Unchained - Bits + Bips: Fed Moves, Election Plays & DeFi Token Valuations - Ep. 695

Episode Date: August 28, 2024

In this episode of Bits + Bips, hosts James Seyffart, Alex Kruger, and Joe McCann welcome venture capitalist Rennick Palley to explore the implications of Fed chair Jerome Powell's recent shift from focusing on inflation to employment, analyzing how it might influence crypto and global markets.  Palley also shares some incisive analysis for why he thinks blue-chip DeFi projects might be overvalued, and both McCann and Palley highlight why they are still bullish on memecoins. Finally, the gang discusses the growing political influence of the crypto industry, the potential impact of Kamala Harris presidential run on future regulations, and whether Justin Sun is using Tron as his “personal piggy bank.” Plus, what’s the latest with bitcoin ETF option applications, and what Telegram CEO Pavel Durov’s arrest means. Show highlights: 00:00 Intro 02:41 How Powell's speech signaled a shift from a focus on inflation to employment and what that means for crypto markets  10:25 Why the Fed's proactive stance on the labor market could cement Powell's legacy, and how cutting rates amid high real rates might prevent long-term economic damage 23:47 How a significant payroll revision caused a brief panic, yet the markets dismissed it as noise due to its lagging nature 27:21 What the absence of crypto in the DNC's platform means for the industry, and how Kamala Harris’ presidential run could impact future regulations 34:12 How the surge in crypto contributions to political campaigns highlights the industry's growing influence 37:00 How the growing narrative around undervalued DeFi tokens could play out under a Trump administration, given the perception of Republican support for crypto 43:15 Why blue-chip DeFi projects, despite their dominant market share and attractive business models, may be overvalued, according to Rennick 53:44 Whether Justin Sun uses Tron as his “personal piggy bank” 58:52 Whether investing in memecoins is a good strategy and how to construct a portfolio around them 1:12:59 Why James says that the withdrawal and refiling of bitcoin ETF options applications signals potential progress, and how the SEC’s ongoing review could lead to approval by early 2025 1:19:43 Pavel Durov’s arrest and why Alex believes TON might be a good asset to buy Hosts: James Seyffart, Research Analyst at Bloomberg Intelligence Alex Kruger, Founder of Asgard Joe McCann, Founder, CEO, and CIO of Asymmetric Guest: Rennick Palley, Czar of Speed, Protector of the Hat. Learn more about your ad choices. Visit megaphone.fm/adchoices

On election night, it's going to be such a big trade election night. I mean, we're very far away from that, right? But that's a moment of your trading. You want to stay up all night long. And when the odds are tilting one way and another, you really jam it. Like Max Long or the opposite. Hi, everyone. Welcome to bits and bips.

Exploring how crypto and macro collide one basis point at a time. I'm your host, James Safer. Tradfai Archmaster, Lord of Bloomberg's End. Here with Alex Kruger, Bougar Macro of House Asgard, Protector of the Realm, and Joe McCann, Lord Commander of Asymmetric, and Master of Bunk. We're here to discuss the latest stories in the worlds of crypto and macro news. Just remember that nothing we say here is investment advice. Please check unchaincrypto.com slash bips and bips for more disclosures.

Also joining us today is Renek Polly, Tsar of Speed Protector of the Hat. Before we jump in, Renek, why don't you give a little bit of background on who you are and then we'll get into the show. Sure. Yeah, thanks. I've been in crypto since 2016. It's when I started Stratos. Stratos is primarily an early stage crypto-focused venture firm. So we have a series of early-stage funds and we have a liquid hedge fund. So I've been investing in everything across the space from D-Fi before was D-Fi, real-world assets before that was the thing, a couple of L-1s, modular, L-2s before they kind of took off.

we try to be early in in terms of the narratives that we invest in and yeah it's been a really interesting ride but happy to be here eight years in crypto since 2016 is like a lifetime some other thing all his hair yeah buy and hold yeah what what did you do before 2016 what were you what were you doing before you got into crypto I was at a hedge fund in New York So it is a very large value focused primarily long only global equity fund. So is that kind of like investment research and like that style, which was very deliberate trading, very little turnover in the portfolio that kind of trained me to think about crypto, which could argue whether that's the right way to invest in crypto or not. In hindsight, I feel good about being mostly long for a long time, but definitely wish I'd take a little bit more off the top than some of the cycle peaks, but can't win them all.

Just happy to have beta in this space, frankly. Your former colleagues that were at the hedge fund, do they think you were absolutely insane when you went to crypto in 2016, 2017? A lot of them still do. I haven't even made the full jump yet. I haven't made the full jump, and I'm still, I'm covering it pretty heavily for Bloomberg, and I get it from my current colleagues all the time. But let's move on. Let's talk a little bit more about that trad-fi stuff. So Jackson Hole and the Salt Conference were this week,

or last week, in Wyoming. And Joe was there. So, Joe, why don't you get into what you, what you talked about at the Salt Conference and what Jackson Hole means to Trad-Fi? Yeah, sure. So the Salt Conference was, it's called the Wyoming Blockchain Symposium, and it's kind of like the pre-event to the big event, which is when all the world central bankers come together and effectively determine our futures. So it was actually a really good conference. It's put on by Skybridge, Anthony Scaramucci and team. I think the Sall team does a really good job of bringing like the kind of traditional finance gravitas with some of the more, I'd say, elevated crypto stuff that you can get. There was a lot of actually like heads of state there.

So I'm going to butcher this, but I think it's either the prime minister or president or something to that effect of Bermuda. You had Senator Scott there, of course, Senator Loomis, who is from Wyoming, you had the governor of Wyoming. So it was interesting because rarely if you go to a crypto conference, you're going to see anybody notable, except maybe Alex Kruger. but the other aspect that I found interesting was that there was actually a no surprise, a rather large Bitcoin contingency and a surprising number of Solana focused folks. So, I mean, Raj, co-founder of Solana Labs is there, but also there was a lot of chatter about Solana even sort of on stage. I thought the panels were actually really well done.

I was on a panel with Kal Samani and a handful of other guys, Galton from Reverend Howard, just kind of talking about liquid fund strategies, you know, how to generate alpha at a liquid token fund and crypto. But all in all, I mean, the overall vibe and sense was, I think, a bit more positive given, you know, the price action and kind of suicide watch people have been on for the month of August in terms of sentiment. So, you know, things that like a policy level tend to move at a glacial pace, but the fact that there was, I would say, folks that you wouldn't traditionally think be associated with blockchain or crypto being there was pretty good. And then, of course, this was followed up by Jerome Powell speaking, given his speech on Friday, which no surprise,

made it very clear that they're going to be getting their cutting cycle. And so the question then, of course, is what they do in 25 bits? So they do in 50. Obviously, I'm still in the camp of 50 because, as I mentioned in the past, I think there was a policy error by not cutting in July. Futures markets are downplaying that a bit, which I think tends to make sense. We do have one more employment data point coming out first week of September, the NFP print that comes out, non-farm payrolls. I think if that comes in soft and the employment rate ticks up again, it's just inevitable they have to cut 50.

If it isn't, if it's, you know, strong, then I think you're probably safe at 25. We still, of course, I'm in the camp that I think it's 50. but overall the speech, I think, was pretty indicative that I don't want to say it was like a victory lap, but maybe a little bit taming the kind of COVID inflation, even kind of acknowledging that his view of it being transitory was incorrect. But ultimately, you know, we've got a PCE print coming later this week. I think that the Fed is clearly, I mean, I think daily, Governor Daley came out today saying like cutting rates is even still restricting. I don't know how much more dubbish you can get. So, you know, what does this mean for risk assets, crypto, macro?

It's been the same, I have the same view, right? I think global equities continue to increase. Great cuts are affecting that. We saw the dollar index actually hit like a, you know, I think a 18 month or 20 month low on the close on Friday. And it even tagged a new low today here on Monday. Weaker dollar, risk assets rise. I think that that's going to be the case.

So, you know, I don't know, Alex, what were your thoughts on Powell's speech? Well, he didn't say that much new, to be honest. He, a set of, basically, you could say, like, finalizing the pivot that he started in December, right? It's not, it's not like it's black and white. It was a pivot that being, as I said, been ongoing all the way since December 23. this was to me kind of like the final cherry on the cake where I think like he came out and say basically as you said a victory lap he said mission accomplished we've done it a few things that I think are important to to pay attention to is is basically or understand what what does

this mean this means that basically the focus is not anymore on inflation the focus is it's actually more on jobs now than inflation. So using Powell's words is what he said as the balance of risks to our mandate has changed. We do not welcome further cooling in labor market conditions. We'll do everything we can to support a strong labor market and the policy rate level gives ample room to respond to risks. That means it's, yeah, now we're going to be focusing on jobs more than inflation. Both matter, but it's more about jobs. One thing I do have to say, I was kind of given that it was kind of expected, I was surprised that how much equities moved on the news.

Crypto was different because you had a perfect technical setup of basically the 62K breakout and going up to exactly where it went, right? Yeah. James, any thoughts? Yeah, I would say, like, what I took away from it was, I feel like Powell was basically saying he's on board with Joe on the 50 basis points rate cut, and he's like, I did the rest of, we don't know what the rest of the, what the rest of the Fed are thinking, but I think Powell is basically on board with you in 50 and other people aren't.

So I just listened to today, some of my colleagues, Joe Wisenthal and Tracy Allaway have a podcast called Oddlots. And they interviewed Tom Barkin today. And he was way more, well, he wasn't hawkish by any means. I think he was, but he was, I think he's more in the camp of 25 basis points because his overall thinking was, yes, we've tamed inflation. inflation is down, but we're still at like two and a half plus percent over the last 12 months. And he's like, that's still higher than our 2% mandate.

I am worried about jobs, but a lot of the unemployment data, which we can talk about, like his view is like a lot of the reason that unemployment is ticking up is because our overall level of people like in the workforce has gone up. So it's not so much that people have lost their jobs necessarily. It's just that the amount of people in the workforce has gone up. So that's kind of driving it. So it's like a numerator blindness. Like oftentimes you see all this stuff out there and it's denominator blindness.

But right now with the unemployment rate, his argument was like kind of like it's more so because our economy is growing and more people are trying to enter the workforce. So I think there's going to be this push and pull. Obviously, markets right now are pricing for some or between 25 to 50 BIPs, so one or two cuts. Right now the markets are pricing for a full percentage point cut before the end of this year. And then they're pricing for an additional percentage point cut in 2025. So obviously things can change, but that's what the data is looking like. I'll just add one thing to that about, you know, we've, at any smetri can talk about this for a while.

The real rate, depending on how you slice it if you're at the top of the quarter door, which would be five and a half percent using like median CPI is like it's north of three percent. Real rate is three percent. They're incredibly restrictive. And you could cut 200 basis points and be back at like a normal kind of neutral real rate, if you will. That's not a real thing. But like the concept being like close to 1% is like pretty standard for a healthy economy. And I still have people contact me saying like, oh, the rate cuts are going to crash the markets or it's going to, you know, screw everything up. Look at the last time they cut rates and the time before that.

I'm like, yeah, but we're real rates at over 3%. Like, no. And, you know, I think to Alex's point about the focus on the other half of the mandate, labor, that's a real thing. I mean, look, like Fed Daily came out today and said, we have to, quote, prevent injuring the labor market and that the direction of rates is down. I don't know how much clearer you could get on what these guys are thinking about the direction of where things are headed. Because if you end up with the problem with the labor market is that when companies fire people or do a reduction in force, those jobs don't come back quickly. typically, right? And I think that that has a much broader lag effect on the economy, because all of a sudden, you have a lot more people that aren't actually working. So the Fed being proactive in trying to get out

in front of the potential labor market issues, yes, you can slice and dice the data. There was a hurricane, all this kind of stuff, right? But getting out in front of that, I think, is going to cement Powell's legacy such that he tamed the inflation monster of COVID while also not completely cratering the economy. Yeah, the other thing I would say is like there's, there's the things are very different now. So you talked about like people saying last time they cut rates. So they did they screw the economy. Most of the time when the Fed has to like cut rates and does it drastically, it's like we're in a recession and we know we're going to a recession.

Whereas now it's like we're trying to preempt. I mean, theoretically we could find out a year from now that we've already started to enter a recession now. I mean, actually before we get to, I'll just say real quick that there was a massive revision to to the jobs numbers, the payroll numbers. But before we get to that renick, do you have anything to add on like? like what your thoughts are on on current rates and employment? Yeah. I mean, I think you guys summarized it well. I think Joe bringing up Daley's commentary is interesting.

Like, so Daley used to be the head of the New York Fed. He's now retired. And so he has the ability to say things that current Fed chairs can't. And he's been saying now at least since early August, like he literally used the word stimulus in his Bloomberg op-ed. And so he's definitely been on the side of dovishness and, you know, being accommodative. Look, I wouldn't be surprised if that's actually the mood inside the Fed right now. But, you know, Powell and the other sitting Fed chairs are really trying to like guide the market that way as opposed to come out and saying, you know, we're going to be too accommodative and

really drive things too aggressively. Because I think, you know, again, to your guy's point, If Powell can land the bird here and manage inflation and not destroy the economy, like, that's got to be one of the best performances of any Fed chair to date. So he's definitely got his work cut out for him. But so far, he's, I think, been pretty well judged. And also managing the market, right? Because it's two different things. It was like the actual fundamentals of what's going on in the economy.

And then there's what Wall Street is doing and how it's reacting for what he's saying. I think he's done a pretty good job. Yeah, be careful. Crypto people would be bad. We'll be upset. You say the Fed's doing good job. But I actually, I kind of agree with you. I think anybody with the Tradfai background who looks at this stuff has to look at this. It'd be like, this is pretty impressive. One of the most interesting things I saw with like talking about rates is like if you look back to other times, like the U.S. market, particularly on housing, which is a huge part of the economy, obviously, we have

less than 10% of the mortgage are adjustable rates. So these changes in rates aren't like impacting the housing market as much as they should. You go back to 2008. That number was over 50% was adjustable. So like all of a sudden you change rates and you have a direct impact much quicker on the economy. And now it's like everyone has these rates locked into like three percentish. And they're just sitting pretty and they don't it's not they're not really impacted too much unless they have to borrow money to buy a car or something else. The other thing is just liquidity. Like what is the Fed doing with liquidity overall? I think one of the things that rates coming down is also really going to help are just regional bank balance sheets. Just where the 10 year has gone in the last couple of weeks really

eases things for them and enables them to actually start lending to their communities again, which a lot of them, I've heard, basically have not been lending at all because they're like, we can't take on any more risk. We've already basically gone upside down because of our treasury book. We can't do anything else. And that's obviously a really important liquidity driver for small and medium businesses that are kind of like the bread and butter of employment. It's not like these companies like, you know, the Magnificent Seven that have basically their own bank balance sheets where they're making positive spread off of the Treasury. Everyone was worried about rising rates hurting these companies and all these companies

with like billions and billions and billions of dollars in bank accounts are earning more money than they borrowed at during the last decade. Yeah. And I think Renick brings up a really good point, which underscores part of the piece that we wrote in our latest update where like if you take like the regional banks versus the G-Sibs, it's a bimodal distribution. So, bimodal distribution is two humps. It's like two normal curves and one, right?

And so the left side of the distribution is your regional banks where they have, you know, to Reddick's point, negative carry on their treasury book. They can't actually, if they're lending money, they're losing money. So they tighten up the credit, which affects small business, which affects things like the Russell 2000. And because those small businesses that they have to actually borrow to fund their businesses, whereas, you know, if you're Apple, if you're Google, if you're Tesla, et cetera, you've got billions upon billions of dollars on your balance sheet and you're just parking in T bills earning five and a quarter, you're loving it, right? If you're a small business, you're hating it. If you're a big business, you're loving it.

And that's why it's this sort of bimodal distribution, which is why I think looking at the average of, say, bank balance sheet. or deposits is flawed. We saw this last year with the regional bank crisis, right? You said the Fed was coming out saying like, oh, the bank's deposits are good, the balance sheets are good, et cetera, et cetera. Yeah, on average, if you include JPMorgan, Bank of America, these massive Gsids, but then if you go to the regional banks, they were screwed. So one of the proxies that we tend to track now, historically we've looked at like how Bitcoin correlates with like the NASDAQ, but given the concentration of Mag 7 bets, it's not. really that good of a proxy anymore. In fact, we think the Russell 2000 is actually a better

short-term correlator than something like NASDAQ because it kind of represents these companies that have been struggling and are now folks are trying to, you know, Renex background, invest in value-based businesses because they're so rate-sensitive. So, you know, obviously some small cap business isn't a direct correlation of Bitcoin, but lately we have actually seen those two trading in concert to some extent. especially since Trump, no? And Trump wins. Yeah.

At least on a relative basis, they've been outperforming. But I think the other thing is, to your point, Joe, if you look at the NASDAQ, low 40% of it is max out. So it's just they constitute such a big percentage of the overall market. I guess a question in my mind is, you know, how far do stops run from here given, you the earnings multiple on the NASDAQ today. Yeah, I mean, I've been in this chat room with some folks that have been Max bearish since the Varshock on August 5th. And I was like, I don't know, guys, it feels like, you know, yeah, Deutsche Bank's

positioning indicator go from like 72 to 31. It's already back to 70, right? Like, I think one of the things that people miss here is there's a monster passive bid that comes into the market through CTAs. And they've got about $150 billion to buy as of last week. Or as of last week into September. You've got the largest corporate stock buybacks happened last week. They're still on the bid.

So even if you look at the fundamentals of the market and say, Max Evans, you know, the valuations don't make sense or, you know, the economy's in a recession or heading towards a recession, like whatever narrative you want. Like say that to the TWOP that's just constantly buying. every single day, right? The VIX, for example, on August 5th, so pretty stunning statistics, the largest intraday move ever and the fastest retracement ever. And so to me, that suggests this was some, somebody got massively squeezed short on VIX calls. Yes, there was a VAR shock that ran through the global system. That's been washed and that positioning has been reset. And it's

kind of like, are we back to where we were pre-Varshock? Yeah, things got extended and semi-sold off in July, but like we've got Nvidia earnings this week. I think that will be a big tell for the broader market. It's just hard for me to fight these flows. You see 150 billion in CTA to buy over six weeks plus corporate buybacks. I'm not selling that. I'm not getting, I'm certainly not getting in front of that. Yeah. Just to put some numbers on it, the P.U. ratio of the of NASDAX like 33 times right now. It's a little overvalued. But, you know, if you look at the five year average, it's, you know, mid to high 20s.

So it's about one standard deviation away from the typical earnings ratio. So I think, you know, I would agree with you. I don't think that there's a reason to be bearish, especially considering again, like even if we have a minor recession, what's going to happen to, you know, the Magnificent seven companies? I think it's unlikely that they start to see some significant earnings decline, given their business models. Yeah, I actually, I often argue, people are like, they're obviously in a massive bubble. And I'm like, if you look at any of their valuation stuff, like, yeah, you could argue they're overvaluate, but they're nowhere near like the numbers.

Well, Invidia and Tesla removed from that conversation. But the other ones for the most part. But these companies, these companies are cash counts. They throw off so much cash. And, you know, I think Raul Paul has talked about this to some extent that like, no surprise, meta and Google and, you know, these guys just throw off so much money because the incremental cost of making more money is next to zero because it's software. It's the digitization of media and entertainment and et cetera.

And it's like, that's why these guys make so much money, right? They've built amazing software products that it's not like you're trying. turning out a new physical widget every time you do a Google search, right? Like, it's just not the case. And, you know, the algorithms, targeting and retargeting algorithms gets better and better and better. It's just, it's hard to look at a meta or, you know, an Amazon and go, this thing's overvalue. Compared to what? Like, who's their competition? Like, maybe the regulators that are trying to break them up. But, you know, what are you going to do? That's a, that's something that you can't really box that risk in anyway. I actually, so I actually did it.

research on this that's relevant to this for a couple weeks ago. And I looked at active managers and what were their largest overweight and underweight positions in large cap. So U.S. large cap. So they were underweight almost all of the mag seven in every category. So like I broke it down looking at value managers, growth managers and managers that didn't have a value or growth mandate. And every single one of those categories had like a decently size over overweight position in meta and a very decently sized underway position in the mag seven, which is which is interesting. So meta is the only overweight position. and active large-cap managers across mutual funds,

ETFs, any sort of public fund, which is interesting. I'm not surprised, actually. I'll just, we can move on after this point unless somebody has something to add. Right after the Farshok on August 5th, there was massive dark pool buying of meta. It was just getting absolutely gobbled up.

And so your data point affirms that buying, and it could just be because it's, you know, maybe viewed as one of the best, if not the best in the Mag 7, certainly where it's being valued at today. How do you know that dark pool number? How do you know that it was being gaddled up in dark pools? I can't give away all my secrets, Jane. All right.

Let's go back real quick to something Osama before with the payrolls revision. So basically, payrolls for the 12 months proceeding, so from March to March, so 23 to 24, they revised our estimated payrolls jobs by $818,000 downwards. So about $68, $70,000 jobs per month decrease. So I guess one, I'll go to you, Alex. One, what do you think of that? And two, like what other data points for the economy are you looking at or have you seen since our last episode that you're paying attention to? Well, I mean, that was a very interesting number because we never look at those revisions.

They happen literally once a year. Sorry, twice a year. You have the preliminary on what is it in August. and then the final one in January. And they are for, it's a 12-month revision. So the one we just had was basically from April 23 to March 24. And the thing about that kind of data is that it's such a long lag, but it doesn't matter. That's the way I thought about it when it came up.

I thought it was interesting seeing a lot of panic around it. That was literally last Sunday. Suddenly everybody starts talking about it and tweeting about it and posting about it. And there's articles. And you can see this kind of like hysteria building around it. And when that happens, there's always a possibility that the hysteria turns into a self-fulfilling prophecy, especially in crypto. It didn't happen. It would have been quite idiotic.

It would have happened, in my opinion. Because, again, that data has such a long lag. and the BLS revises payrolls every month regardless. And the Fed already knew about it. So it was, yeah, it was just noise. The number is very remarkable, but when it comes to markets and trading and managing risk, it was just noise.

The only thing I'll add that is maybe somewhat counter to what Alex is saying, but he's right. It's on such a lag that, you know, is there anything actionable? Not really. But the headline matters. And this also gives, I think, more justification for the Fed to actually do 50 bips. Right. So for example, that revision was the largest revision since the global financial crisis. That headline alone is enough firepower to enable the Fed to cut rates in and of itself. I mean, maybe that's a bit hyperbolic, but I think you guys get the spirit there. But since the Fed has been looking for reasons to cut rates and they have changed their tune on the mandate, right, saying inflation tamed, focus on the labor market, oh, we got all these revisions. Yes, they're on a huge lag. But what if we extrapolate that forward? Assume that same revision path continues now with an uptick and unemployment.

That's a problem, right? So from my perspective, although it wasn't actionable on the day that it really came out from a trading perspective. I mean, sure, you could have clipped a few things as like a day trader or something. But to me, this just gives further credence to the Fed actually doing 50, especially if we get a week NFP print in the first week of September. Yeah, that's literally my takeaway. I thought it gave more ammunition to go 50. Renick, do you have anything to add? Very convenient timing. Funny how that works. Yeah. All right. Let's get on to politics. Everybody's favorite topic.

Unfortunately, even if you don't want to hear about politics, they matter to everything, particularly this time of year. We just had the DNC, the Democratic National Convention, where they put up Kamala and Tim Walts to run for president. We also got their platform, the DNC official platform, no mention of anything crypto, which I guess at least there's nothing negative in there about trying to stop it or kill it. What were your guys' takeaway? We'll go to you, Renick. You can start this one. Sure. I think they're faking it until they make it, smoke and mirrors of whatever, you know,

euphemism you want to use for it, like just waiting to see how long they can string along the idea that there's going to be some, you know, something positive and constructive for crypto on the democratic side. But I'm not holding my breath. I think the words you're looking for is reset. What are your thoughts here, Joe? You look. I mean, I like everybody else, I just so desperately want there to be some clarity on this stuff, right? Like working as an American in this industry is just, it's been unbearably challenging, let alone being one of the most volatile asset classes in history, right? I think this might be a non-consensus view because I've been trying to formulate this thought for a while.

I think there's a case to be made that the Harris election team is, not including it in their kind of legitimate talking points and part of their platform directly because they can actually use the fact that Trump is including in this platform as a way to divide folks that may be, you know, sort of anti-Trump almost, right? So like if they also acknowledge that there's going to be a comprehensive regulatory framework or they're going to reset or whatever. Now all of a sudden you've got people being like, oh, well, Trump did that first. Kamala Harris already, you know, adopted is the loose term.

The no tax on tips, right? That was a Trump thing that he put forward. Maybe she does this again with the crypto thing to be pro-crypto. And so like I said, it's not, it's probably somewhat non-consensus, but I do think there's a case to be made that by not focusing on it, and in fact, potentially in the future, as we lead up to the election, pointing to, you know, crypto bros as Trump, you know, fanboys and supporters could potentially rile the base of Democrats to rally against it. That would be really bad for the crypto industry in general. I think the counter argument

of this is there's still an enormous amount of capital behind the Fairshakes Super PAC, as well as just, I would say general interest from folks. I mean, I think anecdotally we've talked about this. I've talked with lots of folks that have been lifelong Democrats. They're not voting largely because of this issue. Yes, they are involved in crypto and have skin in the game. But you know, you see the same thing from someone like David Marcus, former CEO PayPal, runs a Bitcoin startup company now, very well respected in Silicon Valley, raised, I think, $200 million for the DNC, last election, he's voting for Trump. I mean, this is, it's hard to avoid those things and just assume that, you know, crypto's not going to be a thing. There has to be a strategic reason. I would assume that the Harris

election team is not including it. And maybe my theory is correct that they're trying to pit, you know, people against Trump because he is pro crypto and we don't want to be pro crypto. It just seems like a foolish strategy giving the amount of money that's backing, uh, uh, uh, uh, crypto today. Alex, anything to add on that front? Yeah, let's see. Well, first of all, I think Camilla just topped basically on her, I mean, on her lead versus Trump at the DNC. Dad, and right after we had Kennedy throwing his support behind Trump and asking his his supporters to vote for Trump. And he withdrew himself from the battle. in the swing states,

swing states only, but he did. I think those two things basically are a good sign that the lead should diminish going forward. So the trend changed.

That's one thing I wanted to say. The other is that it's what really matters in the US is the swing states, right? And in the swing states, interestingly, in most polls, let's leave aside

the fact that people believe and they may be maybe the case or not that polls are manipulated, etc, et cetera, et cetera. In most polls, Trump leads Harris in six out of the seven swing states by a very small margin, but he does. So those two things combined tilt the violence slightly towards Trump. That being said, I mean, we're talking about the difference in those swing states. it's like 10,000, 10,000 voters in 2020 was 10,000, 30,000, 60,000 in extreme cases.

So the difference is so small that this is, I think it's all going to be decided at the very end on basically a marketing blitz right into the elections. And in the meantime, it's just going to be like going from one side to the other. Another thing that I thought it was very interesting from Kamala Harris and the Democrats is this emphasis on price gouging. And maybe getting too political here, but it's, yeah, getting to political here. Let's move on from that. Another thing also on, I'm not a fan of Argentina. So you have a particular. Yeah, I know it.

It never ends well. It would be a disaster. and just basically trying to blame inflation on price controls, on basically price gouging on companies like Kraft and other companies like trying to extract extraordinary profits from the market when they just had the, and this was a bipartisan thing, right? Both parties voted for the fiscal stimulus that we had in 2020. And it was the Fed that pushed rates down to,

to zero very aggressively. But anyway, another thing I wanted to point on this, which I think is very interesting, is I was reading that in 24, crypto backers are almost 50% of all corporate money that's been contributed to the elections. The number I saw was 248 million,

which is pretty remarkable, I think. Yeah, I mean, the numbers are insane. You see, people are talking about how like this is evil and it's awful that crypto is putting so much money into politics. And my view is like politics tried to destroy this entire space and ruin these people's livelihoods. Like, do you not expect them to fight back? Like, even if you think crypto is a waste, like, did you think that they were just going to bend over? And that's not the way it works. That's the way any of this works.

It's incredible. Yeah. It's incredible. Like, when you think about what crypto really is, it's supposed to be somewhat anti-political. And the fact that, you know, basically 15 years into it, crypto as an industry can have this much sway on the political outcome. It just goes to show what happens when crypto is a $10 trillion asset class or, you know, five, 10 years from now, the amount of influence it's going to have. So I look at this and I say, yeah, I mean, I would love for there to be the reset or whatever.

but the fact that people are even focused on what Harris is saying in comparison to Trump is just, you know, I think is foreshadowing the long-term trend. Totally agree. So do you guys have any strong views? And the one thing I will go back to is Alex, when you were saying the price gouged thing, I knew exactly where you're going to go. And I want to finish my thought and saying, like, if anyone has the right to complain about that type of stuff and put it in there, it's somebody from Argentina. Yeah. Yeah. Do you guys have a view on like investing in crypto? Like in TradFi, if you talk to most people, it's like you really shouldn't try to like pick like your investments based on who's going to win the election. Like I mean, if you think about it, if you invested in oil and gas when Trump got elected, that was a really bad decision. And if you invest and then it's the opposite would have been the case. Like if you were thinking about Biden, you would have been like you should not invest in oil gas. He's going to promote alternatives and all this stuff. And energy had some of the best few years. And energy had some of the best few years. in the last couple decades. So it's hard to look at this

and even look at the platforms and know how to decide. But do you think you guys are traders and investors, if you're looking at this, do you think there's better plays in crypto if Trump wins versus if the Democrats win? I mean, what's your view out?

You want to do Bitcoin. And if Republicans win, it should be a bet on the Solana ATF and on Alcoins in general. Maybe this is a good good opportunity to talk about defy, which I'm not, I don't actually don't hold any defy tokens or very, very few. But there is a narrative building up on crypto, basically talking about how fairly valid or attractive defy name, some defy names are here. And if that were to be the case, which I don't know, it would make sense for, for, for, that niche to do well under Trump with the view that basically Republicans are pro-crypto

and the haris is against and Bitcoin is not necessarily crypto. Bitcoin is digital gold. So that that's the reasoning. Makes sense to me. Do you have any, Joe Renick, do you guys disagree? From my perspective, you know, how do you make a trade based on a digital option, a digital option is something that either happens or it doesn't. So either Trump gets elected or he doesn't, right? Paris gets elected or she doesn't. It's really difficult to box that in because on the one hand, we know that politicians say whatever they need to say to get elected, right? I think Trump is a master

at this, right? Do they actually follow through with what they said on the campaign trail? I'm sure there's some data to suggest that some of it gets followed through on, but I would argue most of it or a lot of it does not. And so with the crypto industry at large in the United States, it's very hard to make a case that a Trump win is not beneficial to crypto. And it's difficult to make a case that if Harris wins and keeps everybody the same, right, Gensler in, et cetera, that, you know, that, that crypto benefits. So it's, yeah, a Trump win is probably really, really good for crypto, right? I will say the only other thing to consider is when you have the institutionalization of

crypto happened this year, meaning with ETS particularly. And like BlackRock doesn't lose. So, you know, irrespective of who wins the presidency, there's still going to be a continued push for the institutionalization of crypto. And so whether this is kind of reversing SAB-121, it's a stable coin bill, it's something like there's going to be a continued amount of pressure to push this to the forefront, irrespective of who wins. And so I do think to Redox point earlier, we talked about this on an earlier show.

My view is really like, it doesn't matter who gets elected president-ish with an asterisk. What matters is the fact that this is now a topic of discussion at the highest level of politics globally. That has an outsized impact on the industry more broadly. The difference is, is it rapidly accelerated with a Trump win or is it progressively incrementally improved with a Harris win? By the way, on quick one, on election night, it is going to be such a big trade election night. I mean, we're very far away from that, right? But that's a moment of your trading. You want to stay up all night long.

And when the odds are tilting one way and another, you really jam it, like Max Long or the opposite. Well, you say that and I think back to the night Trump got elected. I mean, stocks, everything got pummeled, like absolutely collapsed. And within like 24 hours, it was going the exact opposite direction. And we went on an amazing absolute bull run of money pouring into. to ETFs in my world and just buying out the wazoo. So I'll be interested.

I guess now I guess theoretically it would be, who knows what's going to happen? I don't know. I'm not a trader. It was just so unexpected when he won. I think everyone was going into that thinking he was going to be a Hillary landslide and Trump was kind of a joke. And then, you know, as the state started coming in, it was like, what is going on here? This guy's about to win.

So I think the market was caught in caught by surprise. I'm not sure if it will play out exactly that way this time. Yeah, I mean, it sounds like Trump was even surprised. If you hear, if you listen to other people, like he didn't even really expect to win in 2016. So, sorry, Joe. Go ahead. Yeah, we're definitely surprised. So historically, like, presidential elections are a kind of known, unknown.

And markets tend to favor certainty of outcomes. And if you look at kind of the VIX term structure, there's almost. always a kink up in October ahead of the election because people don't know what's going to happen, so they get afraid and they buy protection. And that's why the VIX ends up ticking up on term structure in October. I don't think that's going to be any different this time, right? I think you're going to have maybe a challenging September, potentially a challenging October as it relates to equities. Historically, the S&P's worst month of the year is September. October has had some historically horrible events as well. And leading up to an election.

you can have pretty wild swings and volatility. But to your point about Trump, when he won in 2016, the market actually first sold off. Those likely some algorithms that were just dumping. And then it just went straight up. Why? Because the market favors certainty. And they're like, okay, this wasn't what any of us expected.

But now that it's resolved, we can now move forward. And that's, I do feel that we're going to see something. similar, barring some crazy exogenous event, like a pandemic or war or whatever, you'll probably see something similar in November and December, which, of course, in my view, favors risk assets like crypto, especially as we're entering into a cutting cycle globally coordinated with central banks. Aside from Japan. Well, their hiking cycle is done.

Yeah. Let's get into this defy renaissance. So, Renick, if you want to do that. to dive into like what you're seeing in the in the in the defy side of things and go from there sure yeah so just to provide some context i think you know the way i look at the space you've got majors you've got recently launched tokens that are kind of you know low float high fdv you've got defy a lot of that stuff has been around for a number of years now. You've got infrastructure and random, you know, other. And then you've got memes. So like, you kind of have to look at all of these

things in relation to each other and say like, okay, well, what's going to be interesting from where things are today on a relative basis? So obviously up to this point, the trade has been you want to be long majors, especially Salana, ideally underweight Heath. You want to own some memes and basically everything in between that barbell has just not performed at all this year. And what's interesting is, you know, defy has kind of been taken out with the bathwater of Alts. And so I think what people are kind of saying is like, look, defy is interesting because these are like real businesses that generate real revenue and real earnings. Whereas like a lot of the new tokens that have launched, a lot of the other stuff like, you know, the chain links of the

not to, you know, throw them out specifically, but, you know, just in that category, a lot of them are not really actually functioning businesses. So there are no like, quote unquote, fundamentals there. So I can empathize with the view that like defy is interesting as an investment from that perspective. I think the question is, well, what multiple are they trading at and how should you value these businesses and how will they behave in different market scenarios from? here. So basically, I took a look recently at Blue Chip Defi, which is Ave, Lido, Uniswap, and Maker. And of them, of each one of their categories, they have, you know, 60 to 80 percent of the market, at least in EVM crypto space, which is huge, by the way. It's insane that single companies have

or projects have that level of market share. And like, look, if you look at these businesses holding valuation aside, they're amazing assets in the sense that they have zero marginal cost, like a software business. They are software. They have zero need for additional capital to scale. They clearly have some degree of network effects and the ability to maintain a huge market share. So those are a lot of things that are like really interesting when you're analyzing an investment opportunity.

The issue with them, though, is their revenue. volatility because their revenue is tied directly to TVL and TVL is basically perfectly one correlated to ETH, which is, you know, a hundred ball plus asset. And so then you look at that and say, okay, well, it's almost a SaaS business. And so maybe it should have like a SaaS like multiple. But the reality is it's not because it trades with crypto. And so then, you know, right now to get to the punchline, these things are all trading at like high 20s PE ratio. When you assume earnings are basically the revenue that the protocol makes minus their expenses that they're reporting, which you know, you could argue that it's really funded by the Treasury and it's not really,

but anyway, the point is high 20s. Earlier we talked about the NASDAQ, the NASDAQ average company is in, you know, 33 times. So if you were to compare the two, I would say I'd rather own Magnificent 7 at 33 times, then defy at high 20s and have 100% volatility in my revenue. So I think that defy still today is overvalued from that perspective. Now, I could make the argument why I'd like to own this at high 20s. I think if you think that stable coins are going to 200, 300 billion and so is TVL and you're going to see basically their revenue increase in lockstep with that, okay, then maybe you're buying in at something more like a high single digit PE ratio. And in that case, that's appealing.

But then what I would say to you is, why wouldn't you just buy ether sole in that case? Because if you look at the way these things trade historically, their earnings multiple compresses at the peak and expands at the trough. So basically, you're going to get negative less than one beta to TVL growth. And so you're actually better, you're going to make more money, I suspect, owning ETH and some of the majors from here than you would owning DFI because of that multiple compression that occurs, which by the way, happens in every cyclical business. You know, they, they, the market is skeptical of their peak earnings potential that it's not

going to persist through cycle. Now, I think there are some opportunities for how the DFI projects are being run, like for, example, if you look at AVE, they're charging like seven BIPs is their revenue per dollar of TVL, which is really, really small. They probably could raise that. And if they, if they just doubled it, you know, they go from 28 times P.E to 14, which suddenly becomes a lot more attractive. And I know, again, Avey is working on making distributions to token holders. And, you know, they've been talking about doing this kind of L1 structure. So, you know, there are reasons that there are like embedded call options there.

But I think by and large, the defy ecosystem is kind of going through a multiple re-rating. And I think it's possible that the more the multiples will continue to compress through this cycle. Eventually, they'll be very investable. I just don't, I don't know if they are today. I got to give, I got to give Renick a huge shout out for an incredibly comprehensive. hints of breakdown using, you know, traditional financial models being applied to networks, because I've always, you know, been of the ilk to suggest that applying these types of models

to permissionless networks is largely flawed because they're networks, but these protocols actually earn revenue. It doesn't mean you can't use a price of earnings multiple, but you're, I think your conclusion is that they're overvalued, which is also consistent with my as to why I would value them as networks and the network effects associated with them. It's no surprise that someone like AVE has arguably the largest lending protocol across in EL1. They were first and Theorem has the most TVL. Duh.

Of course, that's going to be the case. Does that mean that the token is over undervalued? It doesn't really matter from my perspective. Where are dollars flowing into? And to your point, Renick, if someone is going to, say, take a core position and say, I'm just picking AVE as an example versus Ethereum or even Salonah for that matter. What's the relative value on doing that? Because you could back out of the points that you made around like the PE ratio associated with these protocols.

But just look at the relative value of what happens with these tokens. One, if you understand how crypto works, which we on this call absolutely do, the distribution of tokens and getting into as many holders as possible, is incredibly important for the value of that particular protocol or network, etc. Well, they've done a good job of that. Well, then why all of a sudden would people turn their attention back to it based on some fundamental analysis? Because the reality is, if you look at Dogecoin, it was one of the top performing assets in the last bull run cycle,

it did absolutely nothing, right? It had a lot of engagement. Elon tweeted about it, right? There's no fundamental framework for that, right? And so I agree with your assessment on this that I actually talked with a guy, I think at consensus back in late May in Austin was really trying to sell me on the value of these protocols and what they're generating. I'm like, yeah, but I'm sorry, man, no one cares. It sounds ridiculous.

But if you take a step back and go, the models that we use to value companies are for companies. And it doesn't mean you can't use that as like a compass, if you will, for the. these new types of companies, which are called them Dow's or protocols, but it doesn't map one for one. And especially as we've had incremental dollars flow out of crypto from the 2022 crash, we haven't seen a lot of that incremental, those dollars come back. What is going to be the reason attention to get people to say, buy these fundamentally undervalued or in your case running, which I agree with, overvalued tokens? I just, I struggle to currently see a scenario where it makes a lot of sense. Yeah. Well, thank you for the kind words there. I agree with what you're saying. And

really what I would say is, first of all, I'm not saying that I don't think these defy tokens can pump this cycle. I definitely think they can. The question just is what's going to outperform from here. I view the crypto world as you've got networks like L1s and then you've got the protocols and DAPs that are built on top of them. I think the world will start to perceive those more like traditional centralized companies, at least in the way that they're valued. And the reason why I care about, well, how would a Tradfai guy look at it is over time, the new capital coming into the space, the liquid funds that are going to be buying these tokens that are going to buy them from us eventually are going to probably take the view of the world that they currently have and

try and project it onto crypto. And so I think that'll be important for setting the marginal price in the future. At least for the DAPs. Networks completely agree. The L-1s, those, I think, trade on a monetary premium or, you know, something else unrelated to the underlying revenues and earnings. Yeah, I love that. Actually, that was really interesting. I like any sort of thing where you can rate it back, try to come up with the valuation. In relation to what we were talking about, let's get into a little bit of Tron Summer. So you talk about fees that these different protocols are earning. I mean, if you look over the last like 30, 90 days, no matter how you look at it, I'm looking at the token terminal. I mean, Tron is pulling in fees left and right. Does anyone have

a view on what's going on here? Oh, just quickly on that. I mean, so I'm not training on Tron, but it's being kind of telegraphed by Justin Sand that this would happen or he would try to to make it happen, meaning a small DFI or some sort of above average activity on Tron and Dijian's moving on there. Why I say this is because he actually, a month about four to six weeks ago, I think it was four weeks ago, he actually said so explicitly that said so, meaning

that he developing a defy ecosystem in Tron it was one of his goals. So that happened and then a fast word a few weeks later and two other things happened. One is Justin Sand basically taking over two of the private keys from WBTC from BitGo, which also prompted MakerD out to get read of WBTC as one of their collateral assets.

And the other thing that started happening right away is basically people talking about memes, which felt quite orchestrated, nothing wrong with that, but it felt like there was a, how to put it, a coordinated effort to drive activity on chain on Tron. Yeah, so quite a few people basically started to talk about

memes here, memes there, people bridging, and suddenly all the Dejan sphere of crypto is trading Tron shit coins for the first time ever. Or for the first time since, 2021, actually. It was a brief period there in 21, I think, when he launched a Dex, Justin Son, I mean. I think this whole thing is masterfully executed, honestly. Imagine you're Justin's son. You're a crypto billionaire. You want to do things in defy.

You want to do things on chain. But you don't really want to put $3 billion of Bitcoin on some other chain. So just control an L1, put your own capital on it, have the ability to roll back the chain if anything bad happens, and then drive a shitload of fundamental value for the underlying chain as you are the single person basically providing all the TVL. You win every way. And like you can see that basically in Tron, Defi. There's $6 billion of TVL on JustL, which is the lending protocol on Tron. But there's only 300 million of borrowed demand. So it's like completely lopsided. It's just like, you know, Justin's son's piggy bank basically. And I think his goal is like, hey, I'm going to control this thing. It's not even truly a decentralized network, but I'm going to make it easy enough for people in emerging markets to use. And I'm going to make it so that people slowly start to trust me that I'm not going to do anything wrong here.

And people are going to forget that I control it because they're going to start making money on memes and playing around on it as if it were Solana. And so far, he's, he's kind of pulling that off. So I've got to give him credit for that. Yeah, before we get to memes, I will say, like the one thing I always hear about Tron from people who are traveling in different countries around the world, like, particularly some third world countries, like a lot of people use tether on Tron. Like people are like, use like the hardcore Bitcoin maxis, they go places and like people

aren't using Bitcoin. They're using Tether on Tron because the fees are so low. I don't know how much it's actually impacting the fees on Tron. but like that's the one time I consistently hear it come up. Like I haven't heard, granted, I'm not as in the weeds as you guys are, but I haven't heard much of any of this other stuff, but I do constantly hear about stable coins on Tron as the one solid use case. Justin Sun, best product market fit in crypto.

Yeah, I just wanted to add there that if you think about it, there is not that many chains that have a real significant community. One is Solana, Ethereum, Bitcoin. you could say BSC and Tron. Tron definitely is one of the very few precisely because of so many flows on OTC flows, cross-border payments and so on. They happen in Tron.

And they're right behind ETH, Ethereum, on how much tether is on chain. Yeah. It's interesting. Before we, I'll wrap up by talking about some of the Bitcoin ETF option stuff because I get questions on it every single day. But before we do that, let's go to Renick and Joe and talk about some meme coins. We just said memes a bunch of times. We know Renick's a big dog with hack guy.

Joe is obviously a known bonk connoisseur. So why don't you guys get into like how you're seeing meme coins play out right now? Sure, Renick, go for it. Look, I mean, I'll just talk about our perspective on meme coins. we think it's a big part of the crypto market. If you look at the things that people like to engage with most, you look at the trading volume as a multiple of the market cap of memes, they're off the charts.

So, you know, we kind of knew, to your point, Joe, about Doge performance last cycle, you know, that this cycle memes would probably perform really well. And so we started building a meme position in Q4 of 2020. And that was like a very different time than today. That was like pre-pumped-up fun. That was when, you know, Bonk had just started its run. And so one of the reasons why we got interested in WIF was, you know, we thought it was going to kind of be like a Bonk echo. You know, just like Shib was a Doge echo.

And, you know, okay, this is still a Shiba Inu, but it's got a hat and it's different. And, you know, the market cap we bought in at gave us. huge asymmetry. And, you know, our portfolio construction, our view on it is definitely don't take too much risk on the way in very small portfolio exposures on a relative basis, at least from a cost on our cost basis. But we've let some ride with being one of them. We're still holding most of the position. It's definitely been a wild ride. But, you know, I think there's still a lot more upside left in some of these winners. And I think today what's happened is the market has kind of become this power law where if you made it above, you know, five, seven, hundred million in market

cap, you're now in sort of like the blue chip meme space. And then everything else is kind of getting like left for dead. No one's making any money on pumped off on anymore. I'm sure you guys all saw the data that came out. That was crazy. It's a totally different world today than it was in January. like because it was just a lot less saturated than it is now, I think the space is going to move on to something else. And those memes that have kind of been minted into the blue chip category, I think are the ones that are going to benefit from most of the flows going forward this cycle. So our strategy has really changed over the months.

That data you were, the data you were talking about before, do you guys know what the exact numbers are in PumpDuff? It was some like 90-something percent of people like I've lost money on Pump. on do you know what does anyone know what the actual numbers are or should we just leave it at 90% of it was a lot worse than that I thought it was like less than one percent of wallets made any money Jesus yeah I mean there's a there's a lot that I agree with with what renick was describing here so so first let's talk about portfolio construction uh as it relates to means in fact when I was at the in Jackson Hole on the before I got on the panel the moderator was

asking me because I was I was out of town when they were doing like the pre-meeting discussion with the panelists, and he wanted to get to speed with me quickly. And I kind of told him about, yeah, like, we'll trade anything that moves. Right. Like, we don't have some like elitist view on whether or not we'll, he's like, wait, so you'll trade meme coins? I was like, yeah, we'll trade meme coins. And he was so excited because the audience, no surprise, most people, you know,

scoff or laugh at something like meme coins. You know, I point to the Dogecoin example every time because I'm like, you know, my job as a hedge fund manager is to make my LP's money, not like present well, right? And so that taking that kind of framing out of my, you know, mental headspace was enabling me to identify Bonk in October of last year. And I think that if you apply some level of risk management, which most people don't in meme coins, but if you're running a fund, you should. We have a concentration risk policy where if anything's not the top 20 by market cap, we don't allocate more than 2% of our funds, AUM, period.

End of story. Would I have liked to have bought a lot more bonk? Yeah. But that steers away from the risk management policies that we have in place for a reason. Because if you buy something with a quarter of your funds, AUM or a quarter of your portfolio or a half of your portfolio and it doesn't work, you're screwed. You're in a whole forever. If it works, hey, 2% times a thousand. It's pretty good, right? Like, yes, it could have always been better. But we still view it that way as well. And so certainly we've traded it around. We still have a pretty sizable position. that we're comfortable holding, largely because we don't think the meme coin thing is going away. And in fact, when we start to see, you know, more retail dollars flow in, they're going to flow

to blue chips. And I completely agree with Renick. My kind of threshold for a blue chip is like eclipsing and maintaining a billion dollar market cap. Very, very hard to do. You know, I know there's been instances. I think it was like Popcat. Somebody had something on like prediction market and they juiced it. It came back, right? Like, but for the most part, if you. you've reached that level of market cap, there's a lot of trading activity, which means the exchange is want to list it because they want to make money on it, especially if it's trading primarily on chain. Then you get all the market makers involved. They want to make money on it. It's a self-fulpilling prophecy at that point when a meme coin becomes a blue chip. And I don't

want to say that all these meme coins are going to be around forever, but like, those coin still trades a lot of volume. And so does Shibino and so does Pepe and so does Bonk. So does WIF. and I think that you will start to see a few more actually, you know, rise to the ranks of becoming a blue chip meme coin. And in doing so, you know, this is likely going to be because retail is going to be adopting it. Well, how does retail tend to buy crypto to begin with? They go to centralized exchanges, whether it's things like Coinbase or Revolut, wherever these things are actually accessible. It becomes, again, a self-fulfilling prophecy for this needs to go up in value, mostly because the on-chain D-gens, aren't the ones that are going to actually propel it, you know, another 2, 10, 20x from here.

I will say that the landscape of meme coin trading has, to a Rennix point, dramatically changed since earlier this year. It is a PVP, you know, it's a video game, right? And furthermore, the data that's coming out of Pump.comte-Fun, assume it's 90%. It's 99. I just checked. So, yeah. What is 99% for people that, I want to spend five, ten bucks when they go to the gas station. A scratch-off ticket, right? Like, this has been the kind of view that I've had with a lot of the long tail of meme coins is that people almost know they're not going to make money on it.

But they love to hear the story of the guy that got into WIF at 500K market cap, right? And they think that that can be them. It's the same concept of hitting a slot machine. It's the same concept of hitting the lottery or a scratch-off ticket or whatever. I don't think this stuff is going to change. and will retail adopt a lot of this stuff? I mean, potentially, you could start to see how meme coins could favor companies like maybe draft kings or fan duel.

I'm not suggesting they go this route, but you can see meme coins being associated with sports very easily. And we're already seeing that with block asset and UFC. There's also a number of exchanges. Like, I've probably been pitched, I mean, a dozen at least of meme coin specific exchanges. And I think that there will be some category winners there. One of the challenges with something like a pumped-off fund is that first, these guys are printing money, God bless them.

But it's kind of like 4chan meets meme coins, right? Like the filtering on the site or what you can actually obtain leaves a lot to be desired for most people. And so I think that there is actually the next iteration of this is going to be something to the effect of kind of like discovery or filtering or curation even, which might be inherently antithelioration. to decentralized principles, but it almost doesn't matter because what matters and what end users like.

So, for example, if you take, there's a music website service called SoundCloud. They came out in the late 2000s and basically anybody can upload their music. And today, there's just, there's an enormous amount of music on there across genres that don't even know what they are. And that might just be my age, but some of these genres, I'm like, I have no clue how is this even a genre. the problem with something like a SoundCloud is that there's a lack of curation associated with all this new stuff to discover. That's kind of pumped out fun.

I think that there is an opportunity for a new exchange to come forth and provide maybe like a launch pad that guarantees no rugs or, you know, these have been kind of vetted or certified or curated for this particular type of vertical or industry or meme even for that matter. I think that that's going to be kind of where we're going to see a lot more innovation around this because the kind of. concept of meme coin going away is not real because that's that's basically saying the concept of gambling is going away just reminded me of uh the the grimace coin the macdonald's instagram account got hacked and people are like up in arms and but like it was done and rugged within a couple hours like the people who like went in and put money in there probably knew that they were hacked they were just trying to get in front and play it and like they wanted to ride it up and get out before it tanked and it just got pulled too quickly like i think that everyone who's playing in the space

knows that they're playing with a lottery ticket and they know they're likely to get burned. I don't know about everyone. Everyone's probably a little strong. But I think the vast majority of people in this space, I agree with you, Joe. They know that they're playing with fire here. I mean, the folks that I have seen that have been successful with this, I won't share my alpha most because I don't want to be responsible for it. But there's a telegram chat where this guy has a Discord group where they kind of, you know,

have some sophisticated technology to identify potentially. new meme coins that are going to pump, right? And I've been kind of monitoring watching this. And you know, these are, you can't trade real like insusual size of this type of stuff. But the retail fervor around this is crazy. And what they what they do is they kind of have like some sophisticated infrastructure that monitors like previous wallets that were involved in other, you know, tokens that went up or how much volume is cured over the X amount of time, how much of the liquidity pool. But it happens instantaneously. And so, It reminds me of like trading on the on desk on Wall Street 2007 when you were trying to click a mouse and be faster than Citadel. It's just not possible. And that's basically where I think a lot of this PVP meme coin trading is going to. Somebody's making a lot of money besides Pump. Fund. And it's not a person. It's a computer. Yeah. We actually, so a we let the seed round of a company in 2022 that's using its intention was to use AI. These guys are like,

you know, long-time AI machine learning engineers, like very sophisticated guys who were going to go build like an NFT suggestion engine. And that was really interesting because you could, obviously, there are many dimensions to NFTs that you could try and identify what was going to be interesting for people. It was more of like a team bet. I was never really that excited about the initial view, but like knew that they were smart and can kind of like help guide them over time. And what they're working on right now is actually this. It's like using AI to help identify newly launched meme coins that are going to pump. And so far the testing is very positive. They've been able to generate really good returns. The issue is just figuring out how to scale it. Because, you know, when these things

launch, they're very small market cap. Are they given you? they've given you the tips before they happen? Are you getting insight to what this AI is outputting to what happens to mind? It happens too quickly. You literally need a computer to do it. Yeah, you've got to have a bot trading. You know, that's not how we're set up at the hedge fund. But, you know, if we can figure out how to scale it, like we might put a sleeve of the fund

in something like this. So we're working with them to try and figure it out. Interesting. Alex, anything to add a means before I close out with some Bitcoin ETF options? Yeah, it's, it's, uh, that way. What Reddick was talking about is definitely doable. It's, and I mean, I don't know, this alpha room that Joe mentioned, but it's basically about studying, like, who is buying, how much is buying,

how much is being bought in the first block, in the first 10 blocks, how much profit taken they took, how many wallets are there left behind that are connected and how much of the supply they hold, and so on to try to identify if there is, strong backers behind and if anybody is holding too much money, like too much profit. Because if anybody is holding too much profit, that meme coin is going to fail. So, yeah, it's definitely interesting. I'm going to ask Renick what's, I'm going to ask Renick and Joe what these company and Rooms are after they call, even though they didn't want to chill it.

Well, Alex, if you like training five sole worth of notes, Yeah, I'm happy to share it with you. It's still interesting. Yeah, you're telling all these people that their size is not size, essentially, right now, Joe. Five souls. Sorry. $300. All right.

Bitcoin ETF options. I get asked about this constantly. I'm actually writing some research on it now. So I initially thought there was a deadline for the SEC to decide whether or not to allow options trading on the current Bitcoin ETFs by the end of September, essentially. It's like September 20-something. And then every exchange withdrew it like two weeks ago. So all the exchanges started withdrawing their applications to allow for options.

I was like, this is weird. Like everyone's withdrawing at the same time, which means two things to me. One, the first thing is the SEC's talking to them. Like these exchanges are not going to withdraw without anything. So like most people see that and like, that's horrible. It reminds me of like when the Bitcoin, that ETF applications got delayed way early. I was like, actually, that's kind of positive because that means there's move they're kind of looking at some of the stuff and there was some movement on the other end.

And then what we saw was CBOE so far as the only one that I'm aware of that has refiled. So now their ultimate deadline is going to be end of May. But the applications that were initially out were like 11, 13, 14 pages, like very basic. We want to add options on these things. The new filing from CBOE is 44 pages long with all these things about position limits, all this new information about possible manipulation and how they're going to prevent it. So from my point of view, I'm looking at this and I'm like, all right, I was not super optimistic that we were definitely getting options this year.

It's still possible, but I do think the SEC is going to approve this by the ultimate deadline, which is going to be sometime in May of 2025. It's not out of the question that it couldn't happen this year. But my view is just if the SEC's given all this feedback, they took it in, their lawyers went out and wrote up a 44-page document to like hopefully assuage the SEC's concerns. That's a positive. The downside is you need two other agencies to do work to get these options set and ready to go. You need the OCC to do some work and you need the CFTC to basically sign off on that work.

So there's been examples. There's gold ETS out there that tried this years ago, never got across. There's a palladium and platinum ETF that have been around since before 2010 that applied for options in 2010 and they're just still sitting out there. So unfortunately, unlike the ETFs where you have to be ultimately denied and approved, that is the case of the SEC. The problem is the OCC and CFTC have no deadline. So there's still a lot of ambiguity, but my inkling is there's a lot of demand. There's a lot of pressure here from big players in TratFi, the issuers, namely BlackRock, Fidelity. You have the exchanges, CBOE, NASDAQ, NIC, there's a lot of power that want these things to have options and it just makes sense.

If you look at there's there's two X leverage Bitcoin ETFs. There's now 1.75 microstratage ETF that they have options on these things have options on them. So there's all these things that have options just because it's like a regulatory. arbitrage type of thing. They go through a different process and the spot products can't. So these things that are based on derivatives now have derivatives on them, but you can't have the spot products that have derivatives. Like logically, it makes no sense.

So for my point of view, this needs to happen. Just no guarantee. I think it's going to happen before. I think it'll happen in the first quarter of 2025, but it's not out of the question that it won't happen this year. Yeah, I actually, I share that view. I think I wrote about this maybe separate eight months ago because if you zoom, way out to your point about BlackRock being involved in this, James, like, I think one of the

things that's missed with the adding options to the ETFs is that the banks desperately want this because they can create what are called structured products and make enormous fees on them. So a structured product in the simplest sense is you buy the Bitcoin ETF and you sell a covered call against it, you take in the premium, you can like generate some sort of, you know, income or carry from that. You package that together and you sell it to a, pension fund or an asset manager or a hedge fund or whatever, right? Or retail potentially as well. Structured products are enormous revenue drivers for banks. And it's because they can charge a lot of money because they're simplifying the process, right? So the more complex the structured product,

the more fees that they can charge on it. Well, you can't really have a structured product without options in most cases. Yes, other asset classes, of course you can. But when it comes to something like an ETF, you need options to create these structured products. Well, the same story was said about Rock when they filed for their spot ETF. There were so many people that were saying this is never going to happen, et cetera, et cetera. I'm like, guys, it's BlackRock. They don't lose. Like, give me a break. If they're actually pushing this through, they already know what the answer is. And I think as BlackRock has made it super clear that they want to eventually tokenize many more assets, adding something like a Tradfi option to an ETF seems like an easier lift than say maybe the points that you bring up about the

palladiums of the world, et cetera. So from my perspective, I just look at it and go, where's the money being made? The money's being made. Yes, market makers making options, etc. They're already sure they make money. The structured products are actually where the majority of the money's to be made for these banks that want to wrap these things up. And if they see opportunities to make money,

they will push politically and otherwise to make that a reality. Yes, of course, there's the process to your point, James, with the agencies that have to be involved. It just seems like a foregone conclusion to me that we're going to end up having these at some point next year. Yeah, I'd argue it would be arbitrary and capricious for the SEC deny these things. Like you just talked about like a covered call Bitcoin ETFs. We have covered called Bitcoin ETFs that have options trading on them that are basically using futures a way more

inefficient way to generate these exposures and they're just still out there already. So like, I don't know. All I'll say is if the SEC denies this, the deadline like I said should be sometime in May, I would love to read that denial order. It'll be, it'll be as very nerdy of me, but I would love to read the denial order to see what they back into. Alex Renick, you guys have anything to add on that front. No, I guess quickly, it's interesting. The way they make the money banks on structure products is the embedded options. They basically, they spread it out. So the prices of the options that are put into the structure node or structure product, they are priced very expensively by salespeople. So it's a very effective way for banks and sales desks to make a lot

money. I mean, hedging also. It just makes things controlling risk, doing things, allowing options. It adds to liquidity of the ETFs and efficiency of ETFs. It bribed down trading costs in many cases. There's just so many pros to it. I guess, I don't know. The SEC seems to be genuinely concerned about somebody moving the spot market of Bitcoin using spot ETF options, which I guess isn't that crazy. You've seen plenty of like gamma delta gamma squeezes and these different things. So I think people are worried. I think that's what the SEC and the CFTC are concerned about. So I guess they're just going to focus on making sure those position limits here. So we'll see.

All right. We went really long today. So we're going to cut it there. Just a quick one. I think we have to mention Pavaldurov, founder of Telegram, just quickly because it's what happened where it's Monday. So this just happened over the weekend. The founder of Telegram being he landed with his private jet in France. and he was put into jail, basically, as part of an ongoing investigation.

And we had Ton take a very large dump on the news on the last two days. He's supposed to be being released on the 28th, that's my understanding. So I think Ton is a good asset to be looking at for, trading from the long side rather soon. Yeah, I mean, he's looking at facing 20 years in prison. It kind of reminds me of, you know, like writing code and going to prison for it. But it seems to be like there might be more to it. I guess time will tell like what the government actually has and believes.

But I don't know. Renick, do you have anything to add on that front? I mean, yeah, I didn't know he was already scheduled to be released. Maybe that's bail or something. But I just think it's remarkable that. especially in the EU, these countries think that they can censor technology and platforms that have been built in other countries based on some sort of ideals that they have about what can be said and what can't be said. Now, I don't know everything that's been alleged. Maybe there are things on telegram that shouldn't be there. But that's a like the fact that you can just arrest someone when they show up in your country is insane to me.

And like the fact that the world has become so digital and, you know, everything happens on these social platforms and then to try and hold one individual accountable just because there's free speech, there's something not right about that in my mind. It's almost like we need a permissionless network to ensure that this doesn't happen, right? look, I don't know all of the facts as it relates to Pabell's arrest, but it doesn't look good. Not necessarily, I mean, it doesn't look good for Pavel, but it doesn't look good for, I would say, free speeds and censorship in general. You know, you've got people getting arrested for posting memes in the UK. You've got Brazil, I think, banning Twitter slash X. I think the EU was coming out a couple weeks ago, basically, you know, threatening Elon Musk to censors and stuff. That was just one person.

There was a, but the EU basically backed off. No, no, you're right. It didn't happen. A notable talking head, right? And so I think the point that I'm getting to is that there feels like there is a concerted effort to censor and or continue to control. the means of production, right? I think if you zoom out, you know, call it or go back 40, 50 years, 60 years, whatever,

certainly in the United States, like there was basically three television networks. And like the radio stations were largely controlled. I mean, yes, there were like local radio stations and that sort of thing. But the distribution of content was completely and utterly controllable via propaganda and the government in any way, shape, or form that you needed to. Well, now that's over, right? You have the rise of citizen journalism.

You have the rise in live streaming and basically videos that can propagate around the world in seconds. They can't control that really anymore. But what they can do is control the things that are in a centralized manner, which unfortunately, Telegram is. And so Telegram is not a truly decentralized, permissionless, or even encrypted network, which I think terrifies a lot of people in general. But neither is SMS. And people text message all day long as well. And in fact, AT&T had one of the largest data breaches ever, I think a month or two ago with everybody that ever texted anything ever on AT&T's network was freely available for people to see, right?

This is, I think, a travesty for myriad reasons. But it is also, I think, a wake-up call to folks that are maybe not involved in blockchain Web3 or crypto to take a closer look at, you know, look, you had. deplatforming as a big movement, you know, four or five years ago, Trump being deplatformed, et cetera, him being the largest one. That's like phase one, phase two is just utter censorship. And I think that there's, you know, there's a problem with that that I don't know how the powers that be actually address it, but innovators will always find ways of engineering around these types of solutions. It's a shame that you have folks in jail for this types of stuff. and hopefully Pavel can actually make a case otherwise and either get out entirely

or reduce his sentence. But on the surface, this looks like an incredibly overzealous, you know, breach of power from whomever is in charge of this to actually arrest Powell and throw him in jail for these, for these accusations. Yeah, it reminds me of two things. I remember when, like, the FBI and politicians were going after Apple to unlock a phone of like, and they wouldn't do it. but like no one arrested Tim Cook for not accessing the iPhone that they wanted to do.

And the other thing it reminds me of is Alexei Pertsev, who created tornado cash, which, for better or worse, was being used by North Korean hackers and a bunch of not very good people to say the least. But he's in jail for five years, 60-something months, I think. So those are the other two things that I couldn't think of off the top of my head that remind me of this. It's a little scary. Renick, we'll let you, you didn't really say much, but we'll let you close out the thoughts here and then then we'll wrap up.

I think it's just the woke mind virus. It's been distributed across the world and it is now doing its best to protect itself, which is really fighting against free speech and, you know, code existing on chain, etc. So I think this is, we're going to continue to see this trend, unfortunately. And I think we're all kind of sitting on the right side of the trade trying to invest in things that are decentralized. Well put. Nicely put, yeah.

Yeah, well done. All right, guys. This was a long one. Apologies for that. Hopefully it was enjoyable. But thanks for joining us for this episode of Bits and Bips. We'll be back in two weeks to discuss more about how the worlds of crypto and macro are colliding. Till then, stay safe.

Thank you, guys. Thanks for having me.