Unchained - Bits + Bips: Are the U.S. and China About to Reshape the Global Economy? - Ep. 835

Episode Date: May 14, 2025

After the U.S. and China announced a 90-day pause on tariffs, signaling a massive de-escalation of the trade wars, markets rallied.  In this week’s Bits + Bips, the panel covers the biggest macro and crypto forces in motion right now: Will US-China tariff reset reshape the global economy, or just kick the can down the road? America’s ballooning deficit and why politicians are spending like it’s wartime. Why some think ETH has a unique lane to outperform. How policymakers ignore the power of the crypto community at their own risk. Plus: Saylor copycats, Solana’s risk-reward balance, and whether stagflation or recession is still in the cards. Sponsors: Bitwise Ram Ahluwalia, CFA, CEO and Founder of Lumida Steve Ehrlich, Executive editor at Unchained Guests: Peter Tchir, Head of Macro Strategy at Academy Securities Zach Pandl, Head of research at Grayscale POLITICO: Trump: The EU is ‘nastier than China’ David Bailey and Bitcoin-Native Holding Company Nakamoto Announce Merger with KindlyMD® to Establish Bitcoin Treasury Unchained: Michael Saylor Copycats Rush to Win the Solana Rat Race. Can Lightning Strike Twice? Reuters: Brokerages Scale Back Recession Odds After U.S.-China Trade Truce White House: Joint Statement on U.S.-China Economic and Trade Meeting in Geneva McKinsey: Chinese Consumption Amid the New Reality CBS: U.S. Could Face Default by August if Congress Doesn't Address Debt Ceiling, Bessent Says Stablecoin bill drama Unchained: Why the Senate Stablecoin Bill Stalled & What It Means for Crypto Tether in the Clear? Yes, Under This New Republican-Led Senate Stablecoin Bill  Stablecoin Bill Stalls in Senate as GOP Cries Foul Over Dem Resistance A House Hearing on Crypto? More Like a Big, Partisan Fight Timestamps: 👋 0:00 Intro 🇨🇳🇺🇲 3:27 The significance of the U.S.-China tariff pause 🌎 8:55 Is this a global economic reset or just kicking the can down the road? 🧑‍💼 20:23 Has Bessent beaten Navarro in the Trump trade tug of war? 💔 23:11 Whether the U.S.-China relationship is heading for a permanent split 🏦 30:22 Is the U.S. heading for a debt default in August? 🎭 38:37 Why more are copying Strategy’s bitcoin playbook 🚀 44:53 ETH’s explosive short squeeze caught traders off guard. Can it continue? 🏛️ 52:47 How stablecoin policy suddenly became major political battleground ⚠️ 1:00:20 Are there still stagflation and recession risks? Hosts:Links Learn more about your ad choices. Visit megaphone.fm/adchoices

My kind of controversial take maybe or auto consensus take would be I believe that Ethereum is very well placed and has a kind of unique lane to compete in that competition. I think American exceptionalism is back. I don't think that dollar is going to drop as much as people think. Bond yields are attracted. They're going to want to buy that. Eurozone stocks are expensive now. You know, there's no alternative. Hi, everyone. Welcome to Bits and Bips. Exploring how crypto and macroprudelytes. collide one basis point at a time. Today we're going to talk about macro, tariffs, Scott dissent, China, stable coin, the stable coin bills that almost were, and a lot more. But first, a few quick intros. I'm Stephen Erlich, high scribe of the Unchained Kingdom. I'm here with our soon-to-be-hear, Ram Al-Walya, Mastor Wealth, leader of Lumida, and we have two special guests. First,

joining us for the first time, we have Peter Chir. First night of the Academy Securities Roundtable, and Zach Pandle, truth seeker of the asset realms at grayscale. Peter, since this is, first of all, welcome, since this is the first time that you're joining us, wanting to just take a minute or two and share your background and some of the work that you do in this industry. Perfect, yeah. I started a long time ago back in, you know, traditional Wall Street,

did a lot of structured product stuff, wound up doing a lot of synthetic CDOs, actually helped create the CDX suite of indices, so the big short fame. I traded about a trillion dollars of credit as a market maker and then at a hedge fund. Then in 2009, I started trying to figure out how to work with large asset managers. I built and sold a business, joined Academy about eight years ago where I think there's two kind of neat things.

One, I still talk to asset managers, but I spent about half my time talking to large corporations as our macro strategists and also working with some of the municipal issuers as well. And then the neat part for me at Academy Securities has been we have a pool of about 20 retired generals, admirals, CIA people who serve as our geopolitical intelligence group. So I'm able to kind of incorporate their thing into coming from macro. So when I'm macro, it's much more from a fixed income and credit side and kind of new product side of things. And that's kind of what I try and bring to the table from macro and been able to incorporate geopolitical, which has been incredibly useful given a number of them served under Trump directly under Trump 1.0. Just a very quick disclosure

here. Nothing that we say is investment advice. Please check UnchainedCripto.com backslash bits and bips for more disclosures. And before we dive in, I just want to run a quick ad so you can hear from our sponsors. Crypto moves fast. It's why Bitwise launched the weekly CIO memo, a jargon-free summary of what's moving crypto markets written by one of the best in the business, CIO Matt Hogan. Get up to speed in five minutes or less. Check it out at bitwiseinvestments.com slash CIO memo. Carefully consider the extreme risks associated with crypto before investing. Big news. Unchained just launched a brand new newsletter. Bits and Bips. Just like this podcast,

it's all about how crypto and macro collide, one basis point at a time. Get expert analysis, market insights, and the biggest stories shaping both worlds, straight to your inbox. Subscribe now for free at bits and bips.bohive.com. That's bits and bibs.bips.bohm.com. Find the link in the show notes. All right. So let's dive in. China. Trump hinted at a big China deal yesterday. I think most of us were, I guess, hoping it was going to be a little more substantive or optimistic than the Britain deal, which was encouraging, but not so much a deal in the traditional sense. Then they came up with the announcement that they're going to put a 90-day pause on all tariff. and bring them back down to just at the baseline level. Markets were obviously enthusiastic.

Rahm, why don't you kick us off and just kind of explain what you think the significance of this is? And the question really on everyone's mind is, what can you accomplish in the next 90 days? Well, the market's discounting a resolution of the trade war and other geopolitical wars. And it looks like Trump is choosing on the side of markets rather than the side of the external revenue service. Ten percent's below market expectations. Think about what we're on the Liberation Day, placards, the China tariffs were, I want to say, like the 45-ish range. 10 percent is extremely low on China. And Trump also said that they have an intention together with China to open up China's markets. Now, what does that mean from an American technology company perspective,

software companies enter there. I doubt we're going to see social media firms enter there. What does it mean for American financial services? But overall, that's exciting. You're seeing that there's a reduction in policy risk. The policy risk is that you have a global trade war and tariffs are higher than smooth-holy levels. And it looks like, you know, best at one, cooler heads are prevailing.

It seems to me that American exceptionalism is back. capital is rotating back into American markets, semiconductors, QQQ, MAG7 is all doing well. And hedge funds are off-sides. We've talked about this last week, right? The net exposure of hedge funds is somewhere around the seventh percentile of the last five years. They're fully invested in their long book. The only thing they can do is cover and they have to cover shorts. So I expect dips will be bought.

I think a lot of institutional capital is off-sides, retail. bought the dip and they bid up markets in a low liquidity environment. Now institutions are forced to chase. You couple that with buybacks from earnings season. And it is quite an amazing backdrop that you have here. That's unfolding now. Yeah. Peter, I'd like to kind of lean into the geopolitical part of your business here.

Because, I mean, there's a few things that are occurring. I mean, we can talk about the nuts and bolts of, like, how we're going to construct a trade deal and, like, what U.S. goods the Chinese government may buy and so on and so forth. But there's a much bigger issue at play, something that Rahm hinted at. I think the U.S. and Scott percent, they're trying to sort of remake the Chinese economy and sort of push it towards that consumer focus that, I guess the government, the CCP, has been trying to do as well. I mean, that seems to be what they're looking to do so they can reorient manufacturing back to the U.S. I mean, what are you hearing from your sources, I guess, within the Trump administration and people that you work with? And how does that fit into how this negotiation may happen over the next 90 days? Zach, would you like to jump in?

Yep, absolutely. Thanks. Thanks, Stephen. Look, it's been an absolute kind of roller coaster for markets. I'll build off of ROM's comments. Of course, a tariff tantrum in the early part of April and then a huge relief rally as the White House. has pivoted away from the initial proposals. I would agree entirely with what Ram said is that, you know, if the idea of this policy change was to kind of remake the American economy, remake the Chinese economy in some way, it's pretty hard to see that in a brief period of high threatened tariffs and in what has been disclosed so far in terms of the deal. So, you know, this was one

of the potential outcomes that we could get just small deals. And the White House would, would kind of declare victory and move on. I'm not sure. I'm not sure really this is the end of the story. I mean, the president seems to have a longstanding conviction to try to bring back domestic manufacturing, grow domestic employment,

and shrink the trade deficit. I'm not sure that we're going to have accomplished that from what's been announced so far. What I feel more strongly about is sort of the read on markets recently. You know, it's been a roller coaster, of course, for markets as well. And what stands out to me is that Bitcoin has, been outperforming in both market phases, both in the drawdown and the initial tariff tantrum

in early April and in the recovery. It's outperform stocks on the down swing and on the upswing. And that's exactly what you want for this type of asset. We're going to have some beta to the broader market. You can't escape that entirely. But Bitcoin is outperforming in both legs. That's what I want to see. That makes me comfortable that is responding as expected to these types of shocks, this type of uncertainty. And I think it speaks well. for the outlook for Bitcoin for the second half of the year. Yeah, and that's a great point. And we're definitely going to get into that a lot more later in the show.

But really, I'm interested in the broader bilateral geopolitical dynamics here because this is a trade deal, but it's also sort of a remaking potentially of the entire international political economy. That's what they're looking to do here. What are your thoughts? I think, unfortunately, we are pivoting back away from kind of that grand strategy. I think that was the grand strategy. I suspect when this all started, Trump had the view that he would make these statements,

people would come begging to the table, we would get a deal, and we would move on. And China in particular said, yes, sir, may I have another, yes, sir, may have another, the first two times and then came back. I think you've seen no real resolution with Europe. And I think we're kind of backpedling and we're back at deals that I think we probably could have got that deal with the UK with the phone call, probably right around what we could have done with China, except that I think we've now looked disorganized, right? We came through, I think we should have known on day one, USMCA product should have been exempted from the, you know,

Canada, Mexico tariffs. I think this is, you know, we, we, I think we're in a worse situation globally than we were before. I will give Trump credit that he pivoted away. I think, you know, to me, we are headed towards a path that was headed for depression. He backed off of that. I think he's, we still have some recession risk. I'm not sure. at 30% that anyone is in a big rush to move out of China other than to places that they think might be 10%. I don't see it helping us back here. I think there's some suspicion that if we get the budget approved, that we back off further from tariffs. So having said that, I do think one of the things we're going to see is a pivot, focus on the budget, focus on things that for national

security equals national production. And the other thing this administration's talked a lot about is crypto, right? And that kind of fell to the wayside a little bit. So if you want a good easy win, you go with David Sacks, you get, you know, Howard Lutnik is clearly, or at least his old firm, is clearly very involved in crypto. So whether I agree and I disagree that, you know, the federal government should be getting involved, I think if he can get that through, it's something that has a lot of appeal. It's populace to some degree. He likes it. There's a lot of states that I think, especially the red states that would be lined up. So I think right now you want to make a bet on, you know, crypto. The way Trump behaves, right, is, okay, he was going down this path. He's

someone screwed it up or he doesn't like how it's working. So he'll take these small wins. It'll still be in the background. But he's going to look for something he can get wins on. I think crypto is going to be one of those areas he focuses on as well as the budget. Yeah. It's funny. I mean, the idea of looking for wins because that's something I know that's a big expectation of his upcoming trip to the Middle East.

There's talk that he's looking to sign at $1 trillion worth of deals. And I know some of the commentary was harkening back to. his first trips to the Middle East during his initial administration. And one of the things I actually give him a lot of credit for are the Abraham Accords and some of the real progress that was made towards Middle East peace. And I know that's a little bit in tatters right now. But let's go back to the grand strategy that you mentioned, Peter, because that is really, really important here. Because there's, again, a few things that play. I actually remember, Peter, you may not even know this, but I actually used to be an intelligence analyst for the DOD and I studied geopolitics

in grad school too. And one of the things that I did was try to go to speeches from any major leader I could. And I was in a talk with Colin Powell, I think that right after he left being being sec-death. And he was discussing a conversation he had with his counterpart in China. And this was 20 years ago at this point. And he asked him what keeps him up at night. And it wasn't like the potential reunification of Taiwan or war with the U.S. or some sort of conflagration in the South China Sea. It was, it kept saying the number 8%, 8%, trying to find a way to keep 8% growth, which was the standard back then.

I know it's slower now. And I get that, I guess Trump and Bessent and Navarro and all of them felt that they were able to lever China's need to, maybe China was bluffing about how much pain they would be willing to take to come back to the table, but then what are they going to get once they're here? Because you're right.

I mean, the UK call, it could have happened with one phone call. Like we ratcheted up the tariffs to eye-watering, levels, we brought them back now, what have we actually achieved so far other than proving to everyone that we have a very volatile policymaking apparatus right now. And that's why we're seeing funds flow from dollar entities into the EU and elsewhere. Like, what are we actually going to, what are we going to accomplish now that we've kind of hit all the pool balls? And now it's time to really deliver. Ram, what do you, what do you see is next? Well, you know, as it relates to the UK deal, what was accomplished is UK lowered their tariffs and the United States

increased our tariffs to 10%. So the big outcome of that is Americans will pay a higher sales tax when they purchase in the United Kingdom. And the United Kingdom gave their people a tax cut. I'd rather do the opposite. But it's noise, it's negligible, it's not really driving outcomes. The thing that drives outcomes is China, because if you're that easy on China, who's the primary geopolitical foe. I'm sure Peter, we can double-click on the geopolitics there, but as I understand it, the national defense strategy is oriented around China. You know, 10 years ago is to be the ability to sustain a two-front war. Now it's around China. So, yeah, the signaling is significant. I agree, you know, China has been pulling all their government statistics, right? Youth unemployment's

been going up double digits. They pulled those stats six months ago. A lot of the data you would find the St. Louis Federal Reserve, China's just stopped publishing that. I do think they have a high tolerance for pain. At the same time, though, you've seen protests that are happening. And Xi Jinping is optimizing for his political control. He's not really looking after the welfare from the people who take a different policy approach, but he is concerned about a survival. So if you're seeing protests there, then, you know, he needs to bend. It looks like both sides we're looking for a mutual face-saving de-escalation. And Trump last week was previewing that.

You know, last Thursday, he gave this talk from the White House, which sounded like a great free trader, right? They talked about this, using my word, shared prosperity. We can do a lot of trade with China. I was like, what is this? I mean, this is Thursday. It was a great pivot. But I'd love to, you know, double click on the China geopolitics.

And, you know, even like, are they real risks of the United States from a military perspective? Are there risks as a relates to a Taiwan invasion from China, given that they've got a one child left behind, one child policy, and who's going to send their only child to war? They've never been an active war before. This is in six to eight hour distance by ship to Taiwan. You can see the boats coming, et cetera, et cetera. I love to get anyone's take on this. Yeah, I think, you know, at Academy, we talk about this a fair bit. We're not overly concerned about a military invasion of, you know, Taiwan by China.

It's, you know, they're practicing exercises. They're not that far long, as you pointed out, one, they have, they've had a lot of difficulty. You know, they haven't actually been in war. So they saw what happened to Russia and how weak that turned out. So I think they're going to be hesitant to do that. They've had to clean up some of their own military where their rocket division was supposed to be this, you know, super special force that they develop and they found a lot of corruption there. So we don't see as imminent. I think they're more likely to use their maritime militia, which is actually quite huge. It's, you know, 50,000 fishing

ships. Beyond that, there are several hundred actually quite large ships that they can array in various waters to make it difficult to do trade. So I think we see something happening along that where it's not an embargo officially because an embargo would be or blockade would be an active war, but you could disrupt trade if they choose to do that. I think away from that they're going to continue to push and prod on Taiwan and try and get them to join economically. You're seeing them make huge strides in what they're trying to do in terms of fact. I think two of the things that we've been talking about for a while are, you know, you need ASML technology if you want to make really small chips or very thin chips efficiently.

You can make thin chips efficiently with worse technology. China's been doing some of that. The other thing, when we kind of look at Moore's Law where you expect, you know, chip capacity of. effectively double every two years. There's more and more things pointing that it's going to be about the layering of the chips and how they package them into semiconductors that drives that, and that technology China is not as far behind. So we've been kind of, you know, what I think caught us all by surprise at Academy Securities was China's our number one pacing threat. We thought there was

going to be a lot done. And we thought there'd be a big policy kind of around things that national security and national production go hand in hand. If it's a national security threat, national production. And lately Besson's been coming on to that a little bit. So I think that all makes sense. What I think was kind of incomprehensible is why you would pick a fight with the entire world. I'm not a military genius, but kind of divide and conquer seems to work. And instead we picked our $30 trillion economy and picked a fight with $80 trillion. We always talked about this national production for national security. And I guess naively in hindsight, we kind of been considered national production to include our close allies, Canada, NATO, that seems to been pushed away.

So I think it's a little bit concerning that we lost track of that. And the two things I would say that I think we're making mistakes when we look at China is to me, China is already moving away from what we call made in China to made by China. China can't survive by making our goods anymore, right? They need to sell their own brands. It's one reason you see Timu, you see, you know, Cheyenne, look globally, B-YID, to me was the ticker symbol for Boyd gaming until about two or three years ago. And now it's everywhere. These EVs, you've got Huawei. So I think we represent about 15% of China's market.

They're trying to pivot away. They've had all these great geopolitical relationships with the autocratic resource rich nations. And that's where Trump, I think, is slightly right, right? China's had this huge advantage with autocrats because we don't bribe. We want people taken out of jail, et cetera. China doesn't care. China just wants their resources. So I think they're trying to grow this trade. And what keeps coming back to me, and I have to remind myself this a lot, is it's easy to think of China, circa 2005, as this maker of cheap trinkets and goods. China has moved much more beyond that, right? They've actually outsource and lost business on a lot of the low-end stuff. They are developing a pretty good manufacturing base, robotics, and their skill level is very high.

They have been, you know, they've effectively, you know, taken manufacturing skills from us. We've seeded it for so long that now they have it. And I think pretending that they're these kind of cheap trinket makers makes for bad policy. We have to understand how sophisticated they become, what things they can do and fight on that playing field. So it's nice to see, I think Besson talking about some of these things a little bit more.

It's nice to see us going with the UK. I think we've got to get Canada, other countries on board if we're going to have this, you know, fights with China. And the one thing I do think is now, every country is going to try to sign some sort of deal with us. but behind the scenes, they're going to be looking for ways not to deal with the U.S. or be as reliant because I think we lost a lot of trust in this process.

Zach, I want to come to you, because I know you have a lot to react to, but just related to Besson, the Besson Navarro sort of tug of war. He famously, I think, was reported, convinced Trump to initially put the 90-day pause on when they got him out of, got Navarro out of the room. It seems like Besson, again, was the one who spearheaded all this for the U.S. Does this mean that he's really the one in charge of U.S. trade policy now? And if so, what does that mean for future negotiations and the potential upper limit of any tariffs again? I think it does.

I think essentially, given what the president has been communicating over the weekend, that Scott Besson or Scott B, I think he called him in the truth social post, is in charge. And look, at some point, that's natural. He's the secretary of the Treasury. He's really the leading economic voice for the administration. You know, the president is going to have a lot to say, but it makes sense that the Treasury Secretary is leading things. Scott Bessent has deep experience, many decades of experience in traditional finance as a macro investor.

You know, what is that going to mean? I think it's going to mean that he makes sure to protect the integrity of U.S. markets, first and foremost. You know, we can take a high risk, high stakes strategy, but we're going to make sure that we're not introducing financial stability risks into, say, the Treasury bond market or into the banking system. Those are the kind of things that I think you can expect with Bessentz, steering. It doesn't mean, you know, this story is over or there were not a lot of hard yards ahead. And if I could just sort of build on what Peter mentioned, you know, a great take

on the China relationship. Just to add, my own framing is that there's a kind of slow motion economic divorce happening between these two countries, and it's been playing out for a long period of time. I think both the U.S. leadership and the Chinese leadership have agreed that we can't continue to operate in the same way, that the vulnerabilities are too high. At the same time, there are these deep existing vulnerabilities. China has rare earth minerals that we need. They rely on the dollar as the peg for the Hong Kong dollar, for example. So there are these sort of deep linkages and therefore a kind of mutually assured destruction over the short run. So maybe what happened here is just, you know, the White House, you know, pushed very hard, but, you know,

in light of these existing vulnerability, decided to pull back. I would see it as a tactical retreat, not at laying down of arms on this issue. You know, this sort of slow motion economic divorce is going to play out over many years. And this is just the latest episode in that process that in no means think that it is over, given the negligence. negotiations that have apparently taken place this weekend. I can tell you one group of people, I think, are breathing a tire relief. The folks on the FOMC who had to deal with a lot of pressure to deliver rates. What was it, a week or two ago, I forget exactly which day.

They held steady and definitely seems like they made the right call, at least for now, given how absolutely the situation is. I'm curious to see what expectations. It doesn't look like a divorce, though. It's a good question around, is the United States? decouple from China or not, and maybe a month ago it looked like, yeah, that was the direction of travel. But at a 10% tariff, that's not a divorce. Now, there will be a focus on moving national security categories and sensitive supply chains out. That's going to happen no matter what.

But now Trump's messaging is, hey, we can open up China. By the way, we'll see how this actually plays out. China made these kind of promises 10, 20 years ago. as part of the WTO process, none of that actually happened. You still have to go through the motions. From a market's perspective, though, they're looking for stability, so they'll look through that and rally. But, yeah, it's true. Like, China has an edge of the United States

in a number of technologies. Satellite images recently identified that China's got the largest fusion reactor. I don't think I've got to hear about this news, but the largest fusion reactor. Bigger than, I mean, it's in development. It's not an operating. It's obviously experimental reactor.

but that's one. They're heading more nuclear efficient plants, the United States, faster and cheaper. They're head on battery technology. At BYD is a leader in battery storage, battery efficiency. I don't know why the CIA hasn't hacked that and made that open source for American enterprise. They've certainly hacked us plenty of times.

And on ASML, into the earlier point, China, Huawei, they now have found other lithography today, like, Huawei, that are competitive with ASML. I mean, they're maybe like

two years behind. That's no longer constraint on, on China. Yeah, the idea of a divorce is interesting, too.

I'm glad you kind of brought that up, Rahm, because I have a few different thoughts floating through my head, and this could be for anyone. I mean,

for one, I mean, clearly there has been just a break in how normal relations have been conducted. But, like,

these two, the whole global economy, but especially like the specifications or the specialties of the U.S. and China relationship is not easily unwound. I mean, I forget who said mutually a short destruction, but it's not like one could uncouple from the other without having damage reverberating back onto them. And like for all the bluster, China or Trump's tough talk on China, at least for now, lasted about five and a half, six weeks. So, so we'll see. I know in Europe, the countries are really freaking out's not the right word. But I mean, like they are recalibrating because maybe

Trump 45 was seen as an aberration. Trump 47 certainly was not. And he was saying the same things about NATO and saying the same things about like Europe doing more things to support its economy and support the defensive Ukraine, et cetera, that he is now. But with China, it is a little bit different. This is why I'm so curious to see what's going to happen during the ensuing 90 days and what may happen. My sense is that there's not going to be any more massive eye-watering tariffs. I mean, Besson, I think, is going to have a ceiling on that. But at the same time, it's going to be really hard to extricate all these very deep and specialized supply chains, especially in a public world. So a quick newsflash today. So Trump today said the EU

is nastier than China, quote unquote. I'm sorry, is what? Trump today said the EU is nastier than China. Meanwhile, meanwhile, EU, In what context, just in general? I think he's referring to trade and non-terror barrier. These are complex issues because in Europe, they don't like GMO products. They don't like American beef. It's complicated, right? It's hard to drive an escalot through a Parisian cobblestone road that was developed like 800 years ago or something.

So there are legitimate issues too. I'm not saying that there aren't like the whole free riding defense, polar rest. But, you know, European indices are narrow all-time highs. And UK stock markets at three-year high valuations. And there's this whole repatriation of capital back to Europe that coincided with the Zelensky ejection from office and the trade war. I think that is done. I think that repatriation trade is done. And Europe's going to have a tough slog ahead. I wish it wasn't a tough slog ahead. I think they are going to have a tough slog. Just given what Trump's messaging.

Yeah, I think one thing, I think every country in the world right now is trying to figure out how they do business away from the U.S. I think we've lost a lot of trust. I think that is not coming back quick. And I think one thing that we all have to think about is there really isn't such a thing as a U.S. corporation, right? Our big corporations are all multinational corporations. They all have, you know, reasons to be in certain countries, things to do.

China, Chinese companies and China, the government are one and the same, right? So that Chinese ink thing is very real. And their ability to decide, okay, we want to support XYZ, China Corp, you do this. We're going to, you know, badge or wherever country to take your product. They can do that much more coordinated. I think we've already seen in the U.S., right, there is some willingness to work with the U.S. government, but what the U.S. government wants and what U.S. corporations want are not necessarily the same thing.

And I think that friction will play out as everyone tries to figure out what is best for them in a world where so much can be done by executive order and it can be. be done and undone very quickly, I think that's the problem. And China, I think, will try and use this to their advantage and other countries have to talk to them in a way I wouldn't have thought coming into this administration. It's pretty interesting. Let's just take one more quick pause to hear from our sponsors and then we'll continue with the show. Hi, it's Matt Hogan, the CIO of Bitwise. Every week, I write a five-minute memo on the biggest story impacting crypto. This week, with Heath Rallying, I'm focused on a key question. Should you

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Find the link in the show notes. I think this is a really good discussion and I'm sure it's going to come up in the second half hour of our show. But I want to focus a little more on the U.S. because there's been some interesting dynamics, particularly on Capitol Hill. I mean, for one, there was the, I guess, I don't know if debacle is the right word, but obviously a lot of disappointment that the Genius Act did not move towards a vote on the Senate floor, and that's putting the feature of all crypto legislation, I think, in doubt. But just to stay on the macro theme for now, I mean, Scott Besson also, he kind of sounded the alarm that we're getting a lot closer to the debt ceiling for the, I don't know,

how the upteeth time, we're getting closer than we think. I believe he said in August is when his magic bag of tricks is going to run out. Republicans, I think, put forward a tax bill that would try to, I think, raise the debt limit by four or five trillion dollars or something, which is, I guess, putting like a band-aid on a boat, considering how quickly our national debt is rising. What does all that mean? And how could that, disrupt the treasury market. Somebody have some thoughts they want to jump in first? I'm happy to try first. Look, I mean, this debt ceiling issue comes up repeatedly now.

You know, unfortunately, that this is a fairly common thing for bond market investors now to have to deal with, and we have pretty good guidance and pretty good kind of risk management procedures across all the big institutions. So unfortunately, we're getting used to this game. But I think it speaks to the bigger problem, Stephen, which is on the debt side of things. The problem for the Treasury market is they just keep producing more of it. We're running the largest debt stock as a share of GDP since World War II. And we're not going to do anything about that. We're going to continue to run big deficits.

And that's part of the other news that we've gotten today and over the last a week is the kind of sketch of the budget plan from the Republicans. And there's still a lot to iron out. But I think the main takeaway is there is not political will for large budget cuts, even on the Republican side. So we're going to get some of that. We're going to get some revenue raise from tariffs, of course. But the budget deficits are going to remain large. And so that'll have implications for markets, continue to put pressure on the long end of the curve, and we're going to need to have to keep raising the debt limit repeatedly year after year until that process gets under control.

And it is no sign that that's happening. this year. Peter, what are your thoughts? Yeah, I think one thing, yes, it's both sad and somewhat good, encouraging that Doge didn't seem to find as much pure waste as was thought. So, you know, I think you talk to a lot of government people. They feel that they, you know, do a reasonable job. So again, I think we're all hoping that would be a much bigger number than shown up. So that's going to make their work harder. As you said, Zach, that there does not seem to be really a will. I always kind of view the debt ceiling. Both sides are always happy when the debt ceiling comes up because they can all make their fancy noises and then both sides get whatever

work they want for their budgets. And at some point, I think we're going to really have to address like military, military spending. I think we've seen a lot of evidence from Russian Ukraine. This is moving rapidly towards a drone-led war zone. But, you know, the military actually has very little say in how they spend their money. It's mostly comes from Congress. And it's not like Congress allocates the money. Congress allocates them projects. Those projects are, you know, tend to be along the lines what Congress people want. So we've got our work cut out for us. I think there's a lot of opportunities to figure things out.

I think we'll kind of go through this brief period where, okay, rates are okay, the Fed can be on hold. If this deficit starts looking that's going to get out of control, I think we're back to bond vigilantes maybe later this summer, where people start getting nervous and you start seeing tens go back above 5%. And unfortunately, we're in this vicious cycle where we're rolling over so much debt that, and, you know, the one thing that's still flabry asked me is, Every corporation in America, every individual in America figured out during ZERP,

let's lock in as much long-term debt as we can at very low yields. And only the federal government didn't seem to figure that one out. It was kind of shameful that we did not issue a lot of long-term treasuries when we had the opportunities. So we're left rolling this. I think there's a real risk that the market was sold by both Trump and Bessent, that they really cared about the deficit. They really cared about getting rates lower, which I think they do.

I think like everything else, they might find out that. it's way harder to do that than they thought. And that, to me, is the big risk. And that could push yields higher and be an economic slowdown for us. Yeah. And, and Rahm, I'm curious your thoughts on this. And, too, just, I mean, at some point, Zach, you mentioned we seem to go through this like every year or every other year. And then we, everyone just assumes that at some point, some agreement's going to be reached so that we don't actually default, which would be cataclysmic. But, I mean, given, this is the first time we're going through this when there's a major crisis of confidence in this sort of like U.S. benign, hegemonic world order.

Is there going to be a point where we cry wolf won too many times and there is a problem or is it going to be more of the same? I posted this document in the channel if you can show that on the screen. And what it shows is a CDS pricing on American debt. And it's going up. That's the headline. But look, you know, the congressional budget, the initial proposal in the House shows 8% deficits.

8%. There's no austerity. There's no cost cutting. We were at 6%. Like I want to say like 12 months ago, we're 8%. These are like wartime deficits. It's bullish for the stock market. It's bullish for the economy, just to be clear.

The 10-year is selling off. I'm not as concerned about this bond vigilante risk because you still have disinflationary trends, especially if the tariff rate on China's 10%. Who knows if it settles it or not. But if you're at that, tariff rate, you can still import disinflation. But it is, you know, politicians, when they, when they think about their political survival, they make the decision to spend, spend, spend.

And we're seeing that again. Yeah. I think you, you know, I would credit the Trump administration for making an effort. You know, I think Doge is an important effort, you know, to, of course, get maximum government officials everybody's interest, looking at the defense department and, you know, asking whether we have the right materials and we're in or whether that could be make more efficient. So look, I think they deserve some credit. But the challenge is it's not any one person's decision. We have a situation where our receipts, the tax receipts of the federal government only cover mandatory spending and interest. That's it. All the rest is paid with deficits. And so it's in my view virtually impossible, you know, without major political change in our

country to get the deficits under control. And from an asset market standpoint, you know, the thing that is reflecting that are, you know, non-sovereign money assets like gold and Bitcoin. And this is not something new, you know, for the last 15 years, as this problem has gotten more and more challenging, both in the U.S. and other places, those assets are outperforming other currency assets on an absolute and a risk-adjusted basis. And I think that's just going to continue. You know, I think that, you know, the pressure of deficits, it's going to show up in acid markets in the relief valve of gold and Bitcoin. And I think that that continues. So let's talk about that because I know that I think, I don't know if excited or happy is the right word, but I think we all found it pretty interesting

that at least during these last couple of weeks, and we've spoken about this on some of the past these past conversations, Bitcoin actually has been acting like a safe haven. It decoupled from stocks, especially tech stocks, and was much more highly correlated with gold. And then even today, when stocks went up across the board, Bitcoin and gold slightly went down. Bitcoin still outperform gold, but it went down, which is kind of what you would expect to save haven asset to do. So that was really interesting to me. But I also want to talk, I know, I think two weeks ago or so, I know, Rob, you were on the call. We had a nice discussion about maker strategy and all the copycats. And since then, I mean, we've seen two major companies launch with massive funding

to even one today from David Bailey to try to replicate that success. And they are going much further than micro strategy in terms of looking to leverage their balance sheet to be extremely aggressive in capital markets. I know that we spoke last time about how Salar was very careful to keep his balance sheet unencumbered. And that's what makes him so resilient in the face of perhaps downturns because of the way he structured his dead and strike prices for his preferred stock classes. I'm interested in what the three of you think

about the companies trying to take on the micro-strategy playbook. And I'm not talking about the smaller ones like Metaplanet or Simmer Scientific or all the other small guys, I can't remember, but these massive players backed by the likes of SoftBank and Tether and A blue chip investors in crypto. Are they going to build the house of cards that I think many people feared micro strategy actually was? You're right to focus on the leverage. I always go back to bubbles only happen in safe assets.

And to me, it sounds kind of weird, but I never worry about private credit. I never worry about really risky assets because I think people put their risk appropriately, right? They understand the risk there. And you can go back in time, right? the S&L crisis. It was banks or savings a loan company that did not hedge their simple interest rate risk well. You go back, it was long-term capital, which was swap spreads and Russia default, and a lot of people thought a sovereign couldn't default.

To me, 2001 was much more about Enron, WorldCom, and fraud and investment grade, so you could no longer trust investment grade paper. And 2008 was all about the AAA mortgages, right? And you had the series of products, whether it was the SIVs, that the leverage gets cascaded. And once you triggered one, you triggered the other. And I've sat there and you watched MSTR. I'm particularly been curious about how that trades at a premium. Then you have these 2x and 3x leveraged ETFs that trade on the back of that.

You've started to build up leverage within the system. But again, MSDR itself didn't have a lot of, you know, trigger type risk. As you start adding that in, I think you can see that risk of you get a cascading thing. And I think some of this will occur where people say, well, why do I need to pay a premium for a stock or a strategy? that is very replicable or seems to be reputable. So I think that could put some pressure on those stocks, regardless of what happens with Bitcoin. And I do think it sets us up for that sort of bubble-type scenario

where you start forcing one person after the other to create these. And once the market knows about these triggers and levels, it tends to go after it pretty hard. So I don't think that's tomorrow's business or anything, but it does seem like as this Bitcoin grows, it becomes more important, you're going to want to keep that in your back of your mind. And we'll probably all forget it about it once everyone thinks Bitcoin is the absolute safest thing in the world.

And that's when the trouble starts because that's when people own too much and are levered and get scared. Look, if I could add on this, I look, I think, Stephen, I think that there's a limit to the amount of firms that can directly copy the micro strategy playbook as you as you put it or the strategy playbook after their name change. I see it as an access vehicle. There are people that want Bitcoin for lots of different reasons, investors that want. Bitcoin in their portfolio. And for some reason or another, they can't access Bitcoin directly. And so prefer to get Bitcoin access in the wrapper of a public company. That's how I think about it. I think there's limits to that, in part because Bitcoin ETFs are much more widely available and will be increasingly widely available over the course of the next year. That being said,

I personally believe that there will be more companies that put their Bitcoin on their balance sheet for their own purposes because they believe that that is the right thing to do to protect the value of their business in light of macro uncertainty. Maybe these are businesses in an industry that has a fair amount of currency risk or a fair amount of trade risk. Maybe those types of companies ought to have some Bitcoin on their balance. And even though it's volatile compared to dollar cash, it may not be volatile compared to some of the other business risk that a business is facing. So to me, that's an interesting. story to watch over the rest of this year. I don't think it'll be a huge amount of businesses,

but maybe a couple of dozen public companies, adding Bitcoin to balance sheet for a more natural reason, not because if it's an access field, because it's the right thing for their business. That's what I'll be watching out for. And on Michael Saylor famously says, volatility is as long as it goes up into the right. But that also kind of leads me, and Ron, I'm going to come to you with it. that leads me to just an interesting sort of extension of this discussion. And, Rahm, I'm interested in what you think about strategy, but I mean, I wrote a story last week about three Solana treasury companies

and sort of the rapid starts that they've gotten off to. And like how they're going to try to replicate the playbook and some of the similarities between like the Vol play and the strategy has mastered and how that applies to Solana. And one of the interesting things that I know we all saw is that, most of the market has just skipped over Ethereum, which jumped up 30% this week. So, like, let's use this as an opportunity to just talk about crypto treasury companies in general. Ram, I want your thoughts.

But if you have anything specific on Ether, especially given what's happened in the Pectra update, I'd love to hear that too. Sure. Well, briefly, in micro strategy, like the branding and the capital markets infrastructure and micro strategy are so well developed. I don't think it'll be easy to displace. That's one. Two is I don't really see many corporate treasuries.

are putting Bitcoin to the balance sheet because their liabilities are denominated in dollars. They've got to pay payroll, working capital, rent, they issue debt in dollars. So I just don't see that unless it's a random small cap company like Long Island blockchain, you know, where they're trying to goose up their stock price because of at the risk of going in solvent. I just don't see that. You know, Ethereum massive shortsquease. You know, it goes back to what I was sharing right at the open is you have tremendous

offside positioning for hedge funds and institutions that were short, small caps, short things and downtrends, short Ethereum, and it's a massive short squeeze. Ethereum was a funding leg for these dollar neutral crypto strategies that were cranking out like a 20% annual return. They had no directional view on crypto. They would go along Bitcoin or some other mix of assets. They'd short Ethereum on a dollar neutral basis. That thing is going the opposite direction now.

So that's fundamentally what's at play here is a, is a short squeeze. And, you know, it stops when it stops. Could keep going. So it's your assertion. I mean, I saw that the short squeeze, and I think maybe it was started around the time that the UK deal was announced. It's your assertion that it's really a short squeeze and it's not a fundamental sort of re-rating in the eyes of investors about the theory.

That could happen later, right? in the beginning, all massive rallies off the bottom start with the technical short squeeze, and then the narrative follows, and people take interest, and they start adopting, and they say, hey, I'm going to launch a project here, and then it starts getting more interest. Like I remember like Carvana. Carvana was a left for deadstock. It was started by a guy who's convicted of fraud in the formal life, okay? and had an incredible rally off the 2023 lows. I think it was like $5 or $6,7.

And it's like substantial rally. Then it attracted a tribe and a community of people investing in Carvana. So these things can happen. We talked about last week, too, you know, Ethereum is well positioned as, call it like, tradfai chain, which isn't the term of art that people in Ethereum would like to hair outside of like institutional folks, right? but what I mean by that is decentralized settlement

between investment banks and asset managers. You know, SlackChairns been putting bonds on chain, for example, as real world assets on chain. And it really is, you know, the most institutional grain for a chain for decentralized settlement that would meet the standard of investment. The issue there is you've got just policy needs to get up to speed with that. It's difficult. And I've talked to folks at these.

investment banks and they have these blockchain teams, but they're using what are called these private subnets on AVVACs because they can control it and their permission, which defeats the point of a blockchain, I would use a database at that point. So there's potential there. I would just toss in. I think there are people who I've been talking to myself, you were looking, okay, we missed some of the Bitcoin. What else is there? And you kind of look, okay, Ethereum's like way cheap, relative, anything historical. So if you miss the rally and you think it's going to continue, you wind up looking at something like that. And I think when you talk to people away from the kind of, you know, scarcity, Ethereum seems to have, you know, people can get convinced that there is a

utility to Ethereum. And so you're like, okay, this has some utility beyond scarcity and it's cheap. I think that help, you know, you need something to fuel that short squeeze. I think that's where the buyers come in. It is not, you know, people like me who said, like, let's take a flyer on here. If I kind of like this, I can justify this. I can close my eyes, take a shot here, and then you get lucky because the short squeeze. And again, it's a lot like everything else. You need someone to kind of start that catalyst. And I think that's the sort of buyer that started the catalyst that then got fed very much by the short squeeze.

Incidentally, we've seen that across markets. It's called, I call like the mean reversion or like ketchup trade. You look at what the leader in the U.S. markets are, it's X, Y, consumer discretionary stocks. that includes like retailers that people thought there was recession, cruise lines, restaurant stocks, home builder stocks. And meanwhile, momentum is starting to taper off a bit. You know, you see that, of course, in Bitcoin, but in the equity markets, leaving outside semiconductors, but you're starting to see momentum slow down a bit.

So it's happening in all these markets, these catch-up trades. I'm interested, though, Rahm, you talked about sustainable, like the sustainability of perhaps this resurgence. Because this is one area where I see crypto is maybe even fundamentally different from the rest of, obviously the rest of Tradfi. Because I was trying to think, as you guys were talking, like, what is an example of a really big crypto comeback? The only one, at least in terms of a major token that I can think of, is Solana.

And that was a very unique circumstance because when it collapsed in 2022, along with the rest of the market, but then it had the extra, I guess. guest from San Bankman-Fried because of how closely associated he was with it, a lot of people wrote Solana off for debt. And obviously, that was extremely wrong. And I am not trying to, for all the Ethereum people listening, I'm not trying to write Ethereum off. We love Ethereum.

We think that obviously it's great technology. But momentum is an important thing, especially in crypto. And it seems like at least for crypto investors, they're always, always, always looking for the next big thing. the next token they can get in early and sell at a profit, the next blockchain that they can yield form on, get air drops, et cetera. And Ethereum, I know, I think, Zach, you and I worked on a story about this, one of my first ones at Unchained. Ethereum is now the blockchain for the high value, low volume sort of tradfied transactions. How does Ethereum, if this, if this momentum is going

to continue past the short squeeze, how does it get there? Because I think we'd all like to see Ethereum sort of regain that momentum. Yeah, I mean, I think Rom's point on where this is going is exactly right that he used the term tradfai chain. I mean, what I would say is Ethereum is attractive to institutions because it is secure, it's neutral, and it's resilient. And that means it is suitable for institutional grade finance. And that, I think, makes Ethereum actually very well positioned for the outlook that we're looking at because we have a very dramatic change in the regulatory environment happening in the U.S. We don't have the legislation signed by the president.

The president has been asking for the market structure bill by August. I'm not sure that we're going to get at that soon. But we are going through this process of changing how the digital assets industry, the crypto industry, public blockchains can interact with the big institutions of traditional finance. That is changing on the ground today. And I think that that actually gives Ethereum a unique lane. That doesn't mean it has, doesn't have, you know, intense competition and there aren't a lot of great things happening in other chains.

But I do think it has a unique lane for the environment that we're in. And maybe the pector upgrade just reminded people of that. I mean, I don't think the petra upgrade changed the most important things that the chain needs to work on at the moment, like scaling the L1, that that wasn't part of what happened. but maybe it was just a reminder of the many things that are happening on Ethereum. I think Ethereum is one of the most important assets in crypto, of course, and is actually well placed in the current market backdrop. And the sentiment has shifted away for a long time and maybe is in the process of shifting back. But it has a long way to go.

And I just echo Rom's point that engagement of the institutions and the legislation that we're going to have later this year is really, central, I think, to Ethereum's potential outperformance through the balance of the year. Yeah. So we're getting close to time, but just I need to pick up where you left off, Zach, because we have to talk about what happened in D.C. last week. It was a very discouraging moment for crypto. I think it revealed certain battle lines that perhaps had been a little bit under the surface. But I'm of, I guess, the belief that we could be. looking at a very real possibility of having no crypto legislation passed before the August recess,

which was what President Trump wanted. It's what everybody in the industry wanted. And it certainly seems to be in real danger, especially for Stable Queen legislation, which was supposed to be the easy bill. So I'll kind of throw it open. I have some thoughts on my own, but I'd love to hear what you guys think. I mean, two things. One, do you agree with sort of what I just laid out there? And then two, what is the impact? Because obviously, stable coins, to start, have grown to be a $240 billion industry without any legislation. The crypto economy has hit, was it like $3 trillion without having any legislation. So like what actually could happen if we don't have any, we have, we would still have a friendly SEC. So what would be the impact? I think it will happen.

And it'll happen. Like, I don't have much confidence in politicians to serve their constituents. But crypto is just a rent-seeking opportunity for politicians to raise money. And then we'll run another campaign. But they have to show wins. And they'll show wins. But Besson like stablecoins because it's a source of funding for the U.S. deficit. You could get $100 billion in funding.

Plus, I think we're going to get Austin Campbell on the show. You know, Austin's testified in front of Congress. He's a Columbia professor, brilliant individual and friend. I know I know he's done some math on the source of funding that stable coins could generate to finance U.S. deficit. Now, the interesting thing is if the genius that got passed, it would hurt tether because it would benefit U.S. issuers of stable coin like circle. By the way, Howard Lundick, I believe he owns a chunk of tether. Well, I know that Kanner invested in, I know that Kanner invested in Tether and obviously they've been business partners. I know one of our reporters Jason Brett wrote something about how the Genius Act may not necessarily push out to Heather, but that's something we'll have to just follow up on.

But go ahead, Ron, continue, please. No, that's all. Like, I think it'll happen. You know, it's, you know, you should be disappointed if you're in digital assets and you should hold the people elected accountable. It's embarrassing that I believe three beneficiaries of the Fair Shake Pack voted against. it. Think about that. That's... Wonder what they spent that $200 million on last cycle. Right.

Well, yeah, maybe I'd jump in there. I mean, look, I think we're going to get back on track, and I don't think that we want, you know, any kind of quid pro quos or anything like that with the crypto industry. I think we're going to get good legislation on stable coins and on the broader market structure. Maybe stable coins need to be brought into the market structure bill if that's where we end up. But, you know, I think it'll be a good outcome.

There is risk, though. I think that that is fair to say. And my own take would be that the main implication is actually about Bitcoin dominance, that Bitcoin does not need regulatory clarity in the same way that many other aspects of the crypto industry do. And so I am quite optimistic on altcoins in general, and I would include Ethereum in that bucket. I'm quite optimistic on where that's going, but it is based on the legislation. If we aren't going to get that regulatory clarity and kind of full legislative progress this year, then I actually would, my views would lean more towards Bitcoin and, you know, maybe dominance heading back up to the highs. Again, if we don't see this the past.

Yeah, I was always of the belief of having two bills, I mean, for one, the stable coin bill and then the market structured bill. Some reporting that we had done in the past, one of our former reporters, Veronica Irwin in particular, pointed out how coinbase went a little bit against the grain and trying to bundle everything together. At this point, though, I mean, just given like how precious floor time is in Congress and the ticking clock, I wonder if it makes sense to try to roll everything into one, but I really don't know what's going to quite happen here. I guess the only sort of thing that makes me, I guess, feel better is that crypto has thrived in what can be only described as an adversarial type.

of an adversarial type of environment. So if nothing else, this is neutral or perhaps a little affidantation absent any legislation. So we'll see. Peter, I'm interested if you have any thoughts on this. I don't necessarily know if the legislation in DC is something that you cover particularly closely, but I'd love to hear what you think. You know, I think the Treasury Department has a lot more flexibility to try and do something within their own assets. And the one thing I would say is I think mainstream people underestimate the power of

crypto community. It's three trillion of assets, as you mentioned, and everyone is more or less aligned. So if you think about the amount of donations, the amount of political lobbying, I think that you can see, there's very few other things that I think are as concentrated as this. You have that much wealth where the particular wealth is really concentrated amongst a handful of people who all have a similar agenda. So I would not bet against that agenda being able to get pushed through over time, just because of the power of the lobby group, the fact that it's so well, Again, even if it's not coordinated, most people are kind of pushing in general the same direction, want the same sort of things. You've got the Trump family who clearly is listening.

You've got David Sachs who's clearly listening. You've got Howard Lucknick and his firm, or his former firm, I guess, clearly willing to listen. So I think you'll see a push. I think though Trump needs to do it again sooner than later, because if he has any kind of losses or more questions like the tariff, you know, if you ask, fewer people just want to raise their hand and back them. trusting him if they have their own doubts. So I think that's going to be something that plays out. And if it gets put away, it comes back in two years during midterms where, again, the crypto community can go and spend a lot of time helping with the influences.

I think people really, the mainstream media, every underestimates the potential power of how crypto is influencing elections, both at the federal level, I think the state-wide level. I'm assuming that's why you're seeing so many states go through it. I think New Hampshire passed something. I think you are going to see this. And the more you see out of D.C., the more red state. in particular, we'll try and follow.

So whether you get anything this time around, I'm not 100% sure, but it feels like unless there's a material change, we're headed that direction. And I don't necessarily agree with it, but my job isn't to tell clients what I agree with. It's like, here's what I think might be happening and here's how we take advantage of it, whether I agree with it or not. We're all shaking our heads.

They're nodding our heads. And I agree. Like, politics is significantly influenced by digital assets. I don't think people realize that it shaped election outcomes. I think the vast majority of the Fair Shake Pax bets succeeded, if not all of them. It's like all, but maybe minus one or something like that. Steve, I don't know if you have a moment to talk about like recession risks or not, or do we have time for that? Yeah, we can.

I guess maybe I was hoping that was a little bit past. I think Goldman still has something like a 45% chance of recession, although I guess the risk of a stagflation has decreased now. But yeah, go ahead, Ron. Do you have any thoughts you'd like to talk about? No, no. It's off the table now. Look, you know, equity markets are probably substantially. We have people's 401ks are recovered.

So I don't see it on the table. There could be some softness next quarter with certain inventory buildups slowing down. That's noise. Ernie's still coming in strong. 200,000 non-farm payroll print. But it just tells you that markets can keep going higher in the short run. And you very well could get about a stackflation in the summer. If you're talking 10% tariff rates on China, if that's where we settle out, this is noise.

Yeah, I would maybe add one point to this very quickly. Look, there is so much policy uncertainty at the moment. I think we can all agree with that. And, you know, recession risk is an uncertainty. For me, like the big picture message that markets are sending is that, you know, this is not an environment where equity markets are going to outperform. It's where other types of assets. And I think, you know, things like dollar shorts and Bitcoin are going to perform better. And to me, the numbers are striking since the election.

The S&P 500 is up 1% and Bitcoin is up almost 50%, 47% as of today. So to me, that's the message here is that equities may be challenged in this period of policy uncertainty. Bitcoin is definitely something that's benefiting from the Trump administration policy package altogether. And I think we might see some problems with the earnings and companies going forward. Partly, U.S. 40% of earnings come from foreign, you know, sales. You hear and you're seeing some evidence, certainly in travel, it's only looks like Tesla. Sales are down across the globe as there is a backlash against some of the policies, not necessarily even the policies themselves, but how they've gone.

So I think you could see some damage to U.S. sales globally, which would hurt the S&S. P. It would hurt earnings here, which I think would translate to some recession risk. And I think the recession risk was much lower. But this economy has had some issues beforehand. And the non-farm payroll, I would challenge how accurate that one was. It came out 200,000, but 400,000 of the jobs were from the birth death model. And what the birth death model does, it takes EIN applications. So employment insurance numbers, employment identification numbers, and kinds of translates that into jobs and I find it incredibly difficult to believe that in the month of April that many new businesses are started. What I think has been happening and we've seen evidence of this and it tends

to be why they have to downgrade the jobs data is as people get nervous about their job, their job situation, they pick up a gig economy drive. They become an Uber driver. They become an Uber eats driver. You know, they become an only fans model. Like that's been driving it. There is a lot of applications around that. It's because people, you get, it's easy. easier to keep track and some people have multiple EINs. They'll do one for Uber, one for Lyft. So they said there were 140,000 jobs created in the financial services, new startups in April. There is no one that I saw that was that excited about doing something unless these were people who were getting let go or worried about their jobs and trying to create gig. So I think we're going to

have a huge write down in that. I think you're seeing evidence of slowdown. It's hard to pick up because you had some stuff pulled forward, some stuff pulled back. But I think in this environment, investors might be happy to buy stocks today and yesterday because they can get out of them tomorrow. I don't think you're seeing a big investment by corporations. I think it's kind of status quo with some nervousness. I think most people are going to behave one level more in terms of risk taking than they would otherwise because of the degree of uncertainty that we put in. So I think the economy is going to be slightly slower.

We might be able to avoid a recession now that we backed off. I think otherwise it was imminent. But I would be a little bit cautious about being too complacent. We have a lot of issues that are in domestic economy. that need to be fixed as well. And I think we kind of spent the last month and a half, unfortunately focused fighting with the world rather than figuring out what we can do domestically.

Take a look at this chart. It shows data center spend. It's still intact, not slowing down. And if you look at the earnings reports for data center linked names, the KAPEX spend, you know, is still there. On the backlash, some American consumer-stapled brands, sure, but they're not a big component of the SMP 500. You know, Costco is, but, you know, Costco's 50 times earnings.

I don't think that's going to probably as much upside, but are people going to stop spending on Google and the Vida and not renew their Microsoft licenses in Europe? I just don't see that. And that's really what matters for driving most of the S&P 500 earnings or at least, you know, 35% of the market cap, 30, 35% of the market cap. So, you know, I don't know. I'm not so sure that, okay, so maybe they're less interested in buying. buying American cars. I don't really buying that now anyway, small part of the market cap.

Just, yeah, I agree. I agree there's a kind of like this backlash phenomenon, but it's not felt in sectors that matter. All right. So just to wrap up, I mean, one thing I like to do, which you guys know, and I guess Peter, you'll find out. I'd like to just ask you, like, what is, like, one thing you're looking for this week, one thing that our listeners and viewers should pay attention to the markets, or I'm always curious to hear the answers to this one. What is sort of one contrarian opinion that you have that you're just itching to share and set off some firestorms among our followers on Twitter? I think we're supposed to be watching Trump to pivot to the budget and deregulation, right? That's what I think he was good at. That's what we all wanted them to do.

He got sucked into this trade and tariff. I would like to see less talk. from D.C. about trade and tariff, more about budget and deregulation. I think that would help the market a lot. I think that's how we go up. I think trade deals and stuff have run their course. Everyone's now kind of priced in this 10% to 30% as the boundary. So I think we need to see talk on that. I think what scares me the most is that we have done enough damage to our reputation that asset managers across the globe, pension funds, insurance companies. I don't care about the central banks, continue to reduce their exposure to dollar-based assets, particular yields. We see pressure on yields and that you see China start striking some interesting trade deals.

You start seeing Huawei chips start competing in places like Saudi Arabia who want to become the data center capital of the world. So I think you take, but that's not going to appear next week. So I don't know what appears that scares me next week other than Trump wakes up one day and decides were back to tariffs or threaten someone in default, and that would be a good way to reduce our deficit is defaulting on treasuries, which is certainly something that he could type out. All right. Zach, why don't you go next?

Sure. I'm actually headed to the consensus conference this week in Toronto. And so, you know, we're going to be with all the kind of crypto enthusiasts. If there's one thing that I'm going to be focused on, it's the competition between the smart contract chains, you know, Ethereum and Solana and Tron and Tom. Concoin and Swee and Heptos and Stacks and NIR and Avalanche. I mean, there's so many great projects among the top kind of layer one. A lot of swag.

You're going to be able to get Zach at the conference. Yes, picking up swag from all those teams, exactly. So to me, that's the most interesting question from an investment standpoint into crypto is how you're supposed to build a portfolio around that part of the to the market. And I guess my kind of controversial take maybe or out of consensus take would be, I believe that Ethereum is very well placed. and has a kind of unique lane to compete in that competition. So we will see, you know, that's a debate, but excited to engage with all the builders

that consensus this week. I think American exceptionalism is back. So I'll take the other side of Peters. I don't think that dollar is going to drop as much as people think. I think bond yields are attractive. People are going to want to buy that. Eurozone stocks are expensive now. You know, there's no alternative.

If you want earnings growth, then U.S. stocks. people will get over it. They'll get over the trust issues. And they'll say, hey, Trump is being Trump. We're back. He was just kidding. We're here for business. Let's go do business together.

I think in digital assets, I think Bitcoin dominance has a local peak. And you'll see other names benefit. Alt season could be here. Usually it's a short-lived period of time. I think it could be here now. And I think small-cap names can do pretty well. I think they can do, I think they could do pretty well. You know, you have to pick them carefully, but they've been hated, ignored on love.

They're rallying. Hedge ones got to cover them. I think that's an interesting area of the market right now. And then for me, just to wrap up, we didn't talk about this in the call, but this is going to be a very consequential week for Europe. On Thursday, there's going to be potentially a trade party meeting between Putin, Trump, and Zelinsky, I think the hope is that at least Trump, excuse me, just Putin and Zelensky will meet face-to-face, I believe for the first time since 2019, to try to find a way to end

the conflict in Ukraine. As someone who, like, formerly used to work for the U.S. military, and it's actually very sort of disheartening for me to say this, but I've sort of come around a little bit to the belief that there needs to be some sort of ceasefire and peace agreement, and Russia is going to maintain control of the territories that it's taken over. I have to imagine that back in 2022 when people were afraid that Ukraine was going to fall in a matter of days, the entire country, if that's what they end up keeping, it's in some ways a tremendous victory, even though it is the first time that European boundaries have been redrawn through armed conflict in decades, which is, which is tough. But this is a very consequential week for Ukraine. I mean, they're going to be

impacted by what happens between the U.S. and China tariff discussions. They're trying to figure out a way to up their spending without breaking their own budget rules. And I know that there's already been some legislation passed, especially in Germany, to increase defense spending. But they're even running into some consideration there as they're trying to get their new government up and running. And they're going to have to do all this while we're trying to maintain a credible deterrent in Ukraine so that they can continue building this economic experiment that they have while they're trying to figure out own negotiations and tariffs with the U.S. So there's a lot happening there and what's going to occur between potentially these three world leaders is going to reverberate across all these different, I guess, planes.

So I guess that's not necessarily a contrarian opinion, but that's something that I'm going to be paying very close attention to. With that, anything else that anybody else would like to say before we sign off. All right, well, Peter, Zach, Ram, as always, thanks for being here. Thanks to everybody who joined in and watched this episode of Bits and Bips. We'll be back in one week to discuss more about how the trends of crypto and macro are colliding. However, please note that we will be taking off Memorial Day since I don't think anybody really wants to be talking about crypto that day, even though most likely we probably will be with our friends and families over barbecues. So with that, thank you again, everybody for joining.

and I enjoy the rest of your week.