Unchained - Bits + Bips: Why Rate Cuts Are Less Likely This Year, but Crypto's Outlook Is Positive - Ep. 839

Episode Date: May 21, 2025

U.S. credit got downgraded. Fed policy expectations are flipping. And Coinbase hit the S&P 500 (while also being extorted). But what does all of this mean for crypto? On this week’s Bits + Bips, James Seyffart, Alex Kruger, Ram Ahluwalia, and Noelle Acheson break down: Why the Moody’s downgrade doesn’t mean much for markets Whether Fed rate cuts are now further off than expected Why Alex says Coinbase is a “horrible product” despite S&P inclusion How stablecoins tie into U.S. geopolitical strategy Whether Circle should sell to Coinbase And what the altcoin ETF delay really tells us Plus: unemployment, yield curve control, the “Consensus vibes,” and Ram’s wild anecdote about workers gaming unemployment benefits. Bitwise James Seyffart, Research Analyst at Bloomberg Intelligence Alex Kruger, Founder of Asgard Ram Ahluwalia, CFA, CEO and Founder of Lumida Noelle Acheson, Author of the “Crypto Is Macro Now” Newsletter  Macro Reuters: Moody's downgrade intensifies investor worry about US fiscal path USNews: Trump Tells Walmart to 'Eat the Tariffs' Instead of Raising Prices Coinbase Unchained: How the Attack on Coinbase Shows the Dangers of Centralized Exchanges Fortune: Circle pursues IPO—but talks with Coinbase and Ripple could mean a sale, sources say CNBC: Coinbase joining S&P 500, replacing Discover Financial Stablecoin bill Unchained: Stablecoin Bill Passes Key Hurdle: Dems Join GOP to Deliver a Crypto Win Timestamps: 👋 0:00 Intro 💳 2:18 A big reason why the U.S. credit downgrade matters for investors 📉 7:49 Contrarian take: why souring U.S. debt could also hurt crypto 🛡️ 15:30 Do tariffs work against the U.S. military and national security?  🔁 20:14 Why the crew flipped on Fed rate cut expectations 📊 28:35 Is the U.S. about to introduce yield curve control? 🧾 35:04 Are the Mag7 stocks the new safe havens in a recession? 📈 38:54 What if the “Goldilocks” scenario is priced in, and it's wrong? 💼 44:26 Why hedge funds are secretly in a vulnerable position 🫱 49:15 What the “vibes” at Consensus 2025 revealed 💵🇨🇳 50:44 A secret threat that the stablecoin bill poses to China? 📈 57:43 What Coinbase’s S&P 500 inclusion means and why Robinhood is its biggest threat 🌀 1:07:17 Should Coinbase acquire Circle? Here’s what the panel thinks ⏳ 1:13:38 Why altcoin ETF approvals are delayed and wen staking in ETFs? Learn more about your ad choices. Visit megaphone.fm/adchoices

Has anything changed in your reviews over the last few weeks on inflation where rates are going or any of that? Everything's changed. I'm becoming more convinced we're not going to see rate cuts this year. I agree with that. Maybe the last quarter, but certainly nothing imminent. Hi, everyone. Welcome to Bits and Bips, exploring how crypto and macro collide one basis point at a time. Today we'll talk about consensus 2025, Trump, as usual, some news around Coinbase, some news around.

Circle, the stable coin bill, which is the biggest news of the day today. And then also, we obviously have to get into the U.S. credit downgraded by Moody. But first, some quick intros. I'm your host, James Safer, Tradfoy, Archmaster, Lord of Bloomberg's End. I'm here with Alex Kruger, Kruger, Kruger, Macro of House Asgard, Protector of the Realm. Oh, you're one. Also joined by Noel Alachistan, Hi, Hi, Sierra, and Keeper of the Crypto is Macro Now newsletter. Hello, everyone. Finally, last but not least, Rahmalaa, Mesaer of wealth, leader of Lumida. Good afternoon. And a last

second, happy related birthday to Rom, actually. Oh, thanks. Thanks. I appreciate it. I stopped counting the years five years ago, but Brian Johnson. I'm going to do a reverse aging, hopefully here on now. We're here to discuss the latest stories in the world of Crypto and Macro. Just remember that nothing we say here is investment advice. Please check unjanecrypto.com

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Find the link in the show notes. First thing we have to do is one, it's always nice when we have just the roundtable of four of the six of us who are the recurring guests. So this doesn't happen all that often. We usually have guests, which are also great. But let's go into the biggest news, the Moody's downgrade. Let's go to Noelle here to give us the background, because we were talking before we even went live here, and there's some disagreement a little bit.

But I think that's like 90% of it we agree on. But let's hear from Noel here, and then we'll get into some conversation. The big story is that on Friday, after the stock market closed, Moody's, the rating agency, announced that it was officially downgrading the credit status of U.S. government debt. Now, this is not a surprise. For the details, it's downgraded now from the pristine level AAA to AA1, which is one below still pretty good, but not the pristine level that people expect when they think of the world's risk-free asset.

It's not a surprise, as I was saying, because Moody's said back, I think it was in 23, that they were putting this on a negative watch. So, in other words, this was coming, also Standard and Poor's S&P Global, I should say, they downgraded in 2011 and Fitch downgraded in 2003. So the U.S. government debt has not been pristine for some time. Now, what we were talking about earlier was, does this make any difference to markets? Fundamentally, not much has changed, one, because it's largely priced in. Again, not a surprise. Two, because it's not going to change who can buy U.S. government debt. That big move was back in 2011 when S&P downgraded. Those that could buy U.S. government debt last week can still buy U.S. government

debt. Where it does matter is whether they will actually want to. My view is that while fundamentally not much changes, the messaging here is important, especially given the timing around the debates on the tax bill. Who wants to jump in next? Rahm, any grand thoughts on the movies downgrade? I think there's notable to call out that the rates actually tightened today. after the downgrade. Now, there are technical constraints on certain managers that can't buy AAA-rated debt. So when it loses that AAA rating, then they may have to seek a revision to their mandates to permit them to invest in U.S. grade debt. That's one. Two, this is because we have 8% deficits. We have wartime deficits that are running, and we haven't seen any

austerity. We haven't seen any bell tightening. You know, the budgets have been proposed just are increasing spending overall. That's bullish for markets, bullish for the economy to be clear, but it doesn't help the debt to GDP picture. So, you know, it's politicians kicking the can very predictably once again. It is bullish for digital assets. It's bullish for a number of digital asset names. I know we'll come back to that soon. I think a very interesting question is, where do rates go from here? And I'd love to get the perspective of folks on it. On the one hand, you've got continued disinflationary forces, which you see in improving inflation prints. On the other hand, you've got a weakening dollar and the prospect of tariffs. And Trump or the

weekend said Walmart should quote unquote eat the tariffs. So you've got the prospect of that potentially impacting prices. And on the social media Twitter sphere, there's a big debate and whether rates are going to 5% or we're topping here. Both sides have a lot of conviction. So let me say on Moody's, first, I mean, this is kind of like, I mean, it's backwards looking, but anyway, I was expecting on the news, 50 beeps to 1% move on the S&P. I think we got a little bit more,

and I really thought and still think it's a one-day thing. because as Noel said very clearly, it doesn't affect who can buy, which means it doesn't affect contracts, which is something that actually happened somewhat in 2011. And there was changes in how contracts of basically sovereign swaps are written that they don't include credit scores any longer. So there's been no impact in who can buy. And it was in fixed income circles, it was widely anticipated.

And furthermore, it's furthermore, it's a third agency to fall in line, S&P in 2011, Fitch in 2023 and now Moody's. So it's kind of like a non-event. It is another event, just a one-day thing. the 2011 one by the way was it triggered a very major market correction 2003 was going to be the way I see it is it was meant to be a non-event until basically was picked up by by by Ackman who basically triggered one of the most incredible things I've ever seen in the financial markets which was basically

Agman moving the treasury market as if we're a shit-com was incredible. And, yeah, Noel. I want to push back on the idea that this might, this would be good for crypto. I mean, I'm personally bullish, as you all know, but there is a scenario in which maybe this is not good for crypto, and that is if indeed this does,

maybe not trigger a correction, but encourage the continuation of the correction that has been building except for the rally that we've seen since the China agreement. So if there is a correction, and Alex is totally right in pointing out that the previous two downgrades did trigger a correction, this time is different, then arguably crypto short term would follow the stock market down.

Why would it do that? I mean, hopefully, Alex is right, and it's just a very short-term thing. But what if it isn't? Because the last two times, we didn't have sovereigns exiting U.S. government debt market anyway. I said by sovereigns, I mean foreign buyers. We got the foreign buyer report from the U.S. Treasury Department on Friday, which showed that in February and March, foreign buyers actually

accumulated more U.S. government debt than any other two-month back-to-back period in decades. But that was up until the end of March. In April, we've seen the exodus of foreign buyers from the U.S. government debt market. And this is just another excuse for them to continue to do so yet another justification to their clients or their bosses that this is the strategy to continue with, which is why I think that fundamentally this is a nothing burger, but in terms of messaging, it could have some impact. If we do see yields go up, which I expect, then that should impact stock market valuations, even if just earnings, then the valuations of discounted cash flows, which I know are an old thing, but they do matter. When the yields go up, start market

does tend to wobble. And if the stock market bubbles, then crypto tends to wobble too, at least short term. We saw in the banking crisis in 23, crypto Bitcoin shoot up, but this isn't a banking crisis. You know, it's like I don't agree with it being good for Bitcoin. I think it's truly an unenvent in four Bitcoin stocks in general. But something, when this kind of thing happens, This is the way I look at the market. Others may disagree.

But for me, when there is an event that happens and it's fully retraces on the same day across assets, it's another event. It doesn't come back the day after or the week after. It's done. Market processed it and moved on. One more thing is this thing, the downgrade did generate quite a bit of panic. in in crypto circles which we could observe

last night and it's I think it's an interesting phenomenon that actually it talks about how basically positioning in crypto

is stratifies in Bitcoin and crypto natives are in alcoins mostly so as soon as they start rolling over people get very

very uncomfortable in the meantime Bitcoin and barely, you know, it didn't really matter that much if you think about it. Overall, I agree. I mean, it's like a buy the rumor, sell the news event as it relates to bonds. You know, my view is that you're closer to the high in yields rather than the low end yields. You still are seeing, you know, some slowdown economic activity.

We haven't helped the effects of tariff, real income growth rates are slowing versus inflation. So I think you're probably seeing the high. But it is notable that Bitcoin is at this key technical level. and it's a make or break technical level. And if you look at U.S. equities, too, they're also similarly, they've had a 22% plus run off the bottom, which is the median run that you get off of a correction of that depth where the VIX achieved the level it had.

And where we go from here will be very telling. I would not be surprised to expect some consolidation this week. It would be natural, it would be very healthy. There is an argument to be made that the run we saw in Bitcoin yesterday has nothing at all to do with the Moody's downgrade, just from the timing. It started right when Scott Bessent was on the CNN Meet the Nation show, and he said that we are going to be focusing on increasing GDP, so the debt-to-GDP ratio improves. That did not send a message of austerity, and he didn't mention at all, bringing the deficit down. obviously the message was, we're going to keep on with the fiscal stimulus. And I think that is what pushed Bitcoin up yesterday.

So it went up, came down, but not to do, we haven't yet seen the reaction from the downgrade. You're right. I know. I went to see my cardiologist on Friday, first time in a decade. And he actually thinks it would be healthier for me if Bitcoin goes up, to be honest. I'm sorry, Ron. I can't imagine there's less stress, right? You're going to get less cortisol and more dopamine in your bloodstream.

So Besson, yet, no, to your point, you know, he said, hey, we're going to outgrow debt through growth, which is a supply side answer, right? Now, I ask Grock, which I love, Grock is my favorite AI, indispensable now. but I ask Grock to do a side-by-side table of GDP growth versus debt growth. And this is what you see. It's very hard for GDP to outrun debt growth. If you want a strong GDP year, you've got to increase the debt in the prior year. You've got to have a lot of spending. That's what you see here in 2021.

But all to say is there's no fiscal austerity. It's spending. The spending will continue. In fact, if you look at the stocks of defense contractors are back to all-time high. I remember there's some discussion a few months ago about, you know, Trump saying, hey, can we do a global peace deal and cut defense 2050%. You also had all these primes, for example, Boozano, Hamilton, Accenture, and others that have large government contracts or stocks were smashed and, you know, they're recovering now.

So, you know, U.S. fiscal spending is back. Never stopped, really. Well, never went away. Never went away. And the bill that they're currently debating, I mean, it did actually finally get through the committee last night, which again, extraordinary to be blocked in the rubber stamp committee. So that's, again, a sign that could have some rocky path ahead. But it is quite astonishing in just how much it is going to be increasing, not just the deficit, but also the outstanding debt. And yet they're still talking about Doge doing its thing and bringing down spending. Yeah, I mean, I want to go back to something that Ron brought up about how like, you know, Trump going after Walmart saying you can't like increase your prices and all the stuff. It's just like it reminds me of a lot. It's so funny because you see it in the both political parties. They like to like defy that there's consequences to their actions. And Trump's like just like, eat the losses and the Democrats did stuff like this left and right under Biden. Like this is not actually a negative consequence for these things. Like whatever. It's just like it feels like the same exact.

playbook on that front. I just wanted to throw it in there because you brought it up real quick, Ron. Go ahead. I go to Walmart this weekend. You know, what you do when you get older on your birthday, you buy gifts for everyone else, food and drink for everyone else, like it's for a goodo card. So I went to Walmart. By the way, it's a reminder. This is like the eighth wonder of the world. And somehow it just got better from since the last time I was in Walmart. The selection, the variety. And this time when I was in Walmart, I was looking at it from that lens is, hey, can they pass prices on? So two fun facts.

One is Walmart's net margin is 2.9%. Their gross margin is 30%. The difference between their fixed costs and overhead and all the rest. My conclusion from this is Walmart will have no problem passing prices to consumers. In fact, you don't even notice it. If they're board games, you can get there, like the monopolies of the world, like $12.50. If that goes to $15, no one's going to notice. It's not going to make a difference.

So from a retail merchandise perspective, I'm not really that concern. I'm more focused on what tariffs mean for semiconductors because you've got hyperscalers spending hundreds of billions of dollars over the next few years on semiconductor chips. And if you want to maintain a leading dominant role in AI from a national security perspective, which is what Trump admin policy wants, I think is a good policy, how do you square that with tariffs on semiconductors. Do you make the tariff level higher or lower because they're strategic to national security?

I'd argue lower, but... At the same time, you want to incentivize domestic production? Yes. Easier said to none, I guess. Dollar general, dollar tree, all those stocks have been rallying, by the way. If you're going to buy a product for a dollar from these stores, you've got to import from China. So they've been...

A little bit off topic, but, I mean, One of the points of having the biggest military by a very large margin in the world is that you can have your production whatever you want because you have the military. You can take control and protect anything. So I always think that this view that you need to make in America for America, the U.S. to be stronger. It's misplaced. It's mostly a narrative for boats. It's not necessary. I used to have that view, too.

I still do, like the United States has 11 aircraft carrier. We can project force, et cetera. Our defense banning versus Europe and the world combined. It's like we're still the leader. But then these Houthis, what's up with the Houthis? We've lost, F-18 fell off a carrier. Allegedly, some other F-18s were, you know, they were not in commission.

And we did like a deal with the Houthis. Like, what's going on? What's the relevant? Carriers are expensive drones aren't. Right. Like the American military force is not modern for the threats that we see, you know, all to your point. Which is interesting.

It's interesting when you step back and remember that for years, we've been told that what protects the status of the dollar, the U.S. military? The Houthi, it's embarrassing to see that the U.S. had to cut a deal with the Houthis, against the desires and interests of Saudi Arabia and Israel, by the way. Yeah. And then again, there's also some doubts whether that that is indeed what happened. Did they cut a deal with the Houthis? The Houthis are not convinced of this, it seems. Is that right?

Apparently, the article I had read was that the United States was spending a billion dollars a month combating the Houthis for limited material progress. billion dollars a month is actually nothing about the U.S. defense, but it's like absolutely nothing. It's nothing. Billion here, billion there. Yeah, I'm all for things and all the rest, but I was just surprised by. But it does, it does feed into the outlook for the dollar, which we touched on earlier, which is relevant to the downgrade. The dollar is not the not the safe haven it used to be. When Fitch downgraded in 23, U.S. yields went down because although the U.S. government debt was downgraded, people rushed into it as a safe haven. And that is not something we're seeing this time. There are other safe havens. Gold rallied on the news. Gold seems to be continuing to do quite well today. Bitcoin still has its dual narrative struggle going on.

Do you guys have any strong views and has anything changed in your views over the last few weeks on inflation where rates are going or any of that? Everything's changed. I'm becoming more convinced we're not going to see rate cuts this year. I agree with that. Maybe the last quarter, but certainly nothing imminent. I think we'll see cuts maybe last quarter. I don't think it matters that much unless you buy into that liquidity, everything narrative, which is very flawed.

It's what matters is growth and earnings mainly in this market. And yield current. of control. I mean, we know that they have to bring yields down. Yields are not going to come down naturally, especially if inflation expectations remain high as does uncertainty. So some kind of yield control were likely to see by the fourth quarter because otherwise the deficit situation is just going to get untenable. Interest is a greater percentage of the debt, of the deficit now than, of spending, sorry, than a defense that is going to continue as they issue more debt and rate and the yields continue to go up. And that's not productive spending. So they're going to have to come up

with some way to massage the yields down one way or another. So I would say that the views all shared here, I would describe as consensus views. I think we'd all agree their consensus too. The point being, though, that what creates surprise to markets, what moves pricing will be something non-consensus. And I think that view, and I actually have this view, is that you will get a bout of of stackflation over the summer, when the tariff policy after 90 days is there. And I believe the Florin tariffs will be 10%. You saw that in the UK deal, where we raised our sales taxes, EG tariffs, and UK lower theirs, and that's an ally.

That's going to be a template for what a good deal looks like. So that will create a bout of inflation over the summer. But I think it'll be digested. It'll get work through. The other thing that often happens in June, July, August is you get some seasonal weakness in initial claims and employment. It happened last summer. Happened the summer before that. You know, last summer it caused a growth scare, fear.

And right now, markets aren't priced for that. Markets right now are priced for the consensus story, which was just shared. One thing I've been thinking about a lot recently is, you know, we, yeah, we've been. much agree on that rates, cuts are going to be pushed back, if at all, and that the outlook for crypto is positive, medium term. But if what if we're wrong, rather than ask what if we're wrong, we're wrong, why were we wrong? Now, they come at it from a different point of view. How could we be wrong here? Let's go anti-consensus. Yeah, I mean, just to throw in some data here, we were just a week ago, two weeks ago, we were pricing for a cut pretty heavily.

a possibility of June and even and a very high probability of a cut by July. We've pushed that out to the September meeting. I'm probably I think I think something's going to have. I think we're still going to get another cut or two. I think Trump's going to get what he wants instead of a cut. So right now we're basically pricing for one cut by September. And then pricing for another two cuts by before the end of December. So before the end of the year. And then the third cut is expected to come sometime in January or March. That's what the markets are saying right now. I'll say, I'll go against you guys saying he don't know if there's going to be a cut this year. I think we see a cut this year. And it happens in September at the latest. Well, I would say a good

non-consensus angle on this. By the way, James, I think that kind of squares with how I see things too, but is a Renaissance macro and Neil Dutta. And he was very kind of bearish in summer of last year and anticipated these rate cuts. I disagree with those rate cuts, and employment data has been nothing but strong. Corporate earnings have been strong. But that kind of doesn't matter if you're in the policy view and you've got to make a decision.

But, you know, he has a recession call out there. And he's citing weaker government hiring, including at the state and local level. There's also data around tax receipts. Tax receipts are not a real-time variable. It's like a near-time variable. and the tax receipt data is weakening. And if you look at real income versus inflation,

your real income is declining below inflation, which is not a good picture. Housing data remains weak. Housing is a big driver of the economy, of course. But we're seeing inventory backlogs build, right? The mortgage rates are elevated right now. I don't think they can go much higher than here, but they're still elevated.

So that is the, that's the summer story that I think plays out maybe end of June, somewhere through July, August, September. And you have 21 times earnings on the S&P again. So you can't really go from 21 to 22. You need a lot of trust and forward-looking clarity to get higher than that. I just don't see that happening.

So, you know, I think S&P at 6,000 is close to fair value. We're at fair value, like right around now-ish, right? Still bullish between now and your end, but I think you're fairly priced versus that alternative story, which I think will start to come into the foreground. But you're assuming that we're not going to be any significant EPS forecast reductions, which if indeed we do see the bite from tariffs and we do see the employment slowdown, then we will. I've been, again, coming at it from the other way. It's December imagining here. It's cold outside.

we've had three cuts. Why have we had three cuts? And the only thing I think that would trigger that kind of thing is if things are really bad out there. If unemployment is shooting up, sure, that would make them, that would, that's within the Fed's reaction function. Or if the Treasury market has totally seized up and they have to do something and let's face it, the symbolic lowering of rates would be part of that. And also another question to throw out there is why do we think the Fed would only do a 25 basis point cut? if it's going to do one.

Would, as Alex says, that would do absolutely nothing at all. That's like swatting a fly off of a hippo. If it's going to move, it would probably move big to send a message that the market would actually notice. But they did adjustment cuts in Q4 of this past year. Why we're going to do the same? Just managing the real rate of interest, which is what they look at. I don't think they should look at that, but they do look at that.

So the real interest rates remain elevated. We should pull up a chart on that. But they are way too high. why the FOMC officials believe Fed policy is currently restrictive. I think they're wrong. I think the high real interest rate reflects strong underlying economic growth. And you're not going to get a recession. You're going to get labor hoarding. Consumer spending is still fine. But you do the conditions for another summer growth scare. You do adjustment cuts, no other, right? I mean, to your point, I think they could just do two or three adjustment cuts. Just as inflation comes,

down if inflation is right right the summer could throw a curveball on that too Alex what do you think about that interesting to hear well a couple things the the summer data I don't think is going to be very important I think the market is going to look through because with the pivot and tariffs if it's maintained which I don't see any reason to the leave it won't be maintained we have what what they signal is that we have a very pragmatic administration capable of pivoting fast when things go wrong. You don't think the 10% floor on terrace will be maintained? I think it will be maintained.

What I don't think, yeah, I do think. And I think it's fine. I don't think it matters as much. It would matter if we were higher than that. So what I tried to say is that the growth scare is not going to scare anyone. And the other thing I think I wanted to point out is the on the yield curve, control. That's consensus in crypto only. It's not consensus outside of crypto. And it's actually something pushed by, you know, some large influencers in crypto who are wrong over 50% of the time.

That's not going to happen. Not really in the waste. If we see it, it would be extremely bullish because it's not priced in. I don't think it's going to happen because we're, very far away from an emergency situation where the U.S. has to take such an extraordinary measure. It would be extraordinary. Not that extraordinary. I mean, it's happened before in history, and it certainly happened around the world. I mean, we are becoming, in terms of the debt policy, more and more like Japan. So I do, I hear people suggesting this in the macro newsletters I read.

I haven't heard it that much in the crypto-circuitary. And you're totally right. Crypto people tend to not fully understand Fed policy and they tend to see what they want to see there. So I, again, I wouldn't consider myself a crypto native at all. But I do think that this is what we're going to see because I don't think there's any alternative. And I do think that we're going to be taking a page out of Japan's playbook when it comes to that. Maybe we won't even notice it's happening. I mean, there's a runoff naturally anyways. We just might see that tilt in a certain direction. Yeah, it's true. This is mini Japan. So check out this chart here. I saw this from the BAML Flow Show report, but it shows a summary of the quote, big, beautiful bill. And you can see some of the savings and cost components. So a big cost line item in the budget is extending the Trump 1.0 tax cuts. Okay. Now, that's not incremental. That's a continuation. You know, that stimulates for people that had concerns about tax cuts going away, I don't think it stimulates that much, though, because it is current state of affairs. Then you've got new tax cuts, which is $700 billion. However, you've got these tariffs on the bottom of left. They call that savings or revenue. Those are sales taxes. Those sales taxes will be borne by corporates and small businesses. Now, if you're a small business owner, it'll be, and consumers, yes, thank you. Correct. It'll be

some split across the provider service and the consumer. For the small businesses, those tariffs will be felt like an increase of the marginal tax rate. If you import from China, Vietnam, and you sell that hockey stick or on Shopify or whatever it is, furniture, your marginal tax rates effectively going up. The sub 150K population is likely to get a tax cut. So it's actually a kind of redistribution. Right. So high income earners, shareholders and big corporates and then small business owners, they're going to get a tax hike that funds a tax cut for sub 150K, which is, you know, it's a populist economic policy. I'm not for that. that policy, by the way. I think if you're benefiting from services of the state and federal

government, you should have some stake in the system. You should pay taxes. Even if it's small, you know, you should have some stake in that so you feel some accountability towards your elected officials to maintain some kind of cost discipline. Yeah, I mean, it's just crazy. Like, I mean, on there was like $2.7 trillion deficit added. And it's just like, I thought we weren't doing that. I thought the whole point of this was we weren't going to do this anymore. And, Here we are. It's like a 34% increase, which is not trivial. It's going to be great for a year-of-year corporate earnings growth, by the way.

So I'm bullish on this as an investment. It's good for markets, for sure. Definitely good for market. And this is a way that yield-care control can come in the back door. We don't even notice. I mean, we assume that by yield-curd control, and this is perhaps why Alex thinks that it's largely in the crypto-native sector, that the Fed's going to come in and just buy the bonds.

That's not the only way to do yield control. Another way which I think we're going to see is changing bank regulations, so changing the capital rules and encouraging banks to buy 10 years or 20 years. And by the way, you'll get some tax rebates if you do. For instance. And again, bullish, bullish for crypto. Well, you're right on. I mean, that's going to happen.

Now, Bank for America did this, of course, right? Bank of America was buying 1.5% 10-year bonds on the balance street. And now they've got a $100 billion hold to maturity loss because of that. But yeah, the regulation will waive the supplemental leverage rule. They easier for banks to buy bonds. But that's not, is that really in the best interest of banks to own bonds from the quality of their balance sheet? Not necessarily, but that's not the priority. I was going to say two things.

Ron, you were talking about the housing market. The housing market nationally is correcting. Like, it's coming back from the hotness of COVID. But it's very regional. I mean, Texas and Florida, where a lot of people move for multiple reasons, insurance, other things like that just got too hot. They were getting hit the hardest. But like up in the Northeast, New Jersey, New York, Connecticut, like, it's still a very, very, very tight hot housing market right now. And it's actually going the opposite direction with West's the nation, which is fascinating to me. I mean, obviously, I'm not a real estate analyst, but I like watching this stuff because I find it so fascinating. I think I'd say we were talking about unemployment and stuff. One thing that a shout out to Anna Wong, the Bloomberg economist, like she's been talking about this. Like the amount of time that people are taking to find new jobs has extended a lot. So we're not seeing like a kick up in unemployment, but we are seeing some weakness.

And I think Neil Dutta at Renmac has talked about this as well. There is a bit of a decent amount of softening in the employment market. So I think that's another area where that I know what we should be watching. I don't know if we'll see hoarding. And the last thing I wanted to say that I've heard multiple people talking about Josh Brown over at Roottholtz and some other people. One of the unique things about the stock market might be that these top high-flying big names in equities might be not as like risk. We're not in a consumer cyclical environment anymore. Like when you have, even if we go into like a minor recession like some people are calling for in the next year or two, well, it might be that the biggest names.

the S&P 500 hold up better than the vast majority of other names. Like it used to be, you know, manufacturers and all these companies that were subject to the cycle. But like, if you go into a recession, are you really going to like get rid of your $20 Netflix subscription? Are you going to really stop paying a couple dollars for added, you know, memory from your Google Cloud and all these things? Like these are things that are kind of just embedded.

Like you're going to stop going out to dinner maybe or stop doing other things more frequently than more likely than you're going to, you know, stop spending money at these. the mag seven type names. Obviously, that's not true for all of them, but we could be at a point where like these bigger stocks, massive earnings, decent earnings growth might actually hold up better than some of the, a lot of the smaller cap stocks and mid-cap stocks, the things that you would normally think like the high-flying growth names get hit the hardest, but that might not be the case in the next potential respect. The consumption basket has to shift, though. If real incomes aren't keeping up with inflation, there's got to be some shift. I agree with your point on like these

consumer staples, essentially, some of these tech companies. I'm sure an anecdote with you. So when I was in upstate New York to speak weekend, I had dinner with a friend. He's a general manager of a factory that manufactures Kevlar vests and other equipment for the U.S. military. Small town, upstate New York, local manufacturing, and they import silver from overseas. I said, what are the challenges you have in your business? And he said, we can't hire people. We can't get jobs.

I said, what do you mean? Like, upstate New York is suffering from higher unemployment than New York State's well-known. issue. He said, no, no, no. What people do is they sign up, they get the job, and they don't show up the second day of work, and they wait for us to terminate them. Then they go on unemployment benefits and the cycle repeats. And the wage for New York State, I don't know what the minimum wages, maybe it's 18 or 20, somewhere around there, but it's much higher than, say, like, South Carolina. So that's another dynamic here. So to your point, James, on, you know, people are looking for work longer. No, if you want to qualify for unemployment benefit, you've got to raise your

and said, hey, look, I was looking for work, therefore I qualify for unemployment benefits. I could just come find it. And it goes back to like helping Main Street. This is the main street. That's a aspect of base street. Like I'm all for a small business main street, like entrepreneurs. That's an entrepreneur. He can't get the labor he wants due to policy that's counterproductive. And taxpayers are funding that. And that's inflationary. Right. Like that by the way, that's like a quasi form of universal basic income. New York State, essentially you've got a base, a base. introduction to universal basic income. It's not helping the economy.

There are people that are just kind of living, not working and rotating from the benefit to the next. They get the job and rotate to the next. Gaining the system. I mean, I heard about that being anecdotally from other people, being a much bigger problem a couple of years ago. The people that I talked to that were having that problem, including my mother for, she works at a doctor's office

and they had like the same issue. People would come in and then basically not do the work. And like they were fine with getting fired because they would just collect unemployment. But that hasn't been the case from the other people I talked to. It's harder with COVID. But that funny thing, the second person I had over dinner was actually a doctor who shared that exactly what you just said.

But it's a post-COVID phenomenon, right? It's a post-COVID behavior change. Now, it's still not at those levels, but there is this residual effect. All right. I think that's good on macro and stuff. Does anyone else have anything on macro before we moved to crypto? Quickly, you guys mentioned housing. I just wanted to say, like I had a podcast.

last week on macro with one of these crypto podcasts. And one of the guests basically had this extremely gloomy outlook about how the US is going to implode in Q4 and onwards because of the housing market. And had these charts which basically pointed what you guys were talking about, actually, you know, the demand in housing, it's a weakening market, right? There's a lot of people that are actually moving away from buying to renting. There's quite a few metrics that show that is a weakened market. However, the balance sheets of U.S. households are very strong.

So the housing market can continue going south for a very long time, and it doesn't mean we're going to see, and we will not see. I would sign that with blood. a replay of 2008. The housing market is not what defines the economy going forward in the US. It's when I worry about it, a lot of things, worry about tariffs, worry about hyper-scaters, investments and maybe layoffs happening, worry about yields going above now like the 10 years at 4.5, the 10 year going to 5%, anything about 4.7, 4.8 is recent to be concerned.

We're not there yet. But there are many things that you can be worried about if you want to, which is what we do in macro land. We find things to be worried about. House in market, I don't think is one of them. Especially if yields come down. Fair enough. Fair enough. I agree.

I think yields, it's hard to see yields going higher. But Alex, what would you say is priced in? I think it's less helpful to say what will happen in macro because markets are perpetually discounting the future. By the time you arrive at the summer, you're looking at the fall. And it's more interesting to say what's priced in relative to expectations. I think you've got close to Goldilocks priced in. I would say, you know, like discretionary names and tech has run up quite a bit. They probably take a breather here and like defenses and health care and rate sensitive names, even like real estate names, maybe start to rally. But

seems to me a 21 times earnings. Wouldn't you say that that, you know, you're not. You know, your back at pricing in Goldilocks as a base case. It's what you said. It's fairly priced. That means that we can run up a lot higher. You know, it's fairly priced. And we have in the meantime,

we have a carrots. It's like Trump is a purveyor of carrots right now. It's like these deals are not yet done. We have an extra 50 days of carrot land, you know. He's going to give us deals. and then we have the taxes, the fiscal package. I mean, I think things are fairly priced right now. Sentiment, I've been looking at a bazillion sentiment metrics

and positioning metrics too many to point single anyone out. The position in, from what I see, I would say, is slightly underweight risk, which usually means we continue higher if things don't, something bad happens, something very bad happens, not moodies, right? Yeah, I think the multiples you're talking about is one reason. Another reason for potentially, maybe not a recession, but more like a flat-lined market or not a massive market like we've been used to the last couple years.

Because things are priced, like you said, they're fairly valued or at least priced to like things going really well. And then I know before pass over Iran, I do want to say something else in the housing market because something I've noticed, I think we should get, somebody should do the study about all these people who are super bearish in the housing market, big names and where they live, like, if they live in Florida or they live in Texas or they live in California in certain areas where like Airbnbs were huge and the market got really hot, like, people kind of like, they do this thing where they like, this is the whole like national housing market and can't

be like, well, yeah, there's a bubble in this like regional market or this city or what have you. And they can't like grasp it maybe like it's just that area, which is likely to happen. It doesn't mean it's the national housing market. The other point I want to make is you want to more people are renting than buying, somebody who's moving. The rent versus buy scenario right now is so broken. And it's not a problem for many people as long as they still have a job because they have a 30-year fixed rate. We're not like other countries around the world where you have to, your payment goes up as rates went up and inflation goes up. Like maybe your taxes and insurance are going up. But for the most part, your mortgage payment is flat. And I'm looking at stuff. And if you were to

buy like the same house, even after you do a 20% down payment, your monthly payment is equivalent to potentially hot than the rent in the areas that I'm looking. So, like, if like, all right, you have to pay all these fees to buy house, you were 20% down payment. And then your monthly mortgage payment is higher than your rent. And it's like, okay, I'm just going to ready equivalent condo or house or whatever. I'm not going to buy. And until things settle, either rates come down or prices and houses come down, I think that's just going to be the situation for the housing market, which I've heard a lot of people who haven't looked at this, don't realize how like offside so many things are. And it's just because

people are trapped in their homes. If you own a home, you're not giving up. your two and a half, three percent mortgage, and you're fine. It doesn't matter to you. I just want to share this chart back to Alex's point in position. I do think this is one of the most critical variables in the market. So what this shows is the percentile of longshore positioning for hedge funds. Hedge funds are marginal price setters in the market, right? You also have long only buyers.

This is a thing we've been talking about the last several weeks. Last week, believed that the net exposure of a hedge fund was on 7 percent in the backdrop of a market that's rallying 15 out of 18 days. And you can see on that right-hand side of the chart that their net exposure has increased off the lows, but it's still significantly below historical levels. So this is a performance chase. They have to invest. They have to buy.

You see that today. You had Moody's downgrade. S&P had a gap down open. and the indices covered and closed green. So hedge funds are covering shorts. They have to stay long. You can also see consumer staples where net sold this week. They're net sold because they're rotating out of this crouch position and buying Costco 50 times.

And they're buying anything else that gives them some more upside. So I agree. I think this is a it's a critical kind of driver along with the VIX decay that's driving markets, higher. I do think that at 21 times earnings, indices are actually close to fully value, but then sectors within that are misprice and this opportunity. That's why healthcare is rallying right now. So I think you're going to get a natural rotation, technology rally very quickly, discretionary rally quickly because there's no recession. They can still go some more, but these other sectors are going to benefit from rotation. Now we're seeing that happen now.

All right. Let's move on to crypto, because we're in pretty deep and we haven't done any of the the bits part of bits and bibs. So before we do that, let's hear from our sponsors who make the show possible. Hi, it's Matt Hogan, the chief investment officer for Bitwise asset management. Earlier this week, the U.S. Senate took a huge step forward towards passing Stablecoin legislation. I think it's the biggest regulatory development to impact crypto since the approval of Bitcoin ETFs in January of 2024. To learn what it means for Ethereum, Solana, and other crypto assets,

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Best part, it's completely free. Stay ahead of the market and subscribe now at bits and bips.bibs.bhive.com. That's bits and bips.bhive.com. Find the link in the show notes. All right. I guess I'll just start real quick with consensus because I was the only one there from the crew out in Toronto. Honestly, I had heard people were worried about a lot of people showing up. Also, anyone I know who lives in Canada that's involved in this space or launches part of the ETF industry, they were all there. So it's awesome to me because I cover the spaces, obviously. I think there was over 10,000 people there. I will say I went to consensus in Austin in, I guess 22 was the most, the first one after COVID. And half the people there, half the boost there. I was like, I've never heard of like any of these projects. I don't know what is it going on here.

Talk with a lot of wacky people. But I will tell you, the, the American. of people and clients and high quality panels that I sat on. Granted, I focused on the more things that I focused on, you know, that defy and tradfai overlaps, those bridges, staking in ETF, liquidity providers, all these different things. So I was focused on the areas that I cover more specifically. And I got to say, they put on a hell of an event. It was great. Toronto's awesome.

Next year, they're going to be in Miami, so I'm very much looking forward. I prefer Miami in Toronto. But yeah, so it was, I thought it was a great event. I don't really have anything like groundbreaking or anything that I thought was groundbreaking. Just overall, I thought it was extremely well done and looking forward to next year. What were the vibes like? People optimistic, pessimistic, where they focused on new token, they put some venture funding, regulation. What was the talk of the town of the vibes?

Honestly, the vibes were good. They were positive. But all of the above was talked. The regulation was a big topic. I mean, I did a panel. My panel was Annie Bearer of Coin Desk indices. He runs product for them. Anthony Scaramucci of Skybridge, who I'm a swing everybody here knows.

We had Pascal from 3 IQ, so he's one of the guys that launched the sole staking ETF in Canada. So yeah, we had like a pretty damn good crew of different people there talking about things from varying different angles. So yeah, oh, and I forgot John Osteenberg from, he's the CEO of Wisdom Tree. So that was my panel, but there was plenty of panels on all the things you talked about. And overall, I just thought everyone was optimistic. It didn't feel frothy. So I've been to these things like 2022 or 2021, where things really felt kind of frothy, you know.

And this wasn't that. So I guess from that point of view, it's pretty good. Nothing seemed over the opera ridiculous. But yeah, vibes were positive. And to some people dismay, I will say it felt a little bit more like a towards a Tradfai conference. Obviously, I go to those as well. So I've been to the stuff in 2022 where things,

The vibes are really high. It feels like a club at times and things like that. This was not that. There was a little more institutionalized. And I think that was the goal of what CoinDeck is doing to try to institutionalize the space, make it more available for institutional and serious investors. It's a great conference. First one I missed in several years.

Well, Miami's next year, so it's a lot easier to get to. And for a lot of people, they got screwed with flights back to the Dirk area, including me. So I know some people got their flights canceled and stuff. So if you're listening, that happened to you. Sorry. So that's it for consensus. And I don't really have a ton more to report.

Let's move on to, I mean, I think the biggest news going on right now is what's going up with the Stable Coin Bill, the Genius Act. Coming into the last month or two is like Dems and Republicans are on the same side here. We need to get some sort of Stable Coin bill. Seems like plenty of Dems are on side with trying to get this through. There's still a whole group of them that are trying to stop it. And from what I'm trying to, what I can see is they're basically worried about KYC. I'm going to shout out Nick Carter here, former guest of the pod and friend of the pod.

He basically said, like, from what I'm reading of the Democrats and what they're complaining about, obviously one, let's solve it. The first one, from my point of view, if cash were invented today, it would be illegal because they can't trace it, they can't track it. They don't know who's holding what. And they're kind of like preventing digital cash from being able to occur. That's what they're worried about, from my point of view, what the Dems are doing. The second point of view, which I've been saying on this podcast since before Trump even launched his meme coin or right around them, was that we went from over here, everything was off. Then we slung the pendulum way too far to the right with the Trump family leaning in so hard into the space, which I guess is nice. It's positive.

I'm happy they're looking into this. But it's like too much. It's like even if they're not doing any sort of grifting, the kind of like way that you could see this and people can point to it as grifting and doing things that are not good for the environment and doing. whatever. You know, I think all of that, it's obvious the Dems are pointing to that as an excuse for why they don't want to do this. Despite many of them admitting, like this was a $250 billion plus industry and there's no regulation set up specifically for it. And here we are. I rambled there. But like I just find, I think like what I'm happy what the admin is doing with the space for the most part. But like tone it. I think more people in the space would be happy if they toned it back a little bit with what they're doing with or Liberty Financial and the meme coin launches and all these other things. but yeah, you guys are nodding.

I don't know. Alex, if you want to go first, I don't know, what are your thoughts and what's going on in the Genius Act? Don't have a strong opinion. I think it seems it's going to be passed. And I mean, there is one coin out there that is benefiting from it,

but I'm not long enough, so I'm not going to shoot it. I'm sorry. I hope, yeah, let's hope it's past, but I'm not so confident. There's a very strong, I mean, as we speak, I was just checking a moment ago.

As we speak, Elizabeth Warren is on the floor rallying support against it. And her main objections are, as you pointed out, James, that Trump, there's no provision to prevent the Trump family from getting rich on the back of crypto. She's also very upset that there's no block of USDT being traded on US platforms. There's also, and this is actually interesting, specific mentions of the possibility of private companies, creating stable coins and X is specifically mentioned. This is something we're probably going to be hearing more about in coming months. And then, of course, the usual consumer safeguards.

And she's getting support because her points are not invalid. I mean, she actually is making some reasonable points. She is, however, not seeing the bigger picture and she is trying to stop progress in the name of protection. Unfortunately, she just may be successful. And if she's successful, that's really bad news, because it will lose the momentum. And if even the low-hanging fruit, if even the easy thing to get through, can't get through, then that is going to deflate expectations for further progress in regulation.

It's fairly easy to say that it doesn't matter that much because we have a supportive SEC, but the SEC's rulings and attitude towards crypto is dependent on the administration. And what we really need is a bill that a change in administration can't overturn. Yeah, I had a chat with Austin Campbell on this. Austin is probably one of the foremost experts on this testifying in front of Congress. We've got to get him here soon, by the way, a very thoughtful individual. And his view is, one, it'll get past. Two, is that the Treasury Secretary or the Treasury should broadly be supportive of this

because of what it means for Treasury funding, you know, an extra $250 billion in funding. Now, that's against like a $30 trillion Treasury market, but still it's a sorts of funding. He made this phenomenal point, though, which I thought was really insightful around China. He said, if you want to weaken China, which is a peer competitor of the United States, he said, stable coins allow you to pay exporters in China in U.S. dollar terms in stable coin. So it allows those entrepreneurs in China to exit the system. I thought that was very clever. What we're importing from China, it's not from the Chinese government.

We're not importing bank financial services that are backed by China. They're entrepreneurs with businesses. And yes, some are closer to state-owned, et cetera. But a lot of this merchandise, you know, that can be moved. But I thought that was a powerful point. this is a no-brainer from a stable coin national security perspective, also limiting payments to actors offshore like tether, where you don't have as much oversight and control.

So I'd expect that it gets past. Yeah, let's hope. It's important. Funny enough, to mention the stable coins in China, the threat of dollar-backed stable coins being more convenient than other digital payment methods is what is, on the surface anyway, driving the progress towards the digital Euro, the EU-CbDC that we're going to get announced and confirmed towards the end of this year. They are trying to figure out how they can

combat the dollar taking over digital payments in Europe. They're forgetting that European digital payments largely run on US platforms anyway, specifically PayPal Visa MasterCard. And this complete, anyway, don't get me started on this because it is absolutely insane that they are still insisting that this is what Europeans want when the real story is they're afraid of the dollar influence. Yeah, I mean, I just, the last comment on this I'll make is something I know I'll kind of hinted at. Like if we can't even get a stable coin bill, which like before, even before and after Trump's election, it seems like everyone's like kind of like, yeah, we need to do this. Like it needs to be done. If it's going to take forever for us to get this done,

there's no way a market structure bill is going to get done. Like this, this is a bad inclination for how long it's going to take to get that done. And then you have to wait till after midterms. God help us. I guess. That's my view. So we might be just completely dependent on the CFTC and SEC rulemaking and just what they're going to do and they're going to have to come up with like their own guidelines.

And we'll go from there, which is not ideal. It's to be much better if Congress would just actually give them some sort of mandate to handle this in my personal opinion. Let's go on to Coinbase. Coinbase is joining the SMP 500. I don't have any strong views here. I'll pass it off to anyone else if you guys have any strong views. Good for them.

Ram, what are your thoughts on Coinbase likely joining the S&P 500? Well, what a round trip that was, right? When you had like the, you know, Gensler was coming in as the SEC chair a few days after Coinbase had listed. And so now, it's a complete circle. It's a big congratulations to Coinbase. I used to work with Coinbase. They were my largest client when I was at Cross River.

So I know they worked hard for this. Kind of amazing. I think the big questions now for Coinbase are, what do they do with USC and Circle? Do they acquire the business or not? And how do they want to position against Robin Hood? They want to go across asset classes, or do they prioritize payments?

Do they deepen or they go wider? we have to just see how that next journey unfolds. Another question is who's next of the crypto companies? To join the S&B 500 or to go public? To join the S&B 500. I think we're going to see a bunch go public too, which we should get into circle after this, but I'll let it. Who among them would make it to the S&B 500?

It's hard. Very, very difficult to get it. Microstrategy is a candidate, I imagine. strategy would potentially get in. That would be the top. That's when you're supposed to sell, guys. When that happened, I mean, ironically enough,

I think to like some of these platforms that have like restricted owning of Bitcoin, I've talked to many of the people that are the gatekeepers at these platforms, allowing Bitcoin ETFs or Bitcoin exposure in themselves. Vanguard is a very notable one. You can't even use their brokerage to buy the Bitcoin ETFs. And it's funny because like you're getting coins in their micro strategies in NASDAQ, we have every

companies left and right. I feel like it's every day we get a new announcement of some company adding Bitcoin to balance sheet or some new version of, you know, the Bitcoin Treasury company. That, it feels like a little topy to me on that front as well, Rom. But I mean, maybe we're just getting started.

But like, we're at a point where like just your regular equity market exposure is going to have a decent amount of exposure to Bitcoin fighting. Obviously not a few large cap just yet, but we're heading there. The big question for Coinbase also will be they make the bulk of their revenue and earnings through net interest margin through USDC. So how will that be valued going forward?

I think that's a big question to ask. You know, when you join the S&P, usually it's like a euphoric moment. And we were, I was very excited about Coinbase was writing about as much in 23 and 24 on Twitter. By the way, back then it was highly shorted in. hated by a lot of hedge funds. And there was a big Twitter base that was buying Coinbase. And that's another theme we're seeing in the markets, by the way, of course, where retail investors were faster and outpaced hedge funds. And hedge funds just got squeezed. And same thing happened with Palantir. It's happening with Coinbase happened with Jim Chano's shorting microstrategy

for three years now, apparently. Did you guys see this over the weekend? He's selling micro strategy and buying Bitcoin. And he said, oh, I'm doing what Michael Saylor is doing. I'm selling micro strategy shares on buying Bitcoin. I'm not quite the same. But yeah, I think Coinbase has some valuation challenges, just where it is now. And we'll see how it does from here. I was a big fan of this back the last few years.

I don't know. I feel about it now. So I'll jump in here real quick. I was a little bit skeptical of Coinbase's stock price a couple of years ago, obviously blatantly wrong, mostly because I was looking there to get so much of their money with net interest margins, which we need to talk about Circle next. But also, their fees are so high. I was actually helping my boss because he's trying to get more and understand how some of this stuff works. And he cannot, could not get over the fact that like you're paying 1% in fees in some cases. If you do recurring buys, it's over 2%. They're just raking in cash. And that doesn't even include the spreads that they're taking money on. Not that like, Coalibage is a great company, but like that has not been democratized.

Like you look in the ETF world, like you are paying penny wide spreads and you are paying zero transaction fees or at least very minimal transaction fees. And that has not come to the crypto space at all. Even the places that say they are really low fees, not considering names, their spreads are pretty high.

If you look at what the actual spot price of Bitcoin is and you go to buy them and say no fee, the price you get executed at is not where the spot price is. I agree. I don't use the PS4. Yeah, because of all you raised. Yeah. You know, on Coinbase, if you think about it,

Coinbase is a clear example of the story Coinbase tells us is that it's a market that is extremely inefficient and right for disruption. Why? Because Coinbase is a horrible product and a horrible platform run horribly. They have absolutely the worst possible. customer service in a scale from 1 to 10, they rate a 1. They're really bad. They just had this insane leak where they leaked 1% of everybody's information got stolen.

1% of all active traders, a very large number. They leaked everything, like your address, your name, your phone number, your bank, bank details. Your last digital socials, that for those who are not Americans, those are like, That number is sacred. They got your trading activity, all your trade, they got everything. And on the news, they dropped 4%, and the day after it bounced back 8%. So I don't know.

And Emily and Alicia, they're capable operators. Like what they've accomplished and built is serious. And they've got a lot of community around them too. I think the question for Coinbase also is like Robin Hood. You know, Robin Hood is also founder-led with Vlad and their U-X is compelling. It's cross-access class. You don't even need service. The funny thing to Alex's point on Coinbase customer service, once a month I get a customer

service call from Coinbase. Immediately you know it's fraud. You're like Coinbase is calling me? Okay. You know, if I'm driving on the road, I'll try to entertain my kids by seeing how long I can drag out the conversation and protect them from the next unsuspecting person. But yeah, the service is weak. But Robin Hood is executing, you know, very well.

And it's all about the attention of the consumer and where does the consumer live? I think a broader value proposition is compelling. And Robin is actually cheaper than Coinbase too. Yeah, this all goes back to the whole like bridging thing. It's Rod Hood, who is tradfai leaning into the BFI side. more so than pretty much any other, you know, brokerage type platform. And we have Coinbase fill in the opposite way. They've launched a bunch of futures, traditional futures contracts.

They've done that are CFTCU regulated. They're trying to do tokenized stock. Like it's funny, like we're going to see this like merging of different things. And I mean, obviously that's the area that I'm specifically focused on more so than anything else. Just last quick thought on Robin Hood. By the way, Robin Hood now, and I owned it a few weeks ago, but I don't know. I mean, that thing is at 46 times forward earnings now. It's above the average analyst price targets.

I mean, it's expensive. So this whole, we talked about earlier, this high beta animal spirits momentum rally, that's happened. That's got to rotate now to other categories. So you're saying I should sell my Robin Hood stock? Because that was a big buyer of the last year. We don't give any financial advice here.

But the taxes matter and time frame matters. And it is, you know, I admire the level of execution in the community that they've built. And the product, it's impressive what they've done. Yeah. I also, I want to point out one more thing before we start talking about the Circle deal. You mentioned UX and UI. Alex, you were saying it's a horrible product. Like, I saw a tweet this weekend where like the Coinbase traders like were celebrating that they ship four-hour

candles on Coinbase Advance. Oh, amazing. And that weekly and monthly are in the works. And like, like, as somebody who works at Bloomberg, obviously, like I have access to like some of the best charging in the world. But I'm just like, this is, it. insane. This is like a nearly 100 billion dollar company that's like celebrating, shipping a charting candle with four hours in it. Maybe you guys one from a point in the show. We need to balance in that. I love the product. I'm technically a customer from back in 2017 and I would use it more if I were allowed to buy more than I'm currently restricted from buying. But there's some things they could definitely do to improve it. Like lower the- They played an important role in shaping the industry

response to Gary Gensler though. Yeah. Right. I think the industry owes a big credit to them and they you know finance fair shake pack and a bunch of others and they also rallied the troops you know in in that service so that you know credit owed for that yeah all right let's get in the circle we talked about the ripple bid on the show before it now seems to be i don't know how i don't know if you guys how true the rumors are on this front but it seems like as you mentioned rome like a lot of their money comes from the differential between interest rates and and getting free money on their stored in the USDC because they basically have a massive like profit sharing agreement with Circle.

So I was like, I don't know why Coinbase is. And if Ripple's are offering this much money, I mean, Coinbase, there's so much synergies that are already basically partners. Coinbase makes more money from Circle than Circle almost in some ways. I don't know. That might be an exaggeration of the numbers. But they're making a lot of money from their Circle partnership. So I don't know.

What are your thoughts on Coinbase potentially acquiring Circle here? Coinbase has them by the balls because they have a distribution agreement, right? That agreement has to be renewed at some term. And that's got to be disclosed in that is a material risk factor. The party that has more value in the relationship is the party that has distribution. That's Coinbase. You can swap out the back end. You can swap out the supplier funding even.

Although UFC has an incredible brand, right? I mean, UFC is the brand. It is the token. Would I swap for another token that generated yield? Absolutely. And that start happening. I would, the ability to have a digital dollar that accrues yield, that's non-custodial on-chain, that's true innovation.

That's innovation that is significant. But is the USC brand enough? I don't think, I don't think so. I think you're going to see additional stable coins enter the market, where people can offer distinct value propositions competing on yield, for example. example, or the issuing bank and the brand and the counterparty risk of the issuing bank, et cetera. I think all those tertiary things you were just mentioning matter.

But like you, if you're getting able to get a 4% yield versus 0% yield, it doesn't matter. I mean, if we're talking 4 versus 4.1, like people aren't going to move, you know. But if you're talking yield versus no yield, particularly in the U.S., like it's going to go to the yield, something like Athena or whatever. There's plenty of coins out there that are leaning into this space. But again, right now, I think it's more regulatory constraint. than any sort of technical constraint. Like there's plenty of yield-bearing stable-coins out there.

You just can't do it in the U.S. because, one, it will be considered security. And two, there is no stable-coin legislation. Noel, you look like you want to say something. Yeah, go ahead. From what I understand, and obviously I'm not a legal expert, and I'm not American, but yield has various definitions. There are various ways it can be applied.

And the Genius Stable Coin Act does prohibit the issuance of yield-bearing stable coins. that the yield is part of the token or crude to the token, but there is another way that I've seen some issuers do it, and that is just distribute the returns. That is a different, that's a security, essentially, but it's not, but it is a stable coin that earns a yield and it's not outside, if I understand correctly, of the scope of the proposed legislation. Correct me if I'm wrong. Yeah, I think you're right. It's outside the scope right now. So, yeah. I don't know.

The point basically is that yield is not as simple as we think. There are ways around, security markets always find ways around any kind of limitation. Where there's money to be made, somebody will figure out how to do it. Exactly. Like nature, it'll find a way. Yeah, it's like water flowing down with gravity.

It's going to figure it out. I haven't looked at a deal. at all, but it's very hard to replace liquidity. You know, there's a lot of pools and there's a lot of coins that trade against Circle. That's a, that's a, that's a, it's a really good point to, to, I mean, Coinbase does not have the entire upper hand. That's what I'm trying to say.

That's a great point. Yeah. Also, one thing we haven't yet seen in Kyoto because it hasn't been big enough, but at the place it's going could get there fast as any antitrust move against a crypto company. And while, you know, I think Coinbase obviously would be one of interest, should they acquire Circle and make USDC the only stable coin they use on the platform, that's just a hypothetical. But it's intriguing that we're getting to the stage when this could be an issue. That would be interesting. And I would echo what Alex just said, because even in ETF world, we look at things like assets and

flows and trading volume. And like you are, it's true in the ETF world. Like the liquidity begets liquidity. Like it becomes like its own ecosystem, its own solar system. So when something's at the center and there's a lot of things trading around it, it's just being used in multiple different ways. It tends to be used that way. It's part of the reason we have U.S. dollar haemegemone because like, if you're trying to get at different currencies around the world, like it's, if everything is trading in dollars, it's much easier to go from like, you know, the Thai bot into a dollar before you go to like the British Crown's a bad example, but some other currency. So that's part of the reason why there's so much demand for U.S. dollars because everything is

traded in dollars. So in the in the ETF world, which I guess we can get into, I'll give a quick update on ETFs if nobody else has anything to add. Liquidity is really hard to steal. So like we see people an ETF launch and they take over and they'll pass on assets and take more flows from other things. But like spy, it's not the biggest ETF in the world anymore, but by damn, if something goes wrong in the markets, then there needs to be liquid.

liquidity, spy is going to be the one that people go to trade, even if it's more costly and less efficient than newer products. So yeah. Great point. Yeah, Alex, I think you're on the liquidity pools. That's not easy to displace. This merger needs to happen. They'll both benefit from it.

One can't live without the other. The impact the economics is too much. Coinbase has an expensive valuation. They should pay with that currency. And then circle because it's private that has a funny money valuation. I don't mean that in a negative disparaging way. It's just you're privately held. It's a funny valuation.

It's not until you're publicly traded for a year that you really figure out what you're worth. So they should get this transaction done. It makes a lot of sense. Or anything else before I give an update on ETFs and what I'm watching? I know most people don't really care anymore. So I guess it's good at the end, but maybe there'll be some alpha in here for people who really care. We care, James. We care. I care.

This is my job that I feel like it's not as critical anymore. I'm not moving the price of Bitcoin with my tweets about ETS anymore. But yeah, so one of the big things people are asking about Salana, XRP, ETS, all of the above, still everything's just getting delayed. Cans are being kicked down the road the most part right now. Anything that would hold spot crypto assets that would be new, being kicked down the road. Staking is a huge question right now. I think they're going to figure out a way to get staking done.

The problem with staking in an ETF in the U.S. this spot products in the U.S. or in this wrapper called the Granter Trust. We don't need to go in the specifics. It's just a legal structure. The problem is they technically can't really handle the yield. It would be what we refer to as bad income. So there needs to be some input from the IRS. You said that income?

Yeah, for lack of a better term. I'm not a lawyer. What is that? It basically doesn't, it's an unqualified income, essentially. So, like, under the current rules, there's a lot of questions about what staking yield if you're taking in. So if you're an Ethereum grantor trust ETF and you get Ether back, there are issues with the way that that should or would be taxed because grant or trust are a pass-through entity and you're not just getting cash.

So there's a whole bunch of these concerns. So the IRS needs to chime in. Obviously, the SEC and CFC would likely need to chime in. So if the SEC approves this, the question is like, is it going to be settled? So maybe the SEC, like, I have all these thoughts. It's not really flushed out. But like, in my mind, the SEC approves this. Could they be like, the issues are like, well, we can't actually do this until the

IRS comes in and how long does it take the IRS to comment and give feedback on what the situation is. So that's a huge question mark at this point. I think the Solani ETS are going to be approved even before staking is approved. So we could have Solana ETS before we get staking. The one thing I would point out is the crypto index products that didn't file. It's a grayscale, GDLC, BitW. And then also you have Franklin Templeton that is filed for some of this stuff.

And hashtags has a product that is, out there right now that's just Bitcoin and Ethereum, but we'll be allowed to hold these other assets if they come due. The first one, do is July 2nd. So when that happens, I think we'll see some approvals. And yeah, so I think it's possible that those things get through because they're less than 10 or 20% of the overall portfolios in these products that are not Bitcoin or Ethereum. It's possible that he comes out with some framework before then and basically uses that early July deadline to approve other crypto assets. But yeah, so those are my views.

There's a lot of questions still to be answered. I think we just saw some delays today. Things keep just getting kicked down the road. I don't know if anybody has questions. It's understandable. They've got a lot on their plate at the moment, and they're still trying to figure out the definitions. Hester Pierce gave a statement today.

She was speaking at an SEC event. I haven't had a chance to go through the whole thing yet, but it's characteristically sharp and characteristically supportive. She pretty much says that she doesn't think most crypto tokens are securities, or rather she thinks most crypto tokens are not securities, but the way that they are sold can be an investment contract. She also highlights how complex the kind of rulemaking is around crypto, precisely with many other reasons that you highlighted, James.

It's complex, but they're determined. She does say that crypto is not the most important thing that the SEC is looking at at the moment, but she also highlights how significant and important it is to get this done because the lack of clarity around security's definitions is actually not just unique to the crypto asset class. The rules are vague. They always have been. That's partly by design. But with crypto, it's holding back an entire industry.

Well, it's really funny. You have this changing of the guard and people are coming to similar conclusion, that they won't be heavy-handed and just not helpful like Gary Gensel. But they're saying, hey, sometimes security, it depends. It's complicated. It reminds me of this. You guys hear about the news about the Epstein files where Cash Patel, the FBI director and Don Bonjino.

Now, these are like hardcore Maga Trump fans. They went on and they said, there's really nothing there. There's nothing there. It was like the biggest letdown ever. It's like, but you're supposed to be the other side. There's supposed to be something there. Like, no. No, there's nothing there.

of suicide. Sorry, that's it. But they have a lot to do. I think the, I hope the SEC learns the right lessons. Like, why are they not prosecuting Richard Hartful fraud? Why? He is a bad guy. I'm not making a defamatory statement, blah, blah, blah. That's insane, to be honest. The fact that they let him just like go like that, it's absolutely insane. Right. They're learning the wrong lesson. Like, people in digital assets were happy to see SBF prosecuted for deceiving the public. They're happy to see Alex Monski sentence and go to jail. That creates confidence in markets and accountability. So why is that not happening with Richard Hart? Makes no sense. I feel like... This guy, sorry to interrupt, but this guy, he advertised very aggressively,

literally a meme coin as a certificate of deposit. That's the sin. That's wrong. Yes, you cannot advertise banking services unless you are a bank. That's why sales skills was wrong as well. Yeah. So I think this is something that people outside digital officers don't understand. Like people in digital assets actually care about law and order. That's what smart contracts are. They're immutable forms of governance.

Yeah, I mean, crime is legal now, right? Isn't that what everyone online is saying? If it's in the code? Yeah. all right we went over as usual um anyone else have anything to add before you wrap up Alex yeah just just quick one somebody asked a while ago um you know what do you guys think is best positioning right now that's a very loaded question that that goes into financial advice because at the same time it really is dependent on on risk aversion uh and um and basically prior

positioning etc there's so many questions to answer that but if i mean this is, it's not because it's a crypto podcast. If I had to pick one asset to deploy right now, it'd be Bitcoin right now. My opinion, I want to disagree with Alex. I think it's a compelling story. You're going to find out very quickly on Bitcoin, especially just where it is technically right now, which is great. The second thing I would say is that the miners should be under consideration.

I'd love to see if anyone has a view that agrees or disagrees at that. I'm seeing a lot of talk about basically galaxy going after miners, inefficient miners to turn them into redeployed towards AI. I think it's partially reflecting the price. It's been doing very well the galaxy stock recently. The CoreWeave follow through a bit, right? So CoreW is up 100% since IPO. CoreWeave did it deal with CoreWeef Scientific, to your point, those are the AI place. these hybrid plays, and there's a spillover effect from that, I would argue.

Noah, what do you think? That's something that I follow closely. Over 10,000 of you this time, for those of you who are listening to this on the podcast feed or YouTube show later, we also appreciate you as well. Thanks for this episode of Bits and Bips. We'll be back in one week. Actually, we're not recording next week because it's no longer. Oh, yeah, you're right. So we won't be back in one week. We'll be back in two weeks. Thanks, everyone.