The Pomp Podcast - #1555 Bill Barhydt | This Bitcoin Rally Feels Different

Episode Date: May 29, 2025

Bill Barhydt is the Founder & CEO of Abra. In this conversation we talk about the macro environment, tariffs, bitcoin, bitcoin treasury companies, tokenization, and what the future could look like.========================Figure Markets is where crypto meets real-world finance. Trade 24/7 with speed and transparency, borrow against your crypto with no credit checks, and earn—all on-chain. Stocks and real estate trading are coming soon, giving you 24/7 access and instant settlement. It’s the best of TradFi and DeFi in one platform. Get started today at https://www.Figure.com/pomp!Disclosures: https://www.figuremarkets.com/disclosures/=======================Simple Mining makes Bitcoin mining simple and accessible for everyone. We offer a premium white glove hosting service, helping you maximize the profitability of Bitcoin mining. For more information on Simple Mining or to get started mining Bitcoin, visit https://www.simplemining.io/=======================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 going on, guys? Today, we've got an excellent episode with Bill Barheit. He's the founder and CEO of Abra. Abra is a RIA that is specifically focused on helping high net worth individuals do things with their crypto, store it, borrow against it, earn yield, etc. It's all financial services that you get in the traditional world, but now you can get it inside of Bitcoin and cryptocurrencies. In this conversation, we talk about a lot, including what's going on in the macro environment, tariffs, Bitcoin, Bitcoin all-time high, what's going on with the Bitcoin treasury companies, and then what should we think about tokenization and all of the things that are coming from the crypto world

and meeting into that traditional financial system. Obviously, the future is very bright and people are very excited, but Bill has been at this for a long time. He's got some very unique thoughts that I think you guys will find very valuable. So here's my latest conversation with Bill Barheit. All right, Bill, I thought a great place

to start the conversation is the macro environment, once again, seems to be very, very relevant for Bitcoin. We obviously have seen tariff announcements on, tariff announcements off, back on again, back off again, threats, not threats, throughout all of this. Bitcoin went down for a while, down to 75,000, ripped right back up um it feels like the world is waking up to could bitcoin be the solution could bitcoin be the like life raft that will get you out of all the chaos and uncertainty is that

what you are thinking yeah i think people in the know kind of accept that it is and i think the gyrations day-to-day may be partially news driven but the macro direction meaning that if you zoom out the more the more the further out you zoom right the more it looks like it's a liquidity suck. With gyrations hour to hour that might be semi-news driven, like this morning we had the tariff announcement, Europe needs to move faster, so blah, blah, blah. And we saw what happened last time. Okay, yes, for a while the sky was falling and then all of a sudden it looked like it was back to the overlay of the liquidity cycles. And I think that's what's happening now. So anybody who basically was panicking this morning because Bitcoin fell three and a half

has not been paying attention right and and so i think we're going to see more of this this cycle because of the nature of the money printing the negotiations um you know trump feeling like he has to tweet every thought he has every minute he has them um and things like that but but but by and large when you zoom out it does look like bitcoin has become that overlay look if if you accept that the the network itself has value right just using kind of traditional network theory and you overlay and with a fixed float and you overlay that on top of that something that is constantly increasing in the floats this has to happen yeah 100 it has to happen and and so people you know get so afraid of of the gyrations day to day that they forget the basic network theory

that the value of a network right there is a formula to value a network and when you value the network that's growing in terms of something that is being devalued the formula actually acts as a lever on top of what you're devaluing and people don't understand the math of that and they where's the money coming from into bitcoin like there's money printing going on but there's also other store value assets and i think a lot of people historically thought that bitcoin would surpass gold but because gold market cap would contract people would basically demonetize gold it would go into bitcoin the exact opposite has happened like gold is growing and bitcoin is growing. So is all of the like net new capital, you know, flowing into Bitcoin, just printed

money? Or do you see it coming from other pots of money, maybe in an investor's portfolio? So we talk about this a lot at Abra, meaning where are the flows coming? We like to look at the flows, smart asset managers look at flows. So we see three buckets. And I think there's more that if you're more nuanced, but three buckets, basically. Long-term holders like the OG crowd, and we love them because they're all borrowing against their Bitcoin. They don't want to sell. So that's a target audience for Abra to process loans again. So long-term holders. Two is kind of the new holders who we don't know yet if they're going to be long-term

holders or short-term. And the upside and downside of the ETFs are kind of the same, meaning it's really easy to get into Bitcoin now through a traditional brokerage account for most brokerages, but it's equally easy to get out. Now, if it's in a 401k or an IRA, maybe, but you can still out reallocate within the 401k and IRA. So that's bucket number two. And bucket number three is the float left for traders. There's a fourth bucket, which is the Bitcoin that's gone forever, but I'm leaving that aside. So that third bucket is actually shrinking over time, meaning there's less Bitcoin being actively

traded. And so, you know, which leads to, okay, well, where is that kind of liquidity suck for all coins going to come from eventually? But what people don't realize is, is while it's shrinking, it's still a huge amount of money right and for the two trillion dollar asset my guess is is like even 35 percent of the float is still available for for day-to-day trading which is a lot right and and so you know that leaves a lot of room right for not only upside but you know if the demand is coming in from these corporations and and retail hasn't really even started yet this is the most hated rally i've ever seen right well there's google search volume is low media they're mentioning it but it's not mania by any means right and uh it definitely feels like uh you can

talk to multiple people throughout a day and if you're like oh bitcoin's back at an all-time high some of them know but a lot of them don't historically the two ways that we were able to determine whether this rally was retail loved or hated was perpetual future leverage and and it used to be the premium on the on the grayscale stuff and now it's kind of the premium on micro strategy, but the perpetual future leverage ratios are at all-time lows relative to where we are in the rally. Meaning if retail was on board, the amount of leverage in the system would be much higher than it is now. And so what that tells me is that there's a lot of room to the upside and the downside swing shouldn't be as much as they were in the past, specific to Bitcoin, I mean.

Now, you mentioned the Bitcoin treasury company strategy, there's MetaPlanet, there's many of these things. It feels like on one hand, this is the Hail Mary that gets caught every time, right? You put Bitcoin on your balance sheet, your stock goes up, everything's amazing. But there's also risk and there's leverage being used. There are these premiums. Some people say, hey, look, there's this NAV premium, doesn't make sense. It's going to collapse. Other people say, no, that's like future cashflow multiples or however you want to think about it. how do you evaluate when these things come out whether you or abra like should we buy should we not is this something we should support or or not um in terms of both the positives and the

negatives yeah i think the vast majority of the public should be holding the underlying just buy bitcoin if you want to have a small coin allocation solana suey whatever that's fine but just buy bitcoin even sailor to his credit i don't know if he just feels compelled to tell people that he really believes it but but look people who um have to buy equities or or for whatever reason want a levered bet that's equity-based will buy micro strategy, right? It is a levered bet. So the downside on this is that, and it would be easier if I had a piece of paper in front of me, but think about the amount of leverage that's being used. The formula works well if the amount of leverage that's being used is less than the devaluation of the dollar that's being absorbed. But that's

not the case right now, meaning they're leveraging themselves collectively as a corporate treasury. Let's take all the companies in the aggregate that are trying to buy Bitcoin right now and overlay the amount of leverage that they're taking at shareholder expense. That leverage is higher than the rate of devaluation of the dollar. I think that on the low end, you have kind of like mid-single-digit leverage, and then on the high end, you've got like, I think, 27%, 25%, something like that. Yeah, so that sounds right. And so by definition, there's a huge risk there because if the dollar devaluation slows and you start to get it to a position where what they call that MNAV is not growing, you're going to have an unwind problem. So you can unwind these positions exactly the same way you wound them in in the first place. And if that happens, you could see a precipitous fall in the price of Bitcoin while the market catches up to that.

I don't think it would just crash Bitcoin, but it would certainly fall. You know, you could see a 15, 20 percent, 25 percent drop in the price relatively quickly. If for some reason, if we had massive austerity measures, right, the first stocks that would get hit, in my opinion, are the Bitcoin stocks. Right. And it's not because Bitcoin becomes worth that much less instantly. It's because of their leverage versus the valuation perception of the dollar in the midterm. Well, I guess also if, you know, a good exercise is like, let's say that strategy or meta plan or whoever came out and said, we're done buying Bitcoin. Then I think that the premiums do collapse 100% on day one. It doesn't mean that they go negative and it's a discounted NAV. It just means they probably go closer to NAV. Those premiums are forward-looking expectations on leverage. Yeah.

And if there's no incremental leverage coming into the system, those premiums should look like an ETF. The only reason they don't is because they believe they're going to get diluted with more shares with the value of Bitcoin growing faster than the amount of dilution, which is the perpetual motion machine that everybody perceives that Saylor has figured out. If you're a shareholder, then the NAV premium collapse back to NAV could mean a lower share price, right? So there's a potential loss there. But for the company, that doesn't mean that you have to sell your Bitcoin. No. right that just means hey look now we just traded nav and we still own a bunch of bitcoin whatever is there a scenario where something can happen and they've got to kind of puke back out all the

bitcoin that they've been buying in your opinion like i guess if people are demanding a payment of converts that aren't converting to no i think i think my understanding because i'm not an expert on what sailors set up my understanding is is that i don't see a scenario under which he would have to sell all the bitcoin if there was a rapid pullback he might have to sell some to deal with the fact that the current note holders are underwater and they can't they're not going to convert yeah right so that amount of bitcoin would have to be sold now if it went to zero quickly he's screwed but we're all screwed at that point right so so but i think it would fall it would create a cycle where it would fall you know to create maximum pain and then recover but a small

amount of bitcoin would probably have to be sold in the very worst case scenario now some of the others have a lot more leverage. I could see those stocks going to zero or crashing or creating big problems with shareholders and then having shareholder lawsuits, et cetera, et cetera, because I think you can make the case that the shareholders don't understand the amount of inherent leverage in the systems that they're investing in. And by the way, I'm not saying that these are all bad things to be doing. I think it's actually kind of interesting that we're using money to test these things, especially if it's not my money. But at the end of the day, you know there is a risk that these things don't work the big bet here again i'll say it again is

is that the united states continues to devalue the dollar at rate x and if the amount of leverage or rate y is slightly higher than x this can actually work you know with with some volatility for quite a while if y gets too high meaning that amount of leverage gets too high versus the rate of devaluation of the dollar and new money stops coming in because there's other places to put the money right that's a big problem when you think about areas outside of bitcoin there's stable coins there's tokenization that all the big banks are talking about um what are the areas that you see that are one exciting to you and to abra but also uh you think are legit going to happen right because people were promising the world yeah uh but are there certain areas where

you're like all right these are the main things right now that we're focused on or paying attention yeah i'll open the kimono for you we're very clear on this at abra i mean so so the fastest growing business at Abra is people opening up their RIA accounts, their registered investment advisor accounts, putting Bitcoin in the vault, and then borrowing against the value of that Bitcoin. Interesting. So that's our fastest growing business today. And that kind of makes sense because as Bitcoin becomes a $2 trillion asset, remember I said there's three buckets, those OGs have a lot of Bitcoin. Why don't they want to sell? Well, two big reasons. One, I think the price is going to go forever given what we just discussed. And two, I don't want

to pay taxes. Right. So we have a great solution for that. And we basically use DeFi marketplaces. So our rates are like 5%, 6% right now, whereas centralized lenders who are artificially, you know, have a cost of capital in the 10%, 11% range are charging 15% for the same loans. Now, where do we go from here? My take is that the DeFi networks that we use to process those loans in the background, so our clients don't see this, right? They can ask. We explain it. It's all in our risk disclosures. But the model that we've come up with is there's an open marketplace, yield on one side, mostly dollar yield, right?

Collateralized loans on the other side, right? Why is that relegated to Bitcoin right now? Well, Bitcoin is the native asset that is worth enough money to warrant those loans. But there are assets out there that you can easily pump into DeFi networks if you do the tokenization correctly that now have a bid and an ask, which is all you need to facilitate the loan. because you need to be able to liquidate if they don't make the payment, right? And that's what DeFi does for you. It basically gives you that 24-7 liquidation.

So that opens up the true value, in my opinion, of tokenization, which is that not only do you have access, we don't really have a big access problem in the US, but with 10 billion people you do, access, meaning I can buy and sell, but I also am liquid in terms of being able to have secondary markets via DeFi

that I can borrow against the value of these assets for. So our belief and vision at Abra is that you're going to have ultimate fungibility of anything and everything. So whether it's stocks, traditional stocks, right funds, refunds, metals, other types of hard to access, private equity venture, higher risk stuff, prediction markets are all going to be fungible. And you're going to be able to borrow against the value of those assets using models like ours, right, that are actually relatively low risk because what we're saying to clients is borrow 30% of the value of that asset. Is there a chance that the value of the asset falls 90%? That's always going to be yes. 100%. Right? But if you're smart about the historical value of the underlying asset that you're borrowing against, there are ways to do this.

People do it all the time with HELOCs, right? That's the most well-understood secondary lending market, right, for borrowing against the value of a fixed asset is HELOC loans in the United States. And there are similar models in Europe, et cetera, et cetera. We're simply saying create a standardized, fungible model to do this for everything. That's the big vision at Abra long term. Yeah, it's obviously finance is going in this direction. and the question i think is um one how much of uh the market is bitcoin gonna eat from a capital you know kind of suck standpoint but also two uh it maybe i don't know uh five years ago was

100 centralized in the traditional financial world zero percent decentralized yeah um 20 years from now it's not a hundred and zero it's some mix between central and decentralized and i think that that's an open question as to like where do we end up is it 50 50 is it you know in favor of of decentralization or centralization. Um, and then you're probably never going to get the full stack to be decentralized because you're still going to have centralized companies or centralized, you know, investors or centralized, whatever, but you'll get maybe pieces of infrastructure, maybe it's markets or whatever that as that decentralization comes in, uh, there's a lot of benefits. Right. And I actually think if you have more confidence in the decentralization,

then obviously you should get more capital to come to the market. It's like a net positive for the whole thing. Right. That's right. Yeah. And I'm also, I would say, you know, 25 years out, I'm probably bearish on the traditional asset management model because I feel like the whole idea of securitization is going to change because right now, BlackRock's ownership model is based upon the idea of incorporation and the joint stock company. I actually think that that model doesn't make sense when you extrapolate 20 years out in the world of AI and DAOs and robots and autonomous organizations. I actually think cars are going to own themselves and you'll have eight robotic AI agents that run themselves. And so again,

25 years out, the model of asset management is going to be flipped on its head. And I think that the incumbents, many of them are not going to survive that model. So what I'm describing actually is what I often describe as kind of a post-forth turning bank. What does a post-forth turning bank look like? Well, it's going to be based upon decentralized rails, operate 24-7, always on, no borders, create fungibility across asset types, deal with this new concept that's coming of dows instead of companies as well as the historical companies and crypto but all in one kind of big you know soup of a financial system which most banks wouldn't even understand what i just said never mind be ready for yep you know when um when you look at that uh post turing uh

type bank um where are the areas of opportunity obviously you're building a company that is tangentially related there right it's like where do you guys see opportunities for yourself but also where do you think maybe is the biggest exposure of risk to the legacy guys? It's like the last place that they'll go to be able to compete with kind of the upstarts. Yeah, those are the right questions. And we get a lot of inbounds now post-Trump administration coming in from mid-sized banks that are asking these questions. How do we get into crypto now? Should we just offer Bitcoin to our clients? Should we offer lending? What should we be doing? So from our perspective for us as a relative upstart relative to banks, which is most crypto companies,

I think the opportunity for us is to be the best possible crypto native bank that we can be for our clients. That means holding crypto assets, facilitating loans against crypto assets, preparing for the oncoming tokenization, which represents holding stocks as tokens, real estate as tokens, other investments as tokens, which are now liquid. So my bank account will be basically a revolving credit account against the value of those assets that I can spend in real time, right? Draw down on.

And if I borrowing smartly against the assets that are appreciating quickly, I might not even be paying back my loans if I'm borrowing in the dollar, which is a perpetually depreciating asset, which I think long-term is the demise of the dollar because that system is not viable in perpetuity. Meaning you can't have a perpetual motion machine

which allows you to borrow forever against the depreciating asset. It just breaks down at some point. But at least I would guess for the next 20 years, that's going to work. And then we'll probably figure out how to spend in the native appreciating asset, which would be Bitcoin and potentially other tokens. But for now, we're building that crypto bank that allows you to buy, store, hold, borrow, earn, yield. If I'm a bank, I'm saying to myself, okay, this business is growing much faster than ours. I said five years ago, people asked me, do you think we'll get to the point where the banks are buying the exchanges? I said, absolutely not. We're going to get to the point where the exchanges are buying banks. because who's growing faster? It's just common sense, right? So I believe in this cycle, the top five exchanges will be competing with each other to figure out which banks to buy to get in the door to figure out how to offer the plethora of services that they want to offer and brokerages

as well, right? And that prepares them for this tokenization of everything, which creates the fungibility model. And then we kind of all back into competing with each other in some way with similar services. I think the traditional exchange model morphs into something which is less trader focused and more investor focused, which is a problem for them longer term because their fees are going to be compressed because, you know, that's why you're going to see all these models where, you know, you have monthly subscription fees instead of trading fees because they know what's coming. Right. When, when you think about the change in regulation that has occurred that you're mentioning, what have been the biggest

positive impacts on Abra? And then what are the things that are still roadblocks or obstacles that need to be changed? Well, the biggest benefit has been there's, you know, I don't have crazy people chasing me with flaming baseball bats trying to kill me all day uh and and and so that sounds good yeah it sounds really good right i mean it's like the little things you know yeah so um and and and not even if we're doing anything you know wrong i mean like like we were um like one of the few companies out there that did went overboard to disclose when we had losses you know with genesis and others we i tweeted about it so so that that hurt you know and not having that anymore has been awesome right and we're just as committed as we were then to following the rules

and we've always said be very clear with us with what the rules are and and we'll follow the rules even if i don't like the rules it doesn't my personal opinion on the rules i'll come on here pontificate but ultimately doesn't matter right because i'm going to follow the rules either way or i'll get out of business yep right so that's number one and i would say number two is we need a model in crypto that allows upstarts to get in without a baseline level of regulatory spend that's untenable. And so I'm hearing rumblings of this kind of sandbox model between like in the US, the CFTC and the SEC, and maybe it'll become a basis for other markets as well. Ours is a little more complicated, so maybe they don't need it as much. But this idea that you can operate in a

model where especially for upstart defi type systems where you may not be decentralized yet but you don't want to basically deal with all the complexities of securities laws and dividends and issuance and all this stuff and so maybe you have a path to get there that is tenable in terms of filings and cost etc etc so so and and we need clear rules of the road for that i'm actually more concerned about that than i am about stablecoin legislation i'm a little concerned about some of the nuances of the current stable coin stimulation uh regulation but i don't think it's going to matter that much stable coins exist today they're going to exist next week after the the legislation is signed and the world will go on what about the banks they're supposedly trying

to all come together a little that will happen uh a little i don't know maybe mafia is a bad terminology a little group uh and create a stable coin together is that like a rico rico by any other name so so i'm hearing rumblings that we are going to get a stable coin from kind of the Zelle Kuritsu and they should. If I was them, that's what I'd be doing. I think the government will support it. I think the problem that I have with the current legislation is, is they'll be able to pay yield on the stable coin they create, whereas everybody else who's not a bank won't. Right. And I think that's an unfair practice. Now you can create a money market token and pay yield on that. The problem is if that's deemed a security, you're probably offering it outside the

us so so you kind of back into some some problems where you inadvertently create regulatory capture opportunities for for the banks and i don't think it was in it was it was inadvertent i think that was very conscious uh ploy on their part to basically say okay this is our opportunity to potentially own this in the us and let everybody you know fight it out in in other markets so yeah yeah do you think that it's a it's a problem that uh um they would be able to do it not really i mean look it's still a dollar at the end of the day right most consumers don't care right a dollar is a dollar is a dollar um and they don't understand the nuance of where the treasuries and short-term securities are being held the average person who uses usdc is probably completely

unaware of what happened in you know march of when was it uh 24 when when you know the banks went south it seems like an eternity ago now but but um it's it's i would like to see more competition that's always my fallback position you want to do what's right by the consumer enable lots of competition and eventually right the the cream will float to the top i've always believed that um regulatory capture is the opposite of that so that's i always like that's my kind of guiding light when it or north star when it comes to regulation traditionally uh less is good right But here, I would say, I think there's a provision that allows for smaller companies to not have to be OCC chartered and allows for money transmission and everything else to enable, you know, basic stable coins. And that's a good thing.

And, you know, again, we're just talking about the dollar. My other concern, which I think they've addressed is, is that, okay, in traditional money markets, you can, or wire, you know, banks, you can receive euros from another bank and convert those to dollars. Those euros were created in the U.S. The original version of the legislation didn't allow for non-U.S. issued stable coins, which makes no sense because you've now taken away the ability to send euros and have those euros converted to dollars. I think they've addressed that, which benefits the likes of Tether and other non-U.S. issuers. What do you think is the single biggest development that could happen this year that is positive for Bitcoin? Biggest single development this year. like is there one last you know hurdle for us to jump over i i think bitcoin is fine you know i don't think so do i i think bitcoin doesn't care about corporate you know adoption i think retail is more important to bitcoin long term than corporate adoption i'm fine with it you know

my company's holding bitcoin we're going to continue to put profits into into bitcoin but i think i think it's it's the the getting the public to understand that the government is like not anti or pro Bitcoin, it just is, would be a big win. Because I do think there's this perception that the government was trying to kill crypto. And I don't think that that has really, the reality of where we are now has caught up with the public yet, right? There's definitely a red and blue issue with crypto right now because of how everything went down in the last election. And we need that to go away, right? There's this kind of liberal perception in some circles right now that crypto is bad, it's a grift, et cetera, et cetera. And Bitcoin is obviously associated

with that by proxy. And I would like for that to go away, but that's a people issue. It's not a Bitcoin issue, right? And so Bitcoin is working just fine. There are some technology issues with Bitcoin that I'm concerned about that need to be addressed, but I think that the atomic nature of Bitcoin is working just fine and will continue to work just fine in the meantime. Yeah, I completely agree. What's the like 60 second pitch on why someone should use Zabra? Yeah. So we are, I think the ultimate place for high net worth investors, upper middle class, family office investors to hold crypto, hold their Bitcoin. It's bankruptcy remote. So you're getting a personal vault, right? That if Abra goes away, it's still yours. You're able to borrow against the value of crypto

at low rates. You're able to earn yield on dollars, Bitcoin, stakeable assets, et cetera, et cetera. And I haven't seen any place that soup to nuts has figured out how to offer that simple range of services to the average investor. I feel like people are very interested in borrowing against earning yield, like all the financial services that are available to them in the traditional world, they want this one, right? Yeah, exactly. Amazing. Well, thank you so much for taking the time to do this and we'll do it again in the future. My pleasure, Amigo. Great to see you.