The Pomp Podcast - 360: Bill Barhydt on Building A Crypto Bank

Episode Date: August 13, 2020

Bill Barhydt is the founder of Abra, a simple to use cryptocurrency investment platform. After working for the CIA, NASA and Goldman Sachs, Bill decided to join Netscape working on telecom and Internet banking deals, mostly in Europe. After the AOL acquisition of Netscape, Bill founded WebSentric. The technology for WebSentric exists today in SAP's online portal service. In this conversation, we discuss macroeconomics, the Federal Reserve, monetary policy, Bitcoin as a reserve asset in corporate treasuries, decentralization, and a number of new products and features that Abra has launched recently. =============================== Our second sponsor is Choice, a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp =============================== The Helium Hotspot is a new product that enables the people, not the telcos, to own and operate a wireless network in their city for Internet of Things devices. You can literally earn crypto for helping to build the network and providing connectivity to Internet of Things devices sending small bits of data. Join the movement and get your Helium Hotspot today with $50 off using the code POMP at helium.com.  =============================== Pomp writes a daily letter to over 50,000 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://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Bill Barheight is the founder of Abra, a simple-to-use cryptocurrency investment platform. After working for the CIA, NASA, and Goldman Sachs, Bill decided to join Netscape, working on telecom and internet banking deals, mostly in Europe. After the AOL acquisition of Netscape, Bill founded WebCentric. The technology for WebCentric exists today in SAP's online portal service. In this conversation, we discuss macroeconomics, the Federal Reserve, monetary policy, Bitcoin

as a reserve asset in corporate treasuries, decentralization, and a number of new products and features that Abra has launched recently. I really enjoyed this conversation with Bill, and I hope you do as well. Before we get into the episode, though, I want to quickly talk about our sponsors. The first is choice by Kingdom Trust. Choice is a new self directed IRA product, and I'm really excited about it. If you're listening to this, you're likely part of the 7.1 million Bitcoin owners who have retirement accounts with

dollars in them, but not Bitcoin. I was in that situation too, but not anymore. Thanks to choice. You can now actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax advantage dollars to do it too. This is an absolute game changer. So Choice has a self-directed IRA product where you use your tax advantage dollars to buy Bitcoin and hold the private keys. This does not exist elsewhere. So go and check it out. Everyone keeps asking me, how do you buy and hold Bitcoin in your retirement account? Choice is a great way. Self-directed IRA, buy Bitcoin,

hold the private keys and use tax advantage dollars to do it all. So go to retirewithchoice.com slash POM. Again, retirewithchoice.com slash POM. Our next sponsor is the Helium Hotspot. It's a new product that enables the people, not the telcos, to own and operate a wireless network in their city. Historically, the telcos have not only owned and operated, but they've had a on these wireless networks. The Helium Hotspot is helping to break the monopoly down. So you can now buy a Helium Hotspot, set it up. It literally takes three minutes. I had allotted an hour because I'm not great with technology sometimes. And it took me three minutes to set up. And by doing so, you can earn crypto for helping to build the network and providing connectivity

for devices in your city. So we can take back the power and take back the ownership of these wireless networks. Join the movement and get your Helium hotspot today. You can get 50 bucks off using the code POMP at Helium.com. So again, go to Helium.com, use the code POMP, you'll get $50 off your purchase of a Helium hotspot, and we can start to break down the stranglehold that telcos have on wireless networks. Let's do it. Lastly, don't forget that I have a daily letter that I write to over 50,000 investors about business technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com.

All right, let's get into this episode with Bill. I hope you guys enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. all right guys bang bang bill is back uh what is this round two or round three oh this is three three oh man i i think that you may be the only one with three all right i don't know or maybe

there's somebody else i can't remember but uh what's up man how are you back by popular demand uh crazy times man i don't know um you know i know i know a lot of people have it a lot worse but I really can't wait to get back out into the world and hug some people I haven't seen in months. But if you have to be sheltered up, I guess working in the crazy crypto world is a good way to go. But yeah, I haven't seen my employees in person in five months now, or four and a half months, whatever it is. But we're all doing what we have to do. And I call my mom every day and she's good. And I thank my lucky stars for that. And what else could I say? I think that's the right way to look at the world. Give us an update or actually before we do that, give us like the 60 seconds. What is Abra before if people have not listened to an episode?

Sure. So Abra is a cryptocurrency wallet bank trading platform, allows you to hold and buy, trade Bitcoin, Ethereum, XRP, about 100 different cryptocurrencies, allows you to use your bank accounts to ACH or wire funds to buy crypto, sell crypto. So we just announced last week a new feature to earn interest. You can earn 9% interest on stable coins, U.S. dollars, and 4% interest on Bitcoin and Ethereum. We also launched an institutional trading desk, which I'm sure we'll talk about. We hired a new CIO, chief investment officer, who's managing a large investment book already for the company to generate yield for our consumers. and we've got a lot of other stuff coming down the pike. But, you know, basically our goal is to be a crypto bank to make it really easy for any consumer

to get involved in cryptocurrency, invest, trade, hold, now earn interest. Yeah. And so as you kind of think about the macro environment, obviously there's the public healthcare side. Maybe let's just start with what's going on in the economy. It seems like everything has changed. We've seen the government step in and create just a massive trillions of dollars in quantitative

easing and response. They've basically stuffed money in every exotic corner of the financial system and are looking for more. And it doesn't look like they're over either. And now we're getting talk about, wait, we actually may optimize for higher levels of inflation than we previously have. So kind of what's your take just on what's been happening from a macroeconomic standpoint? Yeah, I wrote about this last week. I think that this is a pivotal moment for Bitcoin as a new asset class for a couple of reasons, right? We've never had the government come out and say our stated aim is to create inflation above 3%. And now we're looking at potentially 4%. I don't think they've actually said it yet, but I believe the rumor is they're going to, they've more or less said it's the discussion, they're going to set an aim for 4% inflation. I think that they feel they have no choice except to basically reflate the economy in order to create growth. Whether we like that idea, whether we think it's a good idea or bad idea, I don't think

it really matters. That's what they're going to do. And so their stated aim has never been and never will be to protect the value of your money or your wealth, right? By definition, they are willing to erode the value of your money in order to create movement in the system, which is what creates growth. Movement means moving money, borrowing money, paying back money, loans, whatever. But that liquidity is what ultimately creates growth. And what they've said is that we're okay, and history has proven this, because a dollar today

is worth 99% less than it was 100 years ago. They've proven that they're willing to inflate the value of money to the point where your money is worthless in order to do that. It's just that we've never had a government, the U.S. government, come out with a stated aim to create inflation so high, price inflation. But that's also going to basically only be caused by currency inflation, right? And so we don't understand, a lot of people, the difference between currency inflation and price inflation. Everybody focuses on price inflation. As somebody who used to collect baseball cards as a kid, I understand also currency inflation, right? I mean, if you have the only Mickey Mantle rookie card in existence, and all of a sudden you find out there's two of

them, it stands to reason that the one that you had should be worth less than it was before. But we print money without end and don't think the same way about the fact that we keep adding more of this artificial paper into circulation. And so my point is that this has never been a, we've never had a better time for Bitcoin to stake its claim, not that it needs our help, But for Bitcoin to stake its claim as the de facto hard digital asset that I think it's going to become. And I'm not sure it needed a nudge from our government, but it's getting one nonetheless. Yeah, it's almost this belief of if you didn't understand money, sound money, inflation, all that kind of stuff, they're literally running a multi-trillion dollar marketing campaign for learning about this stuff.

And now what people are starting to realize is, wait a second, what are my options? I got like people that I've talked with basically go through kind of a journey. So they start with, I know nothing. Oh, wait a second. If the government's going to print a bunch of money, all I know is that my government usually screws me some way. It's like, how are they screwing me? Right? Oh, okay. They're going to devalue this currency thing. I don't really understand what that means. Let me learn about it. Okay. Now I understand it. What are all of the options I have to protect myself? And this is, I mean, literally stocks getting inflated to real estate, to precious metals, to Bitcoin, to whatever you want. And I think that what people are starting to understand

is the provable scarcity. That's why I keep hammering on this point that we don't know how much gold exists in the world. We don't know what the total addressable market of gold is, the total supply. Now, that doesn't mean that all of a sudden gold is going to fall from the sky and the cap that we think or the circulating supply is going to double overnight. It's just the fact that you can't prove it. And so it feels very kind of antiquated only when compared to this new system, which is provably scarce, right? And so it's like, it was the best we had. Now we have a new system. The new system in comparison looks way better, but it's going to take time for people to kind of understand those differences, right? Absolutely. And by the way, the government

never had a stated goal to protect the value of your money. I mean, that has never been on the table, right? They've never said, hey, the role of the central bank or the role of the treasury is to protect your wealth. Their role ultimately is to manage a house of cards, right? And I don't mean that necessarily in a derogatory way. It is what it is, right? We've had this system for 100 years. It's created more wealth than any other system in history. And in 2008, we saw what happens when you don't manage the house of cards correctly. It starts to buckle under its own weight. People get overly greedy. We need a certain amount of, let's call it greed, but when the system basically gets overly greedy, it buckles under its own weight and the government

can no longer manage the house of cards correctly. But that's its writ from its perspective, from a financial perspective, is to manage the house of cards, not to preserve Anthony's or Bill's wealth. Yeah. Well, and it also feels like, you'll love this. I wrote a piece called the Wizards of the Federal Reserve, and it was based on the Wizard of Oz, which is, you know, they think that it's the all-knowing, all-whatever-powerful person, and then it just turns out to be like a regular guy. And I think that's kind of what we're seeing with the Federal Reserve, which is, again, there's really, really smart, intelligent people who mean well, and they're doing the best they can. It's just, we're basically giving them an impossible task, which is,

hey, manage this highly complex, intricate system called an economy, which that is their job is to manage the economy, not to manage the currency. And so when we ask them to do that, even if they were successful, which they usually do not have true control, they just directly can push it one way or the other. Even if they did, their task is to manage the economy, not to your point, manage the currency. And the way that they manage that economy is by manipulating the value of the currency that you sit with in your bank account. I was going to think about, I don't know if you're a Matrix fan, but if you watch the second Matrix movie when the architect says, this is the umpteenth incarnation of the Matrix, right? And we're getting exceedingly good at it. Well, I feel like,

you know, because every government issued currency has so far has failed and it appears that that trend has no reason to stop. It will continue unabated and that we're basically going to have to recreate our analog Matrix again with the government trying to print more money from scratch. And we've seen it with other countries in Argentina where those poor people have watched their currency fail over and over again. But on the other hand, up until now, it's been the best system for managing an economy. And what I don't know yet is how we go from Bitcoin preserving wealth to Bitcoin and crypto helping to manage an economy. That would be something. But at a minimum, we know that it's phenomenal for preserving wealth and will have a bigger role in that world.

But I also think that over time, you're going to see crypto, and I think we're going to start with stable coins, but eventually move to even provably scarce cryptocurrencies, like you said, having a key role in even managing the economy. So recently, there was one of the the inevitable first, which is there's a publicly listed company called MicroStrategy. A gentleman, Mr. Saylor, decides that he's going to take, it looks like about 20% of his balance sheet, and he's going to move it from cash or US dollars into Bitcoin. But he's not doing it as what I think many would refer to as kind of a speculative, uninformed gamble, right? He basically clearly articulates concerns with the macroeconomy, with inflation, with the idea that

that cash is likely to drastically be devalued in the coming months and years. And so he is using this as a hedge. And literally at one point says, I'm going to use Bitcoin as a reserve asset. And so it's kind of a currency play more than it is like a speculative. I think Bitcoin is going to drastically increase in value in the future or anything like that. What's your general take on kind of seeing this news? Yeah, I mean, Plan B, this has become kind of the Nostradamus of crypto lately, or the person we want to be the Nostradamus of crypto, I'll say, because we all want his model to come true. I actually predicted that at some point, Bitcoin will become an asset class beyond just digital gold, where it is actually used for these purposes. And it's fascinating

getting to see that, granted, a small cap company, but I would suspect it would start with a small cap company and not start with Apple Treasury, would embrace cryptocurrency as an inflation hedge, whether it's currency inflation or price inflation or both. And clearly, now, first of all, this is, let's be clear, this is a small cap company. He mentioned this in, I would say, almost in passing in a quarterly report, maybe two or three weeks ago, realized he was getting a shit ton of press by doing this and is now taking advantage of that press. I'm not saying that that's a good thing or bad thing. It just is. That's what they're doing. But be that as it may, they're still doing it. And I think that sends an incredible message because if you've

got the cash, it's way easier to just sit on the cash, make 2%, 1.5%, whatever it is, if you've got a good treasury and call it a day, right? Nobody's going to get fired for doing that. No one, right? Now, you can get fired for basically putting money in Bitcoin on one of those 40 days where you put it in and it happens to go down. Now, if you've got a long-term perspective and you don't care, right now, the last 11 years, if history is a guide, say, okay, you've got a more than reasonable chance that in dollar terms, what you're investing is going to be worth more than what you put in. So anyway, we'll see where this goes, but it was almost inevitable. It's just fascinating to see how the first really interesting opportunity here with the treasury

embracing Bitcoin happened to come about. He's definitely milking it. I have no problem with that. But I think what's going to be more interesting to see, does anyone else follow suit? does a company in like, you know, the, the, the fortune 1000 embrace a certain amount of crypto has it already happened and we don't know about it. They don't have to, I don't think they have to disclose, uh, to investors how they manage treasury, uh, unless it's a meaningful percentage of their, of their book. So, so I think what happens next is, is even more important, but this is fascinating. And my Twitter crypto Twitter has exploded in the last few hours, everybody talking about this. And so, you know, like I said, what comes next? That's what I want

to see. Yeah. Part of, to me, that is so interesting is this isn't like a random company on this like obscure exchange in some foreign country. This is an American company that's got a market capital over a billion dollars. It's not like they took 1%, right? You know, it looks like 20%, $250 million, bought them about 22,000 Bitcoin, give or take. And it's trade on the NASDAQ. Like, I think that, you know, when people first start thinking about this, it's kind of like governments, like the nefarious governments always do the weird stuff first, and then it becomes mainstream, right? Not saying that there's companies that are necessarily nefarious, but just the ones that are on the fringe usually do some of this stuff first. This is a NASDAQ traded

business that's a billion dollar plus market cap. And the move was with hundreds of millions of dollars. I think that that ends up being just as important as it actually happening, right? It's kind of like who does it and when does it happen? And at the start of kind of these bull markets, seeing something like this, you start looking around the room and you say, Hey, you know, what company, what size or what type of company if they pursue this and they go ahead and do it is the like Paul Tudor Jones moment where now all of a sudden the career risk is removed because, oh, Apple did it. Or maybe it doesn't have to be that big of a company. Maybe it can be a $10 billion company or whatever it is. There's some level where the tipping point

happens and people say, I no longer have career risk to do this because so-and-so did it. And I still don't know where that kind of barometer is. Sure. But we've had these... In the mid-90s, we were having discussions about the internet where we would have conversations about, well, nobody gets fired for integrating with some conglomerate's EDI system for supply chain management. Most of your audience doesn't even know what the hell I just said. My point is that there was a transition to the internet where it wasn't necessarily a safe bet because the internet was porn and gambling from 93 to 96 in most people's minds. Then all of a sudden, it exploded and it was mainstream. Why the hell don't you have an internet strategy? I think the time is coming

where finance departments are going to need to have a crypto, Bitcoin, maybe DeFi strategy. I'm a little skeptical, but we'll see what happens, you know. And so some variation on that with its own terminology that's going to unfold over the next 10 years is going to change corporate finance, right? You know, treasurers and others within the company are going to look at, you know, collateralized lending in crypto for corporate growth. And it's a topic that didn't exist in traditional finance five years ago, right? So the whole lexicon, the strategies that enables, it's all going to change. And this is just a very, obviously buying and holding a small relative, even if it's 20% of your cash in the grand scheme of things in the United States,

it's a relatively small amount of money, but it still sends a message, right? The same way that the first company moved their supply chain onto the internet in 1997 sent the message. Yeah. It also feels like there's multiple trends or patterns all converging for this perfect storm, right? So last year, I wrote a piece saying rocket fuel for Bitcoin. Actually, I think maybe at the Bitcoin 2020 conference or 2019 conference, you and I also had this conversation where it was like, look, you're going to get the rates drawn down, you're going to get massive money printing, and it's all going to coincide relatively at the same time. as the Bitcoin halving. And this like quantitative tightening mechanism is wildly misunderstood. And frankly, most people don't even realize it's happening in many cases, especially if they're not in the Bitcoin world. And so you get those three trends, right? You get rates down, money up, and Bitcoin halving should be rocket fuel alone. But then you start to add in Paul Tudor Jones, you start to add in large public companies. All of these things are happening within,

I mean, we're still, what, 90 days from the halving? You're basically plus or minus three months on either side of the halving. All of this is occurring. You just got to look towards the next year and say, how does it not happen? And that's what I spent a lot of time thinking about. But I also think that Bitcoin's place was inevitable. The fact that we happen to be in the late stages of a multi-decade debt cycle is just the perfect storm. That doesn't mean that Bitcoin wouldn't have worked otherwise, right? I mean, there's a fourth factor which goes into being late stage debt cycle, and that's populism. The rise of populism actually is not an accident. It wasn't caused by Trump. The late stage debt cycle enabled Trump because it's creating

haves and have-nots at a predictable way at a very large scale. All of this is exacerbating in a positive way, you know, the onslaught and the interest in Bitcoin, crypto and the technology and everything else, DeFi now, whatever. And it's not going to stop. You know, the bulls are out of the gate. They're marching down, you know, the alleyways and they're not stopping. And the question now is, okay, like I said, with Paul Tudor Jones, I had the same reaction. What's next? You saw Goldman actually move a full partner now to run crypto. And you mentioned Tudor Jones, but then you've got Micro. Anyway, all of these pieces are coming into play in a way that basically looks to me like an accelerant for what was going to happen anyway. And that's

really exciting because, you know, last year it was all about the ETF and now, and a bunch of other, you know, waiting for the government to do stuff. And I think now there's this groundswell of realizing, hey, I don't think we have to wait. I don't think that the OCC's announcement changed anything. I don't think that Tudor Jones cared about the OCC announcement. I don't think that the guy, the CEO of MicroStrategy, whatever the company's called, even knows about the OCC announcement or cares about the SEC's opinion on ICO, they just look at this in a common sense way, printers going, what's the mean, brr, brr, brr, and money's going to zero. And this is a better way to look at money, right? And so, like I said, the timing could not be better, right? And I think

that we will look back on the announcement of the Fed creating a 4% target as the pivotal moment for Bitcoin going from technology enabling provably scarce digital money to this is necessary for having a real internet digital, I don't know what the right phrase is, internet provably scarce asset for the globe that is not governable by any central government. And I think that announcement is the pivotal moment, or will be the pivotal moment in history for Bitcoin. Why do you think 4%? I don't even think 4% is the key number. I think it's the fact that the government is saying that significantly higher inflation is our stated goal. And that combined with the fact that

the way quantitative easing is working is likely to end up losing money for the Fed at scale, because at some point these IOUs have to be paid back. I don't see how this ends up being only 4%. Somebody's got to pay those IOUs back. And I think it ends up being treasury at scale. Right. And so that can only be done by basically borrowing more and printing more, which creates even wider class, bigger class warfare problems, et cetera, et cetera. So so the four percent is not necessarily the key. The key is, is that we are acknowledging that we basically created a big problem and we don't have any way out except to massively reflate the economy because of the fact that we're again, most of the public. like you point about the Wizard of Oz behind the curtain, doesn't understand the fact that this is a managed house of cards. And the only way out of this is in the late stage debt cycle is to

reflate the economy or we end up in a Great Depression. So from their perspective, I'm not saying that's true. I'm just saying pick your poison from their perspective. And they've picked their poison, which is massive inflation. The other part that shocks me is how many people believe inflation is evenly distributed. That's right. It's mind blowing. The amount of income disparity created and wealth disparity created by government initiated inflation is just it's just mind-blowing uh and i i've given up on this idea that the masses will ever get it um if you know even people in argentina and other places where they've tried to they just don't get it and i i it's something it's not about behavioral economics

I think that part of it is is that people still believe in the dream like I if I work hard if I'm an entrepreneur um I can get my share of that pie and and that's great I I I I've always believed in that as well but but now we've got this it's accelerating because of where we are in this debt cycle and and and you can't stop it now it just it just can't be stopped and and so I think that that's a freight train that people just don't see coming. It manifests itself, like I said, in populism and other things, but I think that is going to get significantly worse before it gets better. Yeah. What's interesting to me is not only one on a geographic basis, but even inside single economies, right? There's a study in Europe, and I wish somebody would do it in

the United States, or maybe somebody has, I just haven't found the study yet, but they basically looked at coming out of the 2008-2009 crisis, they said, well, does everyone experience the same inflation? Like CPI numbers never went above 2%, yada, yada, whatever. And they realized that no, if you break down a society into 20% buckets, you got the top 20%, the next 20%, all the way down to the bottom 20% on a socioeconomic spectrum, the bottom 20% of the socioeconomic ladder ended up experiencing, they believe, somewhere between 6% to 10% inflation coming out of the 08, 09 crisis. And it makes sense theoretically, right? Like, of course, you're devaluing the currency. So the people who hold only currency are going to get way more inflation

impact than the people who have investable assets, all the way up to the people who majority of their net worth is investable assets, and they kind of experience the lowest inflation. But that's not like a well documented, nor like highly talked about component here, right? So 4% inflation target could actually legitimately, and this is going to sound crazy to people, but that could be 15% to 20% inflation for the bottom 20%. Oh, I don't think that's crazy at all. I think being poor has always been incredibly expensive. I've been fortunate financially, and I'm always getting banks and other, hey, take this free loan, or they want my deposits, whatever it is. It's basically all these free services being thrown at me where somebody who probably needs

that money a thousand times more than I do would pay 50X in fees for the same services, and that's going to get worse. And I think you're right. I think that the 4% average is going to have a kind of standard deviation across the income pyramid in any one geography that is very significant. I think if you look at the cities in particular, there's going to be a huge standard deviation between the mean on the haves and the have-nots from a socioeconomic perspective. The part that's crazy to me is imagine in the United States having 20% of the population experience 20% inflation. Like that is just absolutely mind blowing to the point where we do not have the government or social programs in place to deal with that. We don't have the

kind of mainstream media or legacy media that is prepared to have that conversation, right? I mean, it's just, you can almost see it on the horizon. And I think part of the Bitcoin story very quickly is going to turn into, look, buying a house or buying a bunch of stocks or all this kind of stuff, that all requires you to be an investor. In some form or fashion, Bitcoin, I think, is going to take this narrative of the savings technology. It is the protection, which I think would be very interesting. And you see it, obviously, with the corporations now. But you could see that happening at the individual level as well. Yeah. But I mean, what's interesting about that perspective is that von Mises, Hayek, and others, they wrote about this before Bitcoin

existed. The idea that what would happen with a deflationary asset if one truly existed is exactly what we're seeing with these stock-to-flow models. They intuitively understood what a stock-to-flow model would look like for a hard asset like gold if it actually ever became money again. And we're seeing that play out. It's basically playing that playbook to the letter. The challenge with that is that it's still being held by a very small number of people. And part of my stated aim with Avra is to solve that problem by getting Bitcoin and crypto in the hands of more people, and then ultimately making it utilitarian, not just a store of value and investment to hedge against the future. But until that happens,

it hasn't happened. And right now, there's a very small number of people that are holding the vast majority of Bitcoin out there. And I think as a community, we should all be doing our part to spread the wealth, as they say, and incentivize people not to give it away, but to incentivize people to want to invest in it because it's in their best interest to have a small percentage and a minimum of their net worth. And the good news is I'm getting droves of people online coming to me now saying, hey, I want to get into this. How do I start? And it comes in cycles. I had a lot of this happening in February of 18. But it feels different this time. It doesn't feel like, hey, I just need to get in and out

quick. Before, it felt like I'm missing the boat on a get-rich-quick thing. Now, it feels like, hey, I need to be exposed to this. I need to understand how this works. Not just I want to buy some now to help me get started. I want to educate myself. Where can I go to read stuff? So I'm seeing way more of that now than I did when we had the, let's call it, January 18 pump. And that's very encouraging to me, but we're just scratching the surface. And keeping in mind that a billion people out there probably still don't even have never heard of Bitcoin, which is hard to believe. And that's probably too small of a number. Or if they've heard of it, they have no idea that it's a currency or whatever. So especially in Silicon

Valley, I've gone from bubble to bubble to bubble over the last 25 years. And so we need to basically get this outside of that public for sure what have you guys done differently at abra or anything in terms of you've announced so much new products and features and things like that but help us understand kind of how you're uh thinking about navigating uh all this chaos and i think what many of us believe will be a pretty big influx of uh new users to the space of the next 18 months or so yeah you have to be first of all you have to be mission driven as a company because And the mission, when it comes to something like this, has to involve a very long-term view. Any investor in Abra who's basically in this for a two, three-year turnaround is going to be very disappointed.

Not that we're not making money, but if our goal is to get to 100 million, a billion retail consumers, not just traders, but retail consumers who don't trade using this stuff, it's a lot of content. right we produce a ton of content as a company from onboarding to training to uh macroeconomic discussions like this i host an ama every single friday which we have to put a lot of prep work into and as you know hosting this uh and and so and and because we go very deep uh like on certain topics it does involve a tremendous amount of prep work but that's what we signed up for and so So so if if if you look at our site, we have a beginner overview of every single major cryptocurrency, like from market cap perspective, like in the top 50. And people read it and they send us questions, you know, and support like I understand this or I understand that or or or in the AMA. And so you have to basically be willing to go one-to-one, like almost like a grassroots campaign, door-to-door to knock on doors saying, you know, here's my candidate, right?

So we're doing that for Bitcoin and for crypto, and it's a slog. But the reward comes in the fact that we have hundreds of thousands of wallets processing billions of dollars in transactional volume, and it's all good. But ultimately, Bitcoin is still being held by a relatively small number of people after all those efforts. So I believe that by turning this into a real crypto bank with earn interest, borrow against your holdings, trade against 100 different cryptocurrencies, eventually with hundreds of thousands of wallets, it reaches the tipping point. And that's what we're fully committed to. And whether it takes another five years, another 10 years, honestly, I don't care. Because one, I know we can build a profitable, sustainable business along the way. And whenever that tipping point happens, that just means we have more income to invest more

and more product and to reach more places. And my goal is to start at the top of the pyramid and work my way down to the bottom of the pyramid. I spent a lot of time launching mobile money systems in Haiti, for example. And Bitcoin is not going to solve the problems of the people in Haiti in the short term. in the long term, I think it can make a big difference when they don't have to basically deal with corrupt governments to manage their currency. That's a big problem, right? I would say by and large, the people working in government in the United States are not corrupt. They're

misguided, miseducated, misinformed, but not overtly, fraudulently corrupt. On the other hand, a lot of governments in places that are dirt poor are overtly corrupt. And that manifests itself in terms of worthless currencies, worthless economies, et cetera, et cetera. In the long term, Bitcoin solves that. It solves it today in theory, but it's not going to happen. So I want to basically get Bitcoin from here down to here. And if it takes 20 years, 25 years, so be it. And so help me understand, how do you guys think about your treasury management? And specifically around, if we see public companies doing this, obviously crypto companies have tons and tons of crypto kind of flying around, right? You're having to finalize

transactions, right? You got to pay vendors. Some vendors want to be paid in cash. Some want to be paid in Bitcoin. There's all these moving parts. So how does a crypto company like the one you run think about treasury management today, given kind of the macro environment and also the crypto environment? Yeah. So there's two parts to that. There's customer funds and then there's our own balance sheet. So let's talk about customer funds first. I think that's a more interesting part of the question. So we custody funds in two ways, actually three ways that happen, right? The first is for the trading accounts.

And those are basically custody on an exchange. And we go deep with them on their security practices and how they manage cold storage versus warm storage, and then how we effectively can access those accounts on behalf of our consumers via superior API and execute trades. Okay. So that's, that's, uh, that's pure crypto. Um, and, um, you know, we don't, we don't make any incremental money on that.

It's usually a small spread on, on the movement between asset classes. There's no re-hypothecation of that. And you can't because you have money transmitter, licensing, regulations, and things like that, where the state of purpose has to be very, very clear. Then we have our interest bearing accounts, uh, which are both crypto, crypto in the sense of Bitcoin, Ethereum, as well as crypto in the sense of stable coins or dollar deposits. And the stated aim of those accounts is to generate interest for our consumers via our

partner, in this case, Prime Trust, a US chartered trust company. And we run an institutional lending desk, which is the third part of this, which then manages a lending book and reports to an investment committee that I'm part of that then determines who the best lending or what the best lending opportunities are to generate safe yield in the crypto sphere for those assets. And that's a combination of balance sheet risk versus collateralization, et cetera, et cetera. And so there's also treasury then for collateral management and a certain amount of complication

on collateral. So all of that factors into how we manage consumer funds. On the average treasury, it's different because the vast majority of our supplies or our money goes to paying people. That's by far a million expense. And the vast majority of people still want to be paid in dollars. A few people would like to be paid in Bitcoin, and that's fine. But we are not at a point yet where we can manage average treasury in Bitcoin.

I would love to get to that point. And we were always holding a certain amount of Bitcoin as a company, not just on behalf of the consumers, but our own Bitcoin as well. But it's not a majority or anything like that. But I would like to get there eventually. And part of that is even though we have a lot of investors who are crypto first, like blockchain capital and others who only invest in stuff, we also have other investors like American Express, for example, or, you know, a fund backed by Fidelity, who, you know, if we

told them that we were holding 65% of the money in Bitcoin, I'd be having a board meeting tomorrow, I can promise you that. Not that they would stop me, but they would certainly have a lot of questions, right? Anyway, long answer to your question. But, you know, so there's two parts there, the consumer and the company part. And then you guys just hired a new CIO, right? Yeah, tell me about that. Yeah, so Young Cho joined us. He was at Celsius earlier. And then before that, he worked in traditional lending.

I was at a company called Alt Lending. He was at Citi. So he's a backroom both already in crypto and before that traditional lending. And he has very quietly over the past several months, along with others in my team, built this new institutional lending desk, which has already gone very deep in building partnerships all over the crypto sphere. If people are institutional, either traders or other funds, and have a need to either borrow or lend, they can approach Abra and we'll dig into what their needs are. And, you know, usually we'll be able to help.

So word has already gotten out on the street that we're doing this. And so we have a lot of people approaching us. But for those who didn't know, you know, they can certainly approach me or the company. But Young has a fantastic background in this. We've taken a relatively conservative approach. We don't put a lot of eggs in one basket. We create a good diversified portfolio. And that's part of the challenge here because we did get, we're getting a large influx of

deposits already. We kind of expected it because the rates are so high right now and we hope they stay there. But the challenge is to make sure that we continue to build a widely diversified portfolio and not just put all of our eggs in one basket where some investor does something silly where you know we're in trouble and and so i do worry a little bit about what i see in some of the the other uh kind of c5 plays out there that you know there's there's a lot of centralization uh in some of the investments we're seeing and i hope that people will take a hard look at that and start to diversify more um but um it's something it's one of the reasons we hired

him and started this team long before we uh before we announced the uh the consumer product was to make sure that we could build a well-diversified portfolio. And I want to end up on this idea of a crypto bank, which is something that you've mentioned to me multiple times in past episodes we've talked about. But like, what does that look like today? And kind of how do you view the path to building it? Because those two words, historically, I think in some weird way have been like antithetical to each other, right? where crypto wants to literally long Bitcoin, short the bankers type thought process. But to want to build a crypto bank, I think is not necessarily like,

let's go build the next traditional bank and just hold crypto. It looks like something different. So maybe talk about that a little bit. Yeah, sure. So six years ago, if you said crypto bank, to me, that was probably Dropbox or taking Dropbox and making it into BitGo. Love BitGo. I think they provide fantastic services. I'm talking about their original service, which was

really just a multi-sig storage capability. And I only say just because they really evolved tremendously, even though their original service has a lot of value still. But what I mean when I say crypto bank now is an evolving analogous stack to the traditional banking system that's specific to crypto. So the ability to earn, the ability to trade, the ability to hold securely if you don't want to do those things the ability to borrow the ability to pay and spend but all based on crypto rails in some cases the consumer will know they're using crypto because i'm i'm you know holding bitcoin or xrp or whatever whatever whatever i want to do in some cases i may be holding what looks like dollars but using crypto rails like in the form of a stable coin uh

you know you'll see aber doing some more and more in that area in the coming months but you end up with this uh kind of and it's global by the way right so so and and i haven't layered regulation on top of that yet but but i'm just talking in from from a vision perspective a single global entity that can allow people to uh earn spend save borrow invest all one platform all globally all taking advantage of bitcoin and crypto rails where it makes sense um you know what think about supply chain finance. A lot of American investors are shut out of Asian supply chain deals, which can be very lucrative because they can't move money around and they don't have access. Well, stablecoins actually solve that problem because you can actually move money around

very, very quickly to fund supply chain finance deals. So I predict you're going to see crypto banks enabling yield, making investments like that in high-grade opportunities in the coming years. makes perfect sense right because it's yield that we're simply not getting with massive trillion dollar cash stockpiles right so so these are the kinds of of kind of opportunities that are enabled by the crypto bank so it's a new stack but it has this analogy in the old stack if that makes sense and we simply want to be and there's going to be several of them right we simply want to be one that is easy to access, transparent, highly educational, and trustworthy. And we talk about it all the time.

It drives features and everything we do, even if people don't see it in the short term. So it's a slow methodical march in a feature-by-feature basis towards getting to that vision. And do you think that this will be centralized, decentralized? Maybe there's a spectrum between some products or features have to be centralized versus decentralized. How do you think about the centralization in building something like that? Well, my answer is yes. I think the biggest advantage for decentralization right now is regulatory arbitrage, clearly.

And again, I'm not making a judgment on that. It just is what it is. But there is no such thing as true DeFi yet. To me, DeFi means, with the exception of Bitcoin, meaning is there an off switch, right? And so all of these early DeFi systems, if a regulator came in to a certain group and said, shut it down, you're going to jail, they would figure out how to shut it down. If a government came to you and said, Pop, you're the arbiter of all things Bitcoin, shut it down, you'd go out to the community and say, okay, I've been told to shut it down.

And they go, fuck you, we can't shut it down because one, we're not going to, and two, there is no off switch. And so there is that off switch in most of these DeFi systems. So, for example, the smart contract requires information from the outside world. That's provided via Oracle. Well, if the Oracle is talking to the outside world, it's got an off switch by definition. And if you shut it off, there's no more smart contract. So it's not very smart.

So now this company is trying to create decentralized Oracles to eliminate that. And so the regulatory arbitrage isn't even really quite there yet. people are simply getting away with certain things. That's not regulatory arbitrage. It just hasn't woken up the giant yet because you're not big enough for them to care. And I think that's going to change. And so I think a lot of the VCs that are pumping money very quickly in a defire may be in for a rude regulatory awakening. And as somebody who spent a lot of time and money having my own awakenings, I can tell you that they're not fun. And so I don't know how that plays out over time. But I do think there's value in that. I think if you want to run a system

that's truly global, truly accessible, doesn't answer to demand, the theory of DeFi is very interesting. And we'll see if the reality of it gets there. In the meantime, the fact that I have a chief investment officer who knows what he's doing, responds to a committee, that committee reports to a board, that board reports to investors, to me adds a lot of value to consumers. and you also have the opportunity if you don't want to play in that system to take bitcoin put it in a hardware wallet and not deal with any of it and that to me is super interesting i do both i have bitcoin in a hardware wallet nobody could find it and i have bitcoin in aber earning interest and i have cash in a bank and i have cash in aber earning nine percent interest so

so there's different ways that crypto will be used by different people over time and it's incumbent upon us to add value versus simply assuming that everybody should just store it in a hardware wallet. It's so fascinating when you start to look at this idea of so many early attempts of using the Bitcoin ethos or the blockchain technology was simply just taking something that already existed and quote-unquote copying it in this new world. But there's no actual like innovation or breakthrough. I think what we found in the internet was if you just took your business model and put it on the internet, you've got like 10% of the value of the internet. Right. But it was the people who realized, wait, what does the internet empower

that I previously couldn't do? Right. And so I always use the example of like media. If you just took your newspaper and like turn it into a PDF and put it on the internet, like, yeah, sure. Maybe some people could, uh, could, could log in or whatever, but that's not really very valuable compared to what ultimately ended up being the value of you could change headlines. You could, do dynamic updates to the articles, you could have slides, you know what I mean? Like you could do so many different things. And I think that's what we're seeing here with a lot of the finance stuff. And then on top of that, the decentralization, you know, this is a troll comment. And I say, I preface it because people always freak out. But like, supposedly, over 60% of all the Ethereum

nodes in the world, for example, run on cloud providers, and majority of those are on Amazon's AWS. And so again, it doesn't mean that Ethereum doesn't have value. It just means that it's not nearly as decentralized as I think people want to believe. And by the way, that's fine. It's not necessarily like a fatal thing or whatever, but to your point, people just have to understand there is the possibility that if the federal government came in and said, hey, if you're a cloud provider and you're running a DeFi application, you have to shut it down. You could be shut down a lot of all coins could be shut down in hours by a couple of governments with no i don't know if they know this but they're certainly capable of doing it if they

were incentivized or motivated for whatever reason i can't imagine they would be right now but but yes and and shutting down aws would be a very quick way of shutting down a whole bunch of coins for sure uh by the way it wouldn't help abra either but but you know abra's also not running a coin so um but yes to your point and we also don't claim to be a decentralized company right I think that's the piece. I think that in some weird way, centralization has almost become the enemy. And people want to point it and be like, oh, that's so bad. You're centralized. And it's like, yeah, well, the things you think are decentralized probably aren't as decentralized as you think. And also, it's not that centralization is always bad. It's just a

trade-off. There's pros and cons of centralization versus decentralization. And so depending on what you're trying to build, you should then make a decision as to what you want to do. right? Absolutely. I mean, to me, that's the beauty of, you know, what was brand service for file sharing, BitTorrent, right? You know, BitTorrent doesn't have that problem. There's no AWS to shut down for BitTorrent. What I want is I want a Twitter, I want a Facebook, and I want services that run on that model, not on a corporate AWS model. But that's for me personally, right? And so, you know, the company started it, my guess is their first versions would probably be running on AWS and the same cloud services, to your point.

Yeah, it will be very interesting to see. And by the way, one of the things that is pushing people, I think, in this direction is the TikTok saga. I mean, if TikTok was decentralized, then you wouldn't have this conversation. That's exactly what I want. I want decentralized versions of those services that there's no Chinese firewall against, there's no Trump executive order against. It's just out there, just like you can't shut off BitTorrent. The music industry tried for years to shut off BitTorrent and they gave up. Now they'll sue certain users, which is crazy, but they've proven that they can find users, but that's the user's problem because they don't run VPNs or Tor or whatever. And I'm not saying people should

illegally share music. I'm simply saying that those decentralized tools exist. And if they're used correctly, we could actually recreate a lot of these services today. It's just a question of people's incentives for doing it. It's absolutely wild. Two questions for you to wrap up. First being, what do you think plays out over the next 18 months in crypto? What are the milestones or events that you're paying attention to and specifically looking for? Yeah. I'm looking for a number of wallets. I look at how many unique... and we try to decipher it in terms of unique individuals it's very hard because a lot of it is you know she's not reported it's it's unclear anybody can create a crypto address but for us the

key stats I'll tell you the average stats and then the macro stats so so we want to see you know a couple of hundred million people actively using holding Bitcoin over the next 18 months and And I think that's going to be the the biggest advantage of the next run up in price to me is going to be just a massive explosion into the into the mid nine figures of the number of Bitcoin wallets. It's going to happen faster than people think. That's number one. And then I also think we're going to have this mining fee network fee problem again, network congestion that we had with though. And by the way, I loved your talk with Roger on this, but the problem didn't go away. right we just punted uh via the the uasf and so so that's gonna that's gonna come around again i don't know if it's gonna be ugly if we're just gonna accept the fact that we're paying hundred

dollar transaction fees and it is what it is but i don't it's not clear to me how we're going to address that or if we just don't and it's it is what it is everything's just a net settlement because um for people who want to do on-chain transactions lightning by definition doesn't help. Lightning helps if you want to do small dollar transactions and don't mind a semi-centralized solution, which is totally fine. That's what it's meant to be. So that's the other piece that I'm looking for is to say, how are core developers going to address what's likely to happen when Bitcoin does start to get to 25,000? And does this actually become an artificial limiting factor in that plan B model of Bitcoin's run-up.

I would hate to see that happen artificially. I don't know if it will. I haven't really thought it through, but I kind of in the back of my mind, it's one fear I have, I think that we need to look out for. And then from average perspective, we think about assets under management, right?

So it's very simple, right? How much money is in the system? When we announced the interest accounts, we literally grew assets under management something like 15% in a few days, which for us just doesn't normally happen. That's usually a good steady growth. And so that's what we're really excited about that. I think you're going to see just a big, big influx of cash sitting on the sidelines in the West, in particular, into Bitcoin, secondarily in Ethereum and DeFi, a smaller piece, but the vast majority going to Bitcoin over the next 18 months, to answer your question.

And so that's what we're looking for. You want to do a price target? um you know i'll be honest i keep looking for holes in that in that stock to flow model and i have a hard time coming up with holes in it so so part of me wants to say you know because i think that the logic is sound a hundred thousand by the end of next year makes sense uh you know the current price doesn't necessarily reflect that but it's it's it would be no less crazy than what's happened with Tesla shares since March for sure. And so I have no problem saying a hundred thousand by the end of 21. Uh, yeah, I'm there with you, man. I think, uh, I think there's a

higher likelihood of it happening than not. It's kind of how I think about it. Right. So if you had to, you know, kind of think of probabilities in the same timeframe that I'm talking about. Yeah. And end of 2021. Um, so we'll, uh, we'll see, uh, where can we send people to, uh, to find you on the internet and find out about Abra? So I'm on Abra, Bill Barheit, Bill, B-A-R-H-Y-D-T, my first and last name on Twitter, Abra Global on Twitter or Abra.com to download the app or get more information on how we work and even learn about Bitcoin. I know you have a lot of people here, our techies who are new to this, they want to learn, get the basics. We have a fantastic 10-day getting started guide delivered daily via email. And then a weekly newsletter that

really digs into the basics. Uh, I think it's a good compliment to what you're doing, which really kind of is a little bit more advanced in macroeconomic issues as well. Um, and so the number of people, we now have hundreds of thousands of people, uh, actually in that content fairly regularly. That's awesome, man. Well, listen, keep it up. We, uh, we need as many people building as possible. You were definitely one of the people leading the charge. So, uh, we're cheering for you and I'll have to do this again. We'll have to do episode number four at some point. There you go. There you go. I'm going to start paying rent to you and Zoom. Always a pleasure, man.