of course, it's going to take time. But the fact that there's internet right now, and the fact that these very technologies are decentralized is going to make it faster than it would have otherwise happened. And when you look over the last three years, are there any negative surprises, in your opinion, kind of the development of Bitcoin or the adoption of Bitcoin? Is there anything that's happened that you're like, you know, I didn't expect that to happen?

Starting point is 00:20:53 Or maybe it is a negative view of the progress to date? So Bitcoin likes when central bank prints money, and it doesn't like when they contract the money supply. Now, the following is going to sound a little bit simplistic, but it does seem that Bitcoin is even more sensitive to contractions than how sensitive it is to expansions. Now, of course, there's other variables at play, like the stock markets sort of collapsing as well, and the tech industry also kind of experiencing some downturns. But that's kind of one thing to think about. The other thing to think about is the second thing I mentioned as well is Bitcoin has become highly correlated with other sort of risk assets in people's portfolios. But ultimately, I think it was a bit of an inevitability as Bitcoin kind of matured into a trillion dollar asset. Right now, I think we are still in this middle ground where we are going to mimic sort of a leveraged technology stock still for the next several years.

Starting point is 00:22:07 But ultimately, I still think that Bitcoin is first and foremost correlated with kind of the global central central bank monetary aggregates and to to be most specific. So if that continues to expand, which over the medium to long term, I believe it will, Bitcoin price will continue going higher, in my opinion, nevertheless. The last thing I want to talk about Bitcoin before we talk about what you're working on now is leverage. And obviously, when there's leverage in a system, you usually can't see the leverage if you're a market observer, or it's very difficult to identify. In the Bitcoin and kind of broader crypto ecosystem, many times it is actually much easier to see that leverage. And then when you couple that with wild price swings, both to the upside and downside, one, it acts as an incentive for people to take on more and more leverage. But also, two, there's kind of punishment on the other side. Back in 2020, obviously, you shut down a fund. And then you've kind of watched over the last three years as you've continued to invest in the ecosystem and in the industry.

Starting point is 00:23:11 what's your thought process around leverage today how have past experiences kind of changed your opinion about leverage and then what do you really look at in terms of leverage over the last couple of weeks or months in the bitcoin ecosystem as we've seen a number of existing businesses kind of get forced liquidated due to leverage that they had yeah so if you have leverage your uh sort of your outcome is path dependent and if you're only holding spot your outcome is not path dependent really especially in the medium to long term so i've experienced the dangers of excessive leverage firsthand as many of you may know uh but i i think despite any kind of failures or challenges that you may face in life. You simply have to kind of stand up

Starting point is 00:24:03 and try again and again and again until you succeed. I would say that actually leverage has become a little bit more opaque in 2020 to 2021. And the reason I say that is because at least in the 2018-2019 era the majority of leverage existed on centralized exchanges which still shared a lot of the sort of open interest and average leverage and sort of the long short ratios and different kinds of analytics with the end consumers so yes of course every transaction is not transparent on a centralized exchange but they did share the aggregate values with the market. And kind of a lot of quantitative analysts could extrapolate that data with the amount of leverage in the system. So some useful ratios where the key liquidation points

Starting point is 00:25:02 are, et cetera. Unfortunately, I think with some of the sort of the Celsius, Voyager, three hours gap, other stuff we've seen in sort of 2021, 22, a lot of that stuff was a lot more opaque, because even though a lot of these entities describe themselves as C5, the public or the average market participant wasn't privy to their books, their loans, sort of the aggressiveness of the debts involved, their average sort of leverage ratios there. And so it's probably for the better that that got sort of washed out of the system. every sort of bottom every every approximate bottom of a of a global bear market always has entities capitulating and i've experienced something like that firsthand but ultimately

Starting point is 00:26:01 it just leads it's kind of the pain going away and opens up the door to new market market participants kind of scooping up the coins at cheap prices so um it's just like like i said the inevitable symptoms of the bottoming cycle. I recently was listening to an interview and Jerry Seinfeld, uh, of all people was talking to Tim Ferriss and in it, he said that pain is information or education rushing in. And he used the example of when you stub your toe, uh, it is the world telling you, Hey, there's a bedpost there that you didn't think was there. And it's kind of a feedback loop. Uh, when I hear you talk about pain, uh, when it comes to trading and leverage, uh, same thing, right. Kind of information and education rushing in.

Starting point is 00:26:43 Um, and, uh, and obviously nobody wants to experience that, but, but I think it's kind of a fair way to look at, um, you know, some of that pain and, and, and what some of the optimistic takeaways of it could be. Is that fair? Yes. Uh, these things are very, very expensive lessons. Yeah. When you think about, uh, kind of the market today, uh, you now are building something that uses some of the same technologies, but, but is quite different as well. Talk to me a little bit about kind of your journey from what most people would know in terms of the most hardcore, most optimistic Bitcoin bull maybe they've ever heard speak into a microphone to now somebody who is incredibly bullish about Bitcoin, but also has become excited

Starting point is 00:27:23 about other parts of the industry as well. What has that journey been like? And maybe talk a little bit in terms of how you get to the idea you're working on now. Yeah, so obviously, we've had a very big DeFi summer in the summer of 2020. I myself have gotten sort of more interested in that subspace of the industry towards the end of 2020, more so early 2021. One of the things I disagree with sort of your more vanilla Bitcoin maximalist is that absolutely everything else in the space is a scam other than Bitcoin. Because I think that even if Bitcoin becomes the dominant store of value and the dominant currency, there's still going to be other on-chain businesses. Now, whether you like it or not, or whether that diverts attention from

Starting point is 00:28:02 people only buying and only studying Bitcoin, doesn't matter. The on-chain businesses will still exist. The idea that there won't be revenue producing and revenue sharing and cash flow positive blockchain businesses, whether those exist on Bitcoin or in any other chain, is completely preposterous. And I think that actually the next cycle will be defined by sort of decentralized applications that make consistent money and share that money with sort of their community. And I'm actually very excited. Like if we ignore sort of the store of value discussions and currencies per se. I'm very excited by any kind of DeFi application

Starting point is 00:28:42 that can create and maintain a moat and that have sort of consistent fee generation. I think those are very powerful and very exciting. The fact that you can sort of build a business that's completely untethered to physical objects, essentially. And even compared to the fintechs of the 2010s, you don't really even need a bank account to run any of this stuff.

Starting point is 00:29:05 You really just need a bunch of computers and a bunch of discords, and then that's it. And so I think that's unbelievably exciting. I'm building something similar in this space as well. Our project is called STFX. Essentially, it's a completely new way to do short-term asset management. So since 2016, there have been many asset management products in the Ethereum and other ecosystems. However, the collective TVL of all active asset management products in the space right now is 50 million, which is essentially nothing. And the reason for that, I believe, and I don't want to go through the entire list.

Starting point is 00:29:43 I wrote a Medium article kind of describing the 12 reasons why this is the case. But essentially, people don't want to wait for years in any kind of a DeFi vault or in any kind of a vehicle. they want something faster and something with a faster feedback loop so what is a traditional fund it's something that usually lasts for two three years or more something that thus far at least in crypto meant you hold a portfolio of bitcoin and maybe 10 15 other altcoins and you kind of rotate between them um and something that's continuous right something that's portfolio style. Essentially, you can think of every fund as a series of 70 or 200 trades, right? Instead of doing a fund on chain, we're doing something we call single trade funds. So think about it as

Starting point is 00:30:34 if you would sit down with the lawyers in the real world, structure a fund, go through a fundraising process, load up the funds to your exchange, execute just one trade. And as soon as that one trade is done, the investors receive their proportional P&L. You sit down back with the lawyers to kind of wind down the fund and essentially we do that but it all happens in minutes right and the decentralized exchanges particularly those that focus on derivatives have finally matured to a point in middle of 2021 where what I'm describing has finally become possible I think on-chain funds in the classical sense of the world are boring so we are doing kind of on-chain managed trades instead. And instead of people waiting for two years, they only have

Starting point is 00:31:22 to wait a couple of days to a couple of weeks to kind of see the result of their investment. We think that's a lot more exciting. So if traditional funds are molecules, we're trying to build atoms, right? And if traditional funds are kind of 20-minute YouTube videos, we're trying to kind of build the TikTok of asset management. On top of that, the other way to think about it is kind of DeFi since 2021 has kind of been undergoing a voltification of everything moment um this means that many different kinds of on-chain strategies have been packaged into vaults and kind of uh made investable we've seen that with leveraged yield farming with managed uh with liquidity management we've seen that with most famously with options but we're trying to do

Starting point is 00:32:03 something similar but with directional trading and we're making it completely permissionless so i'm super super excited uh if you want to learn more join our discord uh discord.gg stfx This episode is brought to you by Compass Mining, the world's largest marketplace for mining hardware and hosting. With Compass, everyone can mine Bitcoin. You can do it at home or in one of their 23 hosting facilities around the world. All you need to do to start mining your own Bitcoin is go to compassmining.io today. Again, if you want to get into Bitcoin mining, go check out compassmining.io today. This episode is brought to you by LMAX Digital, the number one institutional crypto exchange.

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Starting point is 00:33:40 Open an Alto Crypto IRA to invest in Bitcoin and crypto tax-free. Go to altoira.com slash pomp. That's A-L-T-O-I-R-A dot com slash pomp. Start investing today. So when you think about these short-term trades, I've got a whole bunch of questions. And as many people know, I invested mainly because you said you were doing something and I don't even think I asked you necessarily what you were doing,

Starting point is 00:34:07 as much as just if you're doing something, I'm in. Uh, but when you start to look at the short-term trade, is there anything you can look at in the legacy world that would be kind of a proxy or a comparison, or is this something that's brand new that wouldn't be possible, uh, without this technology? Yeah, that's a great question. I've said many times on Twitter that, uh, the use, like the crypto use cases that I'm most excited about are those that are completely fresh, new, and unique, and are specifically arising for the first time because of sort of the convergence of these technologies.

Starting point is 00:34:43 I personally don't think there's anything in TradFly that can compare. Some of the closest kind of parallels or metaphors that I can make is, you know how AngelList is a place to develop vehicles to invest in startups. Now, AngelList even had vehicles developed for people to come together and to invest in just one startup, right? So there have been funds that just focused on investing in one startup. You can think of our platform as AngelList for trades. So instead of investing in startups, you're investing in a trade idea. And you're sort of essentially giving someone access to funds in a non-custodial manner. So obviously they can't withdraw or run away with it, but they can manage it, right? You're essentially giving somebody access to a portion

Starting point is 00:35:34 of your funds for between two days and two weeks. And essentially during that relatively short-term time period, they're going to be executing on their proposed trading idea. The other way to think about it is you can think of it as a Kickstarter for trades, right? Instead of Kickstarter for charities, this is a Kickstarter for trade. And the other kind of the last but not least parallel that I can draw is if you've ever used TradingView, you've ever been on the TradingView ideas page, we're trying to build something like TradingView ideas, but that's very easily fundraisable and investable in one click. When you start to see people doing this, what prevents me as an individual, if somebody pitches me on a single trade, kind of going

Starting point is 00:36:20 around them and just doing the trade myself? Is it the complexity? Is it a cost thing? Is it an access thing? Like what, what, what kind of keeps me, uh, as we see in private markets all the time, people say, Hey, I want to invest in this company. Oh, that's a great idea. And they try to go around the kind of fund, uh, manager. What, what, how do you think about that? Yeah. So, um, every single STF, what we call them single trade funds, they're going to have a relatively brief fundraising period where anybody in the world essentially can invest into those vehicles. Some of the charts, the prices, the theses, the direction, the asset that the manager uses to incentivize people to invest in their STFs, some of them are going to be binding, things like the asset

Starting point is 00:37:09 and the direction, but some of them are not going to be binding, right? Ultimately, the STF is going to be managed and executed discretionarily by the manager in real time via market orders and not set in advance via limit orders. So even if they said they're going to enter at, let's say, 40, ultimately the manager is going to decide when to enter and you never know when that's going to be the case. Additionally, on top of that, we are going to be letting managers hide one of the parameters of the trade. And as they build a greater reputation in greater capacities, they'll be able to hide two or even more of the parameters of the trade additionally we're building on layer twos so kind of the actual execution is going to happen a lot faster

Starting point is 00:37:54 than it was to happen on layer ones and as people do this are there simple trades like just like hey i think right now is a good time to buy bitcoin and i'm gonna hold it for you know three days uh and kind of just go long only and it's more like a timing thing or is there other complexities that you think certain types of asset managers or kind of those with trade ideas will be attracted to the structure? So just like you said, I think timing is probably the single biggest service that the managers will technically be giving to their clients. So it's timing of the entry, timing of the exit, and kind of shepherding the trade in between. So things like trailing the scope losses and kind of exiting earlier than originally anticipated, or even not deploying

Starting point is 00:38:45 to the trade idea at all, or deploying earlier than they planned or at a different price that they planned, et cetera. So yes, it's not just about ideation. Execution and specifically timing are the biggest services that are provided here. We are starting off with PERPS, Perpetual Futures, simply because it's already the most well-known, most well-understood, highest volume, highest liquidity product in crypto. But we think that if that finds product market fit, these single trade funds can, of course, expand to spot options, NFTs even, as well as more complex trades like longing and shorting

Starting point is 00:39:24 something at the same time and different kinds of sort of simultaneous spreads, things like that. How do fees work? What do you think the fees that folks will charge? Like, why will the fund managers do this? How do they make money? And then also, what does that technically, is that just an on-chain kind of streaming payment type mechanism? Or is there some other way that the fees are transferred between different market participants? So currently, we're thinking that managers will receive around 16% to 17% of the profits that they generate. And the platform that we're building is going to be taking sort of 3% to 4% of the performance fees. and that's simply the default values as the manager grows in their reputation aka capacity

Starting point is 00:40:13 we are going to be charging them progressively less fees right so the bigger and more successful you become the less of the performance fees that you have to share similarly on the investor side we're going to be charging a modest management fee as well and similarly to the managers side, the more and the better that you invest as an investor, your fees start to quickly reduce as well. So we charge a small fee on both sides. But as you sort of level up on either of the classes, the fees that you have to pay start to reduce. Got it. What is the biggest risk that you see right now with STFX? And how do you guys try to mitigate that risk? I think at this stage, uh ensuring that we have successful product market fit is the most important thing like i said we

Starting point is 00:41:08 have been have been like we've been following we've been trying to be opinionated and trying to develop this product in a lean manner um we're starting off with perps because i think by utilizing other ddexes we can enable people to use uh mild leverage on top of their stfs as well I think just given the current demographic of the space, that makes it more exciting and makes it more likely to find product market fit than purely spot-focused on-chain asset management products that we've seen since 2016, 2017. And essentially, it's making sure that the UX or the user experience is as smooth and kind of flawless as possible. So these are like the top two things that I'm currently most focused on. Yeah. And talk to me about the team. What are some of the backgrounds of folks who are working on this?

Starting point is 00:42:04 How much of it is a technical kind of innovation or body of work versus maybe more finance related or market related? So we currently have almost 20 people. I believe it's 18 or 19 right now. Half of the team is anon and half of the team is doxed. So I'm clearly one of the doxed people. But other than myself, I've essentially been building this side by side with six people since February, and we've kind of been growing the team steadily since then. Currently, we have five engineers and over 10 people on the sort of the business marketing design UX community side of things. We have a couple of folks that used to work at Snapchat, an ex-Yelp individual, and sort of a number of people that have worked in DeFi on things like PancakeSwap and sort of other popular DeFi protocols.

Starting point is 00:43:04 Got it. And as you begin to look at the market, you mentioned earlier that decentralized applications will lead or kind of be a big piece of the next bull market here. how do you see STFX fitting into kind of the next bull market? Is it an expectation that this will become one of the dominant kind of applications? It's something where you're really just targeting a specific use case? Yeah. So our ultimate goal is to turn single trade funds into this new financial vehicle, financial primitive, or a money Lego, like they call it in DeFi. And I think that it's very interesting what we're trying to do, because essentially, we are on a mission to unbundle the fund, right? We're trying to take the idea of a fund and use blockchain tech to turn it into a much smaller, shorter, faster, and more compartmentalized, focused, discrete vehicle, right?

Starting point is 00:44:06 Now, I think they often say about technology that some of the kind of new breakthroughs, they come and they start looking like silly toys or silly games. And I think that this has been the case with a lot of like DeFi thus far. But I think if we start getting consistent volumes and prove ourselves, this has all the chances in the world of becoming sort of this new mini asset class or rather this new financial vehicle. Right. You can think of it as an unusual fund structure. My last question for you is around regulation. Obviously, one of the big things that seems to be coming out of a lot of the contagion that we've watched play out in the last couple of months in the crypto ecosystem is more likely increases in disclosures and more regulatory scrutiny. How do you view what you're building now kind of in that regulatory backdrop? What is the types of participants? Do they have to be accredited, non-accredited, U.S., non-U.S.? What's kind of the breakdown there? Yeah. So first of all, before anybody can connect their wallet to the platform, they need to acknowledge sort of all of our terms and conditions. Among many other contingencies, our terms and conditions, our kind of disclosures, disclaimers, risks, privacy policies, as well as the website itself,

Starting point is 00:45:29 will make you kind of agree that you are not from one of the sanctioned countries. You're not from the United States. You're not from sort of Cuba, Iran, I believe Venezuela, a couple of other countries, etc. So obviously, we cannot, because this is a completely decentralized world, we cannot account for every single user. But we have been learning from other successful DeFi protocols and DeFi DAOs thus far and kind of taking the lessons learned from them, trying to imitate them to the point that is kind of reasonable and appropriate. As you begin to look at kind of the current state of the ecosystem, you mentioned some bottoming that you think is either playing out or started to play out at least. Give us kind of your view over the end of the year. So we're recording this, you know, beginning of August of 2022, the next six months. What do you think is kind of the view there?

Starting point is 00:46:26 So I personally publicly started to get some exposure in the 17,000s. Did I go all in? Not yet. Do I still have some fiat on the sidelines? Yes. Am I going to sort of slowly continue getting into the market? Yes. um i think do do i know for a fact whether 17.5 was the ultimate bottom or not no um i think

Starting point is 00:46:50 most bottoms are these wide uh rectangles that's just the way it is and um i think that we have kind of like gotten into that tube so to speak so my view is that for the next half a year we're going to be pretty much ranging rightwards. I'm not 100% sure whether the stock market has already bottomed. I lean towards more of a no than a yes. But regardless, I think, super loosely speaking, I believe that that 20,000 peak that we had in 2017, which was resistance, is going to be flipped into support, right? Even if we quickly go to 17 or even 15, doesn't matter. I think this kind of general 20k area is going to flip into support and kind of this has begun happening right now so i think that kind of buying slightly above 20 or slightly below 20 i think that's a great time

Starting point is 00:47:44 to get in because in the next four four to six years i think we're still going to be higher than today yeah that uh i think that that is a uh a fairly safe view of the world uh but we will see as uh as you and i both know over the years uh best way to be surprised is to think one thing in this industry and think that there's no other possibility. Where can we send folks to find you on the internet or find out more about STFX as you continue to build it? Yeah, so I'm on Twitter at muststopmurad, that's M-U-R-A-D, and you can find all the relevant links there. DMs are open, so happy to talk to anybody who's interested about any topic. My friend, that is a very appropriate Twitter handle because no one can stop you. So keep going. And it's great to have

Starting point is 00:48:32 you back and publicly kind of talking about a lot of this stuff. And I know a lot of folks have learned a lot from you. So we're all excited to kind of see what you continue to build with STFX and then also continue to see your thoughts around Bitcoin as it appears to continue to do what it was designed to do. For sure. Thank you so much for having me once again after all these years and sort of excited to continue the conversation flowing whenever, whenever you're interested. Thanks so much for listening to today's episode. I really hope you enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player. And if you're looking to transition into a brand new job in the Bitcoin or crypto industry,

Starting point is 00:49:10 we've got you covered. Head over to thecryptoacademy.io. My team and I have been working with the top HR teams in the industry to develop an intensive three-week training program with over 50 live events. We teach you exactly what you need to know to break into the industry, including live interview prep and resume review. Our students have been hired at over 75 of the world's best Bitcoin and crypto companies.

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The Pomp Podcast - #1071 Murad Mahmudov On Why Bitcoin Will Be Worth Trillions

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