Unchained - Bits + Bips: Why a US Strategic Crypto Reserve Doesn’t Even Make Sense - Ep. 794

Episode Date: March 5, 2025

A strategic crypto reserve for the U.S. economy? That’s Trump’s latest proposal (or directive?)—and the reaction from the industry has been… let’s just say, mixed. Would it even work? And does it create more problems than it solves? Meanwhile, the White House is hosting a crypto roundtable—but not everyone is convinced it’s going to be productive. Who will be in the room, what will actually be discussed, and will it help or hurt the industry? On this episode of Bits + Bips, hosts James Seyffart and Noelle Acheson together with guests Steve Hou and Steven Ehrlich break it all down. Will tariffs and macro factors keep weighing on crypto? What’s driving the explosion in new ETFs? And what happens if banks start issuing their own stablecoins? Plus: What could be the real next catalyst for the crypto market. Show highlights: 6:13 - Whether a strategic crypto reserve makes sense for the U.S. 14:50 - How this reserve could actually give people outside of crypto second thoughts 24:37 - What the Crypto Roundtable will be about and whether it’s what the industry wanted 27:32 - Whether David Sacks is directing the reserve allocations so as to personally benefit 32:07 - Why Noelle was surprised after the SEC stated memecoins are not securities 42:22 - James’ insights into the avalanche of altcoin ETFs 47:10 - The significance of BlackRock adding IBIT to its model portfolio 54:02 - How macro news drove risk assets to such a selloff on Monday 58:12 - Why the 10YT is such a significant chart to watch 1:10:21 - Whether the war in Ukraine is coming to an end 1:16:20 - What the next catalyst for crypto is 1:19:07 - Whether stablecoins are a good business for banks Thank you to our sponsors! RockWallet Bitwise Hosts: James Seyffart, Research Analyst at Bloomberg Intelligence Noelle Acheson, Author of the “Crypto Is Macro Now” Newsletter  Guests: Steve Hou, Quantitative Researcher at Bloomberg LP  Steven Ehrlich, Executive Editor at Unchained Links Crypto reserve: Unchained: Why Trump May Have Chosen This Week to Announce a Strategic Crypto Reserve Bloomberg: Bitcoin Reserve Is Likely to Come First From States, Senator Lummis Says Crypto roundtable:  CoinDesk: Trump to Host First Crypto Roundtable at White House Next Week Crypto Czar David Sacks says he sold crypto holdings before administration began Memecoins: SEC: Staff Statement on Meme Coins ETFs:  SOL: CME Group to launch Solana futures on March 17 as ETF momentum builds BlackRock Adds Its Bitcoin ETF to Model Portfolio for First Time  Macro: Trump’s tariff post on Truth Social ​​Atlanta’s negative 2.8% GDP projection CNBC: 10-year Treasury yield falls to lowest since December on latest signs of slowing economy Reuters:  Inflation, growth may be in conflict but Fed seen restarting cuts in June US weekly jobless claims post largest gain in five months; weather blamed Stablecoins: CoinDesk: Bank of America CEO Says Bank Will Likely Launch Its Own Stablecoin Learn more about your ad choices. Visit megaphone.fm/adchoices

I think we've, you know, come to a agreement here that it doesn't really make much sense for the U.S. to do it. And it certainly doesn't make sense for the U.S. to just have handsily add, you know, these other coins in there. I don't know. Do you think, I mean, they probably have got to add even more coins, you know, now that you've opened a brigade. Hi, everyone. Welcome to Bits and Bips, exploring how crypto and macro collide one basis point at a time. This week, Trump's announcement of a strategic crypto reserves and market surging, only to retrace almost all the gains Monday. Still not everyone's convinced Bitcoin maxis and even mainstream crypto voices have pushed back, arguing that only BTC Bitcoin belongs in a reserve. We'll dig into why Trump made this move and what the real allocation could look like.

The White House is set to hold a major crypto roundtable this Friday. We'll discuss what to expect and how it could shape the administration's approach going forward. On the macro side, tariffs are back on the table. Equities, tanked, plus the 10-year yield is dropped below its lowest level since December, signaling economic slowdown. We'll break down what all this means for markets. Also on the geopolitical front, you're living under Rock, there was a huge shakeup in the Oval Office this week

between Trump and Zelensky. Zelensky has basically rejected calls for an immediate ceasefire after a rough White House visit, basically saying he doesn't want to do this without some sort of safety measures, security guarantees. How does this impact global stability in the broader risk trade? But before we dive into all that, some quick intros. I'm your host, James Safer, Tradfye Archmaister,

Lord of Bloomberg's End. Here with Noel Acheson, I seeer and keeper of the Crypto's Macro Now newsletter. Hello, everyone. Today we're joined by Steve Howe, the index warden of Bloomberg's realm. No. And Stephen Erlich, I scribe of the Unchained Kingdom. Hi, everybody. We're here to discuss the latest stories in the worlds of crypto and macro.

Just remember that nothing you say here is investment advice. Please check Unshank Crypto.com slash bits and bits from more disclosures. I'd like to introduce you to Rock Wallet. This is a digital wallet that puts your crypto and under your control. Using Rockwallet is quick, easy, and secure. Visit rockwallet.com slash welcome slash unchained for an exclusive welcome offer for unchained listeners. Crypto moves fast. It's why Bitwise launched the weekly CIO memo, a jargon free summary of what's moving crypto markets written by one of the best in the business, CIO Matt Hogan.

Get up to speed in five minutes or less. Check it out at bitwiseinvestments.com slash CIO memo. carefully consider the extreme risks associated with crypto before investing. All right. News of the weekend, news of anything that matters for the most of the listener of this podcast, Trump basically sent crypto markets rallying like crazy this weekend, basically putting out a tweet saying that he was going to put XRP, Salana, ADA, aka Cardano to be in a crypto reserve unanimously across the board in the crypto ecosystem, this was not received well, aside from like some people at Ripple and a few other small things,

but usually a lot of the opinion leaders really didn't like this. I mean, I can pull up a whole bunch of tweets, but they include different people at mainstream crypto firms. You had a lot of key opinion leaders like Naval, Brian Armstrong, you had the Winklewurst twins. Pretty much everyone's saying this doesn't make a lot of sense. Steve, why don't you guys, we have two Steve is here today. So Steve Howe is technically my colleague over at Bloomberg. We don't work too closely together, but we do two.

talk a fair bit. So Steve, how do you give a little background on who you are, and then we can get into Trump's tweet and the crypto reserve? Oh, sure, thanks. Yeah, I'll be very brief. I'm a quantum researcher at Bloomberg, specifically Bloomberg indices. Many people don't know that Bloomberg, you know, we have a business or terminal business, as the information, you know, our platform, but then we have the news business. We actually also have a index business. So I create mostly systematic equity strategies, but sometimes also multi-asset strategies, which then become investable indices. And I have various thoughts on macro and so on Twitter.

So I'm happy to be in this conversation. Yeah, Steve has a lot of thoughts at macro, and I often talk with him. We debate back and forth on different topics. But yeah, he's come up with a whole bunch of white paper. So he's doing real quant-like research on the back end here that is probably a little more in the weeds than we need to get to here. But he's written a lot of really interested in pieces. One of his more recent ones, he just dove into basically investment, strong levels of investment back into different forms of technology, reinvestment capital investment from firms and how you can use that to do investments and create an entities on it, which we can have to talk about that too. Yeah.

All right. Stephen Ehrlich, who's now at Unchained with Laura Shin. So, Stephen, why don't you give us a little background on what you do at Unchained and what you did before? Yeah, hi, everybody. And great to all of you guys here, as I like to say, a long time, listener, first time caller. I recently joined Unchained about a month ago as executive editor. I've admired Laura for a long time and was really excited about the opportunity to join her. People here are listening.

you may remember me as the director of research for digital assets at Forbes, a position that I held for about five years. I've been in crypto all the way back since 2013. I remember looking at my computer screen when Bitcoin was $100 and thought it would be better to pay off my student loans than invest. And probably my other claim to fame is that because I've been in the industry for so long, before all this, I was a senior intelligence officer for the, the U.S. Defense Department. So I was probably one of the, if not the first person to ever grace a crypto conference stage and say that I had to undergo a polygraph test. Fascinating. Absolutely fascinating, which will come in handy if we get into a little bit of the Ukraine and Zelensky type of stuff going on here. We will dive too deep down that rabbit hole, but we'll touch upon it.

All right, going back to what we were talking about with this crypto reserve, I mean, I have a few thoughts. My first thought is, one, I don't like this, like, any semblance of this stuff happening by, like, just simply executive order. It doesn't sit right with me. I think there should be a vote of Congress, which obviously there will be on Cynthia Lummis' bill, which you can get into. The other thing, I tend to agree with most of the opinion leaders here. Like, I, one, I'm not even a huge fan of, like, a Bitcoin reserve. If Congress gets it through, then maybe I could understand it. But really, I'm not even a fan of that. But I'm really not a fan of, like, adding these other coins into a potential strategic reserve.

Like, in my mind, at that point, like, why aren't you just, you know, I can make the argument that the government should have a strategic reserve of like Apple shares and meta shares and Microsoft shares. Like, you can kind of make the argument in my mind, like gold, it's the next digital store of value, things along those lines. These other coins, ETH, Solana, Cardano, XRP, it doesn't make a ton of sense to me, but maybe we'll hear more about it in the coming weeks. What are your guys' thoughts? Do you guys agree that it should be Bitcoin only? Do you guys

understand where this is coming from? Let's go to you first, Noel. I would like to point out that Trump managed to do yesterday what no one else has managed to do, that is unite crypto enthusiasts and skeptics in agreement for the first time. It was epic. I am against the idea of a Bitcoin strategic reserve. It makes absolutely no sense. And I say that as someone who has been a lifelong Bitcoin enthusiast, well, lifelong for Bitcoin's life, basically. It makes no sense for the United States. It makes no sense for Bitcoin. And I really doubt it's going to get very far to Congress because can you imagine trying to explain to all the Congress, the representatives,

why this is, and it's just not an advantage. There's huge political risk. There's huge economic risk as well. Should the United States send a signal that it does not have faith in the U.S. dollar? And it wants to build it up, support it with someone. a store of value. What Trump did yesterday is totally bewildering. I'd have seen no idea why he would send that.

It certainly felt like it wasn't vetted by anyone because he didn't even mention Bitcoin and Eath in the first tweet. Surely anyone with half a brain would suggest that he'd do that. And then I was expecting to see today David Sachs tactfully trying to walk it back, but no, he towed the line and he came out and support his boss's message yesterday, even though it was indeed very clumsy. It is clumsy. It reeks of corporate capture, and it is something that the crypto ecosystem, as you pointed out, James, is united in opposing unless, except for those that really, really want the price to go up.

Steve Howe, what are your thoughts? Like, this is a little bit out of your day job stuff, but I know you're a very opinionated person, so I'd love to hear what your thoughts are on this topic. See, the thing is, I've been a pretty long time skeptic of crypto, but over time, I've become, we're actually personally personally personally. persuaded at least of this market value. And I think this whole pivot from his original thesis of crypto being a fully decentralized device towards one that's embracing and running towards ever more centralization from, you know, sort of Larry Fink, you know, sort of, I guess, setting up Bitcoin ETFs and all the ETFs, you know, crypto ETFs.

You know, talk about like that's very much threatfy, right? So now we have this idea of a strategic reserve, which I'm not really sure what the strategic nature is, but one idea I've always had about this new era we're in. We're in the multi-era, multipolar world today, right? That's one thing that the Chinese foreign minister set at a Munich security conference. We are at a watershed moment for the first time since the end of the Cold War, maybe even And World War II, Pact Americana, is coming apart. In this universe, I can envision a world in which assets would take on ideological loyalties.

Stocks certainly have loyalties to countries. Bonds, sovereign bonds have loyalties, but certain assets possibly do not have ideological loyalties, and that possibly include commodities and crypto. And now, if you now tell me that one of the camps is going to set up a strategic reserve, I don't know. I mean, I haven't really heard, you know, the full rationale. But now, that being said, I tweeted yesterday that I thought, you know, Bitcoin strategic reserve makes no sense, but it makes more sense than a strategic crypto reserve, which is Bitcoin plus a bunch of other,

random coins that are not even necessarily limited supply. I think Solana is pretty much infinite supplied. So what are you exactly reserving? So anyway, I mean, it does remind me a lot of the policies that come out as the Trump administration, which I guess Steve Ehrlich can chat about literally. It feels a bit haphazard, you know. It doesn't feel like something that strategic is very well thought through. So anyway, that's what I think.

I mean, is anybody here going to say they're a pro-Bitcoin? I don't know. I have a few thoughts to game to mind. My first one was that when I saw this, I was going to laugh if this reserve was only like $10 million worth of these various tokens, so not a meaningful amount. Or like, is he somehow going to conflate his world liberty financial platform, which is accumulating various tokens, all that reserve? But, I mean, I have a, I mean, I would echo the points that everyone largely has made online about these tokens.

I mean, I've written a couple of stories. I mean, one, a big one in Forbes last year in the magazine called Cryptos Billion Dollar Zombies, which I basically defined 20 L-1s that had multi-billion-dollar valuations and what we said was little discernible use. We call them zombies because in the real world of finance, at some point, if you have a product that's not making any money, you'd have to take it down around, choke down an acquisition, go bankrupt. But these blockchains have just absolutely massive treasuries and low overhead. They could go on forever. That's the zombie. Ripple was actually the lead for that story.

And Cardano was also in it. So I basically called them functional zombies. in that story. And then just a couple weeks ago, I mean, James, I interviewed you for this story, talking about the upcoming ETS and Ripple and XRP, two of them. Salana's also in there, but I think we kind of see Solana as a little bit different because it does have a thriving ecosystem. I mean, if you're trying to pick out which tokens are going to stand the test of time for years, which I guess is theoretically what a reserve is supposed to be, I can't imagine XRP and Cardano making any sense because I just don't see that.

a lot of people building on them. I don't see, they don't generate much money. And I guess my assertion is that they're largely continuing to exist because they have charismatic founders, very involved communities of token holders that are allowed on Twitter, and they have enough money to buy favor with the administration. Another thing worth bringing up, I totally agree with what you said there, Steve, and they also have very active market. teams. But another thing worth bringing up is the timing of the post yesterday. It was on a Sunday, which generally has thinner liquidity. So it's generally not the kind of time you'd want to drop a market moving post like that if you care about fairness, if you care about access. And

who were the beneficiaries, the crypto natives, the crypto traders who were online on Sunday. All the mainstream retail investors who'd bought the ETF, all the institutions bought the they were stuck. And Eric Trump had the goal to tweet out late last night that, hey, this is a big win for the retail investor because only retail investors are on on Sunday. And that's actually not true at all. Most of the volume probably came from the professionals who have all of the alerts set up. The retail traders are in the ETFs and they were totally left out. It was just bizarre. So I am curious, given that we all seem to be, you know, not that in face, or all these sort of, you know, all of this concept, what do you think is going to be the long-term, you know, implications of this thing?

Because he didn't just come up with it, right? You know, like before Trump had embraced this, what's her name, Cynthia? Yes. And she and someone else have worked on establishing a strategic reserve for Bitcoin, which I guess has a bill in, you know, in Congress, which now, I guess, has to incorporate. these other random coins or not? I don't know. I mean, you guys are more closer to the crypto community. What do you see this as the long-term implications? I was reading a Bloomberg article this morning about, and again, if this is up to date, 24 state-level Bitcoin Reserve bills have been presented, four have been voted on. None of them have made it through. And this is

including the state of Wyoming, which arguably is the most pro-crypto state in the United States. So an answer to your question, Steve, the next steps would be to get the bill through. But even Cynthia Lumas today, the author of the bill, was saying, it's going to be quite a while. She's already dampening expectations because I think even she realizes the political will is just not there. Yeah. I mean, if you look at what's going on with this administration, they're trying to cut costs everywhere. They're cutting things left and right. They're firing people offering payouts. They're, we have Doge the Department of Government Efficiency.

And then to kind of come out and say, we're saving you tax dollars and then we're buying cryptocurrency with it. Like, we always talk a lot in this podcast before the Trump election that there really wasn't a cohort of like an anti-crypto army like Elizabeth Warren talked about having. But like if you say you're doing all this, you're getting rid of people's jobs, you're saving all this money and you're going out and buying crypto, that might. actually create a sort of anti-crypto army. So, I mean, specifically unilaterally, it's not very clear exactly what's going to happen here. Are they going to do this through Treasury or are they going to

do this like to say they're shoring up the dollar? Whereas Cynthia Lummis' bill would go through Congress, it'd be a lot more clear exactly how it works. So one, I don't even know exactly where these assets would sit. There's also like, is Ripple just potentially going to give them like some XRP? Like, is the government actually going to have to buy it at market prices or same with the Cardano? I don't know exactly how they'll get this. So I think it's a hard sell to say, like, we're going to go out and use your taxpaying dollars to buy crypto. For anything in crypto at all, particularly for things beyond Bitcoin, I would say. But maybe that's just me going to go ahead.

I'm sorry, I was just going to say. I think it would be horrible if the government actually goes out and buys XRP. I mean, Ripple has, I forget the exact numbers. I put it in the story last week. I mean, they have billions and billions of XR worth of XRP in their treasury that they could just hand over right now. I mean, they have so much more than they could possibly need for just like regular runway. And they're going to have, I don't know, something like 20 or 30 billion more coming to them through unlocks in the coming years. If they want, my sense is, and same thing with Cardano.

I mean, the Cardano Foundation has a nine-fitting your treasury. I'm not familiar with what Solana's finances are, but my sense is that if those foundations or those companies really want to be included, I mean, Ripplegate $5 million to Trump's inauguration. Why couldn't they give him $100 million worth of XRP to put into this crypto time capsule? And let's just see what happens with it. Another reason would be, why would they do that? What would be the advantage to the government for that? And is that even legal? Can you give that much to the government without some kind of accounting offset.

Another thing is the possibility, we mentioned earlier about maybe just their conflating terms and maybe Trump is conflating strategic reserve with stockpile. Sockpile would imply that they just hang on to what they already have seized through various enforcement actions. And everyone's in favor of that. We certainly don't necessarily need them selling. So why not just hang on that? Maybe, maybe that's what he's talking about.

But that doesn't answer the question as to why host that on a Sunday. I'm curious, too. I mean, the stock pile, even if they hold it, is the government, I mean, I actually don't know the answer to this, but is the government the actual, like, beneficial owner of those tokens that they can choose what to do with, or are there victims to whatever crimes were committed to generate those proceeds that should get the money back? Which is why the government might want to sell it. I don't know the answer to that. I did look into this at one stage, and I was told it's on a case-by-case basis. It very much depends. Often in many cases, there's not an obvious victim.

Often the victims themselves don't necessarily want to come forward for some reason. And sometimes it's just too long ago. And sometimes there is. So it's on a case-by-case basis. But another issue is it turns out that the government doesn't actually know how much they have. They're not very good at their record-keeping. Can we actually envision a scenario in which this reserve is actually used for anything? I mean, a strategic petroleum reserve was recently used by the Biden administration to lower oil prices.

And that was refilled, right? And arguably, you know, there's a purpose to it, right? You know, and he did low oil prices. I don't know. What is the scenario? Has anyone actually even sold out that they actually even deploy such a reserve? No, we're all bewildered. Yeah.

I mean, I know it's been floated about just paying off the national debt with it, but then again, you never sell your Bitcoin. And also, how would that work? Yeah, I don't know. The idea would be, I mean, if the government needs money, I mean, it could just print it. It's fiat money. I mean, they could just print as much money as they need or they sell bonds. I mean, raise taxes.

I don't know. I mean, if the idea is a reserve, but at this point, if the government ever does accumulate a sizable portion of Bitcoin, and I'm not even, I don't even think 19 billion counts given how big Bitcoin is at this point, but, I mean, a much bigger portion. I mean, can you imagine the cell pressure that would come if it ever turned out that the US government was liquidating it for any reason? Because you're right, they wouldn't just do it to lower taxes or something. Ideally, or theoretically, it would have to be for something pretty significant.

Yeah, I'd make two points. Like the one, I think it's the Bitcoin Policy Institute. If I'm wrong, exactly, which is to put this out there, they kind of suggest that they could argue that this is part, they could use this as the exchange stabilization fund, which they use. So, like, theoretically, the Treasury could buy assets. whether that's other foreign currencies, dollars themselves, other things to basically stabilize the dollar market.

So that's one way Trump could theoretically, potentially unilaterally do this and say it's part of the exchange stabilization fund under the Department of Treasury. Again, I'm not a huge fan of that. I think if we're going to do this, it needs to be through Congress. Because like you guys are just talking about, what happens when, you know, somebody who is part of Elizabeth Warren's anti-crypto army gets to the presidential role and decides they're going going to, great, we bought a few billion dollars. Now we're going to market sell all of it.

your head now that somebody else is in charge of the White House. It just, it just, it doesn't sit right with me. The other thing I would say that we haven't really pointed out here is like, the U.S. government already has like a tremendous amount of exposure to this asset class. Like the reason a lot of the U.S. government, the tax receipts, the U.S. government gets a lot of is very financialized compared to most of the countries because their stock market is so big, because of all these different financialization aspects of the U.S. economy. Like, if Bitcoin goes up a lot and people sell it, you have to send 15 percent of those gains. 30% of those gains, depending on short-term, long-term capital gains.

You're making income, whether you're doing defy yields. So, like, they, and most of the elders of these assets sit in the U.S. for the most part. So, like, the U.S. is already heavily exposed to this. And another thing, I would say. So it's not like where the U.S. government is just not going to benefit if this thing grows now, particularly because of what's happening. James, you make a good point. Actually, I think he makes more sense for smaller non-U.S. countries to hold, arguably,

a reserve just as where they hold Forex reserves, right? You know, as part of the portfolio. Yeah, anyway, I think we've, you know, come to an agreement here that it doesn't really make much sense for the US to do it. And it certainly doesn't make sense for the US to just have passed to add, you know, these other coins in there.

I don't know. Do you think, I mean, they're probably going to add even more coins, you know, now that you've opened a market. We have to get the Trump mint coin in there, definitely. And there's no way you can't have Doge. I mean, that's why I called it a time capsule.

Just throw everything in there. Like, do you guys remember that episode, I don't know if anyone watches Parks and Recreation, but there's an episode about a Pawnee time capsule. And basically the entire town hall was, went nuts. And I think they had to create like three time capsules

because people wanted everything from books to, like, whatever. So, yeah, at some point, everyone gets included. Yeah. I mean, you could argue maybe some of this is kind of like throwing like lost coins in some regard, potentially. It just sits there and promotes it and sits in the government balance sheet potentially and whatever. But I mean, let's kind of in the same vein here. Let's go to the White House is having a crypto roundtable.

Based on everything I've seen online, people speaking publicly, the key opinion leaders like we spoke about before, I have to imagine this roundtable is kind of going to come back at David Sachs and kind of say, like, we're not a huge fan of this. I think most people are like, we don't want what the Biden admin was doing. It was just attacking left and right under the Gary Gensler administration. I think most people in crypto are like, just like give us rules of the road and let us build. We like we're kind of like the pendulum has like swung too far to the other side where it's like, we're going to buy all these all coins and put them on the government balance sheet. So I'm curious to see, one, what do you guys think is going to happen at this crypto roundtable

if you have any thoughts at all? I'll start with you know all. Well, I imagine the CEO of Ripple is going to be there. And I would expect the co-founder of Cardano to probably be there also, if indeed they are the crypto-influencers, we're led to believe. But I agree with you. I mean, they're obviously going to be in favor of the idea. It depends how forceful their arguments are and what David Sachs eventually decides to recommend. It's not just David Sachs, though.

He's the chair. There's a pretty extensive working group of very experienced administrators. So I think we can assume that cooler heads will prevail simply because this is just not something. that any of the regulators and officials are going to want to spend political capital, no matter how compelling the arguments presented by those with vested interests are. If you asked everyone in crypto, I think, to create a wish list for what they wanted from the administration. I mean, it started with, I guess, pardoning Ross and getting the SEC to drop all the suits and those kind of things have happened. But from the reporting that I've done and just anecdotally talking to people, I mean, the reserve was something that they found interesting, but primarily if it was just focused on Bitcoin.

And then, two, they want legislation. As far as, like, what this working group meeting is going to be. I mean, I don't know how long it's going to be. Is it a two hours? Is it a half a day thing? Are they going to have lunch? I don't know. But I would imagine that it's going to fill more details about this reserve are going to.

to come out because I am sure that the entire White House team is getting inundated with questions, like the ones that we're talking about right here. As far as things that create longer term sustainability for the industry, like progress on a stable coin bill and a market structure bill, I don't know how much that's going to happen because that stuff happens in Congress. It doesn't happen in the White House. And they're proceeding. I mean, I think we're going to get a stable coin bill.

Hopefully, within the first 100 days of the administration, market structure bill is for a more complicated. So I would not be surprised if that doesn't happen until 2026. So I kind of expect that from the meeting more details on this reserve or stockpile, whatever it is, and that perhaps kind of set an agenda for subsequent meetings or something that's throughout the rest of the year. So I would also say one of the other things that's come out of this, there's a lot of people like heavily critiquing David Sachs saying he's biased here because he has a bunch of exposure. He was an early investor in Solana through his funds and directly, I believe. I don't know exactly what his exposure is, but he came out publicly and said, I've sold all of my crypto and people are still

upset because he has a decent amount of exposure to Bitwise, who a friend of the show, we've had Matt, we've had people on the show many times. They're very vocal in the space. And they're like, well, they own all these coins. And part of me is like, yeah, but we're talking about all the coins, like they're the largest tokens and cryptocurrencies around. It's not like they went and chose like some random tokens that were like, you know, 47th on the world's largest. Like we're looking at here, you take out Tether, B&B, and USDC, and you, they're basically it's just holding all the top largest coins, right? So Cardano's down at eight right now if you go by market cap.

Obviously, Stephen spoke about before. Some of these are more heavily used than others, but there's a lot of people that hold a lot of exposure to these things. And by market cap, these are the largest coins. So I'll defend a little bit there, David Sachs on that front because, you know, I mean, Bitwise is kind of like the way I think about them. You know, in the gold rust, they say, you know, sell picks and shovels. And that's kind of what Bitwise is doing in my mind.

So, yeah, he has exposure to the space, but it's more just exposure to space overwall. And I'll think it the only thing that's out here that's like excluded that theoretically could have been included is B&B. And we all know that's the finance coin, you know, kind of tied with China, Champang Zao, all these things. It kind of makes sense why the U.S. government would not consider that potentially for a strategic reserve. which again, obviously everyone here isn't there. So I don't know if you guys have any thoughts there. Do you think it looks bad for David Sacks? Do you guys think it kind of makes sense?

Noel, you're shaking your head. What are your thoughts? I think we should give him the benefit of the doubt here. He did sell his spot holdings. He does have exposure via craft ventures, but he's not in this for the money. He has plenty of it already. And what he is poised to do for the industry

is potentially very positive. So I vote for giving him the benefit of the doubt. I mean, my sense is, I mean, given some of the Trump meme coin and some of the questionable decisions that I think we're seeing from people in Washington, him having indirect exposure to the, basically a market cap weighted portfolio of crypto tokens is really not a big deal. And for an industry that's as esoteric as this. I mean, we kind of need people that have that level of sophistication. And if he was exposed to all kinds of random meme coins and one's way out on the spectrum, that would be more questionable. But I'm not so worried about that.

Yeah, I'm not so well informed on this aspect. But the only thing I'd be curious is whether or not he has actually spelled out any rationale behind any of the questions we've raised so far. Have we actually heard much from him? Not yet. I don't think unless anyone else has seen something I have. kind of, you know, what we've seen in tweets and public statements, which, from my point of view, is not very explanatory aside from these are U.S.-based coins kind of thing.

What does it mean for crypto to be U.S. base? Founders are based here, I guess. I'm assuming developed in the U.S. But this is also strange because Cardano was developed by a Hong Kong-based company. In fact, its developer is still known as I-O-H-K. I know it's rebranded, but everyone calls it even on its website. It's I-O-H-K for Hong Kong, and the Cardano Foundation is based in Switzerland,

so I'm not quite sure what the definitions are here. And Solana Foundation is also in Switzerland, right? I don't know that. I don't know, I think that sounds right. And to clarify before I get yelled at, Cardano did relocate, the I-O-H-K did relocate to, I think it was Wyoming, so they're no longer based in Hong Kong,

but again, U.S.-based? Yeah, and the founders of Salana are U.S. guys, U.S. persons too. And part of, like, part of this kind of seems like, you know, a lot of people were running and people seemed to be coming back to the U.S. And I wonder if we didn't have such a hostile administration that we had over the last four to eight years. Because even the first Trump administration was not friendly to this space whatsoever. So I wonder how many things actually would have been founded here if it was not, you know, quite as hostile as it was. Before we get to the ETS, one thing that I wanted to bring up, I don't know if you guys have any thoughts. There was a statement from the SEC last week that basically stating what everyone kind of knew is for it.

It was like this huge news on crypto Twitter and X that mean coins are non-securities. That's basically what the statement said. That's kind of how everyone was already operating in my mind. The SEC has done a lot of things. They dropped a lot of cases that people thought they shouldn't have brought. They've provided a lot of clarity. I think this was just like really low-hanging fruit. This is kind of the way the SEC was operating.

They were operating via enforcement, not given any guidelines. And this thing that came out in February 27th basically said, yeah, these things are not securities. If they don't have utility, whatever, we're not going to consider them securities. They don't fall under the SEC. But they do caveat and basically say, if you do fraud and insider manipulation, like we can still go after you for using this, which is something we've talked about on the show before. To me, it's kind of like they're coming in after it seems like the SEC.

the meme coin has been like bubble as kind of completely deflated and they're like, yeah, we're not going to go after this. And it's kind of ironic because part of what the prior SEC admin did was basically made any tokens that were made with utility. They were going after saying they were securities de facto without any conversation. So the one way that you could do things was like, we're going to launch a meme coin and the SEC won't go after us. And like the one for the first real clear guidance we got from the SEC is, you know,

kind of what we already knew. I don't know if you guys have any further thoughts on this or. I'll go to you, Noel. I'll jump in with that and say, I'm actually kind of surprised. Obviously, mean coins aren't securities because common effort, et cetera, et cetera. But there is an argument to be made that if they're issued to make money, then they can be classified. And the previous ACC tried to classify stable points as securities. So I'm surprised that they put that line in the sand, and especially so soon after the confusion regarding the Libra launch, which was what, a week ago, two weeks ago, time doesn't mean anything.

anymore. And that was marketed as a meme coin, but really wasn't. So the takeaway from that episode was we need a definition. And I don't think anybody would be averse to the SEC, at least putting some guardrails around disclosures behind meme coins. So I was surprised to see that announcement. Yeah. I have a couple of thoughts on that. I mean, I think they did try to define a type of meme coin a little bit in that statement. I mean, basically something that was issued, I think, for, I guess, like, social value with like no promise of future development and no utility and no rights to feature cash flows and so on and so forth. I don't think anybody here would disagree that those things are not securities.

If a couple things, I guess two things I would think, though. One, I always wish that they put a little more text into that statement, just talking about how scamming mean coins are. I mean, we all got a couple of really good reminders from Melania and then from, Libra. But, I mean, you guys, I'm sure I'll know this. I mean, an ungodly amount of mean coin coins are are sniped and the token economics are even more disadvantageous than like ICOs back the day when they were sold to institutions at well below market price. I mean, the chances of ordinary person getting richer on meme coin is so small. I kind of wish some of those

numbers would be in there. But two, like, me, not every, I mean, there's lots of meme coins that are not just as defined by that guidance. I mean, look at, look at ship, I know that the team behind there is trying to build a blockchain actually create the whole ecosystem and utility. At what point with that morph from... Which point is this? I mean, they're trying to create a whole blockchain.

I know with Dogecoin, and I know those are not the same things as the pump that fund tokens, but with Dogecoin, I mean, there's been efforts to try to create additional utility and get usage behind them and so on and so forth. So, I mean, one thing I think people always need to remember is that the SEC, whenever they do something, it looks at very specific facts and circumstances, and those things can also change

if teams behind certain mean coins decide that they don't want to just be there for fun, but they actually want to create something. And also the Trump mean coin apparently can be used to pay for Trump merchandise on certain websites. So does that give it a utility, or does that even make it money-like? So you're totally right, Stephen, in that,

further clarification around what mean coins should be, can be, will be, it would have been useful. I think the SEC was correct in putting out a statement saying, no, we're not going to because there was a lot of speculation swirling around about the SEC marching in with their boots. But I agree with you. We need more information on that. And mean coin frenzy hopefully has died away, but people are people and it's not gone away forever.

I actually ran a story last week on this. looking at some of the pumpdut fund numbers. We saw dramatic drop-offs in users and tokens graduating onto radium. Ironically, the drop-off for tokens being created was not quite a start because I guess they're still trying, but that supply is still kind of continuing a little bit apace, but the demand has certainly been affected by those recent tokens that we spoke about. Yeah, it's too easy to launch these tokens. I mean, the one thing I would say is, one, I would love to see, like the SEC brings

suit against Trump coin for creating utility by allowing people to Trump merchandise while he's in office. That would be an interesting news story to cover. The other thing I would say is like going on when you were talking about Stephen about like sniping coins and things like that. I think what came out of the Malay, you know, the Malay token, the Libra token and that whole situation, call me naive. But like until that and Trump and some of these other things, I didn't realize how institutionalized the sniping and back end of these meme coins was and how much money people were using. And like, it was just a complete, a lot of it was very scummy, extremely scummy, I don't mind saying. So I think that, I think people seeing that has kind of driven down

the interest in the space because people realize like, I think there was kind of this aura of like, oh, anyone can launch it and make money and realize it's kind of like there's a lot of big like institutionalized people behind this that are like ripping retail off. Yeah. I mean, there's a couple of services out there you can use where you can actually see the concentration of token holdings within like the top one or 10 wallets and it's not unusual for 70% of the token to be held in just one wallet and and it's not advertised so meme coins are very dangerous and i think you're right james that this was actually a good public example to show people how how difficult it is to successfully trade mean points uh steve you have any thoughts on meme points with gambling speculating

Pure, pure speculation. It's hard to keep track, right? A couple years ago, you know, things such as Doge and, you know, she, you know, were meme coins. And today they almost see this somewhat, you know, sort of stores of value. Exactly. It was the beta, right? It's all sort of relative, right? You know, isn't that a term in crypto land called Lindiness?

Or it was a hollow coin has been around? I mean, I am an economist. So I think of things in terms of equilibriums and how things will eventually settle, settle down, right? I remember when the internet first came around, you know, there was a thought that everybody was going to have their personal websites, you know? And you're going to have tons and tons of different websites. But eventually, you just became Google, right? And a few other websites, you know, like basically news aggregators and so on and so forth. everyone is just visiting.

Most people are just visiting a few websites. And then you have some other websites that get, you know, less and less traffic is very exponential. I suspect that this is, you know, witnessing is going to be part of the journey towards something along that line where ultimately there's just not that much attention to go around. The budget of attention is limited. And, you know, I imagine to the extent that you go beyond the sort of the top five

coins that are going to be around forever for various base L1 utilities, you're just going to have people who are really famous being able to command that kind of attention. And that's what I speculate is going to happen. So interesting thoughts. Yeah, I mean, you could argue that all the, everyone's Instagram and Facebook profiles are kind of like their own website, but it's like a, it's a sub token, almost kind of like these, these pumped out fun tokens, but we don't need to go into there. What makes Rockwellette so special? Well, has the thought of your crypto being compromised ever kept you up at night? Yeah, us too. Rock Wallet is here to take that stress away. It's built with the security of your assets

as the number one priority. Rock Wallet is SOC2 compliant, FinCsun registered, uses two-factor authentication, and the tools just keep getting better, with more upgrades coming in 2025. Right now, Rock Wallet is offering $75 in LTC for Unchained Liston to give Rockwallet a try. Sign up and make your first trade by March 31st to qualify. Visit rockwallet.com slash welcome slash unchained to get started. Hi, it's Matt Hogan, CIO of Bitwise Asset Management. Every week, I write a five-minute memo exploring the biggest story in crypto. My goal is to give you an institutional investor's view on what's happening in the market. This week, I tackle the Trump administration's new plans

to create a U.S. strategic crypto reserve, and the market's tepid response to that news. The TLDR? The market is overthinking this. As imperfect as the proposed reserve is, it's long-term, very bullish for the space. To find out why I think so, check out my memo at bitwiseinvestments.com slash CIO memo. That's bitwiseinvestments.com slash CIO memo. Carefully consider the extreme risks associated with crypto before investing. macro and tariffs. I'll let Noel into that. I just want to talk briefly about the ETF situation. So, Coinbase launched Salana Futures just recently. The CME group, which is the primary Tradify futures market, is going to launch Salana Futures on March 17th. So there's like a whole

buildup here for all these all-coin ETS. We've talked about many times. One thing I do want to point out is there is a Salani ETF that theoretically could go live as early as March 12th. I don't know exactly what it's a Salana futures ETF. So we could see a Salana futures ETF launch at some point in March, particularly if the CME futures go live on March 17th. There are no issues. The SEC allows them to launch the ETF. There's no guarantee this can happen.

Unlike the spot products, we have like specific deadlines. In order to launch, the SEC needs a right order saying that you're approved to go launch, right? So, like, all these things need to happen with the way these future products works, it's kind of like if the SEC doesn't stop you, you can launch one, which uniquely enough last week, this is kind of getting a little off topic. But there's a private credit ETF that from State Street and Apollo. So anyone who follows Tradfai, Apollo is like a private credit, private equity fund house company.

And they basically taking illiquid private credit and putting an ETF wrapper. And they basically launched it because the SEC didn't really stop them. And then afterwards, the SEC was like, whoa, whoa, whoa, we still have questions. But this ETF is already trading. So just to give you an idea how this process works, I think some things might have gotten lost in the shuffle and the new SEC admin changing over, the fact that we only have a couple SEC commissioners rather than the full set of five. So I don't know exactly what happened there, but it's a very unique situation.

That's just to give you the background of like what could happen with these futures products. We have XRP products that are listed here. There's a whole bunch of these other future products that are trying to launch. It will be interesting to watch over the coming weeks. But yeah, we can see some of these things launched before the end of the month. I don't know if anyone has any questions there. Apart from the Solana futures, James, what other ones do you think we might see? What do you expect, apart from the futures ones, which do you think will be the next spot crypto?

Yeah. Oh, the next spot crypto ETF, we think it's going to be the light coin. But we have a whole bunch that have been filed, right? So we, Cardano, everything that's in the potential, you know, presidential crypto reserve, as it has active spot filings with the SEC. and they've gone through the entire process. Most likely, I think like Likecoin will be next. Something like Hedera is probably up there.

Doge has been filed as well. PolkaDot, ironically enough, which wasn't in the potential crypto reserve announcement has also been filed. HEDERA slash HB, which I said already. And then XRP and Solana. But I think XRP, Solana, Farno, part of the problem with why you can't really have an ETF is because they had those lawsuits out there. Most of these lawsuits have now been dropped that we're calling those things securities.

So I'm kind of curious to see how fast things can move. So we usually have this 240-day clock that starts. There's delays here. Honestly, what I'm most interested in seeing what might come first is actually these index-based products. So we have products that already launched that hold Bitcoin and Ethereum, and they're filing from Franklin and hashtags and Bitwise to, like, add other products to them. And then we also have a gray scale product and a Bitwise product that already index funds

that are going to provide you exposure, basically. Honestly, I wouldn't be surprised if we've seen an ETF filing this is the U.S. Crypto Reserve ETF that's just going to hold the same coins. Like, don't hold out, I wouldn't put it past any issue or filing something like that. Gray-scale, actually this morning they put out a tweet saying that I think that reverse of our product is like the only one. They're trying to uplisted and it includes all those tokens. Yeah, GDLC. Yeah, the Grayscale digital large gap.

So the final deadline for that is in July. Yeah. And of course, we have to be made in America crypto ETF. Go ahead, Stephen. I was just going to say, one thing, just going back to the White House thing, I forgot to mention, I really wonder if we're going to see a resolution to the Ripple suit before Friday. I mean, Cardana was mentioned as a listed as an unregistered security in some of the suits against, I don't remember the exact what's Coinbase cracking, finance, maybe it was maybe in all of them,

at least one of them. Ripple was the, Ripple is one of the only tokens that actually was singled out. And, I mean, it wouldn't be incredibly awkward if Brad is there with Trump and his SEC is still suing them because, I mean, that cases has been going through the court system for years. But I really wonder just for sort of like symbolism and for, I guess, showmanship that it would somehow we're going to get some news on that between Tuesday through Thursday. So that's not just hanging over everything. The last ETF piece of news that I want to share before we get to macro, I'll let Noel intro of that. BlackRock has added iBit to one of its model portfolios. Now, for those of you out there who don't know what a model portfolio is, a lot of issuers

basically send out these model portfolios for advisors to track or investors to track. And they'll basically say, we're going to put 15% in U.S. large cap. We're going to put X amount in small cap. and they give you the ETFs to do this strategy, and we'll put this much in bonds, this much in gold, this much in alternative investments, and these types of things, right? So it's basically a recipe to get exposure to the market that this issuer recommends. It's usually issuers. And the benefit is, one, the models are free, and they do it because if you follow their models,

you're going to buy their ETS. So there's different ways to do this. One is you just follow it automatically. Once the model updates and changes, you can have systems set up that are automatically going to do what BlackRock recommends, what Fidelity recommends, what, any issueer out there recommends. Everyone has these things out there. Even individualized companies offer model portfolios that just use, like, you know, it might be like Joe Schmo in the Midwest who has an active equity model portfolio that trades between ATFs, things like that.

So the thing is you can either, A, track it directly, B, you get it and you can choose to follow it exactly or maybe make your own changes or maybe you do want U.S. large cap in that proportion, but you want to use a different ETF, things like it. So there's all different ways to do it. But there are hundreds of billions of dollars tracking these portfolios. The one that BlackRock changed is like a subset of their big portfolios. It's not like one that's really followed all that much because it's specifically geared towards people who want alternatives in their portfolio. So what it is basically across the board, if you subscribe to their model portfolios where you have a specific goal of adding alternatives to your portfolio, now Bitcoin is

automatically recommended at a 1% allocation. So it's a small subset. of the model portfolios that BlackRock offers, and it's only a 1% allocation, so it's really not that much in the grand scheme of things. But from my point of view, it's kind of a big deal that they're starting to dip their toe in the water and recommend this in model portfolios. And I think they're going to take some time before they do it in the bigger ones, because as we kind of hinted at earlier, like this whole space is a lightning rod. And honestly, this, what's going on right now with the Trump admin might make it even more of a

lighting rod. It might anger some of their clients if they just automatically throw it into their largest portfolios. So I don't know if anyone's saying questions to thought. Yeah, go ahead, Steve. James was interesting is that earlier I mentioned that I had been a pretty long-time skeptic of crypto and what made me more bullish on the long-term value of crypto was actually when I went out west and, you know, spoke with folks on the West Coast, you know, sort of rich people, right?

I would talk to them about, you know, what they're invested in or whatever. And they were just casually mentioned, oh, yeah, like I have some, like equity, have some VC. I have some, like, you know, private investments, but I also have crypto. And, you know, I don't do too much about it, like, 3 to 5%. That's 3 to 5%. You know? But then, you know, the thing is, for them, I came to rationalize as that a lot of them made their money in venture. in their own business, or maybe they sold a company,

or maybe they've got shares from a tech company or whatever, that they use to a level of risk-taking, and they're willing to allocate to something. And there is almost what behavioral finance is called availability bias, where if there's a lot of math to be done, you've got to do a ton of math, right? That's why in TRETI, you know, people fight over bibs in fixed income. But when there's no method to be done, people just say, oh, what a heck, you know, 5%.

So, you know, there is no due diligence to be done on Android investing, so people allocate a certain amount. So that's how I came to view crypto as having, or Bitcoin as having values. Because once, you know, they managed to persuade BlackRock to basically make an allocation or, you know, argument. You're going to basically see that a sizable portion of lower liquidity or one. wealth being funneled through some sort of a proportional math, you know, into crypto, which just buy, right, you know, that logic is going to give a value. Anyway, I just thought, it's interesting that they started at 1 to 2%, but clearly see where this is all going.

Yeah, it's funny. I talk to a lot of people. Like, generally, the recommendation is 1 to 2%. You might see somebody recommending 5%. And you talk to people making those recommendations. And often they're like, yeah, I have 25% of my net worth in Bitcoin or some, or, or, you investable network, whatever you want to call it. Like I was on stage at the Bitcoin conference in Nashville interviewing a bunch of people from these issuers, Bitwise, Vanek,

you name it. And Steve Vanek, the founder of Vanek, basically said at that time he had 30% of his like investments in Bitcoin. He was like, I'm at Bitcoin or hard and all the stuff. And I was like, and meanwhile, they're out there. Yeah, one to two percent allocation. It's just funny, like the people recommending it often like at least are eating their own cooking in many regards. Go ahead. Noah. One thing, one thing is personal risk. The other thing, his career risk. Yeah, that's a good point. It's one thing to lose your own money.

It's another thing to pile your clients into a 30% allocation to something that goes down 80%. And never be able to work again. Well, I guess that's why VanEx Twitter account, well, X accounts, the profile picture is a NFC. Yeah, I do wonder how much that 30% where it started, because it clearly didn't start at 30%. I mean, may have started out at 1%. And then he held, like, many people in crypto that were smarter than I am 10 years ago. But yeah, it's interesting. And I'm really curious, too.

I mean, the research that BlackRock sort of put out that allocation for, it's sort of based on a paper that they published in December, looking at the risk profile of Bitcoin. And I think basically what they said was that I think like a 1 to 2% allocation, and they were very precise with the wording because I wrote about this when I was at Forbes. It was something like it offers the same level of portfolio risk as any of the MAC 7 companies. But as soon as you go above that amount, it just gets exponentially more risky. So that's where they came up with the 1, the 2%.

There. With everything happening right now with the market, and this maybe could be a segue into the macro part of the discussion, and the Mag 7 companies just sort of. going down the toilet, we shall buy European defense stocks now. I'm curious how that's going to change. Yeah, speaking of which, that's a good segue into macro. And speaking of the defense stock, I was just looking at my screen now. And it is a sea of red except for three things. One is the German stock exchange because defense spending. The other is gold. And the other is the VIX,

which is shooting up. But we have everything else. Stocks are well down. We have bond deals. The 10-year is well down today. Oil is plunging because OPEC have announced that they're going to increase production as of April. Plus there's some growth concerns in there as well. And crypto prices have not only lost the gains. I'm looking at Bitcoin and Ethes as we speak. They've not only lost the gains they got yesterday after Trump's post. They are now, hello where they were before he sent that message. So there is risk off today in spades. I'd say it's one of the harshest days we've seen,

and we should specify we're recording this on Monday evening. Who knows where things will be by the time you're listening to this. But the growth concerns are getting real, and the economic data that we're starting to see are starting to confirm this. I mean, slowing consumption. The PCE data we got on Friday, showed that inflation-adjusted, consumer spending fell 0.5% in January. That was the highest monthly decline in almost four years.

Today, we got February manufacturing PMI that showed new orders. The new orders index went into contraction. And a couple of weeks ago, we got a preliminary read on the services PMI. We get the final figure later on this week. But the preliminary read had the services activity index. going into contraction the first time in, to be honest, I can't remember when, but that's unusual. Services have been driving most of the economic growth for the past year, a couple of years at least. And the biggest shot came from the Atlanta Fed's, the Federal Reserve Atlanta's GDP now model,

which it takes all of the economic data, puts into a model, and spits out a prediction, not a forecast, a prediction of quarterly GDP growth. On Friday morning, that stood at expecting growth of 2.3%. Two weeks ago, it was at 3.2%. Now, it's 2.3%. Friday afternoon, once the trade information had come out, the goods trade balance, it plunged to a loss, expected negative growth of 1.5% for Q1 in the US. And we thought with today's information, maybe it'll recover a bit, but no, it has plunged even further. And now the Atlanta Fed is expecting GDP growth for the first quarter for the United States of America to be a negative 2.8 percent. And this is quite alarming. Obviously, this is a noisy figure, but I have never seen this kind of a plunge in the GDP expectations

coming from the Atlanta Fed. Typically, they are more accurate than consensus economics forecasts. So it'll adjust. It'll probably not be minus 2.8 by the time we're talking again. next week. But this is startling. It's being adjusted lower largely because of consumption and largely because of the trade situation, which itself could be temporary given that people are bringing forwards imports, given tariffs uncertainty. But given what Trump has announced on tariffs today, that we are indeed going ahead with 25% tariffs on Canada and Mexico starting tomorrow, 10% on Canadian energy. And in doubling the Chinese tariffs from 10% to 20%, And uncertainty is going to be on the table for some time to come.

He's already hinting about more measures coming forth. Beginning of April, we shouldn't see reciprocal tariffs on everyone, apparently, unless there's no wiggle room there. The uncertainty is not going to be great for consumption. It's not going to be great for the trade figures, and it's certainly not going to be great for the margins of the companies that have been making most of the, justifying most of the stock market gains for the past year and a half. So things are looking a bit dicey. The metric to keep an eye on is the 10-year yield. This is something that I obviously, that's the one that I'm most focusing on.

It's also what Treasury Secretary and President Trump himself are focusing on because the 10-year yield being uncomfortably high has been one of the biggest breaks on consumption, much more so than Federal Reserve monetary policy. That coming down should ease some of the pressure on consumer credit rates for mortgages, for car loans, et cetera. That's the one to watch. is coming down also, which will ease some of the global liquidity pressures. So we have playing out some very negative forces, especially the growth concerns for the U.S.,

and we do have some positive forces, as in things might start to look better outside of the U.S., not just from the defense spending, but from the easing of the DXY dollar index. Noelle, could I ask you a question about the 10-year yield? The New York Times had an interesting article today. It was something like Donald Trump's favorite interest rate is going down, but not for reasons that he wanted. And the argument they made was that it was coming down just because people are piling into bonds because of all the uncertainty. So I guess someone who follows this stuff very closely, like how do you sort of, is there a way to figure out like what is actually feeding into that drop or is it maybe too far out or too noisy? I do love that question because it gives me a chance to point out that with economics, it's always noisy.

There's always so much going in there. Jim Bianco, who we had on this show not long ago, he was writing this weekend about how he thought that the drop in the 10-year yield, because the price is going higher, but it's largely because people expect there to be less issuance going forward if indeed we get Europe to pay for its own defense. In other words, he thinks it's a supply issue. not a demand issue. And there may be some of that in there. I personally am more convinced by the demand issue. Investors are rushing into the year because it is seen as a safe haven in this uncertain market, but there's no doubt some of both narratives at play here. It's just the consumption story, the slowdown of consumption story is compelling. It's interesting. Coming into the Trump

election back in December, I had already expected the 10 year to come down. In fact, had a bet with my boss at work that we were going to see, you know, the 10 year actually come down to, you know, close to 4 by the end of last year. And then at the end of last year, we went and renewed that. It was surely going to be under 4.5 by the end of January. Neither came to pass. but my rationale for the time was always that I thought the run-up in 10-year-year-old and the growth expectations as well as growth optimism, you know, among, you know, everybody who got a little giddy about another Trump term was entirely unjustified, right? That there was a lot of projection and hopefulness who are projected onto Trump

because he had presented himself as a blank canvas as to anything goes, right? You ask him, he would tell you, I'll do that, right? So same thing with crypto. Crypto, people have predicted so much hope, right? Anti-Trump's friendliness was the crypto space. So my thought was that eventually this was going to wear off. Once people remembered that it was not going to be easy for him to do any of the things that he had promised, that it was going to take effort.

and he was also not exactly the most sort of, you know, organized person when it comes to doing things that he can use got out all get a little, you know, sort of hazardous. So in my opinion, what we're witnessing is not even necessarily, you know, the, the bearishness with respect to the economy that we're going to enter a recession, which we may well if current trend persists. But I do think a lot of what we are witnessing is sure I've been expected that once the inauguration happened, reality sets in and then you know sort of you already priced in

all the good stuff the high mean now you're pricing in the high variance you know the high variance is that like for example earlier today

we were chatting about why did the market dumped today even though we had known about tariffs for such a long time is because Trump does these things

so haphazedly that up to the last minute you never really quite know whether he's actually go through with it for real or not the last couple times

he sort of yanked at the last minute and said oh, by the way, never mind. They called me and there was a good phone call. And so they had a good phone call today, and you didn't. So, I mean, it's hard for me to take a lot of this series. I mean, looking at the Atlanta Fed Nelcast, I'm just looking at Bloomberg's B-Co models, you know,

a dashboard where we show not just the Atlanta Feds nowcast, but also the New York Fest nowcast, so as Blomberg's own. and it seems to me that while the Atlanta feds one plunged, the other two are quite stable. And historically, those two have also been mostly, I think the reason is because New York Times one uses more of a moving average. I saw New York not New York Fed. Whereas as Flenters, they sort of let the newest data influence, you know, the forecast, you know, a bit more. So, you know, remains to be seen as no-out or you just said, but I suspect in a couple of weeks we're going to

see a bounce back. Yeah, I agree. I do think we'll see a bounce back. Another interesting point about the dropping 10-year yield is that this is happening at a time inflation expectations are shooting up. The conference board released their latest consumer survey, I think it was on Friday, and expectations from this survey for inflation 12 months out, one year away, 6%. 6%. Now, the University of Michigan was, I think it was the previous week. that is not quite as high, but inflation expectations for five to ten years out hit 3.5% in the University of Michigan survey for the first time since 1995. So inflation expectations are not exactly anchored as Chair Powell likes to say, but we are seeing the 10-year yield

dropping intuitively would have expected the opposite. Yeah, I think you just showed how much people are running to safety. Yeah. I mean, I went to Michigan. You know, I'm not on my alma mater, but I also suspect those expectations are wrong. You know, as we have seen, I think someone did a decomposition, right? If you sort of decomposed that. Yeah, by Democrat and Republican, right? Right.

Democrat's expectations of inflation went way up and Republicans went way down, right? Is there a flip? Republicans almost had zero, which makes no sense whatsoever. Right? Republican expectation of inflation swathletes out at zero only. I'm having trouble taking either the media or the mean of their expectations, series very seriously. I am looking at the inflation swaps and they seem fairly stable.

I mean, and like inching up a little bit, but, you know, bubbling mostly. It is very interesting to me that, you know, this podcast where we talk mostly about crypto, that, you know, people who do pay a lot of attention to macro, which of course has to do with the fact that a lot of crypto is driven by liquidity, or at least the perception thereof, I do wonder if at some point we're going to see a divergence and decoupling of cryptos and asset class from simply a high beta version of cues. What do you think? I get this question a lot.

I was actually giving a talk about this precise of the issue the other day, and my answer is no, we're not going to see a decoupling because crypto will always be a risk asset for some traders. It is a high beta. It has the right volatility. It will always be that, no matter what other narratives are going on. And crypto prices are what the last trade reflects. And so short-term traders, those that tend to churn more, in other words, those that do see it as a risk asset, they're generally going to be the price setters. However, crypto, let's Bitcoin, let's narrow it down. Bitcoin is also a store of value for many. That is the narrative that BlackRock is and many others are pushing, for instance. And for many others, as you were hinting at earlier, Steve,

it's a new technology. That's why you have so many of the California crowd involved. So Bitcoin has many narratives and will always go with whatever narrative happens to be top of the pile on a given day. But that changes according to priorities, moods and events. So that's one of the things that gives Bitcoin a higher floor than other assets would have, because it's not just one thing. There will always be someone stepping in when Bitcoin drops because of risk concerns, because they see it as a store of value and now it's more affordable. Just as if the store of value narrative should wane, there are many other reasons to buy it. That gives Bitcoin a higher floor than many other assets can enjoy.

And I would also say if this year is an indication of what you just said, I don't know what is because theoretically, if you think it's trading on the idiosyncrasies of crypto as a whole and Bitcoin specifically, or maybe Bitcoin less but crypto as a whole, I mean, every headline this year has been like tremendous. If you had told me a year ago about the headlines about these drop lawsuits, the SEC meeting a crypto task force, all these different things happening. I could literally list like 40. I'd be like, oh, my God, that's so bullish for the space. And it's been the exact opposite for the space this year.

Like, the price is just tanking, broadly speaking. Obviously, we've had some rallies. It's volatile. It's a volatile asset class. But it's not really, it's creating more like their risk assets are. And the other thing, I would say, going back to what you were talking about with, European versus U.S. markets, it's funny. Like, if you look at the, on the Bloomberg terminal, I have these monitors.

And like, one of them is the world equity indices. And it's broken out by like America's EMEA and Asia Pacific. Every single index in the Americas is red today. Every single index in Europe, EMEA is green today with the Dax, the German exchange, the German index you mentioned before, up the most over 2.6%. Asia is a little more mixed, but mostly flat. Gold is up. So again, it's just like there's very different things.

And I think a lot of it has to do with like Ram has been on this podcast saying like Trump's election was like 100 bips of cutting because of like the, euphoria that people felt, because I think it has to do with Steve Howell, what he was just saying, everyone thought Trump was going to do everything for everyone and everyone was just bullish inflation expectations or like growth expectations. I think that's kind of unwinding right now. I mean, if you look at the U.S. equity markets, we just did a podcast, which Steve has been on, actually, about like the case for Europe. And the case for Europe was kind of like the last like through a few months, people were talking about Europe because like it really couldn't get any

worse. Like the way that risk markets trade specific equities is like expectations. Like, how do you expect the earnings to be? And the expectations for the U.S. market towards the end of last year got insane. Like, it was going to be extremely, extremely hard for the U.S. market to do well. One of the reasons it did so well the last few years is because everyone was worried about all these inflation issues, all these things and it basically climbed a wall of worry. Whereas Europe basically had no expectations. And all of a sudden, earnings are showing up. We're starting to see those defense, German defense stocks pop up. And if the Eurozone, you know, actually starts investing in their own defense and printing money, money and doing different things. You couldn't end up with a situation where they're like actually piling in and there's been no expectations for this year for Europe because everyone's just so beat up that you end up finally getting some money getting allocated to Europe from from around the world. So there's this unique dichotomy where... I do you want to hear what Steve, Stephen thinks. I heard over the weekend I was listening to, you know, these Taiwanese, you know, geopolitical commentators talking about

as allocation globally. And they were talking about how over the last few years, because of global uncertainty, the Ukraine conflict, you know, Middle East and so forth, it was just a lot of, I think, flight to safety and people are safe, you know, in the U.S. risk markets, right? Plus, of course, the general liquidity environment. Now, with the prospect of the war winding down in Ukraine, if it does wind down, You can have a more benign global geopolitical environment in which case people are under allocated to Europe. People are under allocated to China.

And you can actually see a flight of risk capital out of the U.S. towards those geographies. Curious. What Steve, you said at the outset, you didn't think at all that with any chance of the war winding down. It might have been a little bit tongue in cheek there. I mean, clearly I hope that the war winds down because it's just been a trend. tragedy for, I mean, frankly, it's just a massive tragedy. A lot depends on exactly like how, like, how the war winds down.

Like, is there going to be a ceasefire? How sustainable? Is it? What type of security guarantees is Ukraine actually going to get? Because, I mean, I remember, I mean, you guys probably do too. I remember when Russia invaded Crimea in 2014. It's just sort of like, I don't have sure what the word is for the type of territory. But, I mean, it was like 80% of NATO-Russia. I mean, these were people that were part of Ukraine, but really wanted to be Russia. And then there were peace accords, and Putin ran over them when he invaded Ukraine again.

And who knows what's going to happen with all that? And then the real question related to Taiwan is what's going to happen if and when China attempts reunification, perhaps by force? The U.S. has always been, I don't want to get too much in the weecher, but the U.S. has always maintained sort of a stance of strategic ambiguity, where we've never actually said if we would come to the defense of Taiwan in the event that China invaded. I know Biden actually kind of- I was going to say Biden actually did that. I think most people probably any of its predecessors had, but even still, like the official policy is strict ambiguity.

And God knows, I mean, we are much more tied up to the Taiwanese economy because of semiconductor chips than we are to Ukraine. Ukraine, from economic point of view, it's more of a European problem than this one. So, I mean, frankly, I think if a lot depends on like, That's the next flashpoint to look towards. And just because of how big a presence we have in Asia and just that it's been a goal of China to do this for so long. And if they feel that if and when the Ukrainian conflict ends and it's done in a way that is advantageous to Russia, like people in Beijing, I mean, they're going to clearly think that now is the time. Because if, like, why would, I mean, the thought process would be why would Trump encourage the U.S. to go.

defend an island that most Americans probably have never heard of, let alone could pick out on a map. And if that happens, then who knows? It's, I get the idea of rolling in. You see, it's hard to envision, but I, for me, for the longest time, always thought one value of position for crypto was exactly a world in which we returned to a three World War two kind of a spheres of influence, full segmentation of the Delta or Yalta 1.0, right? where Trump basically just seized Ukraine to Russia and sees Taiwan to China and say,

you guys have it, you have your backyard, I'll have mine, and, you know, everyone just operates in their own backyard, and, you know,

you'll have segmentation of global financial systems, and they're not operated by crypto. I mean, I guess that's one way to look at it. From my point of view, the idea of, like, great power rivalries and sort of like this inarchic nature of international relations,

and this kind of gets, since all the theory I did in grad school and sort of the decline of like of American liberalism. And that type of world has not always been very sustainable. And the idea that Bitcoin is sort of this like supernatural or super national currency that kind of floats amidst this like world of Waldorf Gardens. I don't know. I mean, I don't think that's good for anyone, although perhaps we're going that way. I mean, just looking at like the rise of nationalism across the globe. I mean, Trump's not alone in that.

It will be interesting. It will be interesting to see. One thing I would quickly add, though, just going back to the previous conversation about how uncorrelated Bitcoin is. I mean, I agree with what you said, Noel and James. I mean, as it becomes more institutionalized, it's going to remain highly correlated. I actually looked at the last few times that Bitcoin kind of decoupled the rest of the market. And a few and far between it. I mean, in November of 2022, the market was going down already, but then when FTX collapsed,

the bottom just fell out of crypto and the rest of the market kind of kept going. And then on the flip side, when all the good news came out about the Bitcoin ETFs, like when Grace Go won that decision against the SEC, and then when the listings were approved, and then they finally started, I mean, those were very much sort of like endogenous, like, bullish crypto scenarios. I don't know what the next one's going to be. I mean, we maybe sort of had one with the announcement of this reserve, but people were kind of disappointed in it.

maybe if we get more details, we'll know something about it. But other than that, I mean, I'm curious maybe what everyone else thinks. Like, what would be the next big sort of event that would be isolated to crypto that could cause it to move in its own direction up or down compared to the rest of the market? I was writing about this the other day. I get asked a lot, what's the catalyst? That's the catalyst. And my catalyst is just sellers get exhausted. It's not an event.

We've seen events themselves may have a short-term blitz. but not a sustainable one. What's the sustainable blip that's going to, what's the sustainable move that's going to get the next part, leg of the bull run going? Sellers getting exhausted. And we need new money to come in. We are seeing that.

We're seeing new money come in through the ETFs, through the other acquisitions from large institutions. We know this is happening, but there are still sellers that are offloading and taking profits. When they are exhausted, then there isn't a lot of available supply for the new buyers to accumulate, and that's when the run starts. Bull runs are always, always, always driven by new money coming in.

And right now the new money is coming in, but at a trickle and it is being met with selling, when it starts to come in with more enthusiasm and the sellers aren't there, we're going to start to see some sharper moves, which will bring in more money, and that's when it really gets going. But I don't think it's going to be an event. I think it's going to be that. We just reached that inflection point in the cycle. I honestly would have thought the crypto reserve thing was going to be such a shock, you know?

Like if we haven't had the tariff news, I wonder if you would have been such an orthogonal, a uniquely beneficial news to crypto, especially if you create a snowballing effect, which I'm not sure it's going to, but let's say Saudi Arabia also announces its own, you know, crypto reserve, not out of the realm of possibility, right? you could get in your situation where, you know, you start to acquire its own dynamics. So that's just a theory. Yeah, that's the game theory, right, playing out. But I think part of the problem is, like, from issued that tweet, and it's still not very clear.

We talked to this beginning, like, how would this video happen where when it would happen? Like, he's just saying he wants it to happen, which granted, he has done a lot for this space in general. He's, you know, kind of done a lot of his, you know, promises made, promises kept type things. But, like, it's not very clear how he's even going to do this. But And any nation state accumulating If they're intelligent They wouldn't tell anyone until it's done

Yeah and even Cynthia Lumas talked about this A state will probably do it first I mean I'm surprised Wyoming wasn't the one to do it But there's a whole bunch of states trying to do it Maybe they don't get through in this past But I think it's more likely that a state will do it Before the federal government necessarily But time will tell I guess

We went a little long We have a whole bunch of other topics that we wanted to get to but we didn't really get to. Let's wrap up with this one. Bank of America CEO, Brian Moynihan, basically said that they were going to launch their own stable coin, which I found fascinating because in my mind, stable coins, as we discussed in the show, many, many times, they are one of the definitive use cases for blockchain. It's the first real use case of, you know, real world asset tokenization, putting dollars

in the blockchain. It's interesting that Bank of America sees this. I don't know if you guys have any more companies. complex thoughts than that before we wrap up. I've been looking into this, I keep that because stable coins are, you know, the product market fit of the crypto industry for now. It doesn't make a lot of sense. There are going to be a lot of bank stable coins, but it's not a great business model for

the banks because right now the stable coins are going to compete with deposits. And the thing about deposits is they can then lend them out, which is where they make their money, right? They can't do that with stable coins, one presumed, because they're going to who we can assume, depending on the rules, be one-for-one backed. So, again, it's going to be competing with its own business. So I don't really see the point. And stable coins obviously are a much better deal for the user than are tokenized deposits.

Maybe that's what he was talking about. tokenized deposits are simply a token representation of bank deposits. And you then have to do the deposit and ledger adjustment in the background once you've move the stable coins around. And they are of limited utility within the world gardens. And maybe that's what he's talking about. That makes a lot of sense. We know J.P. Morgan, for instance, have been doing really good business.

On theirs, others are going to be following suit. But that's a very different type of asset than a stable coin. So I don't know what he's thinking of there. We're going to see a flood of stable coins. We know that. They're already new issuers appearing almost every week. But for banks, this is a shift in their business model. For me, I mean, I think what he's thinking about it is the number of $13 billion, which I'm sure we all know what that means. That's tethers, I guess, underified profit from last year. In many ways, I mean, there's no better business model than running a stable coin at scale. You get, you basically get deposits. You pay no interest on them and you can invest them in treasuries. I get your point in a well. It kind of could cannibalize deposits. Maybe my sense.

is that like B of A or anyone else who tries this might try to use it as a way to bring in additional money that doesn't compete with deposits and perhaps even as a customer acquisition tool that then they could try to get users of Bank of America Coin or whatever to open up banking accounts and credit card accounts and so on and so forth. But it's just, I mean, the business model, if you can run a stable coin is so lucrative, it would just like it'd be almost in some ways to not at least kick the tires on it. The real trick, though, is figuring out how to do this

in a way that you get that scale. I mean, PayPal, I forget how long ago it was, a year ago, two years ago, they launched their stable coin. They haven't reached, I don't think they've reached a billion dollars yet in market cap. And Tether is 100-something. I don't even know what it is in circles at like $55 billion. I mean, no one has really come close to unseating

either one of those. actually Palo Arduino CEO of Tether said that if he's only in an interview a couple years ago he actually thought he would get dwarfed by like a JPM coin or BFA coin or something like that because of the scale of those banks and he wasn't so worried about it because he always thought that Tether was more for international users not US but you just look at the profits for Tether

which is the most profitable company in all of crypto and their business model is so simple if there are clear rules, I would think every bank would at least take a crack at it and see if they can find the mix that works. Steve, do you have any thoughts before I throw mine in a little more? I know absolutely nothing about this. But so what no other said made a lot of sense to me, it sounds like for me is just a competition and cannibalization of deposits, which large banks of all institutions get away with, you know, for paying nothing. So why would they now provide an instrument that actually pays interest?

Yeah, I would say two things. One, I mean, right now, Tether isn't paying anything. The problem is it's just, again, like you said, it's not a cheap source of capital. They can't really do anything theoretically. They just have to hold the assets, but they get to keep the interest. They don't have to pay anything up. In many Bank of America, I should have looked up what the actual standard savings account is, but it's probably a couple basis points, maybe like 10 basis points in the most.

So it already is like free capital for him. This is kind of their business model. But what I would say is, one, this jumped off, jumped out to me because I didn't, Bank of America hasn't been involved in like any of these conversations I've heard in the crypto front. Like, I've heard JP Morgan doing stuff with blockchain despite Jamie Diamond not really being a huge fan of it, right? I've heard Citigroup getting involved.

US Bank wants to custody this stuff. Like, there's all these other banks that have been, you know, kind of circling around the space. I haven't really heard much from Bank of America. I mean, I know last I checked like most of the plastic. platforms like Merrill, which is part of Bank of America, can't even hold any of these crypto assets. So it's interesting to me. But from my like world of ETFs, what I think of this might be is kind of like cannibalization makes

sense. But like at the same time, Noel, it might be kind of a thing we need to get our help or like dip our toe in the water, understand this, get involved because it might be better for them to cannibalize themselves than to get eaten by somebody else. So what a lot of ETF issuers will do is they'll launch competing products that are cheaper and better than their own products that are legacy that make them a lot of money. but they would rather cannibalize their own selves than let somebody else come in and take their own market share. So I think this is just like they need to get involved to like know what's going on because stable coins are coming.

Yeah, that makes a lot of sense. And what excited me about seeing that report was the idea that we're going to be seeing large banks experiment with defy services. Perhaps not right away, but by next year I really think we're going to be seeing that and they're going to need stable coins for that. It'd be very interesting. Brave New World. All right. Anyone else have any final thoughts before we wrap up? It's going to be an interesting week.

So much to talk about there always is. Yeah. I mean, we didn't really mention specific. I don't know if New Wells City or a thing, but they're also going to be agricultural tariffs that are going into effect in the beginning of April. So, I mean, there's all these. The opportunity to talk about tariffs.

You know, this is kind of the theme, you know. This is his favorite word, after all, always his fourth favorite word or whatever. And yes, crypto is risk asset. Bitcoin behaves like a risk asset today, it for sure is, but gold is going up and that will reflect on the Bitcoin narratives at some stage. Yeah, I mean, one thing I will say is like Biden was almost like completely out of the public eye for like a lot of his administration. And like Trump is the exact opposite and that he's like the headline of the news every single day. It feels like every day he's in the news. And it's kind of like, I mean, me personally as an American, like, ideally, I'd like it to be like somewhere more in the middle.

It's kind of tiring. It's exhausting. It's exhausting. I mean, today he was like, maybe we'll keep upwing those tariffs, 10, 20, 50%. Who knows how high it could go. I saw him talking. I was like, oh, my gosh. I went through my files this weekend.

Since the beginning of the year, sorry, since the inauguration, since the beginning of the year, no, since the beginning of the year. Let's go for that. We've had one weekend without a major breaking drama in crypto. one weekend. Yeah. Tiring. Well, it gives us a lot of stuff to talk about every week. So there's that.

For sure. All right. Thank you for joining us for this episode of Bits and Bits. We'll be back in one week to discuss more about how the worlds of crypto and macro are colliding. Until then, everyone.