Unchained - Bits + Bips: Why Bitcoin Was Strong Amid the DeepSeek Selloff But a Drop May Be Coming - Ep. 774

Episode Date: January 29, 2025

From AI shaking up Big Tech to bitcoin’s role in the macro landscape, Jim Bianco delivers insights on the DeepSeek-triggered market selloff, memecoins, and the challenges facing traditional systems. In this episode, the macro strategist shares why DeepSeek’s AI model is reshaping competition, how crypto reserves might evolve, and what happens to MicroStrategy if bitcoin’s price takes a hit. Plus, hear his take on why stablecoins are a threat to banks, and why memecoins could be more than speculation. Show highlights: What of crypto attracted Jim so much 0:49 What of crypto attracted Jim so much 6:15 Why the DeepSeek new model was so disruptive 12:47 Whether the biggest loser is OpenAI, not all the Mag 7 16:14 Whether we’ll see a major macro response from U.S. companies and government 26:06 What will happen next with the price of bitcoin 28:54 What would happen to MSTR if bitcoin goes 30% lower 34:11 How Trump was able to move so fast since the inauguration 39:30 Why the Fed should not do QE, according to Jim 49:02 How memecoins could be designed to be much more than speculative assets 53:03 Why James hopes the SEC doesn’t approve all the memecoin ETF applications 58:06 Whether banks will start onboarding crypto companies 1:05:52 Why stablecoins poise an existential threat to the current banking system 1:11:19 Whether it’s a bad idea for the U.S. to acquire other cryptos that are not bitcoin Hosts: James Seyffart, Research Analyst at Bloomberg Intelligence Ram Ahluwalia, CFA, CEO and Founder of Lumida Noelle Acheson, Author of the “Crypto Is Macro Now” Newsletter  Guest: Jim Bianco, President and Macro Strategist at Bianco Research Links CNN Business: Trump announces a $500 billion AI infrastructure investment in the US Unchained: Tuttle Capital Files for 10 Leveraged Crypto ETFs CoinDesk: Nasdaq Files for In-Kind Redemptions for BlackRock Spot Bitcoin ETF Reuters: US, Colombia reach deal on deportations; tariff, sanctions put on hold Learn more about your ad choices. Visit megaphone.fm/adchoices

If there's been anything that's come out of defy, it's definitely been stable coins. If you're going to put an ecosystem around that of trading and of banking and of lending and of borrowing, it's going to be around stable points. But that is an existential threat to the current banking system. And that's really where the Fed steps up. That's why I said, why is the Fed approved no charters since Dodd-Frank? Because ultimately, at the end of the day, they're protecting the existing incumbents. and they like the system we have.

Hi, everyone. Welcome to bits and bips, exploring how crypto and macro collide one business point at a time. I'm your host, James Sefert, Bradfairch, archmaister, Lord of Bloomberg Zen, here with Rahm Alawalia, maister of wealth, leader of Lumido. What's going on?

Noel Atchison, hi, hi, seer, and keeper of the crypto is macro now newsletter. Hello, everyone. We're here to discuss the latest stories in the world of crypto and macro. Should remember that nothing we say here is investment advice, please check on chaincrypto.com slash bits and bips for more disclosures.

Today, we are also joined by Jim Bianco, the macro oracle of Bianco research. Jim, why don't you give us a little bit of a rundown before we dive in on who you are, what you do, and how you are involved in the crypto space at all? Yeah, thanks, James. Jim Bianco, I am macro president of Bianco Research. I've been doing that since the late 1990s. So I cover mainly a fixed income market, a lot of macro kind of themes. for our institutional clients.

About a year and a half ago, I started an index called the Bianco Research Total Return Index. It's in the total return fixed income space. My partner Wisdom Tree has an ETF that tracks it. WTBN is its symbol. My, I came to the macro space through, I mean, excuse me, I came to the crypto space through macro around 2017. I first got interested in Bitcoin when I was blown away that the price. price got all the way to $1,000, and I couldn't believe how high the price was back then, and had been playing in the space in and out ever since.

As a macro-tradfai guy, I'll piss off the maxis to get started right away. I am more kind of aligned with more the defy protocols and the defy aspect of what the crypto space brings. So I am very, you know, sympathetic to Ethereum, although it has not been performing very well lately. And I am sympathetic to things like Solana and what it's trying to do as well. And in addition to just being, you know, a fan of Bitcoin. So that's kind of the short course of who I am. I remember, Jim, back in the day, I was in 2017, it must have been.

I was working at Coin desk at the time. I mean, you were the first macro analyst that I followed, and I followed many, but especially you, you were the first to start tweeting favorably about defy. You were the first to start talking about defy. And this was such a shock for all of us deep in the crypto weeds that someone of your reputation and renown was speaking favor of Defi that we were even wondering, maybe his account's been hacked. Maybe it's not really him. Well, my account has been hacked in the past. And there is at least one meme coin that somebody hacked my account and tried to rip up.

people off with, unfortunately, that was a fail. But no, I really, you know, I think that I looked at crypto from the disruptive standpoint, kind of like Uber to the taxis or the internet to newspapers or Amazon to retailing. And I was thinking crypto is going to do this to financial services. And so when, you know, defy, especially DFI summer in 2020, when it really started to go. And I really started to get into, you know, the weeds with some of the OG protocols on the Ethereum network like Balancer and Curve and AVE and Uniswap. And I really started to like what I was seeing there. And it was really, you know, Nexus looking at some of the insurance aspects of it, that this was potentially going to be or still can't. be still is, you know, a whole new financial system that could be sprouting up from,

from the, from the crypto space. And I might add, I've often argued that the world kind of needs it. Now, when I say that, you know, maybe we don't need it in the United States because we're, you know, the alpha of the entire financial system. And we've got rule of law and we've got a lot of regulations and we've got broadly based, you know, access to the banking system. There's not many unbanked people in the United States. I know there are some. But in the third world, you know, through Asia, through Africa, through the Middle East, they are stuck with either shaky currencies run by irresponsible governments, way more than our government is irresponsible. And, you know, unsafe financial systems, either the banking system or the brokerage systems or the money transfer systems.

And that's where, you know, I thought defy could really make a big difference. A lot of people agree. It's just that, you know, it's five years on, and we're not really seeing a whole lot of inroads into that space. I haven't given up on it. I just thought we'd be a little further along after five years after Defy Summer than we actually are. Yeah. I mean, that is the critic's number one claim. I would say, like, there's some sparks of brilliance that could come out of this.

But really, the only use case, as far as I'm concerned, is stable coins, has really, truly come out of this. and digital store of value, you could argue. So arguably, we could have been further along had FTCS not happened. Yeah, that was a real blow. That was a real blow. That and Terra, Luna Terra, also was a real blow to the system as well. Set us back years, but, you know, time to start thinking about catching up, perhaps. Yeah.

All right, let's get into what is the, you know, the topic de jure. today was the day that so we're recording this on Monday, January 27th. Everyone basically over the weekend and particularly today was looking at Deep Seeks AI. Basically they released an AI. And you had the NASDAQ down over 3%. The S&P 500 down 1.5%.

You had Mark Andreessen saying Deek-R-1, which was released, it was released like a week ago. I think a week ago today was when R1 was released. and people are up in arms about how much it actually cost and all these different things. But what it really did is we had almost $600 billion wiped off the valuation of NVIDIA in one day, which is the most that any company has lost in a single day ever. More than the annual GDP of Norway. Yeah, there you go.

The numbers are kind of insane. I guess, like, I'll turn it over to you, Rob. You're an AI. You're an Nvidia believer. What are your thoughts here? How are you looking at this? Let's dive in. So there's the deep seek story.

Then there's the kind of market position around data center overall. So the deep seek actually came out as a story about two weeks ago. I interviewed someone about deep seek in my podcast, Michael Preck, who is a contemporary of Mary Meeker and Henry Blasjit, internet analyst. He walked us through it. So it takes time for the market to process this. What happened, especially on Twitter or the last three days, was this hyper-phenetic kind of fury around Deepseek

because allegedly it took $6 million to get this training run done and create a model that is comparable or better than OpenAI. And one of the greatest delicious ironies of this is that the DeepSeek model is open source. You can read the white paper and OpenAA model is closed source. And so here you have this Open AI contrast in China. They did it for $6 million. And that's not the total cost. They had other training runs and those other fixed costs. and they probably have other Navidia hoppers in the background,

all the rest, whether it's 6 million or 20 million or even 100 million, it's not that. It doesn't really matter. The return on AI spend that they achieved so dramatically and so quickly, by building on top of, by the way, meta's open source white paper, Meta Lama 3, they published that, was dramatic. It was developed by a China Quant Fund, essentially the Jim Simons of China, right? Maybe it's a little bit of exaggeration. It's a quant fund, smart guy, got a team of people.

They built this AI competitor. And it's very powerful. You can download in the app store. It's downloading more than OpenAI. It's got higher download usage. It shows chain of reason. If you ask it a question, it'll tell you how it's thinking in real time.

So that sent Navidia, as well as a data center theme, more generally down. Navidia is down like 70%. Talent Energy, Vistra, Constellation Energy Group. That's the owners of Three Mile Island who need to deal with Microsoft.

They're down like 20, 25, 28%. And so in other areas of the data center theme. I think you've taken a step back, though, last Thursday, I wrote about this on Twitter. I can show that post too. And we're long the data center theme. But last Thursday, you had Trump at Davos saying, everybody cut your rates,

United States and globally, number one. And you had Project Stargate announcing $500 billion of investment. from Microsoft and Oracle and Open AI. So you had this peak sentiment moment, including China. Everything was real. Everything was green coming off the wake of Trump's inauguration. So everything was just bulled up. Everyone had all their chip stack in.

And I wrote then on Friday like, hey, that's a peak sentiment moment. We should take risk off. So I think the market was vulnerable to any negative news. Deep Seek happens to have been the focus point. And that's what's corrected today. As a deep seek expert, because I learned. learned about it on Friday, so I've had now two and a half days to... Yeah, you and everybody else on Twitter or X.

Yeah. Right. I'll just come up from it from a market standpoint. You know, the max seven stocks are the dominant AI providers right now. They're 34% of the market. And as Ram was saying, if what DeepSeek is presenting to the market is a lower cost, more affordable way to get into this space where you don't have to do like, Microsoft in contract to restart three mile island to power it, you're going to get a lot more

competitors and you're going to get a lot more, you're going to get a lot more margin pressure. And the moats that these companies had are going to, you know, kind of, you know, go down. And it's going to allow a lot more people in. So the profitability that you thought they were going to have Friday is being rethought. But it's affecting the entire market, given their massive size that they have in the market. So I just see it as from a moat, a price pointing, you know, a monopoly standpoint, that this thing is potentially going to chip away at their monopolies. And it's going to allow other players who can't afford to restart a nuclear plant to play with this to maybe start getting into this game. And so that's, I think, the way that the market is viewing it right now.

Jim, I love the pun you made about chipping away at their monopolies. That was very good worth calling out. As you mentioned, Jim, I see this as really good news for anyone who isn't an Nvidia shareholder, obviously brutal for some of the market. But stepping back, zooming out, good news for pretty much everybody else, because cheaper AI is when we might finally start to see some of the productivity gains that have been dangled in front of us for so long. And any dent in the concentration, the very dangerous concentration that the market had been

reaching, I mean, unprecedented levels of concentration, as you pointed out, has got to be good news for overall market health. I just jump in real fast. I completely agree. One of the benefits of when the Internet first came on 25 years ago was precisely because it was decentralized and cheap. Anybody could get into it. Anybody could be sitting in their dorm room and invent a source.

social media thing called Facebook and wind up, you know, blowing up. You did not need a billion zillion dollars to get into this space. So if we are going to decentralize this, max seven lose the entire planet wins on some kind of scenario like that. But it was notable that I think, James, you mentioned that 300 new highs in the market, right? So you are seeing that broadening in breath that's playing out. So, you know, distributed low cost intelligence benefits, everyone else. But I don't they actually play out that way because not every player's AI forward and there'll be winners and losers. And even in the tech space, I think the real loser here is open AI. If you're an open AI shareholder, you should be terrified because you've got a knockoff competitor

that can enter the market and distribute is beating you in the app store with not a lot of money. But actually, if like a meta, I think they're beneficiary. They don't necessarily need to spend $50 billion in CapEx. We probably spend it anyway because they can't afford to be number one. the stock was up 2% at some point in the day closed down in the red. But overall, you know, the market's trying to process the winners and losers here. And I don't think actually it's generally old Mac 7. I think it's mostly open AI. And the real stories are like, what about in the video? Look, I mean, the hyper scalers, or as Jim, you called them the scalers

as of end of 4 p.m. today now, they have committed KAPX budgets. These are two-year planning cycles. They're not going to slow down. They can't risk not be number one. So you don't want to be a pennywise and a pound foolish in the race to have a dominant AI offering. So I think Mata and Google are winners. Microsoft could be a winner, but they already committed to spending $500 billion on Stargate Thursday. Satya Nadella must be like cursing aloud after the deep seek. He should have divided that by 10, said 50 billion is all you need. Yeah, I mean, so you brought up Satina Adela.

He tweeted out. But basically, this was all over Twitter. I joke that I was going to hide mute. I don't even know how to pronounce it properly, but I'll just say Jevon's Paradox, which is kind of what Jim was talking about. Like as these things get cheaper, more and more people are going to use them. And like, you can see the charts here. Like if it really does get cheaper, significantly cheaper, you can see a lot more people coming in,

more competitors, things like that. And this is a meme that I just wanted to share that was somebody put in our shared Google Drive that kind of goes to this topic. But yeah, I mean, overall, that's the way things are working. I also wanted to share this from Gavin Baker, who pointed this out. He said there's a lot of distillation. It's likely they could have trained this without unhindered access to GPT. And he said, as it was pointed out yesterday, kind of funny to restrict access to the leading

edge GPUs and not do anything about China's ability to still leading edge American models, obviously defeats the purpose of export restrictions. Why buy the cow and you can get the milk for free? Which basically is saying, like, they probably used a bunch of these, leading-ed models to train some of the models that DeepSeek is now releasing. And I mean, who knows exactly what is going to go? I won't pretend to be an AI expert. But it's two things.

Go ahead. So Deep Seek is having outage issues now and get this because they don't have enough Nvidia chips. How funny is that. They took out $600 billion in Mark Kep Nvidia in the last three days. So they are facing expert controls. But the Deep Seek paper, they had novel innovations. We don't have to get all of it here, but they weren't choosing reinforcement learning and other techniques that were clever and easier to adopt and improve upon.

So the engineers in Jan LeKuns Lab at Meta and Google, they're all excited because they can apply the technology immediately. One thing we should do is step back for a second and think about what the macro response is going to be here. We can probably assume that, yes, there may have been some Nvidia, quite a few Nvidia chips involved. We don't really know how much we can believe the stats that we're hearing from the team about how much it cost and how they did it. But what does the US do now? I don't know if you saw David Sachs's tweet earlier repeating what he was saying last week in the Oval Office that we have to win. And now what does that even look like? So that tariffs aren't sanctions on China.

They're not going to work. That's partly why we got here in the first place and necessity of the mother of invention. And the engineers had to figure out how to do what they wanted to do with what they had. So again, the horse bolting, shutting the door afterwards is not going to be helpful here. So what are they going to do? They're going to incentivize investment. We have a stimulus coming probably. We're going to be not only more funds for more AI development because the U.S.

absolutely has to win. We also have to worry about what might happen should we see any funds implode because of the loss that they sustained today. That would also introduce more stimulus into the market once the loss is stored. Do you mean public federal stimulus? mean just like venture capital or what do you mean by stimulus? Public federal incentives for either private or public investment in more AI investment from the U.S. But then should we start to see funds implode, that would be federal stimulus?

With deficits where they are and with chipsack looking at a form of corporate welfare, I don't see that. I think his comment, love to get your other, everyone else's take, but it seemed to be, he's like, look, the U.S. has to be here to win it. The competition's real. and we're going to make regulation easy to innovate and let the best country win. That's why I read it.

Yeah, definitely. What does it mean, you know, now that we're on the other side of Deepseek, what does it mean that the U.S. wins? What does it mean that we have to win? I mean, is it mean that we have to produce a desktop model that anybody could run off of 110 volts, or does it mean that we have to produce some gigantic, hyperscaler data center type of model that does, you know, further intelligence? Or does it mean both?

Or does it change what winning means from what we thought it meant the day that Stargate was announced? I would argue a few things. One is, look, China, first off, they are ahead on battery technology, B-O-D is ahead, their EVs are ahead, their head on nuclear. They're behind and almost everything else, by the way. But they are ahead on those angles. But if you have a low-cost AI, then edge AI is cheap and efficient. So personal assistant AI, meaning mobile AI, that's your personal system, that doesn't have to tap the cloud that's always on. That's one way to win. Another way to win is driverless technology. If you can get this quality AI in a distributed way that's local, right, EVs cannot access the cloud. They've got to be able to work off terrain, off grid, et cetera. That's a win. So more hardware,

internet of things, all that benefits from DCCs. So I think the consumer is how you measure, the consumer apps. We haven't seen many wins on the consumer app side other than the chatbots. The other would be the military, talking like drone warfare, look at like Andoril, you know, the next generation fighter jet, which is a drone. I think those are all the measures are winning. I agree with measuring winning by usage. I think Jim think that's where it is heading because the technology exists.

And we've been measuring so far how much we're spending on it without actually seeing the productivity games that everyone's been talking about. And we're only going to see those when it is in use by pretty not all industries, obviously, but certainly more than today. And I think that's where the stimulus comes, incentives for businesses to invest in repurposing their supply chains and repurposing their workforces, even incentives to actually get this in the hands of the user, be they consumer, be they military. robotics is something that we need to focus on as well. And I think what we're going to see, especially I'm sure Nvidia knows that robotics are the next frontier to start winning on. And I'm sure that they already have some new chips on the table, if not already in production for that, or could even perhaps repurpose some of their existing supply chains for robotics, which is going to be the next war to try and win. You nailed it.

Robotics is a key on drones or stuff. By the way, after Navidia reports earnings, right now their 4P is like 30, their 4P will drop to lower. I don't know if James can pull up the math quickly, but the Ford PE is going to drop substantially. The SMP is like, what, 20 times now? Yeah, 24, after today? Last week it was 24. Yeah. James, I got a question for you.

Put you in the spot a little bit on your day job here. The ETF NVDL, the 2X Navidia ETF. Nicole talked about whether or not any funds are going to get squeezed on this. be a good proxy to look at. How did that fare today? I mean, they got obliterated, but I mean, they did what they're supposed to do. So, like, those types of issuers that launch those 2X long and 2x inverse single stock ETFs, I mean, they kind of benefit on both sides. The problem is that, like, if you're an issuer of those, so the one you pointed out was granted chairs, but you have Rex that also T-Rex that also launch those, you like, you'd much rather than be like closer in

assets. Like NVDL is still a $5 billion product right now. So, I mean, the thing has got absolutely slaughtered today. How about the NAV? Did the NAV really blow out? Because that's really where you wind up screwing everybody is when it starts to decouple from the underlying. I didn't see anything that looked like completely out of whack, but we also don't have the navs yet for today. So, but yeah, so like we'll get the nabs and we'll see them. But, but, yeah, so like, We'll get the nabs and we'll see them. But yeah, I would expect them to be mostly okay. The one caveat here is that a lot of these products,

specifically the NVIDIA ones, they were leaning on options markets rather than just swaps alone. So like there could be some wonky things that happened there where they don't exactly track like one to one. But other than that, they seem to have operated the way that you would expect them to operate within reason. They might not have given you exactly 2X

and trying to look at exactly what it did. But for the most part, these things are trading vehicles. So if you're using them, honestly, I wouldn't be surprised if one of these blows up someday, potentially. But I would have thought it would have been MSTR, the micro-strategy ones, not the NVIDIA ones. Right. And I guess the NAV premium discount is important, is if somebody was using one of these

as a hedging tool. And they walked in today and said, hey, we got this hedge on and we're all okay, except then the hedge doesn't, you know, do 2x of what the underlying did, and then you're not okay. That's really where the problem could come in. I would say this. Like, one is data center theme is now actually looking attractive. I think it's going to take a few days to settle out when you get this much volatility. It's good to wait at least three days.

Key will be Mark Zuckerberg's comments when meta reports earnings on Wednesday. Then the number two, customer Navidia. Navidia has significant customer concentration in Microsoft and in meta. And, you know, meta said, look, we're going to spend $50 billion in CAPEX. I don't think they're going to change your mind. They're not going to stop. They did stop in 2022 on the Metaverse when the market pressure them to, but they've been growing revenue double digit.

But that is a key driver of Navidia sentiment. But like everything is like cheap now. Last week, the move would have been to sell and de-risk. This week, you have a Monday morning gap down retail panic. our retail investors own those names too. And Nvidia is like down to the 200 day moving average. And quite a few other names are dislocated. So I'm not saying go buy it like tomorrow, but I would say within the next 10 trading days,

there will be an excellent opportunity to pick up these names. That's how I'm orienting around this. I also think it is a combo of like there's some people that are in this that are up a ton and we're just like, all right, time to, you know, there are a lot of things we're saying these shares weren't possibly overbought. there's been a lot of technicians calling for that type. So I think there's just people out there that are like, we're up a ton on this.

Well, let's just take some off the table and it just compounded. That's why these things usually work. But I'm sharing a screen here. Nvidia is down 17% today. The 2X up is up 34, almost 33.8. And then the 2X down is up 33.7. So if one of the things we wrote in our note for our 2025 outlook was like these micro strategy inverse and Nvidia inverse are probably going to pay off at some point in short terms.

And here we go. It's happening in the first month of the year. Pull up KMI or CEG. I want to show you something interesting. Again, let's go back to the data center theme. It's more than VidaStore. It's a data center theme. So KMI is Kinder Morgan.

It's a midstream pipeline. So midstream is needed to get more energy and push natural gas power data center. But if you can pull up like a year to day or a one-year chart, so this thing also tanked quite a bit today, right? That's this one here. 10%, right? So it's down 10%. That's significant, right? It's crushing. Guess what? It's back to pricing on January 1st. And I could tell you a similar story for Constellation Energy and Vistra and

talent energy. So the late money buyer got hurt. Twitter momentum stocks, animal spirit stocks, retail favorites, and I put uranium in that bucket. And what about crypto, Bitcoin? Crypto below 100? Look, I think I've been fairly consistent. insist on around this. I think, you know, whales are selling crypto and Bitcoin breaks 100. And animal spirits are down. You see that Twitter momentum's down. I think crypto is going to lag. I mean, you saw the EO announcement. We have a little bit more clarity from last week. They said they'll get input on the national crypto bank, whatever you want to call it. Stockpile. 180 days from it. Hundred and eight days is forever in crypto. That's in dog years,

There's a 7 to 1 dog to human years, right? In crypto, it's like two hot. It's like vampire ratio to human ratio. No one has patience for that. 180 days? We can presume they're not selling within those 180 days, which is basically what we want with the stockpile anyway. That's priced in.

That's done now. Yeah, I agree. So, well, let's get into that. So you're talking about price action. I mean, Noel, did you have anything to add on macro markets or equity markets like we were just talking before I move on? No, just the impact on Bitcoin is a reminder that Bitcoin trades like a risk asset when the mood is risk off and it trades like a safe haven sometimes and it wants to.

It's a confusing asset. And of course, anyone who sees that as a risk asset is going to be selling when they shift their moods. But anyone who sees it as a longer term safe haven is going to be buying on the dips, which is why it didn't dip as much as I would have thought it would, given the sharp shift and sentiment today. Did you see anything in the spot ETS today and the nabs or in the volumes that could lend some insight here? No, nothing.

There's nothing that like jumped off the screen at me. Like sometimes honestly what jumped off the what's surprising, like usually in days like this, you typically see not necessarily Bitcoin specifically, but like if you look at spy, when things are like when shit's really hitting the fan, like typically you see volume and trading volume really shoot up. And we're like not even, it barely moved today. I don't know partially because it's a Monday. That's a very sign. You won't keep going until we get that capitulation. Yeah, the worst, the worst of like when things get really, really bad. Like we've seen things where it's like a day or two and it flush out and things don't,

but things get really bad. Like, think bottom of like 2020 and the COVID. Like that's when spies breaking trading volume records and we were nowhere near that today. So that's what we were looking at. But I'm sharing Arthur Hayes tweet today. He basically called for. 70, 75K. In Bitcoin, he's still bullish by the end of the year. I mean, I saw Tom Lee talking on CNBC and Bloomberg even in the last few weeks saying that he can see a correction down into the

80, 70K range as well before going up much higher in years ahead. Ram, this kind of seems to be your case, too. Go ahead, Noel. What were you saying? I'm seeing that number thrown around quite a lot. I imagine it's something to the technicals and I'm not a technical analyst, so I don't follow the reasoning. My question is, what would that do to micro strategy should it get down to the 70s? So I'll throw out that low 70s number. I do track two things. You know, one, kind of the average purchase price from all the ETFs, and it's now in the low 70s. And second of all, Sailor's average purchase price is around $68,000.

So if you were to get down into the low 70s, you know, Hayes' forecast, you'd be sitting there and you'd be basically saying, well, at this point, on an average cost basis, Sailor hasn't made you any money. And the collective of the ETFs hasn't produced any net P&L for the collective. Now, of course, if that's an oversawed point in the market rallies, then it will start again. But that's really where you could get some kind of a, you know, let's call it a discussion point. All of a sudden, man, we've got nothing to show for this because we've been buying all the way. up. And, you know, by the way, that's not unusual for something like that to happen. Famously, probably the most famous hedge fund manager of all time is Julian Robertson. You know, he started the Tiger

Fund and they got all the Tiger Cubs, all the managers that he spun out from that. And what typically happens is you have a good 20-year track record where you're just fantastic and then everybody notices you and you get tens of billions of dollars after that. And then the market corrects. And your whole career, you end up not making anybody money. Well, that's the last half of the 2010s, right? On a dollar-a-a-a-a-a-a-based, he's not really created much value because people are in at the exact wrong times. And this is the problem that Sailor faces, right?

He'll keep buying and buying and buying and buying, and maybe we get to the Tom Lee number one day, and we're sitting at $250,000 on Bitcoin. But then you look over at micro-stratage, then it's probably going to have a $210,000 average cost at that point. And then if it corrects to $199,000, collectively, he didn't make anybody any money. This is what happens over and over again. Well, to that point, it's like NVDU and NVDL, same thing. You know, when you have that new product issuance type that happens, within six months, you get some kind of lag.

And now, as James, you know, and Eric, the proliferation of crypto ETS is balloony now. But, Noah, I think you raise a really good point. I'm like, Bitcoin didn't really do that bad at all today. Yeah, exactly. And especially given the uncertainty that we're seeing ratchet up. I mean, we touched earlier, I think probably off screen on what happened with Colombia over the weekend, with the threat of tariffs and then the capitulation of President Petro. And now, of course, Trump thinks that this is a new weapon he has.

It has an impact on not just currencies, but Colombia's largest export to the United States is crude oil. So this is ratchet up uncertainty and when markets are priced for perfection, which arguably they were towards the end of last week, especially after the S&P 500, delivered its strongest post-inagoration week since 1985, or any kind of ratchet up in uncertainty is generally not very good news for risk assets. However, it is good news for safe haven assets,

especially if the potential solution to the uncertainty is greater liquidity. So apparently the whole Columbia tariff thing lasted, I think, less than 20 minutes. Yes. You know, that Trump was actually, if you saw it, Trump was actually on the golf course. And he was told that they wouldn't accept the flight. And then he authorized the tweet to go out. And two holes later, Columbia basically capitulated and let the flight of deportees land in Bogota. So it didn't take very long.

I don't understand what Columbia was trying to do. I mean, if you're going to do something like that, you have to have some kind of leverage or some kind of negotiating point. And to just say to the United States, no, you can't land that plane with our citizens on that plane, I knew this wasn't going to last long. He had no, the president of Columbia had no level in this. Amateur leadership, isn't it? The spin that he's trying to put on it, the president of Colombia, is that he was not

happy with the way his citizens were being treated on the U.S. planes. So he was going to send his plane to make sure they are treated better. When he had an investigative journalist getting a real-time Zoom feed on it. It's not credible. That's the spin he's trying to put on it. Right, exactly. You could have had him off the plane in 10 minutes if you would have let it land. Yes.

It's incredible. This is mixing work and play. Trump is at the golf course and he does a tweet. Tweets are as powerful executive orders in the age of social media now. When he does a tweet, he mentions truth social. I bet you he has that in his contract. He's got to pump truth social whenever he does it. between, but I mean, I think a lot of American presidents looking back and saying, gee, I didn't

know the executive had this power and what I could have done had I been more forceful or an applying effort towards a goal. Like, whatever people's political views are, like he got these hostages released in the last, you know, just a couple of days on his inauguration day, that is a symbolic timing. You know, his speech invoked themes of putting people to Mars and. and space and robotics and AI. I mean, it's a,

I think the velocity of his action since the inauguration has been tremendous. I mean, you can look at the last couple months compared to like years of even like the prior administration. I'm just trying to be politically neutral, but like what they passed, I guess the Biden, they got the student loan debt relief, which is contested.

Like what was accomplished? I don't know. Chips Act, which we didn't need, as probably can get repealed, IRA, which is getting pulled back now. Like, what got done?

Right. You know, and if you also look at his nominees, he's, you know, it's still early, you know, we still haven't had Tulsi Gabbard

go through. We still have in our, RFK go through. But we've got, he's, he's on a role that two months ago, people looked at Pete HECSF as defense secretary

and, you know, Pam Bondi as attorney, General and, you know, even Scott Besson, potentially as Treasury Secretary, that these were going to be tough to get through. And he's just steamrolling all these through. And it just goes to show the political capital and the power that he has, at least right now, that, you know, he's getting all of his nominees. And I haven't seen it, but I always remember every other administration, you know, there's always a nominee or two or three that kind of just, you know, don't quite make it over the finish. I know I know he had, you know, Matt Gates originally as the Attorney General.

And he got rid of him after a week later and he got Pam Bondi, which some people argued really wasn't much of a difference between the two of them. How is Matt the way to get out of it, though, right? I don't know if they got rid of Matt or Matt probably called Trump and said, hey, can you nominate me and I'll bow out? I just got to not want this report released by the House Ethics Committee. Right. Right.

But, you know, if you go back to, if you go back to around Thanksgiving, there was, there was talk that he could have like up to six nominees fail. And now it's likely, well, first of all, it's not going to be six because a couple of them got through. There's a path where all of them get through. And it just shows you the political capital that he has right now. Only Tulsi's at risk. But on Hegset, to your point, only two nominees have come down to a 50-50 split Senate with the vice president had to step in. The last one was Betsy DeVos, Department of Education under the Biden admin. Hexeth was the was most recent. By the way, looking back in hindsight, like, Betsy Debbos really came down 50-50, really that controversial? Really? But also extending,

what you were saying, Jim, and also carrying on with that ram, this approach to the nominees is why I'm bullish on both crypto and AI for this year, because Trump is about winning. He's going to, he and David Sachs are going to do what they have to do to win at that. They're not going to let deep seek. Derail is the word. DRAIL. the development of AI, and they are going to make sure that crypto is not only benefiting from regulation clarity, but also investment support. So this approach, it's different, it's refreshing, it's terrifying as well, and it does add uncertainty, but it also enhances the chances of winning in the sectors that are going to be so important for American innovation and

financial evolution going forward. Yeah, I mean, I think at the end of the day, for better and for worse, like he's going to do mostly what he wants to do and how he wants to do it. There probably was a more delicate way to handle the stuff that happened with Columbia, but that's just not how he's going to do it. The word's delicate and Trump don't go together. Exactly. Yeah, it's not going to happen. There are surprises.

Like, for example, he's threatening layering on sanctions on Russia. That wasn't on many people's bingo card. That he's more critical in terms of posture, on Russia than the Biden admin was. And so I think it's quite interesting. Apparently Denmark had a call. They were apoplectic around how the Trump phone call around Greenland played out. That's actually hilarious.

And Trump is a thing? Is it like you? As a non-American, I want to get your perspective. But also, you know, Denmark are increasing their defenses around Greenland. And Trump says, yeah, what, a couple of extra dog sleds? Denmark has no, the national guard of the United States, is bigger than Greenland and they could take this out.

Denmark has nothing. It is astonishing, but it comes down to uncertainty. We're in totally new times. This is not generally great for risk assets unless you think that they will do whatever it takes to win, and I do think that. But by the time this podcast comes out, we might have had the FOMC statement

depending on when it's out, but again, while nobody expects there to be a move on rates, what we don't know is what Trump will say about whatever ends up happening. We haven't been in this kind of scenario before, and is this going to start impacting directly monetary policy or our interpretation of monetary policy? You know, it's funny because pivoting to monetary policy,

Jay Paul has for years been talking about that the economy is broadly normalizing, that it's returning to a pre-pandemic level. And I've been a big critic of that statement. He's made it over and over again for the last. several years, actually, what is abnormal about the current economy? Why do you think we're going to go back to the previous cycle? We're in a new cycle. A new cycle doesn't mean it's worse. It means it's different. Quit waiting for the old cycle. Well, it turns out that Jay might be right in one respect

that we're going to go back to a pre-2020 cycle is he's not going to cut rates and Trump's going to rip them on social media. So we finally made it back at least in that respect on cycle. It's funny. I mean, Paula was a Trump appointee. Yeah. But Trump on Friday, there was like a Friday night of Massacar, which is not really getting much media attention. But he gutted the IGs, the inspector generals of many departments, who have the responsibility of watching for cost overrun, supervision, and different kind of abuses, which probably is a good move by. Because clearly, they haven't done their job if you're seeing the Pentagon lose a trillion dollars or the last decade. But yeah, I agree, Jim.

I'm like this battle between Trump in the public and Powell, I mean, if you're the Fed, you can't help but let that influence you. Because even if you believe in independence of the Fed, if you want to preserve the independence of the Fed, then you might want to be influenced by the president so that you can preserve the independence of the Fed. You know, some of it, though, for the Fed is a bit of an own goal, too. You know, Trump could come out and be completely accurate by saying in the election, you cut 50, which was supposedly designed to help my opponent, although you could argue it didn't because not only did he win, but that long-term interest rates rose right after he started raising rates. That wasn't in the bingo card of what was supposed to be the reaction. And then he raised rates again in November.

And then he raised rates again in December. And then as soon as January 20th comes, you stop raising rates. Now, I can give you a bunch of economists who give you rational reasons why that happened. But the fact of the matter is, I'm sorry, cut rates. I said it backwards, cut rates. But the rational thing is you were cutting, cutting, cutting until the second I became president, and then you stopped cutting rates at that point. So Trump could point that out, and he has, and he is, in terms of the policy that the Fed is doing.

So it's a bit of an own goal here. You know, you started 50 basis points, you being the Fed, in September. when it was really not clear that you needed to do 50 at that point. And so now you're going to reap what you sowed with this policy. It's a great point on the box the Fed put themselves in. By the way, Trump complimented the Fed last year for not cutting rates prior to September. In fact, he asked the Fed, hey, don't cut rates now because he didn't want them to interfere. But look, Trump is really focused on what Trump wants to do, which is lower rates and usher in the golden age.

Now, the rate that really matters, of course, is the long end of the curve, not the short end. It's going the wrong way, Jim, as you pointed out. It's up like 100 bips. We haven't seen that in any ecosystem cycle. And the only way you can lower the long end of the curve is something called quantitative easing, which neither Powell nor Kevin Warsh, a potential successor to Powell, would support, nor Bessent. Nor should they, because there's a risk. Quantitative easing and zero interest rates from 2010 to 2020 worked because no matter how hard you pushed, you could never get inflation above 2%. Now, no matter how hard you push, you can't get it below 2 and a half.

And in the case of core inflation on CPI, you can't get it below 3. So if I would, I've been an advocate or an argument, arguing that the reason that you've seen, the Fed cut rates and long rates go up 100 basis points is the market's got this latent fear that you're not stimulating the economy. It doesn't need it. You're just raising inflation expectations. We've seen that University of Michigan survey and we've seen some widening in the tips, break-even spreads, you know, the market measure of inflation expectations. So if the answer is, oh, we've got to do QE and we've got to cut rates even more aggressively, great, you're going to put 6% on the 10 year is all you're going to wind up doing. If you're not careful, because the market

will interpret that as just being more inflation, not necessarily being a stimulative towards faster growth. It'll be interesting. I'm like the economic surprise index is turning up now. It's just something. Like I think we're on the later side of this of where the 10 years. But what about on the inflation side? I don't know if you look to Jim or or anyone else here, really the the shelter component of CPI, like the rental inflation component, which is a faster real time measure, is coming down, and Powell said he does pay attention to that. So this is all very good. This is all very good, right? Disinflation is back on the shelter. On labor, it'll take time for immigration to have like a tightening effect on the labor supply. So the one thing you have to be

careful of what you're right. The shelter numbers are down to like point three. I'm talking about CPI now, not like point three a month. It's like a three and a half percent inflation rate. It's still higher than the overall level of inflation. It's the lowest it's been in three years. But if you look at the market measures, like the Zillow and the apartment.com measures and stuff, rents have bottomed. They've bottomed and they might be starting up. So shelters coming down, it is a lagged indicator.

It's still too high. And the forward-looking measures are saying we might not have much more declines. Now, I'm not saying it's going to go up, but it's not going to get to a point where it would be conducive to get the entire inflation measure down to two or under for sustained period of time? I'm 100% with Jim here on this because I think, like, you have like the boom towns during COVID, you know, the states, if you're looking at really Florida and Texas or like the poster trials for this.

And they're the ones that are seeing the huge decreases in home valuations and rents and you name it. But like, you look in the Northeast. Like, it's completely supplied demand. I don't think no matter what the Fed does, essentially, like, you're not going to to solve the, you know, the inflation from housing more than you already have, as far as I'm concerned, for the most part. I mean, there's sort of a dislocation right now between buying and renting because rates are so high and

all of that. But like, for the most part, this is more like a structural issue, I think, in rents and housing than it is for many other areas of the economy. So to give you a fun statistic about the structural issue and how this has changed, the majority of the people in this country live in the northeast and the Midwest, 85% of new housing construction takes place in the south in the west. The Phoenix real estate market alone is larger than the New York City real estate market. Trades more, more value gross per month trades in the Phoenix market because everybody's retiring and moving to Phoenix. No one is rushing to come to New York

City or Chicago or Boston or Philadelphia. Other populations are shrinking. So, yeah, Yeah, that, you know, we have a housing problem. We have high rents. What's the answer? Oh, Hovinian is going to start another project in Austin, Texas. Well, that's not going to help New York City or Boston. And that seems to be, and nor do they want to come up and try and start building in these markets. They're highly regulated, and they're very, you know, difficult to get zoning.

And so it's much easier to go down into Texas or to go down in Arizona where everybody wants to move because that's the migration pattern in the country, although most people still live. in the Midwest and in the Northeast. But can we bring this back to markets? And we have obviously some big economic data drops this week, including inflation. What is going to move sentiment more? The fallout from deep seek or actual economic signs of disinflation and economic growth?

In other words, are we focused on the animal spirits hit from the valuations, or are we focused on the animal spirits boost from strong economy? Deep Seek is mostly behind us now. Everyone had all the weekend to think about it. You had a lot of panic selling today. I think it's going to recede. I don't think that's the right focus. It's an event.

It's about a story, about a startup in China. It has more to do with open AI near term and the promise longer term about edge AI like we discussed. But it's not going to change earnings for Navidia when they report. It's not going to change your earnings from meta. So I think you'll have some waning discussion on it, but it's going to go into the background now. And what would this do, what would this do to the valuation of Trump coin, for instance? No, no, no answer.

Not going there. You know, the easiest thing in the world with Trump coin, with all the meme coins, is to disparage the meme coins. So I'll play devil's advocate for a second and I'll say something nice about meme coins. They have the potential to be a very powerful economic tool, have the potential. You have the coin come out and you have its admission schedule. But nothing stops you once a coin like the Trump coin comes out that you can offer certain incentives. Hey, if you own so many coins, I'll do an AMA on truth social. and you could come and ask the President, United States, any question you want.

Oh, it's open. You know, the rest of us can watch it, but we can't ask a question. You know, the Trump Organization will be a founding sponsor of the 250th anniversary of the Declaration Independence, July 4th, 2026. If you have so many coins, you can get, you know, discounts on tickets or merch. Maybe the Trump Organization will be a sponsor of the 28 Olympics. You can get discounts. So you can offer all these kind of incentives. And what I'm trying to say is imagine if this.

Disney would bring out a meme coin, or imagine if the airlines were to bring out a meme coin as a way to supplement or even replace their airline mileage programs, these could be very powerful types of programs to use instead of what we do now with these meme coins is just raw speculation. So I get it that we don't like the raw speculation about these things that have no value, but if we stop disparaging them, we can say, you know, there is something there that we could do that could be quite useful. And Trump could too if he wanted to with his coin. But as long as everybody wants to hype it, I guess he has no incentive right now to think that way. The way I kind of think about it is it's like it's like distilled pure like speculation or I guess kind of hope on something that

you're talking about, Jim, it kind of like if you look at DJT, the Trump media company, that stock is, it's valued at six points. It's almost $7 billion in valuation. The thing is $2 million of revenue. I mean, it's like there's some business in there that's worth something. And then there's like all this other stuff that's baked into that stock price. And that's kind of what these mean coins are in some ways or so web coins if you want to call them that. So that's, I did not come up with that. I think I'm going to have been little than I first heard like coming up with that analogy and it like really click with me. That's like that's kind of the way I'm thinking about this sort of thing. It's like pure an unadulterated speculation,

attention economy type stuff. And I will say like I'm, I probably sound like a boomer, but I just don't care about this stuff to be precise. And like if we're talking about the Trump coin, the more I've thought about it, the more I think it's a net negative. I think there's some positive things that could come out of it. I think it really tested the Salana system. It probably onboarded some users,

but the data that I'm seeing out looks like it really, anyone who knew came to it came to, you know, using blockchain and Solana, they didn't stick around or do anything else. They just bought the meme coin and then got burned. So, I mean, the fact that he has 80% and could theoretically dump, like hopefully that doesn't happen.

but like, I don't know. I just think the whole thing, it's just giving ammunition to the other side, the Elizabeth Warren anti-crypto army. I can see her just talking about this in a congressional hearing at some point. She's not going to talk about any hearing

because she's not going to say to the offender, right? She'll be able to bring it up and mainstream media will click on it and it's not going to matter in the grand scheme of things. It's just more ammunition for these people. She's already walking back her anti-crypto commentary back into like the debate of last year.

The Democratic Party now knows the consequence of attacking crypto because Fair Shake Pack won nearly every single candidate they fielded. So they were whipsod and they, I think, will be burn once twice shy. Yeah, and midterms are coming up fast. But staying with the mean coins for a second, James, I have a question for you. There is a Doge ETF filing on the table. What odds do you give that? I do not have odds on that.

There's way more than Doge. I mean, we have Doge. We have a Melania, 2X Malania coin filing. I did not see that. Right before we said to the, yeah, so Tuttle Capital filed for 2X, XRP, Solana, Trump, like coin, Delania. It's not good for crypto. BNP, Cardano, Chainlink, Pocodot. We have Doge filings.

We have multiple bonk filings. I mean, we, these, really what this comes down to, is it's issuers pushing the limit of how far Hester Persis, you know, crypto counsel is going to let things go. Like the SEC is going to decide, like, where the line in the sand is. Personally, I hope it's, it's, I never thought I'd say this, but I hope it's a little closer to the Gensler than these filings, if I'm being completely honest. But yes, it'll, they'll determine where that is.

There are some unique filings we can get into in a bit, but yeah, people, I wouldn't be surprised if we do get a meme coin ETF, maybe not necessarily to start 2X, but who knows what's out there. You should get Doge. Doge is definitely a commodity. The blue chip. Right. But the SEC is not a merit regulator, right? So the SEC shouldn't be trying to call balls and strikes around that anyway. It's market structure, right? Market structure. Can the nav stick to the ETF price?

It's more than that also. It's disclosure too. Go ahead, Jim. Sorry. Yeah, I was going to say, now that, you can also find market limits. I think one of the things that crushed the the Trump coin was, you know, when it was flying high, you know, approaching $70 at point not like trading around 25 was when the Melania coin came out. Because, you know, everybody kept saying, well, see, with the great thing about meme coins is the supply is fixed. No, well, it is fixed in that there's only one billion Trump coins, but now we're going to get a billion Melania coins. you know, there's a baron coin the follow, a Trump, Don Jr. coin and a Mara Lago coin, and we're just going to keep going and going and going. And that's where I think it was such a bad reaction to the Melania coin.

Same thing now with all these ETF filings, James. You know, all right, let's assume that they go full Hester Pierce. They're all approved. And half of them just die, you know, in the crib and they don't do anything. The market narrative could turn to say, see, there's a limit to how far we can go with crypto, that it's not this unlimited Michael Saylor, 13 million in 20 years, that there is an upper limit because these things die as soon as they come out. At least if they deny them, you could always promise that, oh, if they only would have let

these go through, there'd be all this demand and stuff like that. It's the whole theory of like, you're better off not, you don't want revenue. Don't worry about profit. Don't, don't give, you have a story to sell. That's better than profit. Silicon Valley. Yeah. It's how true that was.

It's kind of, yeah, I guess the same way. I think that's spot on. You know, what ends bull markets is when people get burned in the IPO market, which is usually when the last phase of this stuff. So I don't think it's less about the narrative around the utility of things. It's very simply put, if people buy it and they get burned, they're not buying it. And then that rolls back up the hill to the issuers and to the ecosystem. And that is the issue.

with this proliferation of ETS that aren't going to really make people money. That's a problem. I would also say the way this is going to play out, even if all of these get approved, the market will decide if there's any demand for these products, right? Like I hear all the time people talking about there's going to be no demand for these single stock ETFs that we thought there would be. Same with these buffered defined outcome ETS. People are destroying the Calamo's 100% protection product.

People, for whatever reason, like to use them in their portfolios. And if people find utility and using these things, they're going to buy them. But what happens in any other ecosystem, even if you look at just commodity ETS or precious metals as an example, like we have palladium, we have platinum, you have nickel, you can invest in silver. You can get exposure to all these things, but still 95, 90% of the assets are in gold. Like, that's probably something along the lines that's going to have here. You're going to have most of the money in the ETP realm in Bitcoin. And then who knows what else is going to come do or who's going to get assets, whether it be Ethereum, Salon, Lana, XRP, some of these other things.

But a lot of these long tails, they might just become small trading vehicles. And if they get $70 million, $100 million in assets and they're charging enough, it could be profitable for the guys that are issuing them. It's just that they're not going to become big, hyper things that are going to attract billions of dollars in the way that the Bitcoin and Ethereum UTS have. Yeah, Wall Street will get paid. That's what that means when you say the issuers will make money. Of course, the toll gates will get paid.

The opportunity is really on a circle IPO, a chain analysis IPO. A Falcon X IPO. That's where people should be focused on. And the other would be on the banks. And Trump at Davos also said, hey, look, J.P. Morgan and Bank for America, you're not banking conservatives. I think that was a nod to Nick Carter's Operation Shookpoint 2.0. And we're going to see enablement of banks to custody crypto. That's a big win.

Those are the most exciting opportunities to be croaked on. Those are long-term projects. Trivia question for you. How many bank charters have been approved? New bank charters have been approved since the financial crisis. 14 to 13. Zero. How about, okay, Live Oak Bank, 2008.

I guess I was, so where you put the device? Since Dodd-Frank, it's been zero. And the Fed and the Fed and the regulators have had a unstated policy that they don't want new if that logjam breaks, you know, and you've talked about them unbanking conservatives and not allowing crypto, the natural response to that is a new bank charter, a new bank charter to let it, you know, to let it happen. There are special purpose national banks like Anchorage that have been issued. However, not enough.

And only under the leadership of Brian Brooks was the former chief legal officer of Coinbase, which is incredible. They got the fox in the head house. But that's like the way it's supposed to be. Like the fox should be ruling the ruse, if that makes any sense. Proved by the Federal Reserve so that you have access to the Fedmaster account. Correct, correct. Like custodia has been denied. Yes. Right. Custodia is probably the poster child of this. You know, it's not only that custodia has been denied, but you go back 10 years ago, I was a thing called Newbank that was trying to do exactly this. They won't let anybody in. And, you know, the answer to the

the problem with conservatives or Melania herself got debanked. And Barron almost got debanked. The answer is to, you know, approve charters to let people that want to market to those businesses. 100%. 100%. To that point, I'll give you a quick trivia right back, Jim. So how many bank charters were out there like, what, 20 years ago or 15 years ago versus

that? I think it's like 15,000 or something like that. Right. And now we're like around 4,200. So by the way, back like 25 years ago, you'd have a couple dozen bank failures in a year, generally small community banks that got over their skis, but you all said more innovation that was taking place. And the pendulum's gone too far.

There's no reason why Amazon, which owns Whole Foods, shouldn't have ATMs and a branch in their facility. That should happen. There's no reason why Google shouldn't have payment rails that compete with Visa Massacre that charge 3% when they have millions of merchants on their platform and millions of consumers on their platform. And it's illegal. That's correct. It's illegal under the Bank Holding Company Act.

That regulation needs to change, and people aren't focused on that. They should. You know, I'm nodding here because I'm based in Europe, and of course the banking scene is very, very different here. And we're a much more bank-dependent economy, not just for personal finance, but also for corporate innovation. And your stock markets. Exactly.

And one of the, what you were, saying, Ram reminded me of debates that I've had over the years about tech protection here in Europe. And it's relevant because what you're talking about, what you're sketching out, is allowing tech companies to become banks effectively, but banks are not allowed to become tech companies. And this is going to be seen by many as unfair competition. Again, this is what we've been through here in Europe. It's going to be seen by unfair competition because the banks have higher compliance costs than the tech companies and the tech companies have all the data so they can easily out-compete the banks, and that's not going to benefit the ecosystem.

However, for those of us in the crypto weeds, this is what we need. And this is one of the reasons crypto evolution has been evolving sort of in the shadows, probably faster in Europe than in the United States, but that's about to change, because we do know that bank, depending on the existing very closed system of banks, especially when you can be debanked just not for even tweets, but for what your job is, you are a high-risk individual. It's not the kind of freedom that the original designers thought of. Well, I think the promise of opportunity is all-to-all competition, right?

When you have zoning and you have licensing, those are actually barriers to entry that benefit the incumbents. That's what it's really about most of the time. And the tech companies don't actually want to be banks because if you're a bank, the compliance burden is, it's like taking a bone saw to your fingers one in a time. It's awful. I used to be an executive at Cross River, and we would have a monthly board meeting, which is just around compliance. There's no strategy, no product innovation. You're reviewing loans. You're reviewing major customer accounts, new product review committee.

Then you can prepare another package for your bank supervisor regulator, which is another board on top of the board. So you're swimming in PowerPoints and paper, and this is why the U.S. banking system has a sclerotic feel to it, and it really needs innovation. What the tech companies really want is like a bank holding company subsidiary that can be more innovative. And they try to do these things with industrial loan charters. Square has one. But yeah, I think all this banking regulations have got to be revisited. You need stable coins to settle payments in real time. Why can't we move money 24-7?

Why do we have to wait for ACH and wires, which are not moving as fast as stable coin? Awful. Yeah. I mean, the one thing we should mention while we're talking about all this is, last week after our show, Esther, they had a closed-door meeting on Thursday. And the next day, she got rid of SAB-121, just like that. And SAB-121 prevented banks from, you know, getting involved at all. It functionally made it illegal to hold anything, to do anything, crypto, particularly

custody. And so, like, it needs to happen, but it kind of is starting to happen already. Like, a lot of these banks have said they want to do this, and they were stopped by the last administration from doing it. They were stopped from getting involved. and it was functionally made illegal, and that's already underway. It's already changing. We're going to see, months from now, maybe even sooner, we'll see these changes and how they take hold.

But like, for example, we had BlackRock file for the ability to do in-kind transactions in ETFs, which, like, for anyone listening, I don't care. But what it basically means is, like, you can hand over Bitcoin and get shares of the ETF or vice versa, hand over shares of the ETF and get Bitcoin. And you think, like, well, isn't that how an ETF works? But no, the way this model that I'm showing here is what in-kind looks like. You can see there's a bunch of lines. There's a bunch of people involved in this process. But there's way more lines and way more people involved in the cash process because they couldn't let the brokers in the banks.

They didn't want people touching actual Bitcoin. So you had to go around and do all these added steps with cash. And at the end of the day, the really liquid stuff like I shares is I bid and the grayscale product. Like they are traded enough that they're pretty liquid. But some of these other products that are further down, they don't trade as much. they're going to see a huge benefit in their spreads, their trading spreads, and the efficiency of doing these creation redemptions,

just because SAB 121 is gone probably. So this was filed on Friday after market close, and right after SAB 121 was gone. I'm assuming that's not a coincidence. And so we'll know within the next few months if the SEC under Uyeda and Paris is going to let this thing go through and we can have in-kind transactions, which in my view should have been there from the get-go.

But again, you had Gensler and Warren and the Biden administration, that basically didn't want banks or anyone in the Tradfired world really touching Bitcoin itself. So they didn't allow in-kind create redeems. I don't know if anyone has any thoughts on that. You have a question for Jim actually pulling on what you were saying, James. Jim, do you think we'll see big American banks using stable coins in the next couple of years? I, you know, I would hope so. I think where stable coins are going to probably get their mojo,

is going to be, you know, in some kind of international and foreign transactions. There was a famous image, was quite a meme going around 21, 22. It was a picture of a Western Union telegraph transfer where somebody would send $300 and it would cost you $9. So it was something like, you know, 1.5%. And back in 1870, when you want to send money to someone, it was actually they put $300 in a saddlebag and somebody had to ride a horse up to give you $300. Today, an international transaction, 150 years later, it's one and a half percent.

It's exactly the same price. There's been no innovation. There's been no cutting of the cost. Stable coins can really step up and for international transfers and for money transfers of those types and could really reduce the cost down to practically nothing. And I think that that is, as James pointed out, if there's been anything that's come on a defy, it's definitely been stable points. If you're going to put an ecosystem around that of trading and of banking and of lending and of borrowing, it's going to be around stable points. But that is an existential threat to the current banking system.

And that's really where the Fed steps up. That's why I said, why is the Fed approved no charters since Dodd-Frank? because ultimately at the end of the day, they're protecting the existing incumbents, and they like the system we have. And, Rob, one statistic for you, about 10 years ago, Jamie Diamond, and I assume it's true, and it's probably greater now, he pointed out that in the post Dodd-Frank era, that J.P. Morgan makes office space for over 1,000 regulators

who go to a J.P. Morgan office and is a full-time job is to regulate J.P. Morgan. 1,000 people. We did the same way across the river. We had dedicated space too. The regulators, you know, they'd come in and hang out and they get luncheon. Drink your coffee? Yeah, banks are quasi-public institution because of the FDIC deposit insurance relationship and the fact that the U.S. taxpayer may be on the hook.

Actually, I don't object to that. I think that's fine. You need supervision if public tax money is on the hook. But you've got to find an appropriate. balance between innovation and overreaching supervision, why not let dynam? By the way, what I really love to see isn't so much the Amazon's gain to banking and Google payments, although that would be innovative. What I'd love to see is entrepreneurs gained a banking.

That's how most community banks actually started and serving their local community. And those local communities are now virtual communities. Let's make that happen. It's not just digital assets. Also, to be clear that like the banking regals, they, the banking regulations. They don't like, they don't really, they don't like fintech, like, think like 10 years ago before people were really talking about. They don't like anything related to this.

They're not fit. It's just a general dislike of the entire ecosystem, I would say. I remember the initial pushback against things like Fenmo. They were, they thought it was the Antichrist for a while. And if you go back in the history of the Federal Reserve, you go back to the, because we were looking at this a couple of years ago, in the mid-1970s, the Federal Reserve published position papers, they were against the creation of the money market fund. They thought that that was a bad idea, too. They are very insular to any kind of change within the strict lending and borrowing

facilities of what a bank does. But at the same time, we're seeing that innovation in finance is going to be inevitable and probably more likely now than it would have been even just a year ago. And yes, this does, I'm tying in what you've all been saying, this does reduce some threats to the existing model of traditional banking. So at the same time, the regulators are going to want them to find other sources of revenue, such as handling crypto, such as somehow finding a way to handle stable coins themselves. So it's not the threat that it could otherwise be. We could be looking at crypto becoming part of banking, which is ironic, but also interesting and somewhat exciting if it ends up distributing opportunity and making finance more efficient.

Look, we need to introduce competition because J.P. Morgan is a monopoly, but I own J.P. Morgan because it's a monopoly. The banking sector is very well positioned. They really don't face any credible threat from crypto. UBS just hit all-time highs today. I think 25 to 30-fund of my equity portfolios in financials. At the same time, I hope you get the innovation. We need that. By the way, I'm really glad to hear that the regulators and bank supervisors were in J.P. Morgan's office at the tune of 1,000, because they're not going to work. Did you hear about it? the union's negotiated that they don't have to go to work. So I'm glad they're doing someone's doing something there. Well, that was pre- that was pre-COVID. So I don't know if they're still there, if they're doing it virtually or not right now. All right. I have one last topic that we've kind of already discussed. All right, let's get into real quick, the SBR versus digital asset stockpile.

I mean, Noel said before, like it's kind of at this point, they said it were 180 days will come back like David Sacks's board or I don't know exactly what term they do is I forget was going to come back and with suggestions suggestions. I guess one of the big things we talked about DeepSeek, obviously we talked about Columbia. The other huge thing that was going on on Twitter the last few days is basically Bitcoin Maxi is really going after the XRP army and Ripple and some of this other stuff. It seems to be from my point of view that a lot of crypto is kind of like it should just be Bitcoin or nothing.

Obviously that's not everyone's point of view. I will say I'm kind of like at the point where like I'd rather just no reserve. Like I can't imagine like the government going out and buying like something like Ripple or XRP, I should say, Ethereum, Solano where like people created this stuff. They have foundations that hold hundreds of millions of dollars, billions of dollars worth of stuff. And then you're also going to have the government buy it. Like it just, I don't know. The incentives, I just really don't like it.

So I'm personally of the opinion. Like if they're going to do this, it should just be whatever they hold. Currently, I have the screen up here. This is from Alex Thorne, which the source is Arkham and Galaxy, obviously, showing off that most of this is Bitcoin already that the government holds. I'm curious what your guys' thoughts are. Do you think it's a good idea to have the government going out there and potentially buying, I don't know, XRP, Solana E, things like that?

What are your thoughts? I'm against it. You know, Nick Carter wrote a good op-ed about why he's against it. any kind of a Bitcoin reserve. I'm against any kind of crypto reserve. I don't think it's a good idea. I also think politically, it could be a very dangerous or politically a toxic idea. It's one thing to say that the government has acquired all of these reserves.

And I know these are through Justice Department investigations that they've got all this, that they've got all these coins. And they can just announce they're not going to sell it. That's one thing. But the other thing is if they're going to actively do the LUMUS bill and try and acquire a million Bitcoin, means they're going to have to issue debt. They're going to have to issue debt and they're going to have to pay interest rates on it in order to buy Bitcoin. And for a lot of people in this country, that is not going to sit well with them, especially given the volatility of Bitcoin

at some point in the future, you probably could say it's going to be sitting at a loss relative to where they bought it. And then they're going to have to explain why the regular taxpayer has to pay interest on the cost of the government-owning a security that is speculative as a crypto and is sitting at a loss. So I don't think it's such a good idea that you want to get the government involved. And the final thing is it always comes with strings attached. Yes, I understand it's the blockchain. And yes, I understand it's decentralized and they can't touch that. But they could do things on the ownership side of who's allowed to own it, how you're allowed to own it, as opposed to on the supply side as well. And you always,

every industry that I've ever looked at, including my own, the financial services industry, has regretted allowing the government into their business. And that's what you're doing with a Bitcoin strategic reserve or a general crypto strategic reserve. I agree with everything Jim said, definitely. I think the idea doesn't make any sense. But I also think it's not going to get very far because can you imagine, Cynthia, Senator Lumas, trying to explain Bitcoin to every single member of Congress to get their support for this. I just don't see it happening. I would say before Ron even jumps in, I would say, like, one, honestly, if it gets through Congress, so be it.

Like, that's a different situation. Like, I'm kind of, I'm with you guys. I don't think it needs to happen. I particularly don't think we should be buying other assets other than Bitcoin. Like, that's like having, like, somebody buy, like, the government buy a bunch of stock of some company in my mind in many, many different ways. But the one thing I would say on Jim's comment, like the way that Lummis' bill is set up is basically she's going to use the balance sheet and revalued the gold at current valuations to use that to ultimately it's just balance sheet tricks to go out and get acquire the Bitcoin. And the profits that the Federal Reserve pays to Treasury of which there are none. Just real quick on that.

There's 8,000 tons of gold that the United States owns and it's valued of $42. Now, if you want to take that 8,000 tons and you want to value it up at around 25 or 2,600 or whatever the gold price is today, that's going to add an asset of somewhere between $800 billion and a trillion. How about just do that and help reduce the debt to GDP in the United States and bring down that issue as opposed to, oh, now that we've got some extra money, this is like playing with the house's money in Vegas is the way a lot of people are going to look at it if you do that. I agree.

I think briefly, the most likely outcome is that the U.S. adopts a huddle policy with existing coins and that'll likely continue to be the case. What's missing, we need to learn more about 180s from now, is what's the case, right? What's the role of this reserve in a broader strategy, right? For example, are we talking about moneyness? Are we talking about what are appropriate foreign exchange reserves to the Federal Reserve? that's not yet part of the conversation. We're jumping to the tool before we get to the problem that we're looking to solve, and there are problems to solve.

But that argument has been advanced. I don't think it makes sense for like Eath Sol and all these other tokens. So if you're going to do it for anyone, the asset that has the closest probability of having some quality like moneyness would be Bitcoin. That's how I look at it. Good point. Keep in mind that, you know, The last point, the last time that came up was in the late 1990s was about the idea of the government or Social Security trust fund acquiring equities.

And that, and that's, you know, various forms. And then it came up again, you know, right before the financial crisis about them potentially buying ETFs. It always comes up at a high, by the way. It does. Security privatization in the late 90s. By the way, it would have been a good idea. Canadian pension plan invests in a broad set of asset class. Canadian pension plan and Jim knows this audience might.

not, but they are the equivalent of Social Security Trust Fund for Canada. And they shoot the lights out, too. They perform really well for the most part over their history. Yeah, and they beat the United States because the United States can only invest in bonds. It's using Peter to pay Paul. The Social Security Trust Fund is a liability of the, it contains assets, and the assets of the Social Security Trust Fund are liabilities of the U.S. government called bonds. At the House level, they net out.

How do you have an asset in one pocket, which is the liability of another pocket? I agree. You know, they couldn't get equities through, even though that's probably a cleaner use case to say that. Of course, they didn't get equities through because they always come up with the stumbling block of voting the proxies. If the federal government owns X percentage of some company and now they get to vote the proxy, do you really want Congress deciding on that and dictating rules to the court to the board as to what they need to do to get a yes in the proxy? That's not a good idea. Japan made piece with it.

You know, in Chile, they privatized their version of Social Security in the late 1970s. Everyone essentially had a stake in the economy, and it worked out very well there, actually. But you have to have a multi-decade horizon, which essentially you have in place with these defined contribution plans anyway. Like, we have a framework out there. It's just funding the transition costs when you put money in. How do you pay for your current expenses? All right. We went a little long today, but that you heard.

I wish somebody disagreed. I wish somebody was on here arguing why we should have it. But I think the general consensus is like, yeah, yeah. Short number go up. I need $250 before December. I will qualify and say, again, if it is anything, Bitcoin makes the most sense. But even then, I don't think the U.S. doesn't need it. Maybe some smaller country with having a bunch of other issues, it might make sense to potentially

take a shot on adding Bitcoin as a really. reserve asset. But yeah, those are my final thoughts. Maybe some of our other guests will have different views. I'm sure this will come up again and again over the coming months. But all right, I'll wrap up now. Thanks for joining us for this episode of Bits and Bips. We'll be back in one week to discuss more about how the world's crypto and macro are colliding. Until then, everyone.