The Pomp Podcast - What Fed Chaos Means for Bitcoin’s Future | Jeff Park

Starting point is 00:00:00 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. 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

Starting point is 00:00:40 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. Going back to the Sunday night with the Powell video being posted i was more surprised and maybe even disappointed that bitcoin didn't react because to me that seems like the exact kind of news flow that would enthuse the social mission of bitcoin but bitcoin didn't move very much when it was an outside asset class and deemed kind of like untouchable it behaved more like the way you expect it as a hedge to like world peace but now because of the institutionalization of bitcoin itself what's going on guys in this conversation

Starting point is 00:01:24 I've got Jeff Park. Jeff is a partner and chief investment officer at ProCap Financial. And we talk about the Fed independence, what's going on with this investigation, how he sees the impact on Bitcoin and the public markets. And then we also get into the BitGo IPO and whether he thinks it's a good idea, bad idea, or how the market should respond. And lastly, we talk a little bit about clarity in the Genius Act and what's going on from a legislation standpoint. All that and much more in this conversation with Jeff Park. All right, Jeff, I thought a great place to start the conversation. The talk of the week is Jerome Powell versus the administration.

Starting point is 00:01:54 It feels like whether it was the president, whether it was an attorney general, somebody somewhere was like, hey, this guy may or may not have misled Congress. And it calls into question the Fed's independence. And so I guess the first thing is just like, is the Fed independent? And does it matter whether they're independent or not?

Starting point is 00:02:10 Yeah, I don't know what you were doing on Sunday night, but I was- I was monitoring the situation. You got your eight screens up monitoring every tweet scrolls. No, so I was, I think, literally on my couch and trying to figure out what to unwind the rest of the night with on Netflix. And then I opened my phone and I saw the video that Powell posted. And I was in shock.

Starting point is 00:02:31 But I couldn't quite figure out why I was in shock. Meaning there was a lot of emotions I was feeling. And it took me some time to compartmentalize all of the little occurrences and big factors in determining why this was such a wow moment. The first thing that is dramatic is I don't ever recall a video like that being posted by like an agency that is meant to be adversarial to an ongoing investigation because things are in discovery, right? So it's a little bit shocking to just see like an agency step right into the public media through the lens of Twitter and X and social networks to make a case. So I think that was the first part that I found jarring. And then the second thing that was a little strange was

Starting point is 00:03:17 the news flow was so back-to-back. Like the announcement of the indictment to- Investigation. Sorry, the investigation to then the video being uploaded was like within minutes. So then you were just starting to realize, wait, was Powell like in his suit Sunday? Like I'm in my couch, like in my pajamas

Starting point is 00:03:38 trying to get ready for Netflix. Are you telling me like he was in a suit and did a live recording, or more likely, he probably recorded it in advance. And leaked it. So whether he leaked it or not, the idea of it being pre-produced is now a little strange, right? Because social media, you think it's live, it's dynamic,

Starting point is 00:03:55 it's authentically kind of in the motion of news flow. But here's this video that clearly is pre-constructed. And so all of that felt like a little strange. So those are my feelings. And the fact that it was on Sunday as futures opened, do you think that was a coincidence? And the timing is odd, too, right? You kind of don't want to do that right before Asia Open and challenge central bank independence out of the gate of a big month. So all of that is a little strange, right? But then let's rationally think about what happened. And the thing that you take away from the most of it is that the charge that is being put upon him is some kind of obfuscation around disclosures in terms of the renovation of the Federal Reserve Building, right?

Starting point is 00:04:41 Which is, I think, you know, within anyone's right to kind of go pursue upgrading our infrastructure. But it quickly, you realize it's being politicized where Powell's own words is to inflate politics, right? he brings politics into the conversation where this is an ongoing representation of the feud that he is having with the Trump administration. And that's also shocking because there's a little basis risk here that the chairman is now taking upon himself to publicly exert without there being enough kind of evidence or discussion around the things at topic. Now, of course, I think many people are quick to believe that's probably related at some level, given kind of the pressure tactics that's been seen in the past. But to bluntly kind of make that jump is, I think,

Starting point is 00:05:30 also highly atypical. And so before we get into the conversation of the Fed independence, the other thing that I thought was really strange was you just saw a bunch of people coming out to support the chairman from both domestic and internationally. So on the domestic side, you saw a bunch of, like Janet Yellen came out in support of not weaponizing the leadership of the Fed. But none of them know, really, what the core issue is that is being investigated. So it's all so preemptive to jump to the conclusion to support a case in which the fact patterns are not aligned to the issues at risk. And then you saw global leaders. This is the one that really blew my mind. You saw like the European Central Bank come in and be like, we endorse, you know, and support

Starting point is 00:06:19 Chairman Powell in his ability to navigate all these things. And you're just like, wait, hold on a second. This is literally a domestic issue, guys. Like we're talking about a renovation budget gone wrong. Why does the European Central Bank need to have a conversation and plug themselves in from the international diaspora? So that was like, whoa, this is really strange. And I think all of this, when you have enough fact patterns building up, give you enough suspicion for just a normal person to be like, this thing is way oversized, not just because of Powell, but all the things around him that is making a case in itself. And that's why I think it's so bizarre. So optics are totally strange. Now let's talk about Fed independence.

Starting point is 00:07:05 Before you go to Fed independence, one other thing that I thought was really interesting is, again, we don't have all of the information, so we've got to be very careful, but it appears that this investigation is not actually of the Federal Reserve. It is just of Powell. Right. Personally.

Starting point is 00:07:20 And whether he misled Congress or not, lied to, you know, whatever language you want to use. The video was posted to the Fed's Twitter account, not Powell's. The ECB said they support the Fed and Powell. Mm-hmm. So in a way, it feels like people are trying to pull the fed into a thing that at least from what we've been told the investigation is actually

Starting point is 00:07:42 not of the fed it's of just him as an individual right and again he is the leader of that organization you know there's you know kind of some gray area in there but i thought that was very weird of like he's not defending himself he's trying to defend an institution that doesn't really feel like the institution's under fire as much as he's under fire right right and that feels like you know small but pretty important difference yeah look and i'm not by in any means condoning the pressure tactics that the Trump administration has taken upon to bend their wills towards the directives from an executive lens that they want. I mean, there's clearly some tension here, and I'm not condoning that as acceptable behavior within the framework of our institutional governments

Starting point is 00:08:18 either. But the reality is you can't play both sides of the aisle. You either respect it and play along, or you either fight the same way and take your gloves off. And I think what you saw with Powell was a little bit of both. It was highly unorthodox. It felt more like a Trumpian response than actually a technocrat who would have been measured and careful and thoughtful, you know, driving with expertise. So maybe that's what it takes, right? You got to fight where it's coming in the same lens. And maybe this is some kind of fight back we're seeing of that institutional power where they're taking upon more Trumpian tactics, which is where the line between the person and the institution, as you said, starts merging and blending. When we think

Starting point is 00:08:59 about the Trump administration, it's no longer kind of the executive ordeals of a party. It's really the Trump line, right? And I think this is the continual trend of what we're seeing with institutionalization and why so many people are losing trust more and more because these institutions are becoming more of an artifact that just outwardly portrays the person, the power, and the personality and the stakeholders behind it that feels a little bit more singular. Now, I think the trap that unfortunately Powell fell into is he started to make this a conversation about Fed independence. And that I think is a dangerous slope because there's actually a lot of really smart people who credibly understand Fed independence itself to be already at risk anyway, regardless of Powell the person, regardless of Trump the person. And so when you come out with independence as a virtue to win the argument, it obfuscates the fact that it's not enough when incompetence or incapabilities are at the center of some of the tensions that we're experiencing with the Fed.

Starting point is 00:09:59 And so here's the problem. The Fed is not independent. So you can't win that argument. And I think that's when people get even more upset that someone is trying to win that argument by exerting independence when we know it's been politicized in an era where monetary policies are overwhelmed by fiscal dominance. And if you really study the history of the Federal Reserve and other central banks across the world, what you realize is that there's always been a very tightly knit relationship between this federal bank and the Treasury. And that is actually pretty much inscrutably written in the 1941 Fed-Treasury Accord as well. For those who are history buffs and look into the text, you will see it without a doubt in your eyes that the federal court does not say, we hereby grant the Fed total independence to operate within their own monetary...

Starting point is 00:10:47 No, it does not. It says that there's actually going to be a way to work with the Treasury to service government needs with minimum monetization of public debt. Those words are very carefully chosen, right? It's not saying it's not going to monetize public debt. It will, just minimally. So that's the open question. They also mentioned a common purpose between the treasury and the central bank. What common purpose could they possibly have if it's not a political one, right?

Starting point is 00:11:13 And the third one is enabling government expenditures, which is fiscal spending. So I think part of why this is such a contentious issue is because we're moving into a world where Fed independence is actually being challenged because of what's going on with dollar liquidity. And it feels anachronistic to continue to rely on that party line to solve the mission-critical problems ahead, right? In other words, to better solve the dollar issues and bring dollar might back, we need to address the cancer at first and actually solve it with inward contemplation. And when you see the chairman kind of rebuffing this whole thing to be about Fed independence, you're going to lose a lot of people on both sides who are both experts of

Starting point is 00:11:54 of partitioning in the capital markets. And then two, those who actually just flat out don't think the Fed is actually in the interest of the common people. When you think about the fact that Powell is not going to be there in six-ish months, does any of this matter in the grand scheme of things? I think the legacy matters in some sense, because you do want the Fed to appear strong. Because in the end of the day, this is all net negative for America, right? Because the challenge here is like the Fed is able to bring prosperity to Americans in ways that are not as easy for most common people to understand, which is that the might of the dollar subsidizes a lot of our consumption. And so even though it feels a little bit invisible, the Fed is actually centrally

Starting point is 00:12:41 extremely important for America to exert its financial superpower. And so you don't want that institution to actually crumble. So when people say the Fed is no longer independent, end the Fed, I don't agree with that. I actually don't think the answer is end the Fed in an abrupt fashion where we just kind of fall into anarchy. We need the Fed. We need central banks. But we can also, at the same time, choose to be a little bit honest with the legacy that you leave behind. And now I think what could happen is if this does become political, who's to say that Powell would not also then make it political, right? So maybe there should have been a rate cut more, even so in January, because CPI came, I don't know, pretty light today, and unemployment, I think, still looks

Starting point is 00:13:22 pretty bleak. And so you might have thought, hey, maybe there would be an accelerated rate cut, but now he's cornered, right? He can't, because he needs to protect his own optics, his own image of independence, which then starts to blur the line between incompetence, when he should have really been cutting rates much sooner. And many would argue, back in 25, he should have been cutting faster. And Governor Meyer has been around that as an exception in the governor's board. So all of this, I think, makes his job a lot more challenging. But it also makes the institution of the Fed a little bit more difficult to leave a lasting legacy for the next chairman. Hi, I'm Matt Hogan, CIO of crypto asset manager Bitwise. Look, crypto can be confusing. There's

Starting point is 00:14:04 so much noise and the space changes so quickly. That's why every week I write a five minute memo on the biggest stories impacting crypto in plain English. Why is Bitcoin up or down? What are people missing? Where should investors look next? Get the lowdown every week. Sign up to get the weekly CIO memo delivered straight to your inbox.

Starting point is 00:14:26 Go to bitwiseinvestments.com slash CIO memo. That's bitwiseinvestments.com slash CIO memo. Carefully consider the extreme risks associated with crypto before investing. One of the things that would be hilarious and not going to happen but would be funny uh the president is the one who appoints the fed chairman right what if trump appoints himself right i mean like i think everyone is assuming that he is going to essentially try to appoint a proxy and say hey this other person is going to take on but uh

Starting point is 00:14:58 you start thinking about like he has i think a publicly stated goal of like the president should be more involved in monetary policy now whether you agree with that or not it does feel like uh we're about to run that experiment. Yes. And, uh, it's kind of like, uh, if that's the path we're going down, like don't even put the proxy, just like, you know, do it now. I think from an optic standpoint, that'd be very bad. I think that, uh, precedent setting would be very bad, you know, all these issues, but it kind of feels like we're going to get anyways, we're just going to put somebody there who he knows is going to listen to. So you reminded me of a point that I was going to make. So thank you for that. And

Starting point is 00:15:33 And actually, my pushback would be that initially it might seem abruptly strange, but in the long term, you could imagine a scenario where it creates a more equal playing field across the globe. So what do I mean by this? You may have seen that a substack was published on behalf of the Federal Reserve yesterday, where they try to protect the sanctity of the reserve by highlighting the rule of law and to avoid emerging markets behavior. And first of all, that was weird, by the way, right?

Starting point is 00:16:06 Substack. Why would former Fed governors use a Substack to communicate an official message? I thought it was fake, but I guess it was real because not enough people called it out to be it was fake, but it literally felt like it was fake. Well, you're operating under the assumption that they wrote it.

Starting point is 00:16:20 Well, that's what I mean. They probably just, somebody else wrote it and signed their name. The account was created like seven hours ago. So it was an account that existed. They published this thing. We have no- How did anyone find it? Yeah, how did anyone find it?

Starting point is 00:16:31 Oh, it must have got sent to the media, right? Exactly. Because, I mean, that is one of the things that people are saying that he, you know, okay, he posted a video on Sunday night, the futures and all that kind of stuff. But also, like the Monday morning news cycle, like now they have a piece of information, you know, they have an asset that they can play kind of his side of the story. And if you watched every single show, they were playing what he said. But also like a slightly tenuous asset, right? Where you can't assign accountability and ownership. I truly still think the sub-stack question is open for debate.

Starting point is 00:17:01 Is it actually them or not? And that's a comfortable thing to live in for them, uncomfortable for us as citizens. But the key word I want to highlight is emerging markets behavior. When I read emerging markets behavior, I always get this kind of feeling of being judged as if emerging markets are worse than developed markets. And the running joke, of course, being South Korea has a long time been called an emerging market. It still is classified as an emerging market today, even though I would argue it's actually quite prosperous at this point. So what does emerging markets behavior means?

Starting point is 00:17:35 That's exactly what you said. It's this tenuous line of executive power that is at risk at times with the legislative power in which the power making structure and the rulemaking structure leans more overweight to the former, the executive branch. So when we talk about emerging markets behavior, we're talking about, you know, Oregon and Turkey seizing control. We're talking about Argentina, where they actually just do things that they want without regards for numbers. We're talking about China, where they basically just decide, let's make more stuff and go towards a construction boom and print the press for it.

Starting point is 00:18:09 And that's authoritarian. So it's all kind of more about like the executive power balance. And so if you frame it this way, actually, instead of calling it emerging markets behavior, what it's saying is we're moving towards a world where change needs to happen faster, right? And it's true democracy at times can be awfully slow, but the US might be alone when the rest of the world is just moving towards authoritarian formats, right? So if the rest of the world is moving towards an executive control model where they can actually dictate more policy, which is more wartime behavior, the U.S. alone cannot operate in a vacuum in one version, right? They have to play with China. They have to play with Europe. And so they need to also be in the same sandbox.

Starting point is 00:18:56 And if you frame it that way, the first fundamental question we have to ask is, is the institutional format of driving decision-making no longer valid when the rest of the world is actually kind of moving in a different direction? And I think when you do some soul searching around that, you might come to a similarly uncomfortable answer, which is perhaps we do need some levers of executive power to be able to act more quickly, move in accordance with what's best for the country, that at times we should also hold the executive power accountable for. One of the aspects that is a weird question but I think is a fair question, if you're going through a point of rapid economic policy change, actually the president and the administration may better understand how they are impacting the economy than let's say the Fed, the Treasury, etc. because they not only understand what has been announced what are they thinking how do they you know uh see those uh net new policies that are unannounced going to impact the economy like you just kind of like a more full information set now that doesn't mean the fed doesn't understand the economy or you know all that kind of stuff but um if you're kind of in the peacetime and nothing's changing then like everyone's playing with the same you know rules like if

Starting point is 00:20:16 you go to the you know recess as a kid everyone understands the rules so no one has an advantage like you go but if you go to a new school and everyone else understands all the rules and you don't you're kind of at a disadvantage right during moments of like economic policy change actually the president of the administration regardless of the political party they have more information as to what their plan is and what they're going to do and so it does like kind of get this weird situation where you're like the fed is actually at a disadvantage because you know was he going to do the tariffs or not people forget like last february people kind of didn't believe he was going to do it and then like how much were the tariffs going to be was

Starting point is 00:20:51 he posturing the whole time or was he going to bring them back down you know only because of negotiate like all of those details the fed doesn't know and so they're kind of flying blind a little bit and they're trying to guess what's going on you know 1600 pennsylvania avenue as much as the media or you know uri and so that's not an argument necessarily we're like oh the white house should take over monetary policy but it does call into like some of the complexities or nuances that are maybe not as obvious on day one when you're like, oh, the president being involved in monetary policy. Well, if you're the Fed and somebody has information, you kind of want them, at least to give you the information if they can. It doesn't feel like there's any information

Starting point is 00:21:28 sharing going on between the Fed and the White House right now. Well, yes and no. I think the reality is monetary policy no longer is in a vacuum. And I think there's a spectrum of policies that are being put in place to drive growth. And you have on one hand monetary policy, you have fiscal policy, and then I would argue even industrial policy. And they're all ways to spend money, right? And if you over-anchor to monetary policy

Starting point is 00:21:52 as a way to maintain the world order, that is a bit more like a technocratic behavior because it is a little bit of like chess with numbers. But if you go all the way to the right of what I would just call like industrial policy, there's no roadmap for industrial policy, okay? No one knows. That's a totally deterministic, sorry, stochastic outcome that will arise out of whatever you do. And most great expansions during industrial revolutions happen by command and control. I would argue that part of why Korea

Starting point is 00:22:27 is so incredibly successful today is we had a dictator during the time in which the miracle of Korea's economic success took hold, but it was at the cost of democracy. Samsung wouldn't exist today without the dictator that was in power. And when you kind of realize that uncomfortable truth, it really puts things into perspective where if AI and data centers and the frontier of this new productivity gain is going to come in unimaginable ways that is going to be driven by industrial policy, well, that is no longer within the domain of the Fed to opine on. Unfortunately, cost of capital, though, is tied to spending, especially when it comes to infrastructure.

Starting point is 00:23:07 And so I think that tenuous line is what's being challenged. But they do need to work in coherence, which is why you have folks like David Sachs, I think, trying to bridge those as interdisciplinary art rather than existing in compartments. This is actually, I think, the biggest flaw of the expert class. They all think that they specialize in one thing and that they have the best view without realizing that you're one tree of many forests. And so to rise above that is kind of the calling that some folks are doing, but it will look unconventional by nature. One of the things that didn't seem to get a lot of attention, but probably should have, is that Trump posted on Truth Social jobs data like 12 hours or 10 hours before he came public. And he was asked, like, what happened there? And he was like, if you give me the data, I'm posting it. Kind of just like, you know, why did you guys all wait type attitude. dude um again you know the market was closed it also kind of like it is kind of weird the

Starting point is 00:24:01 president like posted economic data that everyone will wait you know all the algorithms etc um how does that type of stuff play in where like we know they get the data beforehand obviously most presidents don't tweet it but it does feel like there's a lot of you know most presidents also don't post and say like buy stocks now right right and so it seems like this administration more so than most, they're very in tune with the stock market. They really want it to go up. They're really, you know, looking at the economic data to the point where they're posting and bragging, you know, it's just a different approach, whether you like it or you don't, it's just very different. Now, if you're an investor, like you got to have notifications on

Starting point is 00:24:38 for, you know, presidential accounts, you got to be on true social, like all these different things. How does that change just allocating capital? Yeah. Well, look, I think it's very popular and And it's a populist approach because it's direct to consumer, right? What Trump is saying is, I don't need an intermediary to gate control my timing, my message, or actually hide behind a veil away from my own authenticity to deliver what I know. And it's extremely refreshing to the people. So I think there is some upside there to be advantaged. Of course, you can't break laws doing it where you have different externalities that may arise, which is negative in nature. So you do have to be a little bit careful.

Starting point is 00:25:15 But all in all, like, I don't know, there's no one died from that data coming out a little bit earlier. Right. So like people can harp on it being like that's illegal. But, you know, the line between illegal and immoral and what's permitted and what's not permitted things. I think these are things we just have to question as a norm to do things quickly in ways where people can appreciate it. So I'm reminded of this other story where I think it was a press conference where Secretary Rubio like handed like a post-it to Trump to call on a specific reporter. He said, go back to Exxon. They have a question for you. Yes. It was something I think about a press conference on Venezuela. And he gave a post-it and then Trump like read it out loud. Like, so go back to the reporter at XYZ.

Starting point is 00:25:56 Okay. So I'll call on you. Right. So then a lot of people tweeted that and said, wow, we have a president who literally is incompetent, reading private post-it notes out loud. When I saw that video, I had a totally different thought, which was, what a smart guy. Because in effect, what he could also have been doing is he's giving Rubio social capital. Because there's nothing insidious about wanting to call upon a reporter, right?

Starting point is 00:26:24 But what he did at that moment was he made sure Rubio's little thing was rewarded for then calling on the reporter so then he can have some social capital. I think it's super smart. Some people might say it's bad etiquette or like breaches trust. You know what? Leave that to Trump, leave it to Rubio. And if Rubio thought it was a good thing that happened to him, which I would guess it is again, because if I were in that position, I would have felt like I got rewarded. Who's to complain, right? and so i think there's that element of just being authentic right it's so key like just make it known to people what you're trying to do and then i think hopefully people the funniest part of that whole interaction was then he went to the it was the exxon ceo and then the exxon ceo goes uh he goes all right let's go back to you and he goes uh uh mr president um basically i don't got anything for you uh do you have a question for me and then trump looks at rubio rubio looks somebody else and then that person's like no ask him about whatever and then oh yeah i'm like this looks like a, like a middle school, you know, a play where everyone's like learning their roles.

Starting point is 00:27:23 Um, but it's highly effective. It's super entertaining. Right. And, um, another thing that, uh, happened in that press conference, which, uh, I saw people dissecting is, uh, he's got all the oil execs, all this stuff there. And at the start he goes, Oh, hold on a second. I want to go look at my ballroom. And he gets up and walks over to the door with all the windows in it. And he's like talking about the ballroom and people are just like, dude, what is going on right now and it just feels like the uh abnormal or the kind of like uh outside the box stuff is one obviously this administration style but two it gets the media talking it gets them paying attention to this stuff and you take what otherwise would have been a pretty boring

Starting point is 00:28:01 press conference we could think of two or three anecdotes right off the gate that you know people were talking about and so it becomes a very uh very kind of interesting thing on the economic data one of my hypothesis is they are going to start releasing it earlier like when they get it releasing it because of prediction markets so how many people touch that economic data between when it is like final right and it being released at 8 30 the next morning well we know the president gets it if the president gets it that means that maybe 10 people in his inner circle get it if those 10 people get it then they probably talk right so like where does that that maybe we get to 100 people in the world if there's an economic incentive for them to go in the prediction market

Starting point is 00:28:41 you can say all you want about insider trading this this is whatever the only way that you're going to stomp out that type of stuff is when you have finalized data get it out and so it does feel like we're going to enter a world where there's like a little bit like you're going to close the gap between like the information is official and it is public and it's actually better for markets because now you've taken you know 12 or more hours where some people had information and others didn't to maybe it's an hour and it just feels like that is a trend that has been happening for decades now along a lot of these things, but that will be actually a net positive for financial markets. I agree. I agree. And I think it's democratizing. I think data access has always

Starting point is 00:29:21 been a privileged business for the elite because data is expensive by nature. And so even when you think about those types of economic data release, there were buyers of it for subscription, which you can get data sooner than everybody else, right? It exists. Unfortunately, this kind of cottage industry of early access to data at a premium is a construct. Whether it's morally good or bad is really quite debatable, in my opinion. But the reality is it exists. So I think flattening that is good. And then the question is, how far do you go flattening it? So for example, when you subscribe to exchange data on NASDAQ or NYSE, they have these things called level one, level two, level three. Level one costs a certain amount. Level two costs a

Starting point is 00:30:03 amount, level three costs a certain amount. And they all share different depths of data, I would say, but it doesn't have anything to do with timing. So I think in a way you can start having these kind of practical applications of saying like depth of data is important, it's chargeable because it actually is fair for those who can get the depth and you pay for it to do whatever. But timing is one of those things I think socially people recognize is so central to the concept of front running and inside information that can't, I don't think, be permissible. So I agree with you that prediction markets, one of the greatest things is it's just really bringing it to the mass market. Some people complain, like, look, there's going to be so much inside trading

Starting point is 00:30:45 on predictions markets, so it will enrich somebody at the expense of others. And I always tell them, what do you think the current system is as is anyway? You don't realize that your baseline is off because it already exists to some level. Instead, you're now making it actually more, quote unquote, I love it, capital efficient. Because yes, maybe somebody will make a hundred grand off of it. Because actually, if you make too much, then you probably pass a threshold where you can then I think maybe actually be criminally tried. But if people have information and they're posting it and someone makes a little money on it, but also the world is now just entirely better off because the 99.9999% penetration reach of that being openly accessible. At some point,

Starting point is 00:31:30 it's a trade-off question, right? Like nothing's black and white. The question always is like, how do you solve for the best bang for your buck? And I think predictions market for all its problems and all the misgivings it will continue to have, we must not forget the big picture. The big picture is information is valuable and it is democratic and it will be accessible to all if there's monetary incentives behind it. Today's episode is brought to you by Arch public as markets shift headlines break and interest rates swing one thing stays true opportunity is everywhere at arch public they help you do more than just buy and hold yes their dynamic accumulation algorithms are built for long-term investors but where they really shine

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Starting point is 00:34:28 of the fight between the fed and the you know administration um on the other hand uh i mean trump and the military they seem to be kind of putting their foot down globally and it looks like you know people are kind of like hey the sheriff's back you know in the united states um bitcoin is down to sideways you know uh how do you see the relationship between maybe some of these current events and bitcoin yeah so going back to the sunday night with the powell video being posted, I was not surprised to see gold rip. I was more surprised and maybe even disappointed that Bitcoin didn't react. Because to me, that seems like the exact kind of news flow that would enthuse the social mission of Bitcoin, which is institutions losing credibility, dollars at risk,

Starting point is 00:35:13 the chairmen being undermined by politics. And all of these things historically, I think, would have been like the thesis for Bitcoin. But Bitcoin didn't move very much. And those types of data points end up kind of adding up to wondering like, what is the Bitcoin thesis now going forward than what it used to be? So to answer your question, I don't know. There are times I wake up and I'm not really sure what the Bitcoin thesis is anymore in the sense that it's not reacting based on the news flow that I used to when it was such an outsider's asset class. When it was an asset class and deemed kind of like untouchable, it behaved more like the way you expect it as a hedge to like world peace. But now because of the institutionalization of Bitcoin itself,

Starting point is 00:36:00 it's not super obvious. The other data points, clarity, right? The Clarity Act is being discussed this week and it is probably the most momentous crypto legislation period. And the odds on polymarket for it passing was at 80% yesterday. It's at 20% today. Wow. That's a big jump. Now that market's not super liquid, but it tells you that it's volatile. And in, in, well, that's just binary likely, not likely. Yeah. I mean, it's, it's, it's refreshing though. Cause again, it goes back to like, no one has inside information when we're all making the law, right? It's like, it's like no one could reasonably bet on an outcome, which has to be determined in a cohort that cannot be a single decision maker. But now you have better odds.

Starting point is 00:36:45 It is contentious. It is volatile. There are things that need to be hashed out. But Bitcoin also doesn't really seem to react to this as much either. And so there are times it genuinely makes me wonder, what is Bitcoin competing for? And what is it that will continue to latch on to its value proposition. And more than ever, I still do think it is a gold proxy. The challenge, I think, is to ensure that it doesn't lose its attention by becoming irrelevant. And one of the real worries I have, we talked about it last year, is that I do think young people are starting to lose interest in Bitcoin. And if Bitcoin was the thesis to think about the wealth transfer from boomers to you know gen alpha in a way that's going to happen through

Starting point is 00:37:36 bitcoin instead of gold and that's why the boomers are buying it because they think the young people want it if the young people don't want the boomers don't want it and the whole thing ends and so it's always at the center of like my concerns which is like where are the young people focused on are they interested um and uh and there's just actually been a lot of other things that young people have taken interest in gravity towards like ai i think is a huge one And for that, the payoff is a little more obvious, right? If you invest in yourself through tooling and understand how to work to increase your own technological capacity, that's a more assured payoff than spending time on crypto

Starting point is 00:38:14 Twitter and trying to figure out what is actually going to make sense when you see clarity itself being held up, right? As a young person, you're like, oh my God, it's become this DC game, but DC doesn't even know what it wants to be. It's like the banks are fighting Coinbase. It's like, oh, my God, I don't want to be involved in that. And those things, I worry about long-term optics a little bit there. It's a very real question.

Starting point is 00:38:37 We're going to find out. On optics front, BitGo is going public. I think people are pretty excited about this. It's going to be interesting to see how Wall Street, you know, kind of reacts to some get in the public market. What are your thoughts? Yeah, BitGo is an interesting business because anytime you ask anyone in Wall Street and crypto, what is BitGo? You'll get a lot of different responses. So some people will say it's a principal trading prime brokerage.

Starting point is 00:39:05 Some people will say it's a custodial business. Some people will say it is actually the issuer of WBTC from a historical legacy. And so BitGo is like this slightly amorphous thing where it doesn't have a clear label attached to it in the ways other crypto companies, in my opinion, did. That is both a risk, but also an immense opportunity. because what I do think BitGo represents is actually a pretty focused pure play on the institutionalization of crypto as an asset class. So now there's risks across each of their revenue generating line item as to what that means from an idiosyncratic BitGo perspective.

Starting point is 00:39:42 But BitGo primarily, in my opinion, has like three businesses. And its most high revenue generating, high margin business is probably the one that gets least talked about, which is staking. They have a giant staking business. And if you look across the multiple assets of tokens that they manage, you'll realize that they wear certain idiosyncratic crypto risks. For example, SUI, I believe, is their biggest staking asset on their balance sheet. SUI may be familiar to some folks. It may not be. Once upon a time, it was called a Solana killer. Now, I don't know if it's as relevant. But the point being that if you believe staking is a big business, you have to support altcoins as a big business. So there's a correlation to say,

Starting point is 00:40:26 if you believe in altcoin, staking revenue as a margin play on the growth of the altcoin business is a proxy for a Bitcoin. The other revenue generating line item is their SaaS business, which is a little bit like a subscription prime brokerage type business. But within there also, So I believe is where their partnership with the Trump family on World Liberty lives. So as you may know, World Liberty issued a stablecoin and BitGo is a participant of that ecosystem. So kind of like the way you bet on Tether or Coinbase on the fees associated with a stablecoin's trajectory, BitGo is a participant for which I believe they're due a quarter

Starting point is 00:41:06 of the revenue. So 50 goes to the family, 25 goes to BitGo, and 25 goes, I believe, somewhere else. But it's a play towards a stablecoin ecosystem that is somewhere probably between Tether and Circle from a competitive perspective. So that's a stablecoin bet that you can make at an emergent level. And so there are all these things about BitGo where each piece is strange, but collectively they have a horse in the big themes of the day for the crypto industry. And so the most compelling part here is, I think, it's valuation. BITCO is supposedly coming online at about $1.75 to $2 billion in valuation, which is pretty much where they were when they raised their Series C three or four years ago.

Starting point is 00:41:53 So it's the same price that you could invest now in the public market than you would have in the private market four years ago, which in a way feels like an arbitrage. Now, there are reasons why I think people are discounting some of BITCO's growth potential, relatively speaking, again, because where are all coins going to go? What's this idiosyncratic risk with the Trump family, et cetera. But I think that it's probably the first IPO where the valuation doesn't have to align to perfect execution to be able to profit from that execution story. So in my mind, it's interesting. And I think it's a clever way to play on the institutional adoption of crypto as a pure play that it represents because BitGo doesn't really

Starting point is 00:42:39 have a retail business. It's not like Coinbase in that sense. And it's certainly not like Gemini in that sense. It is really an institutional business. And for a long time, I think Galaxy was probably the only one you could play to have that beta, but it was probably not as clean given that they have other infrastructure related investments going on than it is to what BitGo would emerge. So now it would probably be a walk down the lane for you to then remember galaxy once tried to buy bitco i remember i remember and that deal failed of course yeah so it's um it's gonna be very interesting i mean if you look at the institutional uh kind of just crypto related like figure right you know i've been involved in that business for

Starting point is 00:43:16 a long time um crushed it right i think people are really excited about it uh not really a consumer business they have some consumer products you know that that uh help the institutional business but for the most part uh that business i think is you know kind of in a different vertical a different space, but is somewhat similar. They're doing many different things. But there's been a really, really positive reception on Wall Street. And it looks like from the financials, especially they've been published, pretty attractive business. BitGo hopefully can be a fast follower to that same theme. Yeah, that's right. I think what you're hitting on is that institutional businesses at its core is very good and durable because

Starting point is 00:43:57 they're really sticky. There's a high switching cost for institutions, not unlike you and me, that can just go from Coinbase to Robinhood to wherever the next best fee commission and rebate sharing programs are offered. The retail business is highly competitive. Institutions are too, but it is, I think, related with sales being rewarded for a long-term contract if you're able to lock them in.

Starting point is 00:44:22 And so to that point, I think BitGo has done a fantastic job appealing to institutions where right now you can't see the profit. That's the biggest problem. They have $15 billion in revenue, but they have no profit. and the the and so you're quick to discount like oh my gosh it's not a profitable business look at

Starting point is 00:44:37 coinbase their margins were so much better and then the game is different because once institutions are onboarded and you get them with lower fees that you turn on later with some value add like that switching cost is much higher because institutions you have to always remember are acting on agencies of others whereas retail are principal investors so retail cares about their spend because it's their money. Institutions are fiduciaries and guardians of others, which means their incentives are totally different. They do not care as much about the actual expense burden. What they do care about is other things like institutional risk, things about reputational risk to safeguarding assets, and other things that you can monetize at intangible value if you're

Starting point is 00:45:20 a well-proven operator, which I believe BitGo for sure is in the league of. Yeah. It's going to be very interesting. Where can we send people to find you on the internet? you can find me on x i'm dgt 10011 and you can also find me on substack same handle amazing well keep writing keep writing jeff all right that's it for this uh this conversation we'll see you guys next time

The Pomp Podcast - What Fed Chaos Means for Bitcoin’s Future | Jeff Park

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