Unchained - Bits + Bips: Is Crypto the Only Asset That Works When Geopolitics Breaks Down?

Episode Date: March 4, 2026

US and Israeli strikes killed Iran's Supreme Leader and initially rattled markets. But does the subsequent market calm reflect genuine resilience or a dangerous underpricing of what comes next? --- Nexo is the premier digital wealth platform. Receive interest on your crypto, borrow against it without selling, and trade a range of assets. Now available in the U.S with 30 days of exclusive privileges. Get started at nexo.com/unchained Bits + Bips is spreading its wings Starting soon, new episodes will only be published on our brand‑new feeds. Here’s what you need to do: Click the links below. ⁠YouTube⁠ ⁠Apple⁠ ⁠Spotify⁠ ⁠X⁠ Smash Follow or Subscribe. 🎉 Done. ---- Over the weekend, US and Israeli forces conducted coordinated strikes on Iran under an operation called Epic Fury, killing Supreme Leader Ayatollah Khamenei and triggering retaliatory missile attacks across the Gulf region.  Markets absorbed the shock in ways that surprised almost everyone: bitcoin briefly dropped and recovered to $70,000, gold touched $5,400, oil surged, and the VIX held in the low 20s while equities finished roughly flat.  In this episode of Bits + Bips, Austin Campbell, Ram Ahluwalia, and Chris Perkins discuss whether the market is correctly pricing this as a contained regional conflict, or is something larger being missed? What does crypto's stability in a weekend war say about its role as an asset class? And with the Clarity Bill stalling again over stablecoin yield, and Anthropic handing the Pentagon to OpenAI, is the window for principled positioning in both crypto and AI closing faster than anyone admits? Hosts: ⁠⁠⁠Ram Ahluwalia⁠⁠⁠, CFA, CEO and Founder of Lumida ⁠⁠⁠Austin Campbell⁠⁠⁠, NYU Stern professor and founder and managing partner of Zero Knowledge Consulting ⁠⁠⁠Christopher Perkins⁠⁠⁠, Managing Partner and President of CoinFund Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, everybody. Welcome to bits and bibs, where we explore how crypto and macro collide one basis point at a time. As always, I'm your host, Austin Campbell, high scholar of zero knowledge consulting, here with my co-hosts, Ram Alawalia, Mastor of Wealth, leader of Luma, and Chris Perkins, the Golden Hand of Coin Fund. We're here to discuss the latest stories in the worlds of crypto and macro, and boy, do we have a few stories today. But before we start, remember that nothing we say here is investment advice. Check Unchained Crypto.com slash bits and bibs for more disclosures. And before we begin, a quick commercial break. Introducing Nexo, the premier digital wealth platform. Receive interest on your digital assets.

Borrow against them without selling. Trade a variety of cryptocurrencies, all in one platform. Now available in the U.S. Get started today at nexo.com slash unchained. Quick note before we get into today's episode. Bits and Bits Now has its dedicated feed. We're spinning off from the Unchained Feed and moving to a new podcast and YouTube channel. So if you want to keep up with our weekly live streams and macro meets crypto breakdowns,

make sure to subscribe to Bits and Bips directly. We won't publish there until March, but subscribe today so you can be ready for launch. Be sure to subscribe to the new feeds at unchained crypto.com slash bits and bits. All right. Welcome back. And I guess right at the top, we've got to start with. with the biggest thing in the market right now, which is Iran. So over the weekend, there were U.S. strikes on Iran.

All right, there we go. In an operation dubbed Epic Fury, the United States and Israel launched a coordinated military campaign against Iran. Early reports indicated widespread air strikes on strategic targets across Tehran and the country. perhaps the biggest news is that supreme leader iatollah Khomeini who had ruled Iran since 89 was confirmed killed in the strikes now by both Iranian state media and originally Israel. One could say that is the most significant escalation in U.S. Iran tensions in decades. The fall out of that led to immediate regional escalation.

Iran has retaliated with missile strikes on U.S. bases, allied facilities, and commercial targets across the Gulf region. Multiple Arab countries have now been struck by Iran, multiple impacts, for instance, in the UAE. Casualties and damages have been reported on both sides, really, the Iranian morning and declared 40-day period of national bereavement for Khomeini headlining that. So in terms of market impact, before we get to some of the items that have happened inside of this. Oil prices originally surged as traders are pricing heightened geopolitical risk at potential

disruptions to Middle East supply routes. Bitcoin and risk assets down slightly at the start, but rebounded quickly, tapped 70,000 today. Gold reached 5,400 an ounce again today. And Paul – excuse me, polymarket attracted record trading volumes as U.S. Iran bet's top 529 million at risk. And in terms of actual reporting, hyperliquid oil prices were used by Bloomberg over the weekend in terms of keeping track of what was going on with the situation. So I want to start, Rom, from the economic perspective with your view of war is typically seen as both a risk event and a supply chain disruption event. What are you seeing in terms of market impact here as a results of what's happening over the weekend.

Yeah, it's a great introduction. So, you know, as you pointed out, oil prices are up. And so industries that rely on oil are down, consumer discretionary, for example, airlines, traveling leisure are down. And then energy leading sector in the market. So all sorts of sub-industry groups within energy also like oil fuel services have done really well. You know, we talked to, I think last Monday we said, the likelihood of Iran may be inversely proportional to Trump's polling in the wake of Epstein.

Now, here we are one week later. I'm not saying those calls in effect, but there's a consideration. At the very least, there's a consideration, like a little tiebreaker, perhaps. You know, at the same time, this Iran news has been discussed for so long that it's been telegraphed into markets. And you saw that with the tenure coming down to 4%, from 4.25%. You saw that with energy leading QQ, XLE, Energy ETF is a top performer year to date. So people did position around it, and the VIX index was in the low 20s for most of the last week and is there now. I find it remarkable that essentially markets are flat and the volatility index is actually up. That's actually bullish.

It's actually a good sign. So that's constructive. But I don't think there's really much of a long-term impact. You know, the amount of kinetic energy, I'm sure Crystal going into this, is just massive. There's no credible counter-threat that the IRGC has. I want to be careful in these words IRGC, not Iran, because the RJC is not representative of the Iranian people, far from it. And the three casualties were friendly fire.

So, you know, Pete Heggseth this morning and Trump or the weekend suggested there might be like a four-week and perhaps five-week time frame. I think they managed expectations pretty well and low. And that helped the market. The market didn't have that. As soon as Pete Hegseff came out this morning and offered that guidance, the market started to rally. He also just injected a lot of confidence in his remarks. I mean, you listen to it. And it's like listening to an earnings report from Palantir or something.

You just see it like American dominance like coming through the screen there. Right. And I think I think expectations will be beat. I think that four to five weeks is actually too low. I think it'll come. I think resolution, you can debate what resolution is defined as, but in terms of the ending of kinetics will happen much faster than people think. Chris, what your take?

Yeah. Yeah, so first up, I'll say that wars come to crypto's doorstep. I mean, how many times have we been in Dubai guys or Abu Dhabi, one of the global centers of crypto, and here we are seeing bombs drop. Again, through an idealistic lens, this is why we're here. Crypto is very resilient. It's decentralized, and you can't just take off, like, it's not like cutting off the head of the snake from a crypto perspective. We're decentralized. We've got validators.

So in case one center gets hit, the networks will perpetuate. Now, let's talk about the war a little bit. To your point, this has been telegraphed, you know, not for a week or two weeks, but for 47 years, right? Like, this had to come to a head at one point. I think there were some surprises we can get into, but the strategic importance of this is pretty material. The Strait of Hormuz controls 20% of the world's oil, 80% or so, I think.

goes to Asia. China is very dependent on oil. They were dependent on Venezuelan oil. They were dependent on Iranian oil. And now the U.S. is positioned to have perhaps control over both of those streams. So this is also part of a greater, I think, China containment strategy. And what surprised me about this was the Iranian response. Yes, they did target U.S. bases. But they also went after every single Arab country that, you know, previously say, you know what, maybe we don't want you guys to use our aerospace guys. Now they're like, okay, we've had enough. And there was a lot of historic resentment, you know, between the Saudis and the Iranians as an example. So I think, if anything, that will probably bring this to an end. And the question is, what is the end?

And what does this mean for markets? So when I was in Iraq a long time ago, we were there to encourage democracy. Our mission was, hey, you know, we're going to turn this into. to a democratic, you know, friend just like us. The Trump, and I think that was part of the policy for failure, you know, because we tried to force our ideals on a country that maybe had different ideals at the time. I think what we're seeing with Trump and if you're going to see anything that comes out of, like, how does legacy look at the Trump foreign policy? It's about certain cases, it looks like take the head off the snake.

And I think what he's going to prioritize is stability over ideals. Right. So at some point, somebody's going to pop up and say, I'm the strong man probably, and Venezuela was the woman. You know, he didn't go with the democratic, you know, opposition. He went with the regime because he wanted stability. I think he's going to look for somebody to assert strength and power and stability. And I think that's how the war probably comes to an end is that there, I don't see us moving boots in the ground, which would be bloody protracted and be very bad, I think, long term for the economy. But then pivoting to, to crypto prices. I think Bitcoin showed a lot of strength as did crypto. I think we were already part of that bottoming. I know I get accused of being the bull on this program, but like I think we were hitting, we were bottoming. And now we see liquidity, you know, all roads are leading to liquidity coming into the markets. And the fact that, yeah, risk assets, Bitcoin came down, it showed a ton of resiliency. It feels like a very good setup for me. And, you know, last thing I'll say is, You know, I've got friends out there who are on the watch, who are like my classmates are now the Commodores of the fleets out there.

You know, all of my thoughts and prayers to the people who are, you know, in the UAE and the surrounding countries are friends, service members to Floyd and their families. I know how it is. It's not easy. So thinking about you guys always. So picking up on a couple of threads there, Chris. One that I think has been, I think what's the right way to say this, maybe misunderstood. in the United States is the position of Iran versus the rest of the Gulf, right?

There is this tendency when you're not like an expert to regard things as sort of a monolith, right? Like see the whole argument around clarity where people are like, oh, the banks, and let me assure you all the banks don't agree. It's a similar problem here. And one of the things that really did surprise me as well, and I actually think is driving part of the market reaction,

is it's like Iran went out of their way to alienate all of their potential sympathy, countries around them as quickly as humanly possible by firing missiles and drones at all of them. Right. Like if you're in like Qatar and you're suddenly catching missiles from the Iranians, you're like, what the hell is this? Like what did we do to you? You know, the UAE obviously has not had a great diplomatic relationship with them, but it's a very different thing to have missiles fired at literally your hotels, right? Like let us not make any pretense that these were military targets here. I believe in Saudi Arabia, there was an attempt to disrupt oil refining as well.

So, like, these are significant sort of economic attacks, and it's branching out far beyond just U.S. military bases in Israel, which were the typical sort of shots in previous, you know, altercations. Two, being very realistic here and looking at, like, capabilities across the map, there hasn't then too much of an effective response, right? Like the United States lost three fighter jets to friendly fire and currently zero to Iran. Israel, like obviously has sported a similarly positive record here. One of the things that I'm also watching is, is the market reacting to the fact that it may be that Iran was mostly talked from a military capacity standpoint versus like

operational capacity to really hit back at scale. Like we have not seen hypersonic missiles into U.S. carrier groups or anything of that sort that people were worried about. We have not seen mass casualties among civilians in other places. We haven't seen major disruptions to infrastructure yet. So as part of what the market is pricing, just call it the kinetic superiority of the Americans so far. Two quick reactions. First off, the head is gone, right? So the leaders assembled Saturday morning, all 40 of them in a compound, an incredible active.

cell phone stupidity. They're gone. Of course, they did that because they probably believe their electronic communications are compromised, which they are. So they had to be in person. So it's like, you're damned if you do damned if you don't there. The other thing I read is that they delegated decision

making to on the ground troops. So that's why I believe you're seeing them strike their neighbors. I don't think it's top down. I think they've lost that because it makes no sense. what they're doing. It shows you just how ineffectual and incompetent autocratic leadership is. They have only two levers, fire missile or issue a menacing threat. Those only things they know

how to do. They have no other kind of maneuverability. The interesting thing going forward is that U.S. allies will now control the Strait of Hormuz, which is a nerve point, to Chris's point, for China. So the long-term strategic benefits for the United States go up quite a bit. It's a very interesting juncture in history here. One last point. One last point. And I'd love to get your take on this. Which Mossad agent is going to run around at this point? I mean, you know, the IRGC hired a guy to smoke out Mossad because they're so heavily infiltrated. Turns out that guy worked for massac. And if you don't work for Mossad, you're going to get bombed, right? So it's almost like, okay, which institution steps up?

Are you with Mossad? No, okay, you're going to get bombed. Isn't that how this plays out? I mean, arguably, the best possible outcome for peace is that the new Ayatollah is also a facade agent, right? I mean, it's going to be a complete rewiring of the Middle East in many senses. And there are some age-old rivalries in that region between Shia and Sunni that go well back over 1,000 years, right? And I think it's an incredible, as the geopolitical starts, I guess, reshifting, I think the economies are also simultaneously shifting.

What are the Middle East governments looking to do? They're looking to get into data centers, right? And data centers, why is UAE positioning itself as a head of crypto? you know, there's a lot of interest in emerging technologies. I think as things settle, it's going to be very bullish for crypto. It's going to be bullish for AI and tech. The Saudis as well, like him or not, he's very focused on a pro-tech agenda. And, you know, as things settle and they have to invest less in kinetic warfare,

I think that they're going to be pouring more and more into tech. I hope that's the case. I really hope we get out of the violence game and back into, you know, tech innovation investment and i i think that's where we're heading if we can get this right you know the hard part is what's next nobody knows right and i hate it when they're like interviewing military people what what have you planned next like it's almost impossible to do but you know to your point rom they have incredible intelligence we saw that with the complete dismantling of hisbullah you know and and they had they we saw it again over the weekend so you know how do they work closely back

channel with somebody who can assert stability and control. I'm not sure it's going to be democratic. I would like for it to be, but I think the prioritization, because remember, we're in a real politic age. It's all about real politic. And like it or not, Trump is moving in this interest. If this thing settles as he wants and he's got a strong, strong, stable, non-confrontational Iran, that makes the region better. You know, China is now, you know, they're, they're, they're, they're much more dependent we're controlling a lot of the oil that they used to get below uh sanction prices like but low market so it's a it's a move of strength if you can pull it off and mind you like we talked about earlier it's march madness right we're starting to kick off the midterm season

and so this all plays into the narrative so he's moved on the chessboard um interesting to see what comes next so trump incited the population to take over the government so that's a call for leadership, right? So that's a possibility absent that the clerics would have to get together and nominate a new leader. So those are the two paths. We'll have to see how it plays out. I hope a popular-led approach would work. I think the difference, back to your point on Iraq, I don't think it was so much about ideals. I think it was more around a lack of institutions. That's it. Lack of habits and routines around how democracy democracy is conducted.

It's a lot more than just an election. You have to have parties and primaries and discussion and the debate and free press in the fifth column. Iran has a better shot, I believe, at that, because you had protests from a very thoughtful, highly educated population. It was coming from the ground up. So one can be hopeful. Yeah.

So democracy in its best form is bottoms up, not tops down. And to your point, what makes our democracy so robust in this country is state and local government, you know, even down to city councils. It gets this very well-y organized and democratic. That was not my experience in Iraq. And my experience in Iraq was, hey, we're here, you know, the guy in Baghdad, you know, he's your new elected leader deal with it. And the sheik's like, no man, I've been in charge for a thousand years.

That's not how it works around here. And so it's just much more complex. I guess my point is that I think the administration wants stability first and foremost. They want control the oil. And I hope that I earnestly hope that the grounds up the democratic regime emerges. The Iranian people are very smart, very thoughtful, very educated. And I think they want it. I hope they get there.

There was a guy on Twitter, his handle is a Roman Helmock guy who was joking a little while back that actually we should just rename it Persia, right, as part of this. But, Chris, to go to what you were saying is there is actually a long, right, and deep history in this region that I think the Iran name and the recent regime kind of obscures. Like, Persia does have a very long history of, like, education and contribution to both the world and the region. That sort of the best case is that that is rediscovered in subway and sort of brought back in that. part to the world and then by the way they're sitting on a ton of oil so as much as we're seeing like an oil supply like disruption move of prices upwards right now if you end up with a stable like call it globally aware cooperative government and i just i don't mean cooperative in

like bowing down to anyone group i just mean in the sense of like not constantly attacking it antagonizing your neighbors you could actually very quickly have a much stronger iranian economy and it becoming the gateway between Europe and Asia once more. So to me, there is a very positive case. But I'll also remind everybody we had Omita on here last week, talking about how sort of the opposition in Iran is quite weak. Right. There is not really an organized sort of, you know, group pushing back. Well, it was slaughtered.

30,000 of that. Correct. Partially because of that, partially because many already left the country, if we're being totally honest. And then I think the other problem you have, and Chris, you're familiar with this from Iraq, is there are factions in this country who would probably rather be their own country, right? Like, what are you doing with the Kurds? For instance, I think the potential pathways, one that maybe is underdiscust, is neither the current regime staying in charge nor like Iran just flips back, but rather call it Yugoslavia, which is to say, does this thing break apart into, several factions that eventually become their own countries. Yeah. I mean, the people will need to be involved, right?

The suppression of the people was driven in part by the IRGC, but also local law enforcement. I don't know that the U.S. government is going to take out local law enforcement. I don't know how you do that. So that has to be done by the people. I think you can be cautiously optimistic, though. It's hard to see what the left-tail risk is, though. It's hard to see what the left-tail risk is from this. The left-tail risk is the conflict lasts longer than expected.

There are fewer transports through this rate of home use, mainly because those ships don't have the right insurances. Yep. But that's temporary phenomena. You know, we had this in 2022 with COVID and, you know, delays in shipping. You know, this is a temporary phenomenon. So markets should look past this. I think they have.

I mean, look at the resiliency of crypto, right? I don't think just crypto. Equities have been pretty resilient today as well. Like as you look down the list, I think this, to me, right, like having seen market regimes before, this is being priced right now as though it is a regional conflict is the way I would describe it. That is to say we don't see major global spillover. Honestly, like Russia and Ukraine was more disruptive to markets than this was. Yeah. And again, what is it shown? Venezuela happened on a Friday night. Hyperliquid was price discovery. This happened on Saturday night. Everyone looked at Hyperliquid.

Now Bloomberg is even quoting it. What we're wondering is like, okay, so hyperliquid has an edge now. it seems to be the 24-7 global commodities indicator. Like, we kind of knew how oil was going to trade as soon as it happened and into the week. We didn't have to wait for Sunday night or whatever for markets to wake up. But we're also seeing the big exchanges now moving towards 24-7. So the question is, can hyper-liquid keep that edge? Because, like, you know, we've been around long enough. Like, liquidity is very, very hard to achieve.

They got it. And once you got it, it's very hard to get rid of it. or lose it. And so as the big guys come in, what does that get a mean for liquidity once their mode of 24-7 is reduced? So, like, that's what we've been looking at. But again, another gold stamp for the crypto markets. They work 24-7 and they gave the markets what they need on the weekends. One of the fascinating parts of this, too, is that a counter-argument against 24-7 trading. And Chris, I'm sure you've heard this as well, is that it will be risk-increasing because we'll get all these jumpy moves when people are not awake, et cetera, et cetera.

And actually in this event, it appears maybe to have been somewhat risk reducing, potentially because instead of just uncertainty, like nobody knows what the price is going to open at, we've got these proxy indicators sort of showing us in a market of people, like even if it's not the full market, like let us accept that hyperliquid is a small subset of markets currently. it is at least not a completely uninformed and idiotic subset. So you can look at that and say there's some information value in here.

And it gives us sort of a boundary on what the open is going to be. I know you and I were in an event earlier today and we'll get to that. But I think one of the things that this is revealing is that the 24-7 news cycle might speed up the information discovery, but that may be risk decreasing in many cases as opposed to risk increasing because you don't have the giant jump risk that people are trying to manage over weekends anymore. Yeah, which should lower your collateral everywhere, right? Because you're collateralizing in real time. That should result in additional liquidity coming back into the system as people, because you used to have to hold the collateral from like Friday till Tuesday,

up to a three-day weekend. And there's a stress, God forbid. That's one of the beauties of 24-7 markets. You get to lower that collateral and increases liquidity. The other data point that we had, frankly, was prediction markets, which had their own little challenge. over the weekend, you know, and debates. Yeah, I think there's plenty to talk about there as well. I mean, I'm going to say right now, the main thing I'm coming around to on prediction markets is that they're learning in a way that crypto has been learning some of the lessons of financial markets.

Prediction markets are in the process of learning many of the lessons of insurance markets right now, which is to say if you're familiar with insurance and reinsurance, some of the biggest fist fights in the history of those markets are around, do I owe you money or not? And that's always the edge cases on terms and conditions and like how were events defined. Maybe the classic one is, does hurricane insurance cover flooding? Right. And like a giant debate that is like ripped through the Florida court system and was worth tens of billions of dollars. And these sorts of things I'm watching in prediction markets now, where the number one thing I would advise everybody is if you're looking at prediction markets,

pay special attention to the wording of the terms of each of these markets. Like that is going to be a space that will need to be standardized over time with much better, call it neutral arbitration in the same way that insurance and reinsurance markets work right now, because you can't have a market where most people thought it would resolve to yes and it resolves to know or vice versa become the standard because then people just back away. I'd stop using it. Yeah. I think, you know, this Iran event has refocused market attention.

However, there are still larger issues that are out there and growing under the surface, right? Like QQ is down 7% year to date. Navity reported blockbuster earnings and it sold off. Markets were strong today, but it was driven by energy. Most sectors were down, including consumer discretionary. rallied you to date, but you've got now stocks like Walmart at 45 times earnings in Costco. That's not sustainable. That's going to have to give back. And so where is the

leadership going to come from? I was just looking at Amazon's free cash flow yield. It's 0.3%. 0.3%. It's incredibly low. That number should be 2 to 3%. You know, you've got the Department of Defense having a public dispute with Anthropic now awarding a contract to open AI. So there are these issues under the surface. Our evaluations are elevated versus free cash flow. The positioning is still crowded. And we're seeing technical weakness in the leading themes in the market. I see people bind the dip on like everything, even things that are just down 40%. It's like, really? It's a bare market and you're just buying the dip. So I do think that after we get through maybe a bit of a rally here, through some of the VIX decay and a faster

resolution than people think around Iran, there are still larger issues that the market is trying to address. And obviously midterm elections are there too. I mean, I was going to say, let's go down one of the rabbit holes that you brought up there, which is the AI component, because this is something we've been talking about for a while. So currently, there was a little bit of a brouhaha between Anthropic and the Pentagon, where Anthropic CEO, you know, an Anthropic, for those listening, kind of positioned itself as the safety AI. Claude had guardrails against certain military and surveillance uses,

and tensions escalated pretty quickly with the Department of War, as they both sought broader contractual language allowing use of anthropics models, but also were alleging that some of the things that Anthropic had, call it implicitly or explicitly permitted before they were backing the way on. I think, to be honest, like both sides are telling the story most favorable to themselves, but the core of the debate is who gets to use this thing and for what and on what terms. This escalated pretty quickly. Donald Trump criticized them on social media, Anthropic has done a bunch of PR around this. It framed them as hostile and unreliable for national security needs,

And unsurprisingly, somebody else in the market, as happens in competitive marketplaces, stepped in and took advantage. So Sam Altman shows up and signs a contract with the Department of War where it's now Open AI that will be essentially filling that gap and working with them. There are, again, guardrails around that, but not the same sort of categorical refusals. So to me, before we get to the operational realities for the military, Rom, I want to come back to a point that you have raised previously on this show, which is where is the value capture going to be an AI? Because to me, this is maybe the best example of somebody just hot swapping

one model for another and moving on with life. So like what is the different? Yeah, no, I agree. I agree. You know, we, I instructed our team of Luminat switch over to Anthropic and their enterprise use cases. They work really well. I give credit to Dario for a principal stand. I don't think he would do that. I still don't think, deep down aside, I think they will bend the knee eventually out of economic necessity. And I'm concerned that Sam Altman now is playing some role. Is it critical or not? I hope not. With the U.S. Department of Defense, this is a guy that was fired by his board where a developer died or was killed on his watch and where he made misrepresentations to early investors

like Elon Musk, where is the integrity in any of that? It's not a one-off, it's a three-off, that's a pattern. So it's a bit of a concern that Open AI is in there. Couldn't we have found someone else, please? But yeah, no, I agree. There's limited value capture and all this. You know, the open source models like Hugging Face, you know, they're a tenth of the cost of these models. They're one year behind, but they catch up.

So it's just like the cost of storage. We saw this with the hard drives and the memory, right? Just drops over time. That's going to happen. So I don't see the value capture. Look at like Palantir stock. Look at, I think that's a bubble deflating. But, hey, they've got value capture.

It got the multiple. I don't see it for these LLMs, which are in a brutal war of attrition with each other. Let me just chime in. I mean, as somebody who's been in war, been shot at, lost a lot of friends, this debate is really hard for me because obviously, you know, you want to do the, the great thing about the U.S. military is you always want to do the right thing on the battlefield. You don't swear allegiance to the president or to a king. You swear to the Constitution. As an officer, you have to follow the lawful. orders and uphold the Constitution. And that's wonderful. This is actually very similar to crypto,

this debate that's going on. Now, what Dario said is there's two things, two conditions he had. One was like lethal autonomous decision making and the second one was mass surveillance. What I've come to know, whether it's crypto or AI, is that it's not the technology that is evil or not evil. Maybe it is in the case of AI, but generally it's technology. It's the behavior that people employ it to do, right? And the thing is, is like, technology, we have laws. Just because you have new technology doesn't mean that you ignore the old laws. And as you're thinking about mass surveillance, well, if there's laws that prevent mass

surveillance, it's a policy issue. And then the government tries to conduct mass surveillance, like put it to bed, you know, throw people in jail, like hold them accountable because it's illegal. And that's why it's important to have that policy. I think the lethality piece is a little bit more complex. for me because if there is a technology that saves like one Marine on the battlefield or one of your, you know, provided it's done legally, why would you suppress its development if it can be done ethically? So like I'm almost of the acceleration camp. Like you can't restrict it. You need to study it

because like let's go back to Iran. The Iranians are really good at drones. They have the Shahed drone, which is at low cost. I mean, they've had effect with a, on the battlefield just through sheer size. Like, I've come from the, from the place. I'm sorry, but like, you've got to give the guys and the ladies in the ground the best tools possible. And like, but law should apply. And I think Darius's point is like, well, wait a second. The laws haven't caught up to this technology.

Well, we got to hold then our Congress accountable. And, you know, we have to use the democracy that we talked about. So it's tricky. But I just hate anything that deprives, you know, our mental. and women on the ground who are sacrificing their lives, anything that that protects them. I think another important point there. I understand this is unpleasant to a lot of people call it the theoretical ethics camp, but in war people play to win, right? And what I mean by that is if you're not willing to do something with an AI model and the other side is that that thing

works that they just win. So one of the things that I think we, I'll just be transparent and say, we don't know from the outside exactly where the lines were drawn. But if you're in the Department of Ward, Anthropic is telling you, we want them drawn here and it's going to impede operational capabilities and Open AI is telling you no, no over here and it's not. That's a trivial decision for them to make, right? Because like, you know, it's back to the whole, God, what was that quote from Unforgiven? Deserve ain't got nothing to do with it, right? Like both sides. are playing to win. And ultimately, Chris, to your point, if the United States is handicapping ourselves in a way that's causing us to lose conflicts or get our people killed, that that is a bad decision,

just strictly speaking in that regard. So there's a case we made that Anthropic may have been held captive by its own employees. So the US DOD agreed that the AI technology would only be used for lawful purposes. In fact, there's a post from the Undersecretary Defense going through the contract language. And from their point of view, it looks completely reasonable. And also, David Sachs and Elon both stated that there are a number of holdovers in the Biden administration that went to Anthropic. And if you look outside Anthropics HQ, there is a lot of chalk and, you know, rainbows and quasi-protests or support, this and that. So I wouldn't be surprised if that decision was made because of talent. People, they were trying to find.

away not to do a deal that in fact would be lawful and address the concerns of Anthropic. After all, that's in the contract. They weren't making the claim that the DOD wouldn't abide by it. That's not what they said. I mean, so back to what we've been saying about AI too. Is the future that we're seeing here going to be employees losing a lot of the poll to do that over time? Because, you know, one, Claude just got swapped out for O.

open AI piece. But two, like one of the other big AI related news items was Jack Dorsey cutting nearly half the staff at square block, XYZ, whatever we're calling the thing now. Right. And he was saying, essentially, we're preparing for an AI future. Now, in fairness, they had probably massively overhired in the pandemic. So I have a feeling there's some element of pointing an AI to justify right sizing the staff in general. But it is also a statement that you can be like, well, of the 10,000 people we have 4,000 of new piece because of AI. And that will also send a message to remaining employees. Like if you're not sort of on the team, you're going to be much more easily replaceable.

Are you guys seeing that same dynamic in employment overall, like just zooming out from the DOT? Yeah, I think they're in a bubble. I think Silicon Valley AI engineers are in a bubble. They're not in reality. They're getting lavish pay packages. They're getting poached. They're turning down $100 million pay packages. right from Zuck you know startups go through these cycles where they they have the

foosball table and the free everything and the retreat and they're in kind of peak mode of this kind of lavishness and they're in a bubble but yeah reality is gonna come home to risk Jack Dorsey ran Twitter with thousands and thousands of employees yeah and Elon runs it with 35 he's not a lean mean operator now Jack Dorsey is many wonderful and amazing and brilliant things, by the way. I have an incredible amount of respect for Jack Dorsey and how he conducts his life, not just his entrepreneurial business building skills. But he likes to think, he likes to contemplate, he's like a kind of a philosopher entrepreneur.

He's not a great cost efficient operator. And so you've seen a lot of these startups justify headcount reductions based on AI. You know, Klarna did the same thing. They cut out work and they said, oh, we did with AI. Come on, you're just cutting costs, hit your numbers. for the IPO. A lot of uncertainty, isn't it? But your point, like, hey, if Jack's doing it, I should do it too.

And it's a really good opportunity to optimize. Now, you know, let's not even talk about it. There's legal things too. Like, hey, you're restructuring. You know, sometimes when you fire people, you get sued. Well, here, everyone's restructuring because of AI. It kind of lowers your liability in certain cases. So I do think it's going to be a trend that you're going to see that companies will use

to optimize. And let's not forget, like AI should be massively deflationary for this reason. Yeah, wait until thinking machines blows up. Remember that one? That was the CTO from Open AI started, raised a couple billion dollars. Ilya created like safe AI. This is like insanity. This is insane stuff.

You're not supposed to get billion dollar valuations on a, not even a PowerPoint, just because you were around the Open AI hoop. We're going to look back at this and say, what craziness was done in Silicon Valley. Yeah, and I think what's It's interesting to me, Rahm, that you were saying there is exactly the Silicon Valley component of this, because if you look across like some of, call it the more people focused or hands-on industries, we're not seeing this same trend everywhere. You know, a good example is my wife works for Memorial Sloan Kettering, the cancer

hospital. We are not seeing tons of doctors and nurses being replaced by AI in this context, right? Is it going to be integrated? Is it going to improve productivity? Is AI going to be a powerful diagnostic tool for patients 100% over time? Is it going to lead to massive headcount reductions in the healthcare industry? Almost certainly no. And it is kind of funny that there are these subsets of industries that I think are both living

in a bubble but that also disproportionately driving the discourse. Like the idea, you saw that Satrini paper that we were talking about of like, oh, everything's been destroyed by AI. I'm like that is a very software developer-centric. Yeah, software rallied since then. That marked the bottom, potentially. But look at private equity and private credit. It's getting absolutely destroyed in the markets right now,

and they're lending to software. They're subject to mark to market. They live in reality land, right? Open AI and these software, these AI, L.M, this is storytime. That's why Dario's on the pocket. No one knew who Dario was. Six months ago. Now he's making the podcast circuit because they have to go public and his thesis for how they get to a trillion dollars or another. Here's an interesting story in the first two years around the enterprise adoption, which I believe I'm actually signed up as a customer.

But after year two, he's like, oh, we'll have a data center full of geniuses. They will solve $950 billion somehow from that. Insanity. No, I think that tread will play out over time. and people will find out, yeah, I mean, this, you know, okay, so one final point before we go to ads, because then we have one more thing we want to talk about before Chris has to leave. But you've seen this sort of misidentification of where the value is before in other industries. We saw it in the tech bubble.

We've also seen it in crypto with fat protocol thesis that right now appears to be slowly falling apart as well. It may be that the AI companies themselves are not the value accreter, right? in this space. That is not a refutation of the value of AI. It is a refutation of the specific conduit of value transmission going through the model companies. Rom, I believe our water company is highly valid. We only need water. Does anyone know the name of their local water company? Is Con Edison a trillion dollar come? We all need electricity. And intelligence will be a utility on demand at low cost service competitively. Well, on that note, I believe we have a couple more sponsors that we need to hear from.

and then Chris and I will talk about something we were at earlier today. Step into a new era of wealth. Discover Nexo, the premier digital wealth platform. Manage your crypto portfolio with confidence and control. Receive interest on your digital assets. Barrow against them without selling. Trade a wide range of cryptocurrencies, all in one platform. Now available in the U.S.

With 30 days of exclusive privileges for new clients. experience wealth club premiere, access enhanced interest rates, reduced borrowing costs, and crypto cashback on swaps. Get started today at nexo.com slash unchain. Quick note before we continue with today's episode, Bits and Bips now has its own dedicated home. We're spinning off from Unchained and launching a standalone podcast and YouTube channel focused on the Fed, Macro, AI, and how it all collides with crypto. If you want to keep up with our weekly live streams and Macro meets Crypto breakdowns, make sure you're following Bits and Bips directly.

We won't start publishing until March, but getting set up now means you'll be ready on day one. You can find the new Bits and Bips channels at Unchained Crypto.com slash Bits and Bips. You can also find us by searching Bits and Bips on YouTube, Apple Podcasts, Spotify, or wherever you listen. All right, everybody, welcome back. So earlier today, Chris and I were at the Economic Club of New York with former podcast guest, Patrick Witt, talking about the current situation with clarity and what is going on in Washington, D.C. Chris actually was the one interviewing Patrick on stage. So, Chris, I'm just going to lob this one over to you.

What was the conversation about? What was the overall tone? What were your takeaways first? Yeah, we've been talking about crypto markets for a long time. And like, what's next for crypto? We know that's an institutional error. And for it to accomplish its true potential, I think a lot of us think that this thing called clarity has to pass. Right now, the White House, according to Patrick, they've been really focused on obviously getting it over the line.

They're implementing genius right now because genius, you just don't pass the bill and go away. There's a lot of different regulations and rulemaking. They're navigating the OCC rulemaking that again reaffirmed no interest on stable coins from issuers. So he's navigating all of that. And then like when it comes to clarity, the irony continues to be that what's holding up clarity? Well, it's the stable coin stuff that we thought we were already lit. It feels like there's progress. My sense is that clarity could go either way.

The irony is if you look at a polymarket today, it shot up recently to about a 70% chance. Pretty thin markets. You're looking at about 300K in the pool. But somebody thinks that this is going to happen or at least thought a lot more so than the past. It feels like just what I'm hearing through the grapevine is that the coin bases of the world have come a long way. They're at the 45, 50 yard line. The banks really haven't moved and continue to dig in.

And that's fine. And people are like, well, how come these people get to decide what the bill is? Like, that's for the senators to decide. That's for, and that's exactly what they're trying to do is because a lot of the senators will sit back and say, I want to hear your story, banks. Tell me. I want to hear your story, Coinbase, crypto. tell me. And then they figure out which direction that they're going to vote. It's a lot easier

for a senator to say, okay, good, you know, both you guys figured it out. I'm good now. You're cool. I'm cool. We're all cool. This makes good policy. So it's not, it's, you know, a lot of people like, it's not fair. The industry is just, you know, doing it in a bubble. Not so fast because those senators are thinking about getting reelected as well. So it's just sausage making. And it's hard. And, you know, I personally still think it's going to happen. It's coin flip. But the other thing that I think the crypto industry hasn't endeared itself to members of Congress is that there's still a lot of wackos out there. And they need to see more utility, more grownups, more focus on actually delivering real use value to people. That's what we need to do a better job of showing and telling and explaining.

So that was my takeaway. What about yours, Austin? You heard it from the audience. Yeah. So, one, to pile on to a point that you're making there, I think a lot of people, people in crypto are in denial about how bad the reputation of crypto is after, call it, 2022 into present, like, but call it the average two-legged human on the street. I tweeted recently that crypto was ranked probably one to two slots below slime mold in most people's preference

lists and everybody got mad with me, but I'm like, I'm just repeating what I hear. And I think, Chris, you're right. It makes it easy for people to make bad faith arguments that are anti-crypto and get away with them because the reputation of the industry is so poor. But what I was hearing from the audience, too, is that one of the things we're going to see over the next five to ten years, and this will be unwelcome to some varieties of crypto natives, is a much greater convergence between blockchain technology and traditional financial firms, right? And that is to say the idea that we're going to tear down the entire system and replace it

with decentralized permissionless money is on the way. way out. But the idea that we can actually take the current system of massively upgraded in ways that improve people's lives and financial access and fairness is on the way in. And so one of the things that was interesting to me, because this is very like DC in real politic, is a pathway where clarity can happen and where the sort of like punching match from genius can be resolved is how do we make sure that the entities that are, call it the most bold, politically, socially, and maybe economically favorable get something out of this, aka or winners. And so one of the big takeaways is I genuinely don't think the interests of the

big banks and the community banks are the same here. And people have been treating that side like a monolith for a long time. But the reality is, you know, thought experiment here that I've discussed with a couple of friends before, if all of the stable coin issuers were to be told, hey, you guys can pay yield, but only if you keep X percentage of your reserve at deposits at banks under, say, $10 billion balance sheet size, who's the loser there except for the giant banks to begin with? And so I think as we start sort of like making the sausage in Washington, D.C., if you're outside of that framework, you need to understand a couple of things that are important. One, Chris said something really powerful, like now twice in this episode about how the United States operates, which is we have our Constitution, we have elected representatives, and they do genuinely serve at the behest of the people. You can vote these people out if you don't like them. So number one, if you're listening to this and you're an American citizen and you have a strong view about this, go look up who your House representative and your senators are and just like call them, write them, email,

them, you can go visit their office in Washington, D.C. Like, it's shocking, but you can check into the building and just go walk right in there. Tell them what you believe. It will move the needle. And that, too, finding a compromise between the people in this space who I would say have the biggest political acts here will get things done. And to me, that is the, call it legitimate people in the crypto industry trying to face U.S. persons. Like Coinbase is a good example. They never fled the U.S. whatever you think about them, they've been willing to be regulated. Well, argue about the terms, but they're not fleeing the U.S., they're not fleeing the U.S., and then the community banks, right?

Like those are the two groups who people really care about here. The big banks kind of hide behind the community banks as a shield. But the answer is if the community banks are happy and the big banks are not, I like our odds. I like that too. Yeah, speaking to Patrick, talked a little bit about Quantum, didn't seem to be keeping him awake at night like our friend Nick Carter. And then getting back to, like, what people want to see is they want to see better utility and user experience.

And to me, that's going to, I think AI is going to play a huge role in that. Like, AI doesn't care about the downstream, you know, wallet interfaces and all the brain damage that we deal with every single day on chain. So I think those are some things. The other thing that's frankly fascinating is that when you talk to Normies, you know, in events like that, what was their biggest concern? Security, isn't this a crappy product because no one can trace it? Actually, everyone can trace it.

And we all sometimes forget in our little bubble, just how unaware most people are. They just don't care. They've got more important things to care about. I was going to say one of the things that you run into there is, you know, it's a well-known problem in economics like the streetlight effect, which is to say because crypto is so transparent, you can observe the crime and therefore people think it's bad. but there's probably way more crime that we're simply not detecting in the traditional system

and then people think it's better because they don't see it. Yeah, something I'll share it anecdotally. I still receive reverse inquiry from call it like Baby Boomer conservative profile types that are asking about specifically Bitcoin, unprompted. I find that interesting. I do think, and they approach it with, curiosity like should I have allocation to Bitcoin with an open mind so yeah I do think Bitcoin has crossed the Rubicon in terms of broader public consciousness and

understanding which is a major accomplishment I have yet to see that with other digital assets thus far it's not a comment on the price potentials of their assets I'm just sharing what I see on the ground I see there's a lot of potential and like what Ethereum has done and other like Salon, and other those too, like hyperliquid. But the inquiry I do get is around Bitcoin. It's kind of interesting. Yeah, and Bitcoin is crypto, right?

There's no difference. I will also hop in there and say the other one that I get and I see why you're not getting it from the investor side is stable coins. Yeah. Right? Like when I talk to a lot of companies that are doing things like payroll, international wire business, like how do we just manage our like money. Stablecoins are genuinely a topic of conversation from a curiosity standpoint now as well.

If we're looking at the two things in crypto that so far to me definitely have product market fit, it's Bitcoin and stable coins. Everything else I think is very TBD, Rob, as you're saying, which is not a refutation, but just a statement of not yet, right? Maybe it will be in the future, but it's not certain that it will be. I would be shocked if Bitcoin and stable coins are God from the playing field like 10, 20, 30 years. I agree. I think there's a lot bringing it back to Iran. It's like, does Bitcoin play a role in whatever institutions of form coming out of this?

You know, we talked about social media, access to information and technology. And, you know, the Iranians do have these deep technical skills and know-how. one one can dream that there might be a role for decentralized money as a check on unchecked executive authority they're going to open up mr beast wallets with tom lee i mean that is not in the realm of impossible i i would like to point out to everybody uh as as a topic i just covered in my newsletter mr beast bought a fintech app that does handle crypto it's called step right like everybody is joking about that but that may be a very real thing i will also remind everybody mr beast has more youtube subscribers that people who exist in the united states of america

so that that is not a small distribution i think i think iran and crypto hold strong promise it's a young educated demographic um i think they're going to come out of this after being suppressed thinking very forward, being very forward, being focused on innovation. And I think the conditions are very ripe. Trump can make it happen, right? Yeah. What is the it though? Omid talked about it, how he was an early adopter largely because of his background in Iran growing up

and his ability to seamlessly exchange value with people that he needed to. So I do think the conditions are sound. See what happens, guys. I would also point out, Chris, we talked about. this today at the event too. Like Patrick was on stage on the topic of security and observability, making the point of it depends what end of that you're on, right? Like there is the bad of like the North Koreans and what they're doing on chain. But there's also the good of if you've been an extractive system that essentially steals your money either through inflation or just straight

up corruption and evil, now you have the ability and importantly voluntary ability to opt into the dollar system through stable coins, right? Like, no, Nobody, we're not holding a gun to anybody's head saying you must use tether. Right. Like that's not how this works. But when you give people options, they are able to take advantage of them. And it fundamentally creates competition that delivers essentially the end value to consumers. Yes, sir.

All right. So on that note, Chris today has a hard stop. And we have some upcoming programming. So I'm going to go ahead and take us out here, which is thanks for joining us for this episode of Bits and Bips. We'll be back in one week to discuss more about how the worlds of crypto and macro are colliding. But next up here, Stephen Erlich will be with Rob Haddock, general partner of Dragonfly on the Bips and Bips interview. So until then, that is enough from all of us, everyone, and enjoy the next show. Cheers. Good one.