The Pomp Podcast - #1329 Arthur Hayes | Bitcoin Is Going To $1 Million!

Episode Date: March 18, 2024

Arthur Hayes is the Co-Founder of BitMEX and CIO of Maelstrom Fund. In this conversation, we talk about bitcoin, macro environment, banks, Microstrategy, Altcoin ETFs, stablecoins, various playbooks different nations are using, bull market predictions, portfolio construction, and more.  ======================= Base is making it their mission to bring a billion people onchain. But what exactly is Base? It's an Ethereum L2 offering a seamless experience for both builders and users. With near-zero gas fees and rapid transaction speeds, Base is shaping the future of the onchain world. Base is a canvas for everyone, with hundreds of apps in the Base ecosystem, whether you're an emerging creator, a seasoned developer, or someone exploring the onchain space for the first time, Base is designed to bring your ideas to life. So, if you're looking for a platform where the future of onchain is being built daily, Base is your destination. Join in and make onchain the next online. Learn more at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠base.org⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and follow along on Twitter at @BuildOnBase to see cool things to do onchain, everyday. ======================= Introducing Espresso - the world’s most interactive portable display. They have a portable screen that is incredibly light, comes with a nice stand, and the user interface is very easy. Anyone who listens to this podcast can go to ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠us.espres.so/pomp⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. They have a brand new offer waiting for you.  ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Today's episode is with the one and only Arthur Hayes. Arthur Hayes is the chief investment officer of Maelstrom, and he is the co-founder and former CEO of BitMEX. Arthur is

a legend in the cryptocurrency industry, and he does not disappoint in this conversation. Today, we talk about it all. We go through Bitcoin and the macro backdrop, why dropping bonds and buying Bitcoin may be a better strategy, the death of the 60-40 portfolio, What he thinks about Michael Saylor and MicroStrategy How he thinks that Bitcoin ETFs and Altcoin ETFs may play out in the market What are his thoughts around stablecoins, property rights, his favorite assets right now What's in his meme coin bag What is the craziest investment he's made

Where has he made the most money And what does he think is going to be the price of Bitcoin as we get into this bull market Arthur Hayes literally has been in this industry longer than most. He built one of the most important and largest companies. And now, Arthur shares all of his thoughts on the current environment with you. Here is my conversation with Arthur Hayes. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions

and do not reflect the opinions of Pomp Investments. You should not treat 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. Today's episode is brought to you by BASE. BASE is making it their mission to bring a billion people on chain. What exactly is BASE? It's a layer two offering a seamless experience for both builders and users. With near-zero gas fees and rapid transaction speeds, BASE is shaping the future of the on-chain world.

BASE is a canvas for everyone with hundreds of apps in the ecosystem, whether you're an emerging creator, a seasoned developer, or someone exploring the on-chain space for the first time. BASE is designed to bring your ideas to life. So if you're looking for a platform where the future of on-chain is being built daily, BASE is your destination. Join in and make on-chain the next online. learn more at base.org or follow along on twitter at build on base again that's at build on base to see cool things to do on chain every single day today's episode is brought to you by espresso the maker of the world's thinnest portable display now listen up if you're like me you feel like you are at a command center when you sit down at your desk i got a gazillion tabs

open and different windows for different activities there's my web browser my text messages. I've Slack open and I got a notes app. I normally work on a desktop and it can be very, very productive, but everything falls apart the second I leave my desk. If I'm traveling, if I go to a coffee shop to do some work or just want to work from the kitchen table, my laptop doesn't have enough screen space. I lose my command center and my productivity falls off a cliff. It's a major problem, but this is where Espresso comes in. They have a portable screen that is so beautiful that you think Steve Jobs came back from the dead to create it. The thing is incredibly light. It comes with a nice stand and the user interface

is so easy that I figured it out how to do it in less than three minutes. If you listen to this podcast, you know, that's not an easy feat. So the espresso team and I, we became friends. I got to know them because I really liked the product and those screens. They now want to offer them to any fan of the podcast. So we struck a little deal. Here's how it works. Anyone who listens to this podcast can go to us.espres.so or that's too confusing. Just go click the link in the description. If you go to Espresso's website, they've got a brand new offer there sitting for you. You get a little discount and you'll get a beautiful screen. Trust me. I use mine every day. You'll love the Espresso screen and I think it'll make you more productive. Go check them out today

by clicking on the link in the description. All right, guys. Bang, bang. I've got Arthur here. Arthur, the macro environment is insane. Everyone seems to be buying Bitcoin. Some people say it's because of the ETF. Some people say it's because they think inflation is coming back. Other people are just buying it because that's what all the cool kids are doing. What the hell is going on with the macro environment? Why is Bitcoin now becoming part of the legacy financial system?

So first of all, and I'm going to write about this probably in my next essay, I think it's very, very simple. And the simple answer is that real yields in the U.S., EU, China, Japan are negative and have been negative since the global financial crisis. And at a simple basis, I define the real yield as a government's 10-year bond minus nominal GDP. And so at a theoretical level, it's very simple. If I'm going to lend the government money, I at least should be compensated at the rate at which that economy is growing. Very simple. And so if the 10-year yield is below that rate, then the government is profiting off of bondholders. And if it's above that, it really is positive, then bondholders are profiting at the expense of the government.

And it's just that simple. Now, obviously, if you're a politician, the goal is to keep yields lower than where the economy is growing on a nominal basis, because that means that you can spend money like a drunken sailor and it's profitable for the government to do so and obviously as we know the best way to win an election or you know engender the support of your population is to give them free shit now obviously nothing's ever free you're paying with it via financial repression but that's sort of the goal and so every single different sort of major economic block has a different flavor of a way that they financially repress savers to make sure that the government bond yields are below how fast the economy is

growing. So take the US, for example, very simply, it's the Fed. So the Fed since 2008 has been printing money. I think the down balance is whatever, 8 trillion it is, up from like 1 or 2 trillion at the start of the GFC. What do they do? They bought bonds to do what? To make the interest rates go down. At the same time, the US economy on a nominal basis has been growing ever since 2009 apart from the COVID lockdowns. So it's been very, very successful. And what do we see as a result? Bitcoin is the sort of release valve or the most popular one since 2009. And it's gone up the most of any asset class ever in human history, which makes sense because the United States has printed the most money that it's ever printed in its entire history. If you move

over to China, similar sort of situation, their entire industrial policy is centered around, let's make sure that we borrow money from the people through the banking system at a lower rate than which the chinese economy grows so chinese economy in a nominal basis has been growing you know five to twenty percent every year since the the mid 90s but on a bank balance you get you're lucky to get more than four to five percent as a saver and so what happened in china obviously there wasn't a bitcoin back in you know the year 2000 when they joined the awto or even now today it's you know difficult to buy bitcoin onshore in china they bought property property was the one asset where the government was encouraging the price to essentially reflect

the amount of capital that's being created and the growth in the economy and as we saw like you know property market zoomed china and obviously it's going through a bit of correction right now but you could understand why a chinese person if you see the economy growing at 20 a year and you're only getting four percent in your bank account you're going to do something else with your money japan the boj has probably printed the most money in nominal terms of any central bank ever they own more than 50 of the bond market same deal nominal gdp growth is growing in japan but yields are negative on bank balances and they've been holding 10-year yields at around you know one to one and a half percent for the last you know few decades again same thing the

nikkei has actually obviously taken off as again has weakened um and then europe similar deal the ecb is buying all the bonds of the governments and on a nominal basis you're still the growth is still growing in europe so it's the same story everywhere in the world the question is when are investors going to realize that holding bonds is for dumb people and so great you can realize that but then what are you going to do as as an investor before these bitcoin etfs in the us and obviously soon to come in the uk and probably china as well there wasn't really other many options okay yeah you could go buy some gold but then you got to store it somewhere it's a pain in the ass you could buy some stocks by the nasdaq obviously good managers did that by sp that's

outperformed but at the end of the day you're kind of stuck in these shitty things called government bonds then along comes the etf which is finally traffic saying okay well we recognize the situation in the past the government leans on the banks to finance the government and it hurts the profitability of the banks and there was a um i think he's a columbia professor charles colarmus colarmus can't pronounce his name whatever he wrote a paper last summer about fiscal dominance and the theme of the paper was because the deficits are so high the the federal government in the us essentially merges the fed and the treasury and they lean on the banking system with their banking reserves which is around three trillion dollars right now to provide

financing to the government now the problem is that banks at least in the u.s are for-profit entities and the shareholders want to make money so they don't like it when the government basically says yeah okay you have that great business going there but what you're really going to do is just buy our shitty bonds and they've pushed back on this there was a recent um i guess proposed legislation from the fed saying hey why don't the large banks provide more capital You have to hold high reserves. The banks did a full court press and sort of lobbyists. And of course, it was defeated.

They don't have to provide more capital. They don't want to provide more capital because that hurts their profitability. So at a higher level, why not support a Bitcoin ETF? All of a sudden, you know, BlackRock files a Bitcoin ETF last summer, took the Wickel Clowns 10 years. They still don't have one. They think it's one in six months, right? And so now all the banks have a way to give these bond investors something else to buy.

We know that's negative yielding. We know that the government deficits are going to continue to go higher. Taxes are not going to get raised enough to cover them. Spending is getting out of control. No presidential candidate is campaigning on, I'm going to balance the budget. Not a single one of these clowns are. So it's not going to change. People are starting to realize this.

And now they've got a product leased for a TradFi fund manager they can allocate to a Bitcoin ETF. They don't have to change their prospectus. They don't have to worry about custody. They don't have to worry about any of the things that make Bitcoin special other than the fact that they did the back test and it was negatively correlated to certain things they care about. And it's performed well as rates have been negative. So I think that's the macro backdrop. And that's why I think these flows are going to continue as the global investor class realizes that this time, you know, they're going to eat a massive amount of shit if they keep holding these shitty bonds. Maybe it's time to diversify. Here's an option. And it doesn't entail any career rest for them to buy a Bitcoin ETF because it's being sold by BlackRock. You don't lose your job by buying one of Larry Fink's products as a fiduciary. so i think that's sort of the the macro backdrop which is why i think people need to not take any chips off the table it's time to even add more because now it's a reflexive price movement the

more the price goes up the more people hear about it the more they look at their bumper for like well what the is i'm down 50 over three years worst bond market performance since the war of 1812 in the us why am i not owning this bitcoin thing all i got to do is like click two buttons and buy this etf and all of a sudden i've you know got the best performing asset in all of stratify in my portfolio so i think that's the sort of the backdrop very favorable and it's going to be a fun blue market so let's talk about individuals and maybe like uh institutional investors historically they followed portfolio theory 60 40 global portfolios yeah that's 40 percent in fixed income uh most of if not all that being bonds of some kind uh is there a world where

they just drop all the bonds and put 40 bitcoin or how do you think you know let's say that they all come to the realization they say i need to act what does that look like you know five ten years from now so i don't think that you will be everyone will be able to get out of the 40. the people who act now will be able to get out of the 40. but if you are you know just dragging your feet or you know being honest with the vanguard ceo that i'm never going to look bitcoin in my portfolio blah blah blah he his ass was out in a few weeks um then you're going to be sitting there a few years from now like i really want to get all these bonds but guess what as the government sees that the traditional holders of their securities are no longer willing

to buy them at these low rates then they change the accounting rules to make them do it anyways right so if you're a pension fund you can only invest in suitable things well i bet you that a bitcoin etf is not going to be suitable um soon enough because they want you to stay in those bonds or in your retirement account yes now you can allocate to a bitcoin etf maybe you won't have that option in a few years time as it's not deemed as suitable what's deemed suitable a low yielding government bond because it's safe right and so that's how they make sure that if the 40 starts leaking into bitcoin and nasdaq and ai or whatever it is and not buying bonds when issuance is wrapping up around the world, then you just change the accounting rules. And because all the

money is in the Tradify system, the Tradify fiduciaries have to follow these rules and therefore the capital is stuck. So I don't think there's any world, there's no world in which the entire 40 of fixed income gets into Bitcoin, but there is a world where there's a rush for the exits now. And if Bitcoin's at, I don't know, a few hundred thousand, a million, whatever it is in a few years time, and there's wars to be funded on every side, China, US, Europe, Japan, Everybody's at war with everybody and you need to print money to support the military effort. There's no way in hell that they're going to let that 40 just walk out the door. What about the banks who are right now, many of them would be insolvent if they were marking their bond portfolios to market.

They're sitting with tons and tons of these bonds. Are they, one, going to be able to get out? Two, will the government let them out? And three, will the banking regulation have to change in order for them to buy Bitcoin and put it on their balance sheet? I don't think that they'll let them out. So what they'll do is they'll make it very profitable for them to hold bonds on an accounting basis. So what you're starting to see now, there's a letter from ISDA, the Swap Steelers Association, I think last week or the week before, basically begging the Fed and the Treasury and the regulars in the U.S. to reinstate the supplemental leverage ratio, the SLR exemption for U.S. treasuries for bank holding companies. What does that mean?

it means that if I hold the treasury right now, I have to hold a bit of capital against that because it has a certain amount of risk. Now it's very low, but it's still greater than zero. If the SLR is reinstated and these treasuries are no longer considered risky assets, then you can hold them with infinite leverage. And so then, yeah, I can have a one or two basis point arbitrage with a bank. I can create money on a thin air because that's what I can do as a bank and I can buy these bonds and show an accounting profit with no accounting risk. Obviously, there's an economic risk and that economic risk will then be hoisted onto the taxpayers because every time the banking system goes underwater, central banks come and print

money to save it. So the bonuses for the bankers, they'll be compensated for doing something that's economically stupid, but accounting wise sound. And that's how the government will keep the banks in the business of buying their debt. now another group is corporations uh many corporations when they report they say cash or you know cash like instruments and whatever kind of bureaucratic uh uh nomenclature they'll use michael saylor and microstrategy they seem to be epitomizing the like drop bonds you know buy bitcoin uh he's taking almost his entire treasury now and put it into bitcoin what do

you think about what he's doing well i think he's obviously it's a great strategy right you're borrowing money in a depreciating asset and investing it in a finite asset it's it's like what warren buffett did with japanese trading companies right borrow at one percent in yen in a company that has a five percent dividend yield it's a genius strategy now obviously i don't think most corporates are going to have the ability to do what sailor's doing sailor is the board it's essentially his company he can do what the he wants right a public company if you make cars is not going to be able to let me go issue a bunch of like 10-year debt and go go buy Bitcoin. It's just not going to happen. Will they diversify into holding Bitcoin as an

asset? I mean, unless they're just trying to pump the markets, but I don't really see corporates engaging in a micro-strategies type situation because they're not really owned by just one person who just believes in Bitcoin and can do whatever he wants. Now, what do you think the risk is for Saylor specifically? I saw, I think in the last couple of days, somebody was pretty short the stock and it looks like they're kind of trapped and there's a little bit of a short squeeze that's happening. That obviously, if those shorts had been maybe more overwhelming, they could have had some sort of impact, but that's just stock price. Do you see any actual risk to the business itself and the efficacy? Or is everything that people are going to kind

of critique micro strategy is it's volatility, it's short sellers, it's things that have maybe short-term impact on price, but there's really not a risk to the strategy itself? I mean, I have to really depend on, I know he has an operating business. How much cash does that throw off? What's his interest expense, right? And whatever that ratio is, if he's paying out more money and interest than he's earning in the cash flow from the software business that he has, then yes, there is a risk if the price of Bitcoin goes down, can he sell enough Bitcoin fast enough to pay back a loan? But I'm not really sure on the cash flow implications. I think it's not going to

matter he could probably issue stock like there's so many people he's created a meme around himself that like microstrategy is the badass you know stratified corporate dude who's buying bitcoin like i think even if his business was a negative carry in terms of cash flow versus the interest he's paying he could probably mean himself in a way to dumping a bunch of stock on some robin hood muppets buying it um the bitcoin etfs obviously have been very successful i've been surprised at how much inflow they've gotten so far um and also i think the impact on price uh you know my thought process was hey we'll we'll definitely go up when they're approved but unlikely we'd hit a new all-time high before the having and obviously you know we've kind of

blown through that um what do you think like is this what you expected do you expect you know 100 billion dollars to flow into the etfs more i mean i was definitely not expecting it to be this quick like fastest growth in aum ever for an etf complex it's like the best performing product in terms of aum growth for i guess probably every single one of those major asset managers so obviously it's hit a nerve it's the timing is right everybody's freaking out about these massive well not everybody certain investors are freaking out about these massive deficits there's this inflation issue ever since covid there's a general mistrust of the government however they lied to us about vaccines and all sorts of other things right and then you have contentious presidential

elections around the world people want something different and i think this taps into sort of that narrative and then you have you know the entire trad5 financial press pushing this narrative of yes bitcoin's a good inflation and guess what here buy this product over here pay these guys some money to manage it for you right so now all the interests are aligned and now you have cnbc every days spitting out messages that you and i and others have been talking about for decades right so it's just that incentives are aligned and so it can continue as long as the narrative holds what does that mean i don't know but i think that we're just at the start right if you think about how people allocate to these things it's they go to their hr department they get a form they check

some boxes it's annoying as hell and then okay then money just starts trickling in from their 401k so once you've made those allocations then it's just on autopilot and that's the beauty and the i guess the bad things about passive investing is it's just a continuous stream of cash once you get into these very sticky flows of retirement accounts and pension funds and all these sorts of things and then you're going to start seeing people do take this etf and do some financial engineering around it maybe if there's some other like listed options you can i think there's a cover call you know press structure product like then you get the private the high net worth sort of groups creating all these structured products auto callables range

accruals all these sorts of things that you can start to do once you have this liquid security that everybody can trade the same things that they do in s p and cosby and hsci and all these other indices like there's a whole group suite of products that are yet to come now that this thing is trading a few billion dollars a day in flow you can start building these complex derivatives on top of the ETF. So I think it's only going to increase the volatility of Bitcoin and there's going to be more funds flowing into it, at least in this particular juncture of the cycle. Yeah. One of the things that I figured would happen over the long run, but I've been surprised how quickly is non-Bitcoin funds like the strategic income opportunities fund

at BlackRock or Fidelity's got a fund in Canada, them saying, we're going to take our other funds and we're going to buy some Bitcoin through our ETFs. And so it's not just net new inflows where somebody's saying, hey, I've got cash in the bank, I'm going to go and I'm going to buy a Bitcoin ETF. It's actually, I gave Fidelity money for a fixed income strategy

or some opportunities fund or whatever. And then they're taking that capital that's already in that fund and they're buying Bitcoin as well. And it feels like that is a sign that Bitcoin will end up in a lot of these portfolios as a small percentage within a basket of goods that these asset allocators

are really just looking to juice their returns with. Exactly. it's just math right you run the correlations it makes sense they allocate they're you know receiving on right hand paying a left hand everybody's happy because they make fees now um is there a risk with you know blackrock's got one percent michael saylor's got about one percent uh if you add up all the etfs they're creeping up you know three four percent uh of all circulating supply is there a risk with etfs that like they could get too big of course i mean look at how the percentage of passive investors in the traditional stock market across the world

it's destroying price discovery the stocks that are highly valued are highly valued because they're highly valued not because they're good companies right so if you're in the sap 500 and you're a top market cap then you get more money just because of how the index is weighted and so that's going to happen in this this passive situation right as you know people just tick the box and the money keeps flowing into bitcoin and they keep accumulating or get bitcoin while this narrative holds they don't do anything right so bitcoin is one of those monetary assets where it has to do something for it to be valuable because if it doesn't move then the miners don't get paid passive investings like blackrock do all their point is i'm going to create

this vehicle you can put your money in i'm going to charge you some fees and i don't do anything else right it's a great business but they don't care one way or the other about bitcoin they're not going to do anything either good or bad to further or you know put that detriment the the movement of bitcoin and so that's the issue it's just not going to move so if it gets too big and there's not this movement then you know we have this whole segment of the market that has no connection to what's actually going on and that could be an issue if there's some contentious sort of things that need to get approved on the network level maybe there's some privacy things security things whatever it is and these passive investors because like man well i this is not my job i just

sit here and i accumulate assets right and so that's i think the risk are we anywhere close to that no but it's bitcoin right the whole point is everyone should be able to buy it for whatever their purposes are and we've and we hopefully we've created an economic game such that we still get people to use the asset and if we don't then the game is faulty and we have to go back to the drawing board and do something else do you think that uh bitcoin etfs and kind of the rise of that passive persistent capital flow will it dampen volatility uh and dampen volatility could be hey it's not going to actually be as volatile in both directions or could it potentially dampen volatility on the downside so we won't see those 80 drawdowns you know kind of on the other side

of these bull markets but that persistent flow just leads to kind of a grinding up of the price over time like how do you kind of think about price action how it used to work and now like post ETF launch, how it could work? I think it's really going to depend on the types of derivatives that take off on Bitcoin. So we're seeing in the zero day options world, obviously in the US, and as you've seen, if you've ever traded KOSPI in Korea, once you get the retail into these sort of highly leveraged option strategies, the volatility obviously spikes up because what do you do? You buy out of the money, call and put a lot of tickets.

forces dealers to to gamma hedge these things especially if they're very short dated and so if we get like zero day bitcoin options trading where you can essentially have like you know 100x plus gearing on your position you're going to start to see some wacky moves in in the price and so while yes you know a very passive steady stream of money coming in that might be a bit sticky might dampen volatility to to some extent but remember that once we have these derivatives on top those etf trading flows are going to fling up and down you're going to have very big traders having to hedge their positions in the spot markets and in the the non sort of like trad fi type derivative markets offshore so i think the volatility probably

increases as we get more um different types of people trading highly leveraged derivatives on the back of the bitcoin etf the bt uh bitcoin etfs have been successful um one of the areas where i think we move next is altcoin etfs now obviously there's a lot of speculation whether it's going to get approved and kind of the individual ones um but the altcoin etf issuers there's currently you know the black rocks of the world they're trying to get the ethereum one approved but there's companies in canada like defy technologies which you know we've worked closely with and their whole strategy is like there's a bunch of degens on wall street that want access to this they can't go and sign up for a coinbase account or a binance account so if you can get the first

etp or etf into the market where somebody can go buy that brand new coin they just heard about obviously that's going to attract capital how sustainable do you think that game is and like is the altcoin etf market going to be just as big or bigger than kind of the bitcoin etf conversation and flows yeah i mean i guess if you are a managing director or some senior person at any of these funds you're like okay well this is the most successful launch ever it's bitcoin there's like 3 000 of these coins out there you know there's an appetite for people to trade these things you can watch as many of the things you can do you give a what's in it no chance you don't know what it is it doesn't

matter what it is you know it's custody in the right way tick the box you got to tick watch it and so i think obviously there's maybe a little bit more resistance what's the ether one if it happens if that happens and the floodgates are open right these guys are making so much money are attracting so much aom their stock prices are going to perform alongside this crypto narrative there's going to be no incentive for try to fight not to have as many of these assets stuffed into these vehicles that they're comfortable with as possible because at the end of the day it's just more and more fee income and then on the other side if you think about the dealers like the jp morgans the cities the goldmans the morgan stanleys they love this black

rock is probably the most important client on the street in terms of paying commissions because the clients just sit there and the money is there and they you know they rebalance they trade in and out right now you have a whole crypto portfolio that moves up you know 30 in a day just because somebody sent a tweet like it's like heaven for these banks right it's completely uh a disjointed opaque market where they can charge whatever the they want and the end client is just so happy that they're able to buy a coin in their retirement account so nobody is fee sensitive across the entire curve it's a bonanza for trad fi and so yes there's going to be all coin etfs everything they can get their hands on of course it'll be overdone but there's just pent up demand

to have something that moves because central banks have destroyed price discovery in every other asset class out there this is the one thing where they're not leaning on it with all sorts of manipulations and so the people actually want to trade it and now wall street can make a lot of money helping them do it this is exactly what the this uh one company d5 technology is exactly what they're seeing it's just it's like a magnet people just say hey i need to buy that asset i can't buy it in you know my regular account where's the thing and they're going outside of their geographies they're going to different platforms like whatever they can do to get in these assets i think will continue um stable coins are interesting because i think there's really two narratives one is like

uh stable coins are obviously the killer app for uh payments when it comes to crypto they're by far the most popular uh and so crypto people some of them you know kind of the hardcore bitcoin maximalists are still they want to ignore that data point uh for the most part uh but also stable coins are almost becoming too important for the legacy financial system i think stable coins that collectively uh are the 16th largest holder of u.s treasuries in a world where japan and china are actually decreasing the uh amount that they're buying these uh treasuries like in some weird way the stable coins are bailing out the government because they're just buying so many treasuries And so how do you think about like stablecoins as payment, but also stablecoins becoming like, could they become a systematic kind of important player that's like too big to fail?

So I think that, and I talked about this in a recent essay about Tether and Athena. I think that the Fed and the US Treasury, to take them as an example, do not like stablecoins. It has nothing to do with crypto and everything to do with the sorts of things that the Fed has to do to control short-term interest rates. and bail out the banks after the global financial crisis. So quickly rehash, 2008, banks ran out of reserves because they invested in dodging mortgages. So the Fed said, we are never gonna let the banks run out of reserves again.

So we're gonna do QE. So we're going to buy bonds from banks and credit them reserves at the Fed. Now, the problem with that is that the bank could take that reserve and lend it out and, you know, increase goods and services production in the economy, which obviously creates inflation. So the Fed said, OK, well, we need to bribe the banks not to lend. So we're going to pay interest on these excess reserves that they hold at the Fed to make sure

they don't transform those into credit in the economy. Now, when their interest rate was zero percent, it doesn't cost the Fed anything. At five and a half percent, the Fed is paying out hundreds of billions of dollars a year in interest to the banks for doing nothing. The banks could lend the money, but then that creates inflation. So the Fed instead says, we'll pay them billions. And now the Fed is trading at a loss in terms of their net income. On the other side, you have reverse repos. It's another function of the money markets.

They have to pay a rate at this reverse repo facility to keep the short-term rates at their policy rate. And that's a similar sort of situation. All this capital that they don't want to go out into the system to create inflation, they need to pay an interest rate on. And then the third piece is short-term T-bills, which essentially trades at a slight yield premium to interest on excess reserves and reverse rebills. So it's all related. And so if you take this whole thing together, as the Fed has been raising rates, Fed and Treasury are paying out over a trillion dollars in interest income to wealthy savers and the banks. And so along comes stablecoins. The banks have no competition.

they have no interest in providing a 24 7 um currency that trades around the world because why would you do that if you have a monopoly on on trends and transfer payments and so then you have the tethers in the circles and the first digitals and all these other stable coins say hey great we're going to take this ethereum tron whatever blockchain stuff some money to bank account and let you move this around uh the crypto ecosystem great product however it's been so successful that now it's exacerbating these negative income issues that the fed and the treasury have which is it's just stuffing more dollars into these facilities that they don't want to have stuffed in there because they have to pay interest on it and as inflation is not

going down rates are going to stay high they're going to keep paying out trillions of dollars a year in interest income so that's why the fed and the treasury don't like what's called narrow banking or fully reserved banks which is essentially what a tether is it's it takes money into a bank account it makes no loans it stuffs the money back into the fed or the treasury you know reverse repos or um short-term t-bills so but they don't like it but on the other hand they didn't do anything about it and so now they hold some such a large position in treasuries if they cut them out of the market number one obviously that further erodes the protection of property rights that is supposed to be a bedrock of western financial capitalism

We know that's dead, what happened with Russia and other countries. But again, a bunch of motherfuckers sitting down in Bahamas who just had some dollars in a bank account. Now they got them frozen. Maybe more people don't want to hold treasuries if that's how they're going to act. And then if they make themselves, their treasuries just shutting them down. Well, then everyone rushed for the exit, Tether deep pegs, big redemptions. And then you cause havoc in the treasury market as Tether goes and tries to dump $100 billion of the treasuries. So I think it's in this kind of stalemate situation where they don't really know what to do.

Maybe they're going to allow a JP Morgan or a Citi to do the same thing, because if they offered a similar product, you'd obviously use their product versus Tether because they're essentially risk-free. They're in honor of the U.S. government. If they're offering a $24.7 that trades on a public blockchain, I would rather trust JP Morgan than Tether as a customer. So I think that's where we are. On that one real quick, I wrote this, I don't know, four or five years ago. I called it the corporate money printer or the corporate central bank playbook or something. And I was like, if I'm JP Morgan, I'm 100% launching a stable coin that's backed by dollars. I'm going to get all my customers to use it.

And then at some point, I'm going to say, well, now I'm going to act like the government. And I'm going to unpeg it. And now I got you guys all trading around this shit coin that's not backed by anything. and you got jpm coin and like you trust it but now i can print as much jpm coin as i want and again i don't know what the regulation how they would treat this but the idea that uh you know we don't have rules where if you launch one of these and it's backed by a currency that you could unpeg it in the future seems a little bit crazy because it kind of is almost as going backwards in history where there was you know a bunch of competing currencies from uh individual producers

or kind of publishers of these currencies. And so it feels like once the large banks and kind of economically incentivized people get involved, there's a lot of crazy shit that they could do that we're just like not prepared for. People don't really understand yet what's possible. Yeah, I think the bigger issue is that the central banks around the world

have not made the decision on where they want currency to sit. Should it sit with, should it be a private thing that's created electronically? Should it be a commercial banking thing or should it be a government thing and that's sort of the debate that's going on the central bank digital currency world which is you know wholesale or retail retail being the fed or pboc or boj

offers a an app and all currencies held directly with the central bank which automatically puts all commercial banks out of business now the commercial banks are the most powerful entities in every single economy in the world nobody goes against them at the government level not even in fucking China? Are they going against the banks that the government even owns to do this and offer currency directly to the people by an app? Everyone's going through a convoluted wholesale thing to give the banks a reason to exist in this digital realm. So I think it's a confusion on policy because what banking system do they want to have? And while they can't decide on whether they want to put commercial banks out of business or not, the private market's saying, well,

fuck this. I don't want to deal with nine to five, some like asshole teller who like takes five hours for lunch. I want to move my money 24 seven. And look, there's this thing called the public blockchain and the issuers are bringing up these products. And so, you know, governments are going to have to decide what sort of bank, you know, banking system do they want in the tethers and the circles and these physically dollar backed or fiat backed stable coins are pushing the issue and showing them, well, if you don't do something, then all this money is going to accumulate here. And we're going to exacerbate some fundamental issues with your money markets that you've created to essentially print money to save the banking system post the global financial crisis. When you mentioned earlier property rights, describe why you think that is being eroded away.

And I think that you're alluding to kind of Russian billionaires that aren't part of the government, but they had their private property taken, seized, frozen, et cetera. But are there other examples or things that. no forget the russian millions the russian state a state act or a sovereign country that holds debt right what did russia do they did what they're supposed to they produced oil they sold them in dollars they earned dollars they bought treasury like a good little country and you know when they did something that the western elites didn't like they said oh those are nice bonds you have thank you very much we'll take them please um there was no due process no not even a kangaroo trial to like convict putin of being whatever the he's supposed to be according to the western

financial media no we're just going to take this um and there is no property rights it's whatever we say they are that's the problem is that if for whatever reason you fall out of favor with the political lease in you know in the us or in western europe that these bonds that you dutifully bought so that you don't have a balance of payments crisis when you're paying for goods that are priced in in dollars and euros are now null and void and you no longer have access to your money that's what i mean by property rights being eroded and so if you're china if you're japan if you're saudi arabia if you're anyone who earns lots of um dollars you're like well they did that to russia they could do it to me right if it's a you know it's a presidential

election year and for whatever reason like the color of my skin or my passport is what gets all all the Americans riled up, my assets are going to be grass and there goes my property. And so I think that's one reason why if you're a, you know, a sovereign entity that's used to earn dollars and buy treasuries, you're like, well, hold on a second. Maybe I shouldn't be investing my economic surplus in this asset, which can be confiscated with no due process at all. And I've seen examples of it most recently with what's happened with the sovereign state of the Russian Federation. So what's interesting about this is, on one hand, I think that nation states can come to the conclusion that Bitcoin is kind of this sanctions hedge. There's a guy at Harvard School of Economics here with this whole paper about like, oh, people might start buying Bitcoin and putting it in their treasury because of the ability to kind of resist the sanctions, and that would be really attractive.

On the other hand, I always remind people that there's like two guys who tried to price oil on something other than dollars, and they're both dead now, right? And so, like, there's this element of if you are too big of a country and you do something that could be interpreted as an abrasive movement, then obviously you are subject to the full wrath of the U.S. government, whether directly or indirectly. And so the ETS. I mean, I challenge that. That was true, right? Because, you know, Gaddafi and Saddam, right? They tried to do a gold theorem and all sorts of things. And, you know, they found out how what their friendship was worth as a gun down in a hole.

but uh saudi arabia recently or yeah they're doing swaps with in yuan india is buying oil and rupees right the global south the people the countries with the population growth with the economic vitality are like well fuck this we're gonna start buying stuff on our own currencies so we don't have to hold as many dollars and sort of come you know and so that's it's already happening the percentage of oil trans transactions in non-dollar currencies i think is was reported it like 20 last year or something very high so yes i would agree with you back in the you know 90s and early 2000s people were afraid of becoming like saddam and gaddafi but i think that fear is eroded and now people are well the empire is declining let's stop using this currency that

um is not useful for us in an economic sense yeah what's interesting at the same time that maybe the oil non-US dollar transaction volume is increasing. The international transaction volume for US dollars is continuing to explode. I think it's like 48% of all international payments are still dollars, and that's been increasing in the last couple of years. And so I think people are like, I don't want the shitty currency, but I may want another good major currency is kind of the point. And so whether it's Saudi, whether it's India, et cetera. But I do think that there's this like new, I don't know, a chess piece on the board, which is if I'm a country and I want exposure to Bitcoin's price, but I don't want to buy Bitcoin and then have the US like knocking

on my door being like, hey, what are you guys doing with that? Are you thinking about leaving the dollar? Are you thinking about going somewhere else? The ETFs now allow my sovereign wealth fund or other capital pools to get price exposure without actually taking ownership of the Bitcoin. And I do think that the US probably looks at it very differently is if your sovereign wealth fund is you know hoarding bitcoin taking self-custody of it and you know i don't know what the threshold is but at some point you would do so much bitcoin and take control so much of it that they eventually would view it as some sort of abrasive you know kind of positioning towards the dollar or do you think that no it's overthinking it and just the us is too concerned with its own problems doesn't

really care what these countries are going to do with bitcoin i don't think bitcoin factors into the decision making of you know what a sovereign country does i think i think they're more consoled about gold than they are with bitcoin right there's a i don't know what five or ten thousand year history of gold you know in you know the you know however old these people are these sovereign wealth funds they understand gold gold standard was the name of the game until 1971 right and so if you're a so and you can see since 2008 the percentage of gold as fx reserves um has been growing across the world especially in uh china and non-aligned countries they're buying gold will they buy bitcoin i don't know maybe maybe not they're certainly if they're really concerned

about having a an asset that is outside the us financial system they certainly will be buying a blackrock bitcoin etf right that's not to say that they don't want to custody bitcoin but i think as a central banker you understand gold your country has a history of owning it the general population understands it and so i think that if you're going to express that view and people are expressing that view already you're going to buy gold and you're not going to buy bitcoin maybe you buy some bitcoin here and there but it's not going to be a core thing that you diversify your savings into i i believe which is why i own a lot of gold because i want to be on the same side as of central banks who are going to depreciate currencies in gold terms as well

so let's take off our intelligent hats now and let's put on our fun hats left curve this shit yeah let's fucking go what what's uh what's bitcoin going to in the bull market uh a million you think you think bitcoin hits a million dollars in this bull market absolutely i think people are not i don't know i think people have a big enough imaginations right now oh i need to like take some chips off the table oh it went so fast at 70 000 like no motherfucker like why do they go so fast at 70 000 because a bunch of people now can like click about check a box and buy some bitcoin etf like there's a whole government issue of like too much debt there's elections around the world and what's the message i'm going to print money and

give you stuff rotor you know supporter whatever please support me right that's happening people understand it it's visceral we are entering this phase of inflation and populism this bull market is just getting started and i don't think people have the right imagination about how ridiculous it can get so yes million dollars is my price target are you planning to sell do you have a plan to take risk off is there a timeline is there a price point how do you think about the bitcoin that you have today in terms of ever converting it back to dollars or just i'm holding it i'm going to die with it so i think this is an intellectual thing i've started to think about is i don't want to sell bitcoin for fiat i want to sell bitcoin for energy right because at the end

of the day why why is bitcoin a good thing it's because it's pure energy in a monetary form a dollar used to be worth that when it didn't have any other competition now there's competition gold is very heavy i have some of it not as much bitcoin but again same issue so if bitcoin gets to a silly value in energy terms then i need to sell it and i need to own something some sort of way to have access to primary energy is that you know exxon mobil is that you know buying a power plant i don't know i haven't really thought about it that much but it won't be that i sell bitcoin for dollars i'm going to sell bitcoin for some primary energy source because that's what i'm trading in that's what i'm trading if bitcoin's worth you know 500 barrels of oil today and 10 000

tomorrow well at some point it's a little ridiculous how much oil should a monetary instrument um be worth maybe i should just own the only actual energy itself um because i've been able to get it at such a cheap price relatively speaking so that's kind of where my mind is at if you send in all these coins i own i'll sell for bitcoin if you sell your bitcoin and buy a power plant your the headlines the people will have a field day with you um all right before we get into the coins let's talk uh athena you mentioned earlier stable coins i know you're very bullish on that what is athena and why are you so excited about it so athena is um another stable coin the line of coins that have essentially taken this idea if i combine um say ethereum

and a short perpetual swap then i have a native yield if the swap has a positive funding rate and so i'm going to take this this uh construct crypto plus derivative hedge and it's a synthetic dollar and that's going to back a coin that's going to hopefully retain a one-to-one peg with the us dollar and so athena holds staked eath and short if per if us dollar perp swaps on a number of centralized exchanges so the reason why i like this idea and i've written about it many times over the years is that so if as an asset has a native yield it does not coming from outside it's the protocol itself is paying people to validate which is great and things want like four percent whatever it is and then because of the deflationary nature of ethereum as a currency every

block more ethers burn than is created because the network is being used on a forward basis the eth us dollar exchange rate should trade expensive because the dollar is inflating if is depreciate uh um not depreciating uh there's less heath around and so it's a structural reason why there should be a positive yield this yield should be higher than u.s treasuries or some other strategies you could do on sort of a delta neutral basis so packaging that up putting it in a stable coin makes athena very good product and at a fundamental level the reason why i don't like the physically backed stable coins like Tether and Circle is that without the Tradify banking system, Tether and Circle don't exist. So why am I trusting this very important feature of the

crypto ecosystem, which is moving a fiat derivative around for payments and for trading? Why am I entrusting the Tradify banks, which I want to destroy and disintermediate with upkeeping this vital part of the trading ecosystem? It doesn't make any sense. Why don't we trust something like Athena, which is saying, I'm not decentralized. I'm trusting these centralized exchanges to pay out on their derivatives, to hold the collateral in a responsible manner. But at the end of the day, I'm trusting crypto companies to help forward crypto versus trusting banks to help crypto, which doesn't make any sense.

So that's why I'm a big supporter of Athena, I'm an advisor, got a bunch of tokens. And I mean, they're kicking ass. I think they just crossed a billion US dollars of circulation. So their number six stable coin on the list. I think that they could overtake Tether and become the biggest stable coin within a few years, because I think that as a crypto ecosystem, if this narrative catches hold of, let's support something that is essential to us, but is safe-kept by other counterparties that are in our ecosystem rather than the banks who we want to disintermediate. So I'm super bullish on Athena. They're doing a really good job. Obviously, it's not without risk. Nothing is. But I think this is the risk that I'd like to take. what is uh let's go through your shit coin lottery in your portfolio uh what's the number one you first round draft pick of your shit coins uh that you're most excited so i think that uh

pendle is going to be a standout shit coin and the reason why i say that is so pendle is trying to create an interest rate swap market and if you take a look at derivatives in traditional finance You know, FX derivatives are big, right? That's what we have now. Perp swaps, Bitcoin dollar, shitcoin versus Bitcoin, blah, blah, blah, right? Big market, you know, I started in 2013. It's growing massively.

You know, spot was a big game back then. Now derivatives trades, what, five or six times on a daily basis with the smart markets too. Now the interest rate market is like orders of magnitude bigger than the FX market. If you think about the largest or the biggest or most traded futures contract in the world, it's a Euro dollar contract.

It's not the S&P 500. And so interest rates are essential because money is the most essential thing to human civilization because it's how we price our energy and our time. And then what is time worth is very important, especially in a crypto ecosystem. If we want to have a farm to table use of Bitcoin, Ethereum or whatever cryptos, we need interest rates to borrow and lend amongst the ecosystem. And so we're starting to see that Pendle is pioneering that. they've created some fun things with ability to separate out a fixed yield and sort of trading the yields on like points allocations for certain protocols. They've created sort of a proto yield curve using the stake Athena dollar and different expiries. They can fix the yield on sort of

essentially a variable rate. They're going to be coming out with their version of a leveraged interest rate swap and some of the next versions of Pendle. So I think Pendle could become the largest exchange for derivatives in the entire space, whether centralized or decentralized, if they're really able to take down this interest rate narrative and build the native yield curves across the ecosystem for all the different Bitcoin, Ethereum, and the other shitcoins. So that's probably my number one pick out of my portfolio, and it's doing very well. Obviously, i'm an advisor i got bags um that's what we do so yeah first number one draft pick all right uh let's do two more what's the bag number two and bag number three you want to talk

about um let's see bag number two you lit up when i said you could talk about your shit coins you got so excited so let's hear them yeah yeah so file coin obviously the ai narrative i think it's it's still it's still going right and you're seeing all this energy in sort of the traditional stock markets of all these ai companies valued at you know obscene prices sam altman wants to raise seven trillion or whatever whatever number he put in the ft of all this money he's going to raise for his next AI venture. And so I think we're just getting started in this AI bubble and people are going to start reaching for, okay, well, if this crypto thing is taking off and I can see that AI is validated because there's all this money going into it. Well, like what AI coins

are there around? Filecoins, one of them, obviously there's others. I own a lot of Filecoin. I own a Filecoin mining business as well, part of one. So that's sort of my pick for the data part. obviously ai training models is very data intensive um so i think filecoin is going to be a rock'em sock'em robot this this cycle in terms of uh doing well in the in the portfolio all right what's the craziest one you own well actually you can tell me if you don't want this in the podcast we can cut this out later but uh you and i went to uh dinner in miami and uh we were there with a bunch of very nice kind of older guys super successful in the traditional world and uh we were kind of joking to each other because they're asking about crypto stuff

and as soon as you said the rocks the ethereum rocks i just lost it because you you had them literally they had a million questions what's going on with the rocks why is the rocks valuable whatever and so you got anything crazy like that that uh you're holding now not yet but i think obviously we've made an investment in oil which is going to be a new um wallet for bitcoin ordinals and brc20 and that sort of stuff that's going to be massive we're able to bring like internet nft culture to bitcoin there's going to be all sorts of things that are going to proliferate on that chain because that's the most amount of assets you have all these very very wealthy people in bitcoin terms who now can buy a part of this internet meme culture and so i think that that's

going to be a massive ecosystem unsure how it's going to play out in terms of like you know trading versus lending borrowing and blah blah blah what you know how are the projects going to be successful what are these projects going to offer in terms of like features who knows but i really like the fact that ordinals are digitally scarce at a protocol level versus a lot of the nfts that you're buying on other chains it's basically like this digital receipt that points back to some centralized database that's holding an image or a file whatever it is right and so that's why i like the purity of ordinals matched with we have the richest chain in the world is bitcoin so there's lots of people with money who want to spend it on art that speaks

to them as sort of a bitcoin maxi for some of them i imagine so i think that ordinals are going to be massive this cycle and we're going to see some new ways of launching artistic creations directly on the bitcoin blockchain that's gonna be different than what you've seen with punks and you know forward apes and all this other stuff that came last cycle now obviously i own apes and punks and all that kind of shit too that's just gonna moon maybe one top signal is when i know my ether rock is i don't know like 50 million bucks or something stupid like that then okay well people have gone gone nuts and it's trying to dump the rock and you know do something else it was it was hundreds of thousands last uh last cycle right no i think i think the top sale was like three million

something dollars i think the rocks are gonna go you know into the deck of millions uh really you think the ether rocks could be worth 10 plus million dollars yes wow all right what do you think about like these like culture coins like uh uh zin and uh other ones like that that are basically trying to take things from the existing worlds they're not like new memes it's more so uh existing memes i saw the other day i tweeted about the reddit ipo i got bombarded with all these people talking about a reddit coin which has nothing to do with the company they basically just realized like if the stock goes up the coin's going to go up more so we created a coin that is the exact same ticker symbol and so obviously people are like creating these coins that are

completely untethered to reality but it feels like you know kind of things have value that people believe have value and people seem to be going towards these like culture type coins yeah and i think at a very fundamental level it's a big fuck you to tradify it's like hey you've destroyed the dignity of my labor of my time as a human being by printing all this money and saving these bankrupt banks and you're telling me that i need to own you know a very balanced portfolio and stocks and bonds and oh fuck you i'm gonna buy some dog with hat i'm gonna buy some you know coin that has no economic value other than other people think it does and other people want to say fuck this fiat shit that i have in my wallet i'm gonna buy this because i don't believe in

this system and so i think that's at a very fundamental level what this is all an expression of and why would you buy something that has essentially no fundamental value even in like a crypto ecosystem sense well because you don't value the piece of paper in your in your wallet because the government has devalued this thing over and over and over again and rewarded the same motherfuckers who keep bankrupting the system over and over and over again well i'm tired of this. I'm not going to invest in your stock market, in your bond market. I'm going to buy these meme coins. And guess what? Some of the people doing this are getting fucking rich doing it better than doing whatever else they were doing before. And so I think it's validating.

And obviously that's a function of the bull market. But again, I think there's this anger that's at the bottom of it of like, why have you destroyed what it means to be a productive member of society by printing all this money? Here's a way that I can express my frustration. I also think there's this element of like entertainment value, like the Zincoin thing. I know the guy who started it and a couple other guys I know were like buying it. They were talking about a bunch. I was like, I bought some, right? Like, let's see what happens because I just want to like be part of it.

And it's kind of like, I used to tell people all the time, when your friend starts a company, you should always invest, even if it's a small amount of money. Because if it works, then you celebrate together. And if it doesn't work, you suffer together, right? But like, you're kind of in it with your friend. And it does feel like there's some of this of just like, well, all my other friends are doing it. And so I want to like have fun with them, but rather than like, I don't know,

go to the movies or like do normal people shit, like you just buy some shit coin, get on the internet and like, you know, shill it to all your other friends or something. I don't know. It's like very dystopian, but also it's very clear what's happening in the, in the yeah. But it's very human at the end of the day. Like why, why do we buy like leather goods with letters on them? Right. It's the same dumb shit. Right. Like, Why is that worth $5,000 and why do people, you know, think that they're the hot shit just because they, you know, have a shirt with some alphabets on it, right?

It's the same thing. It's this part of being human and now removing that from the physical space to the online space. And obviously it's correlated with how wealthy you believe that you are. So as the market keeps going up, we're going to keep seeing more of these because people are going to diversify and they're like, well, okay, well, I made this much money trading Bitcoin ETH. maybe i'll just take a flyer on whatever it is this new thing is because i think other people are going to do the same as me yeah well and also i think that the asymmetry and i asymmetry may even be an intelligent term for the ridiculousness like i think it was avi fellman tweeted out and he was like you know i put a thousand dollars in some shit coin i came back a couple months later

i got 150 grand like you just people see that like guess what they do they're gonna go take 100 bucks i'm gonna go spread it out you know they're gonna take a thousand dollars put 100 in 10 different projects, hope they come back in a couple of months, it's up 150X, right? It literally is no different than buying a lottery ticket or anything else. And for what is a relatively small amount of money

for people, like kind of why not? I think is the conclusion people make. Yeah, and what's the other alternative? Stick it in the bank and make 5% when the economy is growing at six or like seven? I mean, might as well take a flyer on something. Yeah, what is the actual portfolio construction you have? So like maybe we'll separate it in two different ways.

like what is the traditional world percentage versus like crypto world and then how do you think about what assets you're either allocated to now or considering allocating to yeah so obviously you know you should hedge everything there's no such thing as an absolute on anything in life uh and so like do i hold treasury bills yeah i've got a lot of treasury bills um they pay my rent uh pay my credit card bill um do i have stocks i own two stocks i own uh ccj kimiko which is a uranium miner um i believe that uranium is nuclear is the future if you want to you know provide energy at a low cost for more people around the world and i own you know a punt of a stock uh fannie mae because i believe that the conservatorship of the uh year um gsc's

is going to end with either trump or biden doesn't really matter which so just a this yo that i'm taking so yeah treasury is a few stocks that's sort of on the traditional side um i've got vaults full of gold because again i want to own the thing that the central banks will depreciate via currencies with that's what they've done most of the time in the past even the us government has depreciated the dollar against gold multiple times so i want to trade on the same side as central banks and then obviously i own a lot of crypto well more than any of that other stuff but the volatility you know my delta trades on my portfolio is insane um not that i care but again what what's the breakdown in crypto like how much uh what percentage bitcoin versus

like maybe eth versus like the long tail stuff i'd probably say bitcoin is like 90% ETH is five. And then, you know, Maelstrom has a lot of early stage investments, right? We're obviously, we're up a lot over what we bought them at during the bear market. But again, imagination, this bull market has not even started yet. We're going for thousand Xs, 10,000 Xs on some of the stuff that we own. And so that portfolio could be worth a lot of money in 25 and 26 if things play out the way i think they are so that that mix could change considerably if um maelstrom and the guys there are doing their jobs correctly because at the end of the day my my challenge to them is well why didn't i just buy bitcoin and eath you guys need to outperform those

assets so that's what you do and so you know today we are doing that um but i think we can do we can do more if we continue holding throughout the cycle some of the stuff that we were early in um starting in like 2022. and then uh one of the things we haven't talked about solana which obviously had an incredible year last year what are your thoughts on solana verse eth and and kind of what solana will do so i don't think anything's going to beat eath um i'm a i guess eath maxi on sort of the usefulness of the decentralized computer mainly that's because eth has the most dedicated developer community and then if you think about the primitives for defy and sort of all the decentralized the d apps the first version is always on the ethereum it's not

on solana or on avax or on cardano or any of the blockchain it starts with an ethereum maybe there's some reasons for like network bloat or gas fees or whatever then they move over to salon or one of these other chains but you're not seeing a need a new primitive emerge on non-east chains first so that's if i start seeing that happen then i'll have to change my mind on my maximalist position on ETH. Does that mean I don't trade in these other L1s? Fuck no, I'll trade all this shit. I think that Solana has a great community, very energized. I don't know who said this, but it was a great point. Solana feels like it's a bunch of younger people who miss the buying ETH at like 10 bucks or a hundred dollars, but now they see Solana and like, okay,

I can buy it at five, six, seven, down the last year or even at 140 today. You look at, well, Solana is a better version of ETH. You know, I disagree, but that's what they believe. And so if Solana is a better version of ETH, then surely it should trade to $5,000, $10,000 in this cycle. So buying it at $140,000 is a great asymmetric risk profile, right? And so I think that's the mentality. And to Solana's credit, the UX and UI on the apps built on top of it

is fucking mind-blowing. It's better than anything in the ecosystem. It's easy to use. uh and so that's why i think that solana is going to be a very good performer uh during the cycle and um when you go and look at investment how much of it is like fundamental analysis versus like what's the meme buy or sell the meme it's first it's cycle so right now you know when we really started investing it was depths of the bear market and i was like okay we need to allocate now right projects are desperate valuations are down lock-up periods are short

this is when we deploy capital now that we're in starting the bull market you're seeing three product you know 100 plus million dollar fdv um projects right i don't want to invest money now because i'm not going to get my coins until 27 28 right fully unlocked which will be after the cycle is finished so um it's first cycle so if i'm right in the right part of the cycle then it's okay what is what do i think is going to be the next narrative or useful product in in the next cycle so obviously we were big on e3 staking um we have a number of projects uh that are focused on that and liquid staking derivatives um that sort of thing and so i think that the cycle the cycle is the most important and the example that i like to give people is

amazon you could have bought it in 2001 or whatever was 2000 that's high at the time it was like 96 it went down 95 in the next like two or three two years and now obviously on both whether you bought in 2000 or bought it in you know 2003 you're up massive but But how many people can hold something and be down 95%, hold it for another, you know, almost 30 years, right? Very few people have that sort of ability to do that with a portfolio because most of the time it's down 95% because it's going to zero, not because it's going to go up another like 10,000%. So price is everything. I don't like investing when everyone else is investing. So now all the VC funds are raising money, you know, throwing money at projects.

this is the worst time to be allocating to the space because not only are you not going to get liquidity until after the cycle, you're paying a very, very high price. If I really like something, then fuck it. I'll just buy it when the token launches. I won't get the super cheap price that some other early investor got, but I also can sell it whenever I want. And so on a risk-adjusted basis, we're going to be shifting more of our focus to what's liquid. What do we think is a good project um let's buy it risk manage it and then be able to sell it when we think that the cycle is topped and then get back into the business of writing going into term sheet things in after you know the market's done 95 and everyone's not trading crypto anymore so i think

it all starts at the cycle first and obviously i don't get into the details on sort of the individual investments i take a cycle hat and i'm just challenging an outshot on the other guys like look, how are you getting out of this position? None of you get paid unless we sell anything. So they're very incentivized that I need to have an exit strategy for every investment that I'm in because, you know, as in a selfish perspective, I don't make any money unless we're able to sell it at a profit versus other funds, which is, you know, LPs and all this kind of shit, right? It's different sort of model. Do you have like a framework? One of the things I hear a lot of people talking about, whether it was Bitcoin early on or now, you know, many of these meme coins,

et cetera, is somebody will buy something, it'll go up 10X and they're like, should I hold? Should I sell? I saw somebody else went up 10,000X. If I double my money in the traditional system, a lot of guys will like rebalance or take half off and just have house money. How do you think about kind of getting out of positions or selling, especially when you're up and it seems like the price is continuing to move upwards? Well, I think about it from a macro sense. Do I believe that the cycle is turning and crypto is no longer a thing anymore, right? So I, in 2021, you know, I didn't call the top exactly, but I came to this, I remember, you know, reading my regular macro stuff and, and I came to this realization, well, hold on, like credit creations going down, growth of the M2 was trending downwards. Why am I holding all this stuff?

And so I dumped everything except for Bitcoin and ETH because I was perfectly happy to hold that through, you know, down 90, 75% unrealized through, through the cycle. but all the other shit coins are on fucking dumped them all right so that is the situation i'm looking for am i gonna we're gonna time the top on every single one of these tokens no but i'm perfectly happy to let them run because you know a rising tide lifts all boats and so if it's a quality project okay maybe i don't top tick the largest market cap that it that it gets to but if i have a general feeling that the time is now to you know rotate out of the riskier cryptos because i think that the macro environment has changed then i guess take all the chips off the table put it back into bitcoin and then again as i was saying earlier i need to figure out that sort of

theoretical like what is the piece of energy infrastructure that i'm going to buy with all this bitcoin um that i have last question for you what's the best investment that you've ever made like tell us the story behind it the best investment that ever made yeah i know you got got some well i'm gonna i'm gonna maybe move it a more uh philosophical level so it's my my time don't don't cop out no no i'm not covering out but i'm gonna get to that i'm gonna get to the investment so right so i lost my job in 2013 working for a bank and i was very fortunate at the time being a you know young late 20s person no wife no kids um no no one that i had to take care of with my you know monthly or yearly salary so it was the best investment i made i

invested my free time into crypto and starting bitmex right i could have obviously gone back to tradfi and got another job you know i was broke as fuck for a long time definitely an investment because you know you see your friends out there making you know a few hundred grand millions of whatever it was at the banks and your ass is not going to the bar buying drinks and you know just do what you got to do right and so that was the best investment that i ever made which is believing in myself and this i had this vision for creating bitmex with my other co-founders and being willing to be very poor for a while to make it happen because there was another there was another option it wasn't like i had to do that so i think that was the best investment

that i've ever made and obviously that's allowed me to do all the other things that i've been able to do post-set facts. So that essay is, you know, being able to be broken, you know, be okay with it. That was the best investment that I ever made. What's interesting about it is it probably also created the most wealth for you, right? Like in a weird way, being an investor, like an actual investor where you're allocating capital is great. But as an entrepreneur, if you're right, like really right one time, you'll create way more wealth doing that than most investors. And so it is this weird thing of like, what is the thing that you've done that's created the most wealth? It's not a thing where you put money. It was the time, it was the effort, like all these things.

And so it's not just like, hey, it like got me out of the system. It got me into this other world, but also like just on a pure, like dollars invested versus return. It was by far the best investment. Yeah. I mean, look at Lauren Warren Buffett. He's made the most money he's ever made 80s and is what 90s or eight like yeah it takes a long time it's not like you just wake up and okay great i'm gonna like invest in undervalued companies and all of a sudden i'm gonna be bursar hathaway making 100 billion dollars in free cash flow a year no like that motherfucker works hard for decades to build up the capital to achieve the kind of returns that he had because he was a professional investor he wasn't a builder of businesses versus someone like

zuckerberg right who by the time he was i don't know 35 or whatever was worth 20 or 30 billion dollars right by creating a company now obviously it's both are hard you know the percentage success rate is very low for for both but again it's it's one of those things right building something you can create wealth faster than being an investor you get to the same point eventually depends on the journey that you want to have that uh that makes sense we're we're going to send people to find your writing i know that uh we get more people over there to read that uh so crypto haze on substack or on medium you can find it all right we'll do it again in the future my friend awesome see you man