Transcript+
It all comes down to computers communicating. The information superhighway can be a confusing mix of on ramps and off ramps. Bitcoin is worthless artificial gold. Is it still rat poison? Probably rat poison squared. We need to get into the world of OK, this is actually foundational technology. What the Internet of Money does is it creates a single network which can do a microtransaction to a giga transaction. The Internet is going to be one of the major forces for reducing the role of gun. The one thing that's missing that that will soon be developed is a reliable E cash. Welcome back to another episode of Final Settlement. Today is July 28th, it's 10:00 AM. It's 2025 boys. How are we doing? Liam Michael, my Co host. I'm personally, I'm personally a little, little ticked off. I have a bone to pick with Brian. So we're. Not let's share it. We're not professional podcasters. We are business builders and operators that happen to talk about the stuff all day long. Figured folks would like to listen and so we decided to share our thoughts. We do it weekly and with that my audio has not been the best every week and so. Does every every understatement. In true business form, try to iterate, you know, weekly and get better. So I had a microphone. The microphone was a little, you know, I'll, I'll save the listeners the details, but end of the day, I thought I figured it out and I got on today and Liam said sounds great. And Brian's like, yeah, it's OK. And it just, it really there's really. There's always, there's always room for improvement. So that that's that's all I'm trying to. Instill it's true and the main reason I'm bringing this up is because if anybody listening today let us know who sounds the best and who sounds the 1st and then in the future also, but specifically for this shows episode because I want to know actually how it sounds and then maybe it's Brian that doesn't sound as good as we. It might be and I'm, and I'm open to that reality as well. I'm I'm down to upgrade my setup too. But yeah. So that's, that's a little behind the scenes of a final settlement. There's been some audio issues and, and we're working on it, folks. So let us know who sounds the best. On to the serious stuff. On to the serious stuff. We're going to start with what I think was, you know, one of the more bullish happenings over the past several months and you know a little counterintuitive might not feel super bullish, but this 80,000 Bitcoin that you know people started to observe on chain a few weeks ago, these Satoshi era wallets started moving. So Bitcoin and we got some more information on it late last week as Galaxy put out a press release basically clarifying that they had executed one of the largest notional Bitcoin transactions ever. It was this 80,000 Bitcoin validated over 9 billion and it really you know, if you just consider the impact it had on bitcoins price. That's where this gets extremely bullish just in the sense of, you know, if you can compare this to prior large sales of Bitcoin, whether it was the German government about a year ago selling 50,000 Bitcoin for the Terra Luna Foundation back in 22 selling around funnily enough, right around 8080 thousand Bitcoin, the price reacted much more aggressively and violently downward than it did this time around. You know, if we look at I'll pull up the on ramp terminal right here for a moment and you can see this, this little dip from, you know, around 119 down to, you know, 1/15, 1:14 and then has kind of recovered back upwards. That is, that is pretty amazing considering the amount of Bitcoin sold and, and again, what that is historically done to the price. And I'll just pull up this other tweet from Macroscope who is talking about this and he said important press release from Galaxy. Information about market depth and liquidity is very valuable to institutional investors. And since the sale ultimately didn't impact price much, the effect will be to reassure current holders and importantly, potential potential future ones. So gentlemen, thoughts on thoughts on this, the sale of Bitcoin, sort of market maturity, liquidity, depth, all these things? Yeah, there are a ton of different ways that we can go with this, but one, it's really important just for the the marketability of Bitcoin to a bunch of different people that it's, you know, become slightly less volatile than it has been over time. Another aspect is, you know, both to, to retail investors as well as institutional investors that they're not going to, you know, get tapped on the shoulder with their risk department if Bitcoin goes down significantly. Another one is there's a lot of Berber out there and worry about Bitcoin treasury companies potentially dumping on the market. And this is, you know, significantly bigger than any other treasury company other than Strategy out there. So would just say the market has matured to a place where, you know, I mean, if Strategy sold all their Bitcoin there, there would definitely be a little price tip. But at this point it's we're in a completely different market than we were a number of years ago. The options on the ETFs are significantly different. There's just more, more ways to kind of hedge your exposure and a little bit more. There's significantly deeper markets and institutional interest. But also it's important to note that they could have been going into one of these Bitcoin treasury companies or had the significant buyer on the other side, just given all of the the new treasury companies that are, you know, being launched every day. Yeah. I think it is like eye opening when you think about the price of Bitcoin 2018-2019 specifically Q1 dipped into the 3004 thousand range for the total, you know the price per coin and that's kind of. That's the dip. We're talking about that. Was the dip we're talking about, but I will say there's a whole notion of, you know, no bad news is bad news in a bull market and then no good news is good news in a in a bear when a downtrend. So the Luna stuff is interesting because it's not really apples to apples in the sense that 80,000 bitcoins result was sold, but it was in a fundamentally different part of the market cycle. So I would imagine if something like this happened when the market was delevering and it will deleverages and what, what, what volatility level, it could have more profound impacts to the market. But it is it's a crazy thing to see. And I think the notion to Liam's point, from a investor perspective, especially an institutional perspective, institutional investor, because remember back in 21 when Tesla had to sell just to test the liquidity of the market. And I think that was like a billion dollars or maybe 2 billion. So yeah, it's it's all positive. I think, I think the ETF passive flows are going to be a big thing. Like there's natural large buyers stepping into the market and I think that's what's absorbing any large amounts of Bitcoin lots being sold. But then the natural like dampening the volatility with the passive flows of ETF's. And then depending on how long the Treasury stuff persists, we'll also keep that kind of like downside protection. Yeah, I think that's that's totally right, because I've seen the take from folks on the interwebs that, oh, like you were worried about the treasury companies selling. Like, look at this, you know, everything's going to be fine. And to Michael's point, like it's not an apples to apples comparison because the market environment will be totally different in that scenario where treasury companies would have to be selling, particularly on the demand side, right? Like to me, what just happened these past few weeks is more reflective of the persistent bid from ETF flows to the corporate treasuries. And so in a deleveraging event, that would obviously be, you know, the opposite way. And so I think it's, it's something just to keep in mind, like, you know, it's, it's less about the amount being sold and really amount about the demand conditions to me. And so maybe that's, that's all there is to say around that. Maybe we hop to some deals. There's, there's a few deals to, to cover. Maybe, Liam, I'll go to your first one, the PNC deal. I'll pull that up. Yeah. There are about 3 lengths in there that are all tangentially related. It's PNC announced that they're going to, you know, roll out a strategic partnership with PNC and Coinbase will benefit from the banking solutions that PNC will offer. And PNC will benefit from the what they're calling crypto as a service infrastructure that they can bring to their clients. At the same time, JP Morgan announced that they're going to be rolling out crypto backed loans on Bitcoin and Ethereum. That's TBD when that happens. I think they said it was sometime next year. I would probably fade that. And then at the same time, you're seeing a number of different, you know, quote UN quote crypto companies. I think it was Anchorage already is a federally Chartered Bank. But outside of that, since the OCC gave guidance that banks can hold digital assets, there's been Bitco, I think it's Circle, Ripple, a few others that have applied for banking licenses and Fidelity digital assets as well. And I think that there's a big dichotomy going on here and. And oh, at the same point the bankers associate. Let me pull it up exactly. Yeah. American Banking Association warned of the risks associated with cryptocurrency assets and why there should be more scrutiny on a number of these different firms that have offered that have applied for banking licenses. So I think what what you're kind of seeing is two different things. One, it would be remiss to not discuss the Biden administration choke .2 point O and the scars that some of these companies likely have from being debanked from the financial system. You can kind of say that the banks may or may not have stood up to what was potentially right or wrong about the de banking of digital asset companies, but you know they they just have their scars and they those were top down from the administration, Federal Reserve, etcetera. But at the same time, there's kind of two dichotomies going on. One is do do we just do it ourselves, get our own banking license and you know, not be reliant on the legacy players or do we benefit from it by providing all those companies infrastructure and additional reach? I would assume that PNC is likely the first to come of Coinbase aiming to offer infrastructure for other companies. And, and then it's, it's interesting that JP Morgan is completely going the other direction and trying to do it all themselves. I think what work, or at least what I think is most of these companies, they're, they're kind of, there's benefit from the distribution of the banks, but at the same time, these companies just won't lead. I think JP Morgan's probably going the wrong route of trying to build it themselves and it'll just take a lot of time, energy and effort to do. And they're going to be hamstrung by compliance the entire way. They're probably not going to be able to to bring anything to market quite as soon as they would have anticipated. It could be a little bit better in the long term, but I think that a lot of these digital asset firms like the bit goes of the world, there's just going to be a little bit of disintermediation of the traditional banking partners. So it's just something that that I'm watching pretty closely here. What are your thoughts? Yeah, I mean. Go ahead. Well. I kind of, I think of like what JPJPMC is doing is very similar to like Apple in the sense of it's not apples to apples, but they don't have to go 1st and they don't have to be overly like overzealous or just move too fast in any One Direction because of their size. And so it kind of makes sense a that they would do something their themselves and two are going to look for the right entry points and they're probably going to be via acquisitions. Because I think I agree, like no, outside of Fidelity, because Fidelity had basically 10 years to iterate and play with custody. I don't think you're going to see a net new company incubate and build a custody solution. What's ultimately going to happen I believe is you're going to see the bit goes, a few other notable, maybe even in Anchorage get purchased, but there's only so many custodians to go around. And so JP Morgan probably ends up with one of them, Bank of New York Mellon ends up with one of them. And so that's where it kind of makes sense that they're not going to go. They have the distribution we talked about I think last week when it came about cutting off a lot of the data sets for the Stripe integrations or not Stripe Plat integrations. So they have their levers that are pretty confident. They're probably playing possum. They're, they know their game that they're going to play in this world. And then on the other side, the PNCS and others, their challenger banks and they need to get first mover advantage because they're seeing deposits fully, they're seeing demographic changes, some of their credit unions. And so they naturally have to jump in just like go in. They have more to lose effectively, like existentially like to lose if they go away because they're kind of going away already. So that's kind of like the idea. I think what we're seeing playing out. The big banks aren't going to go anywhere for a long time. And yeah. Yeah, I think that's that's very well said. I think the JP Ms. of the world have a little bit longer leash to figure this out the right way, whereas the PNC banks of the world, like this was kind of always my base case of like, they're just going to partner, they're going to outsource it to a coin base. And to your point, like they have a little bit more urgency in doing so. They they don't have as as great of ability to sort of sit back and and figure out how to do it themselves. They have to act. And so this is a a first signal of sort of that that type of of thing playing out. There was another another stable coin related news item that I'll pull up here, Interactive Brokers, Moles launching its own stable coin to enable 24/7 funding and crypto transfers for its 3.9 million clients. And then there was another brief stable coin news around Tether. I think they'd announced this maybe a week or two ago, but Paulo was on, I guess Fox business and, and confirming their plans to launch AUS domestic stable coin. And so this is part of sort of the, the impacts of, of the genius act going through. So as I understand it, Tether basically has like a three-year grace period to figure out what, what they're going to do in U.S. markets. And so part of that plan seems to be launching a, a separate version of USTT that is specifically for U.S. markets. I guess the the question to me becomes, does this create some fragmentation in the USDT market and is this sort of three-year window enough time for Tether to figure it out to where they don't get out competed by somebody else who already has, you know an anchor in U.S. markets like USDC would be the the obvious competitor. Any any thoughts on that around just stable coin competition generally speaking? I think the tether grace period, I could be wrong here, but I think my, the understanding is there's certain, maybe this is what you're saying, but there's certain things in the new bill that allowed for companies that were outside of the US that had some exposure into US to like play for those years. And then ultimately then you would need the license. So they can't like operate with a new entity. The this one's an interesting like questioning the way the way to see it play out, because I think there's an angle that not only tether has the data and operational chops to really run this at scale, but also has the connections right. If they were to just a fly by night, you know, if it was finance, it would be very different. I think then, you know, tethers connected to the highest parts of the US market and will increasingly be so so you can see the world where they compete there. And then the other side of it is like from a depth of liquidity or just segmentation of market. I don't really necessarily see it because it's going to end up all being the same thing parked at the same custodian or same, you know, underlying, you know, treasuries. But then also really it feels like a lot of this is all a confidence game. And I mean, it's what financial, it's not all financial services is, but it's built on trust. And I, I think tethers proved, even though there's been a lot of fun for 10 years, they've made everyone hold on their obligations. They hold 50 tons of gold. They hold, you know, over 100,000 or roughly 100,000 BTC. Point being is they come to market and you have a fly by night or a net new company that comes that maybe doesn't have the operational chops and the the war chest that Tether does. Well, what what stable coin are you going to use? I do think the only thing is the marketability of Tether just has like that notion. And so maybe they rebranded something else. We'll talk about it later. But Paxos and what they're doing across quietly building infrastructure across the world, nobody really talks about them. And I think that there could be an opportunity there, but it'll be interesting to just see how it plays out. Yeah, I think that the lack of liquidity for this new vehicle is it's very important. It's probably going to be the first time in a very long time that tethers trying to like reboot, strap what they've already done. They have a massive war chest behind them, but you know, Circle, Coinbase, etcetera, they have a lot of the existing flows and settlement here in the US And so it's going to be really interesting to see how that plays out. I think it's it's going to be a little bit they don't have the same benefit of having all of the liquidity on the overseas markets that they do here, but they do have all the data and, and process for how to do it right. And so I think that they have a massive benefit of working with those who are going to be or trying to be the up and comers. But I don't know if they're going. And that will enable them to get the larger partners later on in my view. But it's going to be difficult for them out of the gate to compete directly with the largest players in the space, in my view. I guess I kind of oversimplify. It is like similar to like Bitcoin, if we figured out the scarcity, then we can figure out how to do the payments. It's like if Tether got to its scale, they can figure out how to move the capital across the different entities, right? Like the BTC can move for the liquidity or the the swapping. I don't know what the regulatory climate will look like to do that, but it'll be interesting to see how it plays out. But that's where I don't like. Yeah. They can keep the losses at first based on if there is any slippage within their existing or their new coin, assuming that they can, you know, kind of fund the new coin with their existing behemoth treasury or is this kind of what you're saying, I think? Yeah, there's that. And then there's the other aspect I don't think most people talk about is tether out. So the USCC, I guess there's two different, be curious your thoughts. There's two different like value props or aspects. There's going to be more growing. But today I think about there's the trading pair for BTC and then there's just offshore dollars for the rest of the world. And Tether really excels actually at both. But really where I think they're going to have an interesting opportunity is the big use case, at least today for stable coins in the US is the notion of cross-border settlement for large businesses. The anecdote, the reference and always sticks out is that Stripe, as big as their businesses only has 1% of the total B2B market. So the idea is if Tether has most of their exposure globally and most of capital markets and businesses, large businesses sit with some multinationals or a large percentage of them in the US. This is a logical version of they have a lot of like infrastructure ready in place to manage those flows where USCC is probably more on the capital market side, but they don't have a lot of those relationships. And USCC is not a global brand. So I think that would be a positive thing. But I it's, it's again going to be very fascinating because Fidelity is coming in and there's a, there's going to be a lot of kind of ties into this that Brian pulled up is going to be a lot of competition for the onboarding of Fiat in disabled coins. And then the middleware between the different entities from wallets to transaction fees. And who wants to play in the middle of all that? Yeah, like you said, I I pulled up the the PayPal deal, which I guess is their, their stable coin is managed by Paxos. This is this is 1 you just alluded to before Michael. Any other color on on what this might mean or? Yeah. I think so the the top of the the article basically headline is that their PayPal is launching the ability to accept crypto via I think it's 100 different crypto assets, but I believe it's all the merchants. And it's somewhat fascinating just because we think about PayPal and how it started with this actual like theme in mind across border and you know move movement of money without banks. But independent of that. PayPal has not only the market penetration, but also there's an interesting aspect of I think where we're going with stable coins and specifically around monetization is the minting of them. So the on ramps from Fiat into stable coins and that's going to be a very interesting area of the market. And then what is like the middleware between the two entities and wallets because that's where you're going to be able to accrue some of the monetization outside of interchange. So in this article, they reference they're going to start with an incentive of I believe 99 basis points and then move it up to 150 basis points. So about half of interchange at 3, roughly 3% traditional interchange fees. And I think like the Paxos and others of the world to Liam's point earlier, there's a lot of these banks are not going to create this technology, specifically the middleware. And how do you accept and then you think about Amazon as a great example of how much flow goes through Amazon and if they can, you know, cut out an additional 1 to 2%, how many billions of dollars a years that gets, you know, fill into their margins. And so Paxos and I think there's others that are playing and that will increasingly play in this like middleware game, but you don't actually have to create any of the infrastructure is going to, we're just going to see more of it as more demand for stable coins comes. I think the big question is how big does the market get and how fast? So roughly right now, I think it's 250 billion. And then it's just to see like, what's the race to a trillion, $2 trillion? Yeah, Besen, I forget the timeline, but he was, I think quoted as saying he thinks it's going to grow to over 3 trillion within forget the time range, maybe like 5 to 10 years. So basically 10X in terms of stable coin market cap? Thanks for tuning into another episode of Final Settlement. If you haven't already, I would recommend you go to earlywriters.com and subscribe to our newsletter as well as all of our research to come. There will be a couple of interesting articles coming out with respect to how we're thinking about capital allocation, and it's changing as Bitcoin becomes to be the identified hurdle rate for many and all capital allocators in the space. If you haven't already, please subscribe as well as reach out to me at bm@earlywriters.com in case you're interested in hearing about how we think about research different than the other typical ones out there. Thanks. Maybe a a quasi related news item was strategies announcement of a new a new preferred instrument called stretch Liam. Maybe if you want to give sort of an overview of what this is, people are calling it a form of sort of algorithmics table coin or algorithmic money market fund. But it maybe just give a a high level overview of it and then we can we can unpack what it might mean. Yeah, for sure. So it's very short duration. I think it pays out monthly, but the IT pays out nine percent. It is a preferred offering and it's the largest preferred IPO offering of the past decade. It's strategies largest preferred offering thus far. So there's stretch, stride, strife and strike and you know, the majority of them are B plus years effective duration and stretch is very short. So it's it's essentially competing with money market funds, but it's at a higher yield of between, you know, 910%. They want the security to stay very stable. And then just, you know, they have talked about how they will sell above $101.00 and and buy back or issue their financial engineering 100 under $99.00. And so they're likely going to continue to pay out that vehicle and it's 2.5 billion. And this is really interesting when you think about how this fits into the broader macro and you know, Bitcoin economy theme, because right now the if you looked at Galaxy's lending report, the effective duration of pretty much every lending vehicle on Bitcoin and digital assets is one year. I think Arch is the only one who has two year lending option on on Bitcoin directly the federal. And so this is very significant because it goes after the largest market with respect to Bitcoin or Bitcoins collateralized securities. And so there is people should do their own research with respect to stretch. There is a lot of different questions that I have and I haven't done quite as much as likely others have with respect to which vehicle between stretch stride, strike and strife that actually, you know, and then MSTR if you where the Bitcoin actually sits in in those different preferred vehicles. So would recommend, you know, doing more research as you look at all of this. But when you think about where we are in the business cycle where Jerome Powell is likely out as the Fed chair within the next 12 months, Trump is going to announce his own his next Fed chair and it's likely going to be very politically driven in terms of where the interest rates go. And you know, that's likely going to be down. Trump is going has said that many times and so stretch automatically gets much more competitive than money markets funds, which is the effective duration that it's competing with. So that just brings more capital into, you know, the Bitcoin economy as well as the effective interest rates on a lot of these lending products that have been rolled out. Those will likely go down as well as, you know, short term interest rates go down. There's a large question about, you know, if the long end of the yield curve goes up in the future, but that's pretty irrelevant right now because right now the Bitcoin economy just doesn't have quite as much of an effective duration yield curve at this time. So it's, you know, and at this time there is a lot of, there's just like a lot of financialization of Bitcoin, whether you like it or a lot or not. And you know, it's just the fact of the world. And so it's very important to watch this and you know, how the next 12 months shake out it, it probably does not look like past cycles, at least to my view, based on everything that we've talked about with, you know, banks adopting this infrastructure. And you know, I think we're we're a little bit early on in a longer cycle at this point. What do you guys think? Mike. So I have a few hot takes and they're just instinctuals and they're they're left barbell, I think. I think a lot of the stuff when we bring up financialization and you hear people not like certain things, it's easy to throw the baby out with the bath water and say, oh, it's Luddites or it's financialization, you got to like it, whatever. And I think the reality is Bitcoin will financialize in the economy, but it's going to look fundamentally different than anything we're seeing today. And the mental model is everything that has come into Bitcoin in its first iteration generally is not what ends up sticking and standing and a lot of things blow up. And this is just one O 1, right? Technological evolutions, you have to destroy capital, destructive creativity or whatever. And so I don't think so. With that said, I think the there's two things that I've been thinking about. They kind of like interweave together and I don't, I'm not going to say they're one was done or created for the other to happen, but they conveniently work. One is that I don't, I don't think Sailor or MSDR has any risk. I think we all agree from like a deleveraging, they have so much Bitcoin, they're going to be fine. They don't have the debt any kind of elaborate in the market. They're going to be perfectly fine. What what's going to happen is they're going to roll up the structured products and then a lot of people are going to try to mimic them or go further out in the risk curve. And then they're going to, you know, end up in uncharted territory. And where the second part comes is a lot of these companies, I think everyone agrees they're going to trade at at lower than their M NAV and then sailor just going to go buy them all up. And so whether this is part of sailors cheerleading for this stuff or not, but there's a reality. And I wouldn't say it's definitely more than non zero that MSTR ends up owning a large percentage of this new cycles treasury companies. And I think a lot of that's obviously from the people's thesis and the coming in and thinking this is a new era in a new way versus they don't understand how this is going to play out. And if they thought or knew that that's how it's going to play out, they wouldn't be so positive to what's happening here. Yeah. Does that make sense? It does, I think. I think Sailor was asked about that maybe a few months ago and his his response. I'd have to watch it again, but I recall it being somewhat cagey and and sort of insinuating he wouldn't do that, but like kind of leaving the leaving the option on the table. Like if circumstances change, maybe he would consider acquiring other other treasury companies. But to me, like, I think you're totally right. Like that would be the logical progression of this is that as these copycats try to compete, create other structured products, get it, get outside of their skis in terms of leverage. That would be the natural sort of evolution of how this plays out is like the most resilient robust balance sheet just scoops up the the less resilient ones who got too far out on the risk curve. Like that. That makes total logical sense to me. I guess it's just a question of like, does does Sailor ultimately embrace that as the logical thing? Well, does Sailor even have an option? Because if it's the shareholders that are deciding, he's effectively been able to buy Bitcoin at less than spot and that's what their whole thesis is. Yeah. And I know that Nakamoto and I think Strive said that they're like publicly that they intend to buy companies that discount to net asset value or or net cash on their balance sheet. And you know there's especially they don't need to be Bitcoin treasury companies. I think they've said they could do all the digital asset treasury companies or just, you know, non operating businesses. But while this is probably going to contradict our earlier point, there is a benefit of acquiring companies with Bitcoin on their balance sheet today because you don't have to go out and purchase it on the open market where there is like some potential slippage. It depends on the market size though. But yeah, there will be more acquisitions and roll up of companies put Bitcoin on the balance sheet. Yeah, I think that's a safe assumption. Mike, you'd brought this tweet from from VJ. We went from the entire state apparatus being adversarial to Bitcoin to the 6th largest treasury company being owned by the president's family. This is not priced in. So you see on the chart there, Trump Media and Technology now has 18 / 18,000 Bitcoin. They are #6 on the list in terms of Bitcoin treasuries. Yeah, I thought it was just interesting that that's the case. I don't know. I don't follow this list as closely and I don't remember seeing that name even in the top like 20. So I don't know if this just got updated or where the like influx. But to see them close to top five, they're right, you know, shy of Mara or Ryan, I'm sorry, is a pretty wild thing to see. And then it's also pretty crazy to see because you, let's say they jump, they only need, you know what, 908 hundred more Bitcoin to leapfrog to be in the top five. Well, now you effectively have three of the top five sitting in, you know, basically executive positions of the largest country in the world, right? You have 21 with Cantor being involved and then Bitcoin standard Treasury company. I think that's also Cantor, right? And then Trump. It's a it's a fascinating thing to play out. And then TBD on who who Michael Saylor is owned by. Well, you also, but you also have Eric Trump on the board of Metaplanet coming in at 7 and he's also working at American Bitcoin. I forgot his exact role which I don't see on the list right now, but it's you know, they have also planned to acquire a Bitcoin treasury, so it's these. He definitely would not be antagonistic to Bitcoin unless he there's falling out in his family I would assume. Yeah. It's just, it's just a fascinating thing that we just talked about doesn't get talked about enough that most people recognize at a certain point, the market will price these treasury companies to at NAV or below, unless they have some insane differentiation, which they're creating more BTC via structured products or cash flow. And so it's the logical progression that these hundred end up as ten kind of directionally, right prior to distributed, let's say it's 20, and then these other companies end up owned by them. And if somebody explained that out loud, there'd be less fervor because nobody would want that. But that's not what's being discussed here. It's like this is the new wave of Bitcoin ownership as these companies are going to go. I don't necessarily think it's good bad. It's just it's, it is what it is. I think we all agree that the real innovation or thing that's interesting is to watch cash flow value producing businesses accumulate BTC. 100% the the best way I've sort of heard that dynamic described is like, well, one strategy obviously has the first mover advantage, massive scale, but two, the sort of higher level point is like their product is the stock itself, right? And so like they've been able to create all these various instruments sort of, you know, tamp up or tamp down the volatility of the underlying through all these instruments. Like that in and of itself is their core operating business. That is what they've specialized in and really pioneered and innovative. I think it's, it's hard to dispute that. The other side of it is, you know, these copycats that literally don't have that that sort of at least track record of doing what what Sailor has done. And so there are accumulation vehicles that don't necessarily have a core operating business. And so there's there's sort of these different buckets emerging in the Bitcoin treasury company space. You know, you have like the blocks of the world, Teslas of the world where, you know, their Bitcoin strategy is not their core focus. And I think that is that that sort of bucket with a real core operating business just naturally has more longevity and long term sustainability than the copycat accumulation vehicle with no core operating business. Like those are the ones that are going to move out the risk curve farther than they probably should. And at some point the market is going to realize like, you know, there's better ways to to get exposure to this asset than this this shell company that that's accumulated X amount of Bitcoin. And that's when those naps are going to start to compress, particularly in that, in that sort of bucket. And so I think it's, you know, we are still early in this like progression. Like I, I do think that is true. Like I think that this can persist for longer than we probably anticipate in terms of it being difficult to discern those buckets that I referenced, you know, for the average retail participant, they kind of don't necessarily have that level of clarity on like the, the distinctions between these things. So it could it could. You know, last the sort of mania and hype around these things could last a lot longer than than we expect. But at some point there's going to be a delineation of of these various buckets and and the long term sustainability of these strategies. So something to keep an eye on. As the price of Bitcoin continues to appreciate, it's always important to take stock of your custody setup. Here at Early Riders we focus significantly on multi institution custody as we believe that fault tolerant, redundant setups are extremely important. I would recommend checking out on Ramp Bitcoin and seeing if that could potentially be right for you until the rest of the show. Michael, you'd shared this this ALTS newsletter. I'm not sure exactly what you wanted me to pull up from it, but yeah, maybe. Maybe starting with if you go back to the the Texas one? Yeah, I couldn't open it because I. Don't. Have a let me pull it. So the title of the the piece was the money moves. Why Texas is all in on precious metals and surging Bitcoin. This has less to do with Texas and really more of just the theme of people looking for hard assets. I don't know if this is going to pull up. Yeah, here we go. So money moves. Why Texas is all in on precious metals and surging Bitcoin. New legislation will give gold, silver and cryptocurrency boost the Lone Star State. I thought this was really fascinating in the article because it brings up two parts. It talks about the SPR and holding a strategic Bitcoin reserve and Bitcoin, and then the gold and Bitcoin. I'm sorry, gold and silver legislation, I don't know how far it is. I think it actually might have fully passed, but the core idea is that citizens will be able to hold gold or silver at the sovereign bullying depository and then they'll get issued like a debit card to be able to use it to purchase. Now, I think we all agree that's pretty inefficient, but I think the, the theme is what's core there is that there's a notion of gold and Bitcoin from investors looking for hard sound money assets. And that's going to continue to play out. I think the, the second article, if you want to pull up, was kind of ties into a lot of this, which was there's a notable media company and I guess it's a media company. It's called Alts go mainstream and it's fully dedicated to alts going, you know, just alternative investments. And if you Scroll down, there's a there's a matrix chart that shows, it's a little bit further right there. Yeah. So it effectively shows a fluent investor product ownership type. And it shows all these different products and things that people are going into alternative investments and digital gold and physical gold are moving up the curve. But I think the core theme is that this is still not fully widely understood is everyone now understands or has heard of alt or alternative investments, but they think of them as ways to preserve and store wealth. And all I can think of is they're, they're effectively the because the risk curve and inflation is so high, people have to go further and further out on the risk curve to try to return the capital. And most of it's destroyed. These alternative investments end up, and a lot of these things like private credit where people can't necessarily underwrite or specifically private equity, which definitely by definition is more opaque, doesn't have the transparency to be able to understand the fundamentals and what you're investing in. And the idea is, well, because a certain few investors got access to core technology before IPO, now the rest of the market has to be able to get access to it. And so I think there's just this growing, nobody's growing dichotomy of signal versus noise, because I'll turn investments. You can buck, you can buck it, crypto currencies, real estate, private credit, just anything under the sun that wouldn't be in the traditional 6040. And it goes to the same thing that Trump came out with with a four O 1K deal with allowing the like presidential decree that there's like $14 trillion locked up in 4 O1 KS. And now those investors can go further out in the risk curve into private. You know, we got the big boost or it was, you know, people in the Bitcoin space are excited about it. But the reality is it's going to put a lot of other people because people don't understand what Bitcoin is. They're going to look at a bunch of other assets. And so I just think that this is a growing dichotomy of individuals that will be able to understand what is preserving capital and what is money. And then what are effectively credit instruments that may nominally grow in value, but in real returns underperform what inflation is and specifically what gold and Bitcoin do. And I think not only is that just a core theme for what we talked about, but also how we look at investments. I think there's going to be a lot of interesting synergies between gold and Bitcoin that persist. The last thing I'll say is I've widely under appreciated and not, it's probably not the best thing, but how long not only gold will persist, but what they're going to try to do to make it persist when they're going to create stable coins that will give it property similar. I'm sorry, yeah, Gold, it's not even necessarily stable coins, but gold peg, you know, securitizing effectively gold to allow you to move it. And obviously that's counterparty risk and a lot of other things that don't make it better than Bitcoin. But that's still going to happen because these boomers love gold and they all hold a lot of gold. And I think this is just not fully understood by the market that gold and Bitcoin are in, specifically how they get digitized and then integrated together for investment investors portfolios is still not talked about enough. Yeah, the other sort of take away to me is like there's going to be an increased learning and education around like, you know, if you, if you want to have an alt pocket, there's basically a better way to do it without a lot of the execution risk, illiquidity risk of private credit or private equity funds. Now you just park it in, in hard money, whether it's gold or Bitcoin or some combination thereof. I think that is going to slowly creep into the alt pocket and I think we're we're very early stages to that. But I think that that that'll be a trend over the next decade is like the the proverbial alts bucket will become more and more dominated by golden Bitcoin and and probably for some time, you know, other crypto assets too. Unfortunately, there was this this other Liam, I don't know if you had any thoughts on that, but there was the other. Yeah, go ahead. Yeah, I was just going to say to your earlier point about, you know, Trump media and technology being a top 510 holder of Bitcoin, whatever it is, and you know, the relationship of Trump family with respect to Bitcoin. And now this letter about, you know, the, I think it was Senator of Texas or whatever, but Texas just getting more interested in hard assets, including Bitcoin in general. It's just going to be both driven from, you know, bottom up from people like us that are just interested in Bitcoin, but can't really discount the fact that the administration is not going to be as antagonistic as they were in the past, likely because they just become educated on the space. Like I would assume that those in Texas who are pushing this are just, you know, fundamentally believe in it. And that is a reason why they're pushing out, you know, the ability for their citizens to get gold and Bitcoin and silver just because, you know, they think it's the right thing to do. And I think that we're going to see more of that over time. And hopefully there will be a lot of confusion about Bitcoin versus the rest of cryptocurrency for a while. But I think it's going to be the gold and Bitcoin and silver and hard assets in general will start to be lumped into one bucket by some. Yeah, I think that's totally right. The next thing I was going to bring up was just along the lines of alts, you know, if you want to group crypto funds into that as well. This this report crypto liquid funds are down bad and shifting to quote UN quote quality tokens. Michael, I think he shared this one. Any thoughts? Yeah, I think the two biggest ones were there's a guy in there, I think it was his fund. Joe McCann, who is historically just going to completely crushed the past five years as early in Salon has been around for a while, was heavily into like meme coins. There's just this reality that the game's kind of changed specifically around. It's not that all coins aren't going to see some pump and lift that it said flight to quality. It's not going to be the penny stock. I'm sure you'll still make money on, you know, a new joking that comes about or a mean coin. But these players are coming in. We've seen the backing with Solana and Ethereum as great examples of whether it's pub goes VCs. There's just going to be a lot more weight thrown around. Some of these large, it's going to look very similar to the traditional markets in in in the listed company space where you're just going to see larger backers, larger teams, more connectivity. Look at Trump as an example. The affiliation with those 3 firms on the top five, you can guarantee like they're going to go into other assets and those are the ones that you're going to naturally see get this lift. And a lot of this crap that everyone's been trading around. Because you could get smaller VCs to do whatever they were doing around the tokenomics and dump on retails. Just like the the games fundamentally changed. And a lot of these guys have been playing the old game. And so I think that's kind of the biggest. It's just interesting to see they finally come home to Bruce that these guys are going to make money forever dumping, you know, these tokens on retail. I don't know, unfortunately, this guy is leading, I think a $500 million Solana digital asset treasury company now to despite his fund being down 80%. And so I would, I, I wish what you're saying was, was true, but I am a little bit skeptical that they will go down forever because, you know, they can use their own funds to front run any buys of Solana or, or do whatever they're going to do in order to bail out their fund. Maybe maybe they should just go All in all in far coin I I just thought this was a funny tweet from Luke Groman. He was responding to Clifford asked this who's a trad fi normie brain hates all things crypto and Bitcoin said For anyone who thinks today's markets are normal, I remind you that the market cap of far coin is still 1.4 billion growing response 1.4 billion far coin is what you get when the risk free asset underpinning the entire banking and currency system is a bond issued by an insolvent government with debt of seven times revenues off balance balance sheet liability of 20 to 30X revenues, peacetime deficits of 7% of GDP that has not run a surplus in 24 years. So I think all of that is to say that yeah, there's going to be more craziness this this cycle, if there are even cycles anymore. I think we're we're just scratching the surface of the craziness. Yeah. I think what I was mainly mentioning because I've been the the bull on like crypto and all this stuff is going to continue to persist. It's more of the like hyper liquid token funds where somebody can come in and like for instance, like the Solana trade, the guy doesn't have as much size as you would need to really like it's $160 a coin asset or whatever it is today versus when he got in with Solana. And what was the other one that SPF did? The other FTX token? It wasn't soul, it was. FTT. Well, there was that, but then there was another one either way, like there's a, there was a notion of being able to really buy in size at, you know, $10 million, whatever the total amount is and see a return profile and have retail come in to get that, you know, launch a whole fund based on that. I think that's where referencing it's going to be a little bit of a different game that we'll see larger institutions come in like the Jane Streets, these larger firms that will move the market and play in these like quote, UN quote flight to quality versus, you know, fly by night guys that make a name. And, and the one that's probably done it, I'd say that's grown with the market really well is Parify, because Parify started back in the day. And I want to say 18 and they're in like all these, you know, synthetics from my, it just comes to mind because I knew those guys there and they, I made an introduction, but they like consistently grew where now until they're like next, I don't even call it grift, but like the next thing. So like now they've backed a lot of the treasury companies, CLC perrify involved in all of these. So they've like moved up. And then again, this isn't an apples apples, but like 10 T and Dan Tepero's firm, they had this thesis of the growing asset class and market and then giving boomers and institutional investors that couldn't get spot Bitcoin into that. And then now they're raising, you know, whatever the size fund and they've grown in that size versus like these other people that have been creating these funds that are 10 to $50,000,000 to buy like these liquid tokens and then be able to return a 10X. Like I think they're just fundamentally a different game that's being played. And that kind of shows where this guy's return profile has and met what he's historically been able to do. Yeah. Maybe one other tweet to pull up was just a little look ahead for this week might be a big week. We the the stretch product cash that we referenced earlier, the 2.5 billion that they raised for that product, Apparently Sailor gets his hands on that that capital. Tomorrow, Wednesday, the US government is is scheduled to release their working group, digital asset working group report effort. There's some anticipation around, you know, some mention of the Bitcoin strategic reserve, perhaps an accumulation plan has been floated. You also have FOMC on Wednesday and micro strategy earnings on Thursday. So could be a big week, boys. Anything else you guys wanted to bring up before we wrap? I think that the I don't know what to think about the reserve working group on Wednesday, but I know that Trump ordered them to give a plan to acquire more Bitcoin without increasing deficit. So we'll see if that's still serious or not, and definitely something to watch. For Yeah, I nothing else outside of whatever is going on with Powell and and the Fed and ultimately I think everyone's, you know, prepared for lower interest rates, which is going to kind of juice everything, which is the base case. Yeah, we we would be remiss not to mention the the clip from last week of Trump and Powell at the at the construction site, both wearing hard hats and Trump pressing him on the costs of the the the renovation. Just a hilarious clip. Could have been out of the office. And the the take away for me is like, he's basically shaming Powell in front of the public and being like, you guys just waste money and there needs to be change. And here's here's how I'm going to get public support for getting you the hell out of here is by just making a public mockery of you. So yeah. I wonder if their renovations have kept pace with, you know, what they claim inflation is. I would doubt it. I I bet that Trump announces who he wants as the new red chair after the meeting. We shall see. All right, boys, that's good for this week. Thanks for like and subscribe. Thanks guys. Bye. Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that On Ramp Media is for informational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit onrampbitcoin.com/contact to schedule a consultation with one of our private Client Advisors.
Transcript source: fountain