Unchained - Bits + Bips: Why TradFi Knows It Needs Crypto More Than Ever to Stay Relevant - Ep. 973

Episode Date: December 9, 2025

Thank you to our sponsors! Uniswap Mantle Hosts Ram Ahluwalia, Austin Campbell, and Chris Perkins dig into why interest rates may not fall as quickly as markets hope, why oil demand could surprise to the upside, and how retail keeps buying every dip—even while consumer confidence hits new lows. The trio also breaks down the growing collision between TradFi and crypto: whether banks can compete with blockchain-native distribution, how BlackRock’s staked ETH ETF filing could reshape the market, and how yields on Ethereum and Solana represent a brand-new financial primitive. Plus, they examine Ripple’s controversial raise, Citadel’s push to regulate DeFi, and why major incumbents are now in a frantic race to choose their crypto “dance partners.” Hosts: Ram Ahluwalia, CFA, CEO and Founder of Lumida Austin Campbell, NYU Stern professor and founder and managing partner of Zero Knowledge Consulting Christopher Perkins, Managing Partner and President of CoinFund Links: Unchained:  BlackRock Files S-1 for Staked ETH ETF Berachain Kept Secret a $25 Million Refund Right to a Brevan Howard Fund CoinDesk:  Citadel Challenges DeFi Framework in Letter to SEC, Sparking Industry Outrage Bloomberg:  Wall Street Hedged Big Crypto Bet in $500 Million Ripple Deal (XRP) Bitcoin Options Show Traders Hunkering Down for Crypto Winter Timestamps: 👏 0:00 Intro 📉 2:06 Whether there’s any real path to lower rates 🛢️ 5:07 Why Ram is bullish on oil demand 🤖 6:12 The biggest constraint on AI adoption 🇯🇵 7:02 Is Japan raising rates still a “nothing burger”? 🛍️ 9:57 How retail keeps buying every dip 🏦 12:21 Can crypto beat banks’ entrenched distribution? 📉 18:00 Why Ram thinks you should “sell the Bitcoin rallies” 📼 20:13 Are we reliving the 1970s? ⛓️ 24:47 How BlackRock’s staked ETH ETF filing could reshape the market ⚖️ 30:28 How staking yields will trade against Fed short rates 💼 38:59 Ripple’s controversial “raise” — and the unusual protections granted to Citadel and Fortress 🛡️ 47:52 How Citadel is fighting DeFi to defend its moat Learn more about your ad choices. Visit megaphone.fm/adchoices

Every account is going to become a wallet. Every wallet is going to become an account, right? And distribution will remain king. It's been king to date and it's going to remain king. How long is it going to be before we start trading Ethereum rates against sulfur or against short-term interest rates? You know, why not? You know, that's called the basis trade, basis swap. For the losers, the retail investors of the token, somehow this money has got to come from somewhere.

Who's on the better side of that transaction, though? Where are you looking at like on this deal? Are you looking at Fortress, Citadel and Galaxy and saying, I want to be on their side of the table? Are you looking at Ripple and say, damn, they could a great deal? Welcome to bits and dips where we explore how crypto and macro collide one basis point in a time. I'm your host, Austin Campbell, high scholar of zero knowledge group, but I'm here with my two usual co-conspirators,

Chris Perkins, the Golden Hand of Coin Fund, and Ram Al-Alawalia, Maester of Wealth, at Lumida. We're going to discuss today the latest stories of the worlds of crypto and macro. I'm going to try to get Chris angry about market structure and we're going to see how that goes. But please remember that nothing we say is investment advice. Check UnchainedCripto.com bits and bids and bips for more disclosures. And in general, don't take advice from podcasters alone. Before we get started, though, here's a quick word from sponsors who make this show possible. 2020 to accelerate the future of real-world assets. With a $150,000 prize pool, backing from a $4 billion treasury,

and direct access to ByBIT's 7 million-plus users, this is the ultimate ecosystem for builders. Are you a builder who needs to add on-chain trading to your product? The Uniswap Trading API from Uniswap Labs offers plug-and-play access to some of the deepest liquidity in crypto. It's on-chain execution at an enterprise level. More liquidity, less complexity. Visit hub.uniswap.org to learn more.

So getting started here today, guys, we're going to start with our favorite topic as ever, which is the marketed macro. So we've titled this little one is the era of ever falling interest rates over. And I'm going to start by saying in a literal sense, the answer there is almost certainly yes. mainly because like Chris, myself, Rahm, all lived and traded through a time period where rates were descending to zero over a roughly 30-year period. And once you hit the zero floor, very strange things start happening if you try to go further. So I like our odds of not going lower than that.

But why do I ask this? What is going on? One, Fed has a December meeting where they are likely to cut rates again. I believe the market odds of a rate cut are now into the high 80s. And yet, when you look inside of the Fed, the views of officials there are deeply split. You have labor softening, but services inflation has been sticky. There are still some concerns about tariffs, valid or not. And as a result, although I think the decision to cut is expected, what the forward path is maybe less so.

Some people are saying there's still significant inflation risk. Lin Alden is out saying that bond underperformance may now slow. we don't have the tailwind of lower rates pushing equity and housing valuations higher, even as we have some degree of debasement and gradual printing. We've seen situations like that in the U.S. before we can talk about consumer sentiment, quite frankly, near historic lows right now, even though high-income households appear to still be spending. So, Rom, I want to start with you. You think about the markets a lot.

What are you making of all of this? So if disinflation continues next year, you could see a pay. have for lower rates, both on the short and the long end, right? So markets right now expect one more rate cut in April of next year. Markets are notoriously wrong about rate cut expectations, by the way. So that's just a line in the sand that's been put out there. If you have more negative data, and again, we talked to the Rochak test last week, I don't think the data is actually that negative, but people perceive it as negative. You mentioned labor market weakening. people have been talking about labor market weakening the last two years in a row and markets are

going higher and we have more net employment. But people will find a reason to cut. They can do that. Long end rates could drop if you see more disinflation. A lot turns on tariffs and right now we're easing back on tariffs. One of the biggest drivers of inflation has been having to reshore and rebuild supply chains domestically in the United States, which by definition have a higher cost. cost structure than China overseas. Otherwise, it would have been built here. So, you know, I think

for the near term, like the 10-year probably is where in these, least was the two competing pressures. I think you could see rate cuts exceed the market expectations next year, though. Rob, what do you think about oil? Oil looks, has been relatively contained from a price perspective, you know, contributes, obviously, to any kind of inflation print. What role is oil having all this? And how are you thinking about it? I'd be bullish on an oil commodity price. I mean, like you said, oil hasn't really rallied. It's on the lower end of a range.

It's somewhere in the $50 to $60. And the demand for energy is only going up. The demand for all forms of energy is going up. There's a lot of demand for natural gas. And that will create a bid for oil. So having consumers strong, we're seeing more traveling leisure, or seeing airline demand go up or seeing cruise line demand go up. People still like their internal combustion engines.

And around the world, you're seeing on average central banks cutting rates, which is stimulative. That also will create a bit for oil. Electrification is taking too long. We don't even have the transmission grid, much less the electrical energy capacity to transition away from oil. I think you're another lows on oil. How much of that is going to be a bottleneck for AI on infrastructure buildout from? Like, as you said, the energy grid actually may turn out to be the binding constraint for some of that. What are you seeing on that?

So it's the number one binding constraint on AI. It is access to energy. That's why CoreWeave wants to buy Core Scientific. That's why you have GE Verona and Cummings and Schneider stock prices growing up because they build these natural gas turbine systems. So, yeah, that energy is the constraint on AI adoption. Nuclear is too far away in the future. It's a great story. You know, small modular reactors, they sound great in theory,

but they're just too far away in the future. Like natural gas has to be the answer to that. You still think Japan's a big nothing burger? I mean, rates are still high. They're major oil importer. Now that the prime minister is making some noise around China. Like, where is your head in Japan right now? To your point, the rates in Japan are going up at the same time, the U.S. dollar has this graceful rally so that the liabilities, which are denominated in yen, haven't caused a scenario where money managers are upside down on a carry trade.

This is different than August of last year, where the liability, essentially the borrowings were increasing just as the value of their assets. or decreasing. And this is a slow moving target. If people see it, everyone's talking about it, people talk about something a lot. It's my favorite word, becomes a nothing burger. There you go. There it is. I was just down with the training desk earlier and I was like, hey, what are the market makers saying? Liquidity in crypto market is very low right now. I think part of that is the pause before the Fed decision comes out. But I also think it still has to do with just the destruction that we saw with retail in 1010. Like retail has not popped back yet. The market makers themselves got hit pretty hard.

I know a bunch of them were raising capital. I don't know. I don't want to speculate what it's related to. But it still seems like liquidity across the crypto space is contained. The other thing that we're watching very closely is basis. Because remember, like this is the cycle we believe where retail ebbs and flows, retail's ebbing a little bit. Institutions are coming in.

And the first institutions to walk through the door, obviously, it's very hard for them to go long assets. Now the regulatory stuff's handled, but it's just a two, it's just the assets are too volatile. So they have to trade the basis. And what we're seeing now is we're seeing basis is tightened. And if your basis is close to the risk free rate, trust me, there's probably better places to drive yield. And so that's been one of the other, you know, challenges that we're seeing as basis has come in. So, and in the context of this, this greater retail ebbing that we continue to see institutions slowly marching forward. How much divergence are we seeing, though, in what we're saying by like retail here, Chris. And what I mean by that is, if you look at alt coins and meme coins,

which were pretty retail driven in crypto, certainly the price performance there has been the sound of a sad balloon deflating over the past few months. But on the other hand, how are we feeling about some of the retail favorites in, call it more traditional markets? Like if you look at the Palantiers, right, like the SoFi. of the world. I guess I'd ask the two of you, are we starting to see retail in general get worn out or retail specifically in crypto get worn out? Well, that's a phenomenal question. I think it's retail and crypto is worn out. I think retail and equity markets reminds me that David Gaggin's meme. Maybe we take a pair of screen. You know, the sellers are exhausted and that it's just

a lot like that. I mean, you had a one-half billion dollar financing. Do you see this stuff by last Friday, knock was on 6% on Friday and Monday, it's down 80 bibs. Right. Like every dip is being bought by retail investors. So the dips are shallow. And a lot of it's also because, you know, institutional investors remain off sides going into year end. But that's the beauty of convergence, right?

Now retail is looking at, okay, what are my opportunities in either equities, you know, crypto or somewhere else. And so as quickly as they may move out of crypto into traditional tech, they can as easily come back. Because again, a lot of those barriers are now being eliminated. Yeah, I agree. I agree. It's all moving to one platform, which advantages these super apps that can trade everything. And the more things that get tokenized, you know, it's interesting to question, who's the winner in the long run?

Is it these crypto natives or is it Trotify that just kind of coops the system? because you've got digital assets going to TrotFi and then Trifai is going to wrap with tokenization. I think this cycle, you're going to see the empire strike back a little bit, right? Because you have the crypto people building into Tradfy. And when the Tradfai, and they're moving, they are building, they're building into crypto. And so, and they have a lot of scale. They have a ton of distribution. They are a very, very viable force.

And so, like, we're going to talk, I think, a little bit later about some folks that are learning how hard it is. is, you know, to go toe to toe with those incumbents. But yeah, like, I think that they're well positioned. You know, convergence isn't like, is an equal. And I think we're seeing, like, a lot of the trad folks moving in. I agree. Do you need all these fancy new wallets when you can access the asset through your traditional brokerage account?

I'm not sure that you do. So, yeah, I agree. I think convergence advantages the incumbents who also know how to build an amazing user experience. But not all the incumbents. Yeah. Well, yeah, okay. Some of them are fighting back. We'll leave out IBKR's user interface.

Sorry, guys, I love you, but you know, it's terrible. All right. So question there. Actually, let me give a little bit of a framing as I think about this then. One of the things that I've been watching for a while is this idea that we're going to tokenize everything. And therefore, all of the crypto-native platforms are going to win. And I get the appeal of that argument to a crypto-native because you're like,

well, we've had a hard time getting distribution. We're finally getting these things moving. We're finally having like people show up. Look, even like, you know, funds and maybe stocks are going to be tokenized. On the other hand, doesn't this just inspire like literally like J.P. Morgan and Fidelity and Fandgarde and Schwab to build all of infrastructure to handle this stuff? And then once they integrated all the unique special things that you thought you were doing in crypto are just in your Robin Hood app. So to Ram's point, why do you need anything else? Because here, like, here I guess is the provocative question.

Are there brokers or banks in the United States that on a standalone basis have more customers than all of crypto? Do you know the answer to that already? For sure. I mean, all the major money center banks fit that bill. Yeah. And so it leaves me in the point of, are we so sure crypto is going to win that engagement? I agree. And Stripe acquired a company.

that does wallet infrastructure as a service on a white-label basis. So if you're a big tech company that isn't with the times, you just rent it. We saw this in Fintech 1.0 in 2015, where you had these lenders come out of nowhere with a better user experience and their first round on NeoBanks. And then one to two years later, you had other Fintechs emerge, which were the arms dealers, that rented the software to the banks. and the banks upgraded. Those are players like Encino and like blend labs on on mortgage, for example.

So I agree. I think the Empire Strikes Back thesis makes a lot of sense. Saw that movie on the plane right back from that step this weekend. But what a great movie. So good. There you go. But I do think there's a really big arms race amongst the incumbents. And they're either going to have to build or buy or partner.

A lot of, some of them can't buy because they're under consent orders and they're in trouble with the regulators. So that brings you to partner. And I think this is dance partner season, right? What capability do I need? Do I need a wallet? Do I need a layer two? Do I need a stable coin? Who's my dance partner?

Because if I can't build it fast enough, my competitor is. So I got to find a dance partner to get to market as soon as possible. That's net positive for the crypto startups because the big guys are coming in and they're going to need that tech and someone who can move more quickly. I'm seeing it everywhere. Like we just saw the, what even, even I guess it's not startups, but like, the Krakken Deutsche Borsa announcement, right? Like, who's my dance partner?

It's happening everywhere. This is dance partner season. Ironically, it'll probably favor, like, crypto entities that have not launched tokens if we're talking about partners in M&A as well, because that reduces the amount of, like, grit that you need to get into one of these partnerships. Look at the wave of acquisitions, right? Like, look at Stripe with Bridge, look at the potential BVNK acquisition, right?

look at what ripple has been up to find me. And I'm not saying that like I necessarily agree with this approach, but find me any project with a significant token that has been acquired by a mainstream traditional financial entity. Yeah, to date for sure. It's been challenged. But I think that that is, you know, these are, we can talk all day around the difference in valuation between equity and tokens and utility and this and that. I think that that scarlet letter is kind of a thing of the past. where I do think in the future. Maybe, you know, we'll have a prediction episode

where we're going to talk about M&A with someone with the token. But again, I don't think it's just M&A. I think it's partnering. It's, hey, give me your tech. I'm going to white label it and off we go. Yeah, I mean, we might be just entering a world of hypercompetition. Look at all these payments companies,

including PayPal and BISER, and Global Payments, and Visa and MasterCard. They're all substantially liable. lagging down or near 52 e glows. They haven't performed at all. Stripe did a good job, just staying private, and they're just doing expensive acquisitions with their private kind of fake valuation. And I think the question is, well, who owns the customer relationship that's going to actually

capture value? It goes back to the point that Allison was raising around these big money center banks. Don't underestimate their ability to do that. Then the other question is, what about these super apps? These super apps recognize that opportunity. and then recent regulation has made it easier, including from SECT or Paul Atkins, for them to get after us. So they think of the super app thesis is still a very interesting thesis to bet on. I was just going to add it in the super account thesis, right?

Every single bank account, you go into, you know, name it, why shouldn't you have, you know, integrated crypto functionality to be able to transfer at low cost, to be able to admit to redeem stable coins, to be able to trade, you know, anything from Spotify. to derivatives to FX. Like, you know, it's also like the, the user experience is going to change. And like, I guess do you think that the wallet becomes that super app or is it the exchange? Every account is going to become a wallet. Every wallet is going to become an account, right? And like distribution will remain king. It's been king to date and it's going to remain king.

On that note, going from something that's rapidly changing to something that actually turns out to be not changing too much. Let's talk about Bitcoin prices for a moment. If you look at the options market there, we're basically seeing Bitcoin being stuck between 80K and 100K. Near-term options interest is heavily concentrated in the late December expiry. It's not extremely spread out. Is all of this just waiting for the Fed decision or people signaling maybe to what Rahm was saying earlier? There's some retail fatigue here and Bitcoin is becoming institutional and relatively normal. here. What is going on with that market?

Did you see Larry Fink's comment? By the way, the weekend, some of our sovereign wealth funds are are nibbling. So there might be a floor at 80. He says they're nibbling at the 80K level. I thought that was an interesting observation. You know, you are seeing higher lows start to form on Bitcoin. It's behaving well, certainly behaving well, right? You had a, you know, a liquidation a couple weeks ago. And so, yeah, I mean, it's, yeah, does it break past 125K in the near term?

No, I still remain of the view that it's, you know, you sell rallies. But it looks okay. So far, I think your point on the Fed is a good one, right? If the Fed has a hawkish cut and says the path of policy from here is one more cut in April, that's not going to help crypto. That won't help Bitcoin specifically. Okay, yeah, I did a lot of times on that. So Bitcoin has this very unique identity.

It's digital gold on one hand. And on the other hand, it's a frontier risk asset, very sensitive to near-term rates. Gold has been around for 5,000 years as a store of value. And I think when people are really fearful now, if you're most, if you're, if you're maximizing your fear, do you choose gold or do you choose Bitcoin? Probably gold, and that's what we're seeing. It's not that you don't think that Bitcoin's going to be digital gold in the future. It's more like, well, wait a second.

You know, I'm really fearful. I'm going to just park it in gold for now and see what happens. So I think that's part of the issue. So I'm going to actually challenge something, Rom said previously, and steel man an argument. I want to see if we can get into a fight here. So, Rob, if we're agreeing with this paradigm for Bitcoin, are we essentially going to see, call it a 1970s style replay in U.S.

markets in general. That is to say a world where the Fed cuts some, people get happy, inflation picks up, the Fed goes back to hiking, people get sad, jobs start to fall, prices go back down, the Fed gets mad, they cut, right? And so on and so forth. Like Bitcoin has been very rangebound, but do we think there's a world that we could be living in for call it 2026 where actually that rangeboundness infects, call it the rest of markets, where we're going to see rates being range bound. We're going to see inflation going back and forth. We're going to see asset prices going back and forth on the same theory.

Or am I being crazy and like AI is great and going to save us and drag us up. That's the number one counter-comp, counterfactual narrative. Is this a replay of the 70s? They can't cut spending. They're lowering rates too early. You reignite inflation as you help when you put on. You get into a cycle of this happening again and again, right? But no, I don't think that's happening

that, right? Yeah, inflation is on the mend. You don't have an OPEC style energy crisis. Energy plays a much smaller role in the economy, in any case. And productivity growth, you know, is here. So, you know, labor markets aren't very tight either. Overall, things are fairly constructive. You know, you're still essentially at all-time highs

and consumer confidence is at the lows. Is that the lows? And it's at the lows because people have PTSD and anxiety. And most that's coming from politics, now geopolitical risk and headlines and televised news and social media, which people are just doomed scrolling their way down to a low consumer confidence number. And that creates a wall of worry. And that's actually bullish.

Many, many people. I was talking to an RIA last night, money manager, And he said he has a like a essentially like a therapy couch where Klein comes into his office. And they, one of them was just sobbing about this, their perceived state of the world. And here we are. Like markets are essentially at all time highs. I want you to know, Rom, I had a student. I won't name who, who proposed to be starting an RIA at one point where here is the business model of the RIA.

On the front end, we're going to take you in. We're going to talk about risk tolerance. we're going to construct your portfolio. We're going to do all the services. Like, we're going to get everything set up. And then we're going to send you out. Whenever you call us back, before you can talk to anybody on the investment side again, you have to talk to a therapist first.

I like that. Right, where it's like most of this is like emotional agitation. And so what we're going to do is talk to you and be like, what is going on? Are you upset? What's going on in your life? Tell me what comes to mind when I mentioned your mother, right? Like all of those sorts of things. And then see, is there a real financial thing going on here?

or have they just been due to it? One of the biggest tells when I was at Merrill Lynch was when people had to stay late and ordered pizzas and they were holding their clients hands. Like that was the time to buy stocks. So I think sentiment is really dower right now. And if you look forward to a year, 26 will be very good. You know, this is a wall of worry driven by politics. You know, you probably do get a premark midterm drawdown, but you buy that.

there's a lot to like there's a lot to like out there it's hard to observe as an outsider but i think the single best predictor of buying moments in u.s financial markets is when stable value funds in 401ks start to see significant inflows right because that is like the last domino is people panicking so much they're reallocating their 401k and even like chamoff you still obsessed about these max seven stocks and waiting from them to fall over and they still they don't because they keep generating earnings and they keep going up and now we're talking about AI deepening in other parts of the economy now we're seeing venture capital funds and private equity funds do AI roll-ups which is an explicit way of allocating capital to sectors of the economy to

drive AI adoption and yet more product of big growth and we are still in the early innings of that getting some motion all right let's do our last little segment here before you might have have to roll one of our sets of ads because I know Chris wants to do this one in particular. Staked Ethereum. So BlackRock submitted an application for a state Ethereum ETF. It would sit alongside the existing 11 billion ETH vehicle, but specifically give the investors exposure to the staking rewards rather than plain E. I have a few follow-on points, but I'm going to pause there to say, Chris, what does this mean?

How much are people currently giving up by having an ETF that just, like holds ETH and does nothing with it. Yeah, it's, I've always said this. I think that the current ETH, ETF product is an awful product. Because if you're an investor, if you're a long-term investor or any investor for that matter, why would you buy into a stock if you don't get the dividend? And we don't like using that analogy because Ethereum is not a security. It's a commodity.

But it has a natural organic yield. We capture that. The rate that we use is called Cesar. it's a nice yield. It's around a 3% yield. It's around a 2.5% real yield. It performs very nicely when you look through a real yield lens vis-a-vis v. Treasuries and stuff like that.

So why would you ever buy an asset without its yield, without its organic yield? The problem with ETFs to date is that it's really hard to give that yield to your customers if you have daily liquidity like ETFs have to do. And the issue that you have is that you just can't bond and unbond Ethereum. There's a queue. There's a line that forms depending on demand. There were some issues in the ecosystem with a particular validator. That queue blew out to a couple of weeks, like three weeks, maybe more than that.

And so if you have daily liquidity where you have an investor who wants to redeem that ETF and take back their cash, and you have that lockup where that Ethereum is bonded and you can't get it out, that forms a liquidity conundity. conundrum. And so what do you have to do is typically you have to find ways of having contingent liquidity. So just in case, and if that contingent liquidity is not staked, well, you lose yield. If you use an LST or you use a different type of yield generating asset, you know, is that what you're signing up for? So it's been this humongous conundrum. And frankly, that's been one of the big drivers of the DATs. The Dats don't have to worry about this on this daily liquidity. It's permanent capital. They can stake, they can restake, they can do all different types of things with more flexibility.

But look, the pure total return Ethereum exposure is something we know is necessary. It's necessary and happening. You know, we're also talking to some of the dads, hey, why don't you issue notes, you know, that give you total return, ETH, if you can't issue equities. There's lots of things to do. It's just a really hard problem. Glad to see Black Rock is working on it. I would really like to see the yield that they end up delivering because they have to figure out

how to, you know, mitigate that contingent liquidity. But it's going to be a better product. And I'm excited to see it launch. So I'll hop in and say there are some, well, there's two angles to go here, actually. Let's start with one that I've written about before, which is I wrote a paper not too long ago, actually was some of the Folks of Gito Foundation about liquid staking tokens on this exact topic. And the conclusion is basically as follows.

One is that the design of your liquid staking token actually really matters in this context, Chris, I think for the exact reasons you're talking about, which is you need to be able to get in and out of liquid staking token well enough that people arbit to the value of the underlying. And then, too, it needs to be tradable. I think in that case, LSTs, especially as the market gets like better, will demonstrate that you're not going to leave what, like a two and a half, three percent yield on the ground tier. You're actually going to be able to earn that and still keep things relatively liquid. Now again, not all LSTs are created equal, so there's some grit on that statement that is not a generic endorsement of LSTs, but well-constructed ones, I think, address this problem.

Also, buried within the absolute dungeon-level depths of the 1940 Act, there's something called interval funds. For those of you who have not run into those things before, that is not an open-ended fund, that it is not a closed-end fund at the extremes. Rather, it's a thing that you have to telegraph that you're going to get out of and you can get out of them. It's either quarterly semi-annual or annually. I feel like that's another good vehicle for staking because then, Chris, to your point, if you need to unstake, you're going to know both when and probably in what amounts long before you have to do it to fulfill the investor like redemption requests and in a world with futures. Even if the unstaking queue takes time, you can take the price risk

off the table in the interim and get everything out. So I'm very excited about this one because I think that's a market structure improvement. Fundamentally, the problem with like the ETF that does nothing, as you can see from the screen, is you're leaving percentage points of yield on the ground. It would be like buying a T bill and not getting the coupons. Yeah. Yeah. And people are like, oh, it's too small. Nobody cares about the yields. They do. Particularly, like, let's talk about basis trading, if that's what they're after. Like, a lot of these institutions are yield hunters. Let's talk about futures as well. If I'm putting on the spot versus features trade, would I rather have a future on spot or feature on total return. I would rather have a future on spot plus yield because it's

going to generate me more yield. So these yield games are just getting started. You're going to see an entire suite, I believe, of futures that are going to follow as well because it's all about the yield. I agree, Chris. I know you've been focused on this topic for several years now, so it's amazing to see it come to life. How do you see yields from staking trade in equilibrium with like short rates from the Fed. Should they be an equilibrium? Am I thinking about that the right way or how do you look at that? What a great question, man.

I've been thinking about this constantly. This goes back to the crypto ethos, right? Like, we are obsessed on this podcast in the economy with what a couple of folks are going to do and what decision they're going to make in a couple of days. There's nothing more centralized and closed than what the Fed does. And that generates like the downstream impacts of that closed decision has a massive impact on everyone and anyone, almost in the world,

because rates drive everything. You turn on Bloomberg in the morning. They don't talk about companies so much. I hate to break it to you. They talk about the Fed because the Fed drives the economy. Well, guess what? Some of these rates have been manipulated in the past, like LIBOR. We saw what happens and how they can get out of hand.

We all lived it. Now along comes crypto and along comes proof of stake. And what do we have? have decentralized rates. These rates, it's essentially the heartbeat of Ethereum we're looking at. Salada and others have the same. You'll see other rates there shortly. But they react. What do they react to? They react to things like how active the network is. The more active it becomes, the more that the priority transaction fees go up, the rates goes higher. Fascinating, fascinating, decentralized rates. They also will control and have a massive impact on these economies. Like we talk about blockchains as nations. nations have a Fed. They have their, they have the Fed. Well, they also have rates. And these are the rates of the blockchains.

It's a really interesting time. Like, rates are a $700 trillion industry just fixed versus floating. They're only getting off the ground now. It's going to be massive. And they're everywhere. Everywhere you have SOFA, which is, you know, one of the standard rates now that we have that replaced LIBOR, you can have an ether rate or Solana rate or another proof of stake rate, avalanche, et cetera.

Anyway, I digress. I think this is one of the most fascinating parts of crypto underdeveloped, very institutionally focused because retail doesn't really trade rates. Institutions, it's all we really do. No offense to anybody out there. But as the market's institutionalizing, rates trading, basis trading, like, how long is it going to be before we start trading Ethereum rates against sulfur or against short-term interest rates? You know, why not? You know, that's called the basis trade, basis swap. I would also say as you look at these markets and we think about the potential forward path to go back to our previous Tradfai versus CryptoNative debates.

One of the unfortunate truths for a lot of crypto natives is some of the biggest, both efficiency and trading gains are going to come from bringing rates markets on chain, not equities markets. Like they have both larger volume and way more broken market structure like interest rate swaps as an example I love because I used to be at J.P. Morgan. I have a book that trades 24-7, and I'm going to end up long in Europe and short in Japan on the exact same trade, posting collateral on both sides, creating unique risk. I would love to be able to just net that on one open access platform. And then I'm getting margined on European hours over here and Japan business hours over here, which is even worse. So 24-7 margining unbreaks all kinds of stuff in that markets. It's like Chris and I have talked on here about her stop bank failing before as well, right? Like getting rid of overnight gap risk.

And so that's an institutional only game for the most part. If you're not familiar with it, don't understand it. And you work in this space. If you learn nothing else from this pod, understand that you're blind to like 70% of the market volume and the stuff probably with the biggest economic game. More or more, it sounds like Ethereum was becoming Tradfite chain. Right. Just listening to both of you guys talk about this. It sure sounds like it.

It's such here, the grades, and I agree with all the statements. I think that the thing Ethereum has going for it is that it has 10 years of history without outages. And if you're a risk manager at any bank, if you're trying to get something through your risk committees, and there's like, I don't know, when I got like crypto futures approved it, Citi had to go, like, they're like 60 people. And it's, and you just take it off the table. If you're like, hey, it's got 10 years of history and that's what the regulator's like. I don't think that Ethereum is the end game, like necessarily. I think that, you know, Solana is going to be what Solana says it wants to be,

which is the decentralized NASDAQ, right? They're trying to do something different than Ethereum. I don't think people. Capital formation, for example, for. They're working capital formation. They're working on, you know, Ascanatolli, I'm the decentralized NASDAX, speed, speed, speed, speed, right? I think they're going to be awesome at it.

You've got other chains that are looking to be, you know, compete with Ethereum and modularity as a layer one, like an avalanche or somebody else. So like I just Ethereum's edge is its modularity and it's, and it's age. It's 10 years old. You know, that's my sense. And I think it's the first stop. I think that's right. You know, the other comment that SEC Chair Pollackens made is that, you know, he lamented

the fact that you don't have 7 to 8,000 public equities. And that's what you had 20 years ago. And it's been a one way arrow headed down due to companies staying. private for longer. Like the idea of having a company like Stripe that, who knows what it's valued at 85 billion, 100 billion, or Andrew at 80 billion as a private company, it's just unfathomable historically. So yeah, I can see these chains start to become capital markets for individual investors. And this is where the SEC needs to focus. Like, what is the disclosure regime, what are the standards to ensure alignment, including investing schedules, et cetera?

And how do you make it distinct from what an S1 filing is? And, you know, are Pekaboo compliance requirements going to apply in this world? And if not, then what is this distinction between this market and how you offer in this market versus a retricional market? So there's still a lot of wood to chop the SBC front to address these issues. But it's a big opportunity. Yep. Well, I was going to say, I'll hop in here and say, we're going to roll the ads before the next segment, because Ram, I did not pay Rom to say that, but he has transitioned to quickly to the next question. Awesome. Mantle has entered a new phase as the distribution layer connecting TradFi and on-chain liquidity. To accelerate this vision, the Mantle Global Hackathon, 2025, is inviting developers to build scalable RWW.

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powerful API. Visit hub.uniswop.org to learn more. All right. So, Rom, on the topic of capital raises that may not have disclosed everything, let's talk about Ripple. So Ripple raised $500 million at a $40 billion valuation. Investors included Citadel, Fortress, Galaxy, Pantera, and more. But the deal apparently included protections where investors have the right to sell shares

back to Ripple after three to four years. at a guaranteed 10% annual return. Investors also have liquidation preference, meaning if something happens with bankruptcy or sale, they have payment priority. And there are a lot of people who have been looking at this and saying 90% of Ripple's value came from the XRP in the first place. So what is going on here?

Is this, what's the right way to say this? Is this really raising money? What is going on? How should disclosure work? Yeah, this is interesting. Now, that's called structure, liquidation preference, and a coupon and the ability to put back. All that is called structure. So in a clean deal, you don't have structure, meaning you have a priced round.

Everyone's in the same boat. And what it shows is that the valuation cleared at this price is because of the structure. So as an investor, calm me in on that deal, by the way. Okay. Can I get involved? No, like I have a joke and I've ever looked at the analysis or not. But it's, if you're a fortress, it's heads, I win, tails you lose. Isn't that?

My worst case is I say, hey, guys, here you go. And you owe me for having lent you your capital. Fortress is a very sophisticated lender. Some might say like aggressive or predatory maybe. I'll use more capitalistic terms, but like aggressive. guess. And I was always wondering, like, why did Fortress do this deal? Now you answer the question why Fortress did this deal. That sounds like a pretty darn good deal. Why does Citadel do the deal? What is strategic for them? They're going to go make a market somewhere. Why did Galaxy

do this deal? Well, they're a prime broker. They should be involved, right? Ripple owns Hidden Road. I think every player in that name has some strategic angle to this. So that's not a clean valuation, is one takeaway. You don't want to own common stock in that deal. Yeah, to me, so, Dan, as a former fixed income person, I look at this thing and I'm like, wait a minute, didn't I just lend them money at 10% and get a bunch of warrants on top of that? That's kind of how that feels if I have the right to put that back in three to four years. It's also a headline and hype. That's clearly what happened here. Chris, what's your take?

Ripple right now is going through a transition just like the rest of the crypto industry, right? It's pivoting from XRP Army solely retail driven to institutional. Going to get out my RLUSD, any distribution through a prime broker. So it's part of this greater theme, right? And to excel in that new environment, it goes back. You have your nothing burger thing? Dance partners, man. They need dance partners, right?

You need liquidity providers. You need other major institutions. they're going to help propel and accelerate this transition into the institutional space, right? And so, you know, economics aside, hey, guys, I got dance partners. We're going into institutional. I have my business model. I'm going to everyone in their mother is going to have RLUUSD, which is growing before you know it. And everyone's going to use Ripple Prime, exit and road, because I have a vision and I'm getting after it.

So like, that's kind of how I see it. I hear you. I agree with your dance partner thesis, building ecosystem, get liquidity providers, get a balance sheet. Who's on the better side of that transaction, though? Where are you looking at like on this deal? Are you looking at Fortress, Citadel and Galaxy and saying, I want to be on their side of the table? Are you looking at Ripple and say, damn, they could a great deal? They're going to break out here and get emerging markets, dominance, and stable coin.

Does Ripple need the money? Oh, they raise money. I don't know. You know. It's always your point. I think it's a partner. I think it's a, I think it's more of a strategic round for both part. I think it's a strategic ground for Ripple.

I think it's a strategic round. You know, I think the other guys are getting some beautiful economics. You know, is this different than, you know, we've heard the rumors of people paying to have big institutions used to blockchain, paying $50 million or $25 million. Like, it's different, but it's still about partnership in my mind. And yeah, I get the deal. Terminus may not be awesome if you're, but who are the, you know, the ripple shareholders, right? Well, I was going to ask, are the losers, the retail investors of the token? Like, somehow this money has got to come from somewhere.

This is called a convex deal. Your downside is you make 10% each year. Your upside is that you have a call option. I'd rather own that than there. And it's coming out of the equity. claims supporting this deal, which are primarily retail investors. Am I reading that correctly? It's off-the-cuff analysis. That's what looks like. Well, I guess that comes back to do you think the majority of the value of the equity is the value of the token and that they will essentially

be selling more tokens to finance this deal, which is kind of the question I was asking. I mean, we saw, for instance, recently on a smaller scale, a similar set of claims around undisclosed side deals for bearer chain, right? And the reason this all comes back, into play for me with the SEC is how much do people need to know about this? Like, should you have to disclose this if you have a token that you've been selling to retail? I think it goes back, Chris, to your point, I like this theme. The Empire strikes back. I mean, the Empire here is.

Bryce Citadel is here. Like, these are firms have been around for decades and they're extracting their pound of flesh. And they're smart and they're sophisticated. They know exactly, you know, the amount of talent at these shops, these guys. know what they're doing galaxy got in the club which is interesting right yeah i mean galaxy is in rest of bank it's a kind of a new investment bank focused on digital assets but it got in on that deal which is notable like that's the player on the table like look there's strategic value there

but like citadel i get fortress i get you need a balance sheet galaxy doesn't have a balance sheet right they can't do market making they market make yeah but i was going to say not at the scale of Citadel. No, not at the same scale. But what do they have? They have an asset management arm. Right. Well, it says, they have they need to box out Goldman Sachs and J.P. Morgan, which are watching

from the distance and they're looking at that deal that just got done. And they're saying, what role do we have to play in this category? And how did Galaxy get involved in that? Why did we not get involved? Presuming that they chose not to get involved, right? The other players are hard to swap out. Like Fortress,

it makes sense why Fortress. It makes sense why Citadel is there. Galaxy got in there. So kudos to that, by that. Again, it's a good deal. Like, on the surface, I'd want to be on that side of the table. But notable that the other investment banks weren't there. I mean, I'll hop in to counter that a little bit by saying like, look, I still talk to management at some of these banks. I think the reason they're not in these deals right now is that in many cases, literally they don't know how. Like I would tell you, I don't think many of them were fully aware of this deal or the implications or how to value the thing. And certainly you probably had a few bankers or traders who were.

And then you go talk to a risk person. And the kind of questions you're, I'm honest to God, the questions you're still getting in 2025 from risk people at some of these big banks are things along the lines of where does Bitcoin have its bank accounts and isn't all of this money laundering? And it's like there's just a crippling. Well, if you want to see money laundering, go to Arbazel, Miami, where I was left. again i used to i put it i put it right next to where's bitcoin's bank account which tell you what i think of that

question but like real talk i don't think the banks have the talent stack right now to execute on this for the big u.s banks and it's going to be a crippling problem for them a little bit like you know when the internet shows up and internet commerce becomes a thing all of the firms that he's like ah we're not going to do it we've got you know one 22 year old kid you handle our e-commerce strategy and all of those are like, you know, Sully that makes that's awesome. That makes a lot of sense. Yeah.

No, I agree. They're still in the catch-up mode. Yeah. All right. Well, let's talk about a firm that I think has gotten the punchline for a moment, which is Citadel. They wrote a letter recently around DFI oversight. And I'm going to be honest here, through a few punches at some of the DFI people.

They urged the SEC to treat some many. Defi protocols like regulated exchanges or broker dealers if they trade tokenized equities, that or tokenized securities. And that is an important caveat. Like I do want to be clear to everybody that nothing Citadel said here impacts Bitcoin, right, or something that is clearly a commodity. They bluntly excluded those from this letter. But they did say these systems may likely satisfy the definitions tied to exchanges or broker

dealers at that current securities laws should, regulate those kinds of things and that it would be dangerous, exact quote, to give broad exemptions to defy. What do you guys make of Citadel showing up here and starting to make these arguments? I guess I can go. I've had a number of private conversations with them and they've been very consistent in how they see the world. They really don't care about what, you know, the silly little crypto industry does with its fun little tokens. Like, go, go crazy. But they draw the line of equities.

and why, like many incumbents, things are working for them in the current market structure, right? They're the kings. And so, you know, if you're going to disrupt an industry, there's a lot of work for them to do. And there's other folks nipping at their heels and other folks that have been, you know, maybe more active in the crypto space for the last four years. We know the names. And so, you know, this isn't just applicable to Citadel and equities. we're seeing in the futures markets where some futures exchanges are saying, you know what,

I got to figure this out. I'm going to go do a deal with polymarket. Others are trying to destroy defy and the like as they're talking to members of the ad committee. So everyone's making a decision. Do I move forward or do I fight it? Look, I will be honest with you. I've dealt with Citadel for many, many, many years.

They're incredibly sophisticated, smart. There's a reason why they are who they are. They're very good in D.C., probably the best in the world. And so they're formidable. And who's on the other side of this? Well, it's the Internet Capital Markets guys, right? The guys that are trying to put everything on chain. I go back to first principles, and the thing that I would like to see us solve for

is the fact we have a huge problem. You know, we have a huge problem with public markets. Rom, you've been talking about this the whole episode. 81% of companies in the United States with $100 million of revenue or more are private. That is awful, right? There is an article, I think of Wall Street Journal yesterday tweeted about it, where like military folks are like piling into crypto and tech stocks. Like if you are not part of the club, you cannot get into private equity.

That boxes you out of the most exciting companies. So what do you do? The only thing you can do is go into crypto because you're allowed to. long-winded way of saying, you know, I would like for us to solve for that 81% as part of any deal that struck. But right now it's the Empire Strikes Back. Yeah. Overall, I mean, yeah, I concur with what you're saying there and that, yes, the Citadel is a force of nature.

And they're extraordinarily well capitalized. And they've been wrapping themselves around infrastructure or wherever they've got a shot. You know, we talked about Ripple a moment ago. But remember, like the EDX exchange, there was a consortium a couple years ago. They're part about part of that also. Yeah, one of their leaders is an investor in the primary on-chain decentralized prime brokerage. Like they're taking a shot where it kind of makes me wonder like where is Jump, where's GSR, where are the other market makers.

I don't like their policy approach though. They want providers of what they call DFI systems. So in my view, treating that as a centralized system to be regulated as an ATS, alternative trading system reg aTS which obviously would allow them to participate i'm not sure that's the right regulatory framework for all of this so these are very hard questions to like i haven't looked at the policy around this i don't know if you guys have studied this my instinct is that reg ats not instinct i know reg aTS does not make any sense for something with the word decentralized finance is a yeah different framework

I mean, I was going to say, I'm like, I wrote a paper about this with Fee. I think the problem that we have here from an SEC perspective and where I think their job is going to be very difficult if they intend to do it properly is that some of the fundamental central assumptions that were made in the 70s coming out the back of the paperwork crisis that we built Band-Aid on Band-Aid on Band-Aid on Band-Aid on top of is that we essentially have undermined. some of those. Like in the 70s, we ended up with something like DTC because the coordination problem of all the transfer agents working with each other was too great. Right. Like you can't have 80 bilateral phone calls going when all you've got is a landline and you can't move the mail fast enough to clear everything. So everybody immobilize your physical shares in a single location and let them trade off that. Okay, good. Only now we've got, you know, a decentralized open access ledger where everybody he could observe the movement of shares in real time.

So we're back to the world where maybe the transfer agent, EG, issuer, could itself be the legal record? And then at that point, what are we doing with like this ATS and the first? What? Right? So you, yeah, it's like if you've been sailing and so you've got all of these rules around building ever more interesting things on your cruise ship and all of a sudden you like get to land and can start building on land,

the possibilities and rules set are completely different. You're not building like the 92 story super tall on a cruise ship. It's just not happening. But you could in New York. They just did down the street from me in Brooklyn. So, you know, I think you end up in this world where a lot of the fundamental assumptions are different. Like another one for the SEC folks in the crowd. What is the definition of decentralized clearing as we currently would think about it in like Mark?

And that's like a brain. Yes. And Cidnell is pushing for KYC too. Like stable coins aren't KYC'd. And stable coins and Dify go hand in hand. Defi is a like the balance sheet for stable. So there's just an incongruity with existing legislation. Yeah. It's very simple in my mind.

You have tech and you have people, right? In the old world, people and companies built tech and they're accountable for that tech and they control the tech. What DFI allows us to do is to build tech. that is decentralized that anyone in the world can use. The stable coin example is perfect, right? A stable coin issuer has to KYC the person or individual institution to whom they issue that stable coin, right? Once you have it, you're responsible.

If you send that asset to North Korea, you got a big problem, right? But that's how the world works. And so, look, I think what it comes down to is taxonomy, the definitions. How do we define what is decentralized? And then, damn it, you need to police the activities and the behaviors of the people that use the technology, right? Computers and cell phones. People do really, really bad things with them, guys. I hate to tell you.

But we don't try to destroy them. We go after the people. The transfer agent thing, Austin, brilliant, right? People don't understand what these internet capital markets can do and how disruptive they are. We used to take securities. We used to lock them in the box and then issue these tokens. That whole box is gone, right? The transfer agent is tracking who owns what.

The amount of savings you can provide industry participants, not to mention the fact that if you can open this up to anyone with the internet, huge opportunity with the right disclosures. So I'm super bullish on the space. I'm sure it'll get sorted, but it's going to be a fight. No, and I think, Chris, to what you're saying, it's one of those, if you have a transaction where right now we go through nine intermediaries, the rules are set to think about how do we make those?

nine intermediaries better, they are not set up to think about what happens if five of those intermediaries just vanish because we straight up don't need them anymore. And that is, I think, the brain twisting that happens and where, like, on one hand, I understand Citadel's point, which is we've built a whole business and we've optimized it in light of the current regulations, but there's a greater societal point of like, why do those regulations exist in the first place, guys, should we not fix them? That I think there will be a reckoning here and just like, we'll talk somebody's economic interests

are going to get totally wiped out here because if you built a much better mouse trap for this Rube Goldberg machine and somebody goes no, no, no, I can just build a button and you press the button once the toast comes out like all the people operating the Rube Goldberg machine

if lost their check. Yeah, I know. I agree. Like this is genuine innovation. The idea that a civilization enables one person to lend to another person without an intermediary and do so in a fully secure basis, secured by encryption, is something we've never seen in history before. This is genuine innovation. Applying reg ATS to defy is contradictory to the point of the innovation.

Yeah, the reg that I'm watching is NMS and the NBBO, right, which is a national market standard, the national best bid an offer. So if somebody executes inequity, that gets routed to the best price. And on the surface, it was like, of course, that makes sense. But it also, I encourage you guys to read Flash Boys if you haven't. It talks about how people can improve on that price slightly. It's very hard. Like, there's generally conflicts between the NBBO and decentralized finance because everything is so decentralized.

That's what I'm watching. It's going to be really interesting to see how that gets sorted. I mean, part of the reason for the NBBO thing was that it's a black box, how your broker executes your stuff, right? Like you just put the order into like Schwab or Fidel or Robin Hood and then magic happens and you get shares and you don't know what's happening so they can easily be scalping you in a decentralized system where everybody can see the execution price, the other venues and the path you took, you have a different level of transparency there. And so again, back to like part of the reason for that rag was a problem that no longer exists. So do we still need the rent? I think I guess I would just say this and we'll probably leave it here because we're out. of time. I think it's a way more complicated problem that people on all sides are giving a credit

for because we're going to have to rethink some fundamental assumptions. We don't mind if Citadel was subject to NBBO to ensure that there's fair price, invest execution standards that are held. Because right now you have a lot of market majors are being one exchange off the other. NBBO would deliver better execution to investors. So I think I'm supporting that. To your point, it's just complicated. All right. Well, on that note, nothing terribly easy is usually worth doing.

So here we're just going to have to embrace the difficulty in the suck of that process. All right, everybody. Thanks for joining us for this episode of Bits and Bips. We will be back in one week to discuss how the worlds of crypto and macro are colliding. So until then, everyone, take care.