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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. All righty. Welcome back to Final settlement everyone. Today is Wednesday, January 29th, 2025. I'm joined by my Co hosts Plural Now, Michael Tanguma and Liam Nelson, who we'll we'll get to in a minute. Lots to get to before. Before we get started, just some brief housekeeping. As we mentioned a couple weeks ago, sort of a new format for the show still going to be sort of every other week cadence. And one of those episodes is going to be sort of this internal group of folks across on ramp and early riders and really just talking sort of inside baseball, what we're seeing in the markets, topical news items etcetera. And then the other one on sort of a monthly basis will be an external guest coming in and and riffing with the three of us. So that's sort of the general new format going forward and lots to get to this week. Lots of new in the news from all of Trump's executive orders over the past couple weeks to, you know, Chinese open source AAI models sort of adding some turbulence to U.S. equity markets this week. We'll get into that. But lots of topics on the list. Before we do that, do you want to just introduce the new member of our team and and Co host of this pod, Liam Nelson? Liam is is joining us from a career in traditional finance, much, much similar to myself. He's finally made the jump out of the Fiat world into the Bitcoin ecosystem. And so we're very excited for him to to be doing so. But Liam, maybe if you want to give the audience a little bit more on what your background is, what what you've worked on and and how you came to Bitcoin and and ultimately early riders. Yeah, pleasure to be here. My name is Liam. I originally started off my career previous to that I was a finance major and then made the jump to .72 long short hedge fund based here in New York. While I was there for a little bit over three years understood pretty much how businesses and industries worked in the impact of the performing businesses on the financial markets. After that I made the jump to family office private equity firm focused on corporate carve outs and during my time there and previously at .72 ultimately found Bitcoin. My journey into Bitcoin was fairly similar to many others, even even those who came way before me. I always think of Adam Back who originally created the precursor to Shaw 256 hashing algorithm, which is used in Bitcoins proof of work and how he originally dismissed Bitcoin because it was too small, skeptical that would work, etcetera. I honestly was fairly similar to that as well, but similar to him, once Bitcoin started to gain some additional traction and the best marketing for Bitcoin is the price increases, I had to get curious, especially when I found out that it had best risk, risk adjusted returns of any asset. So from there, I ultimately did a lot of research, found that I think that this is going to be the end. It will end up as the world reserve asset and final settlement asset to use by pretty much everybody that is self interested. And then after that, I found early writers and you guys through the white paper originally definitely resonated with me that Bitcoin is the hurdle rate. And just because I started to price all of my decisions off of the marginal utility of more Bitcoin and ultimately thought that there was a lot of infrastructure for Bitcoin that needed to be built out. And building it out in a way where you consider the opportunity cost of having more Bitcoin is extremely interesting to me. And so trying to build businesses with capital constraints and while still benefiting from the upside of Bitcoin adoption and how and the higher prices was really interesting to me and resonated. So that's ultimately how I found you guys and why I made the joint jump to. Early riders. So appreciate you sharing that and we're excited to have you. I think a lot of your joining plays into the thesis of the best individuals that work in the traditional markets, whether it's on traditional finance. Tech companies across different professions ultimately will not only get Bitcoin, but then really get that business building and capital formation will fundamentally be different. And then they'll start to rethink that from the ground up. And so it was interesting like last week, Chase, the CEO Acropolis had a tweet about reaching out and following, following us and then reaching out, being interested in what we were building. And you know, now he's leading one of the portfolio companies. And I think it's an important thing to call out because the only way you can rebuild a lot of this structure is really to have the world class individuals join and that can see the vision because there's no shortage of things to rebuild. And the whole thesis has really been that the existing 15 years of Bitcoin, well, there's been a lot of infrastructure. It's been more of a nascent like tinkerer type industry. There's been a lot of individuals telling everyone that you're just going to have to go and, you know, put plastic devices in caves and, you know, have fun staying poor and just figure it out. And, you know, the reality is like, it's just such a big problem as we go into this next wave of adoption. We've seen, you know, past two weeks, I feel like there's been no shortage of mishaps all the way to somebody getting their family, their family, getting their their fingers, you know, mailed to them after kidnapping. And that is really going to take individuals to understand where this market goes and how do you commercialize products and how do you build for mass appeal. We'll also stay still retaining the underlying ethos, whether it's the protocol, we think well, like multi sig and what honor it's doing. But then also when you think about capital formation and building that companies don't need millions and millions of dollars to build certain things. And the investment funds certainly don't need 10s and hundreds of millions of dollars. Because it may seem good at first, But then when you go and look back, you're going to benchmark all those dollars that people were allowed about against Bitcoin. And when those prices are deployed and you're going to get to really back into, can you actually outperform, you know, that price? You think about the billion dollar funds, they're definitely never returning them on a Bitcoin. But I would make the case that even if you've expended hundreds of millions of dollars and you earmark that against Bitcoin, you're going to have a very tough, nearly impossible rate of having to return that capital. And so that's really what ties into what we're building here. And then your recognition that it was ambitious, but also it's ultimately the end state, right? It's like Bitcoin being money is ambitious, but we all know that's kind of the inevitability. As long as the asset stays alive, in the same way as as long as the asset stays alive, the only reason people are going to give it up is if you can give them a form of yield on that. But it has to be yield. It has to be yielded in providing real value in the real world. Yeah, it's, it's something I, I've been thinking a lot about recently, is this idea of yield. And, you know, it feels like every bull market there are, there's increased demand for people wanting to borrow against their Bitcoin, obviously. And you know, the sort of core underlying theme of everything that we've been doing at early riders is like, effectively there's a different form of yield in my mind that is, you know, actually just going out into the real world and producing value. And then with that, you know, accumulating more Bitcoin over time. Like, so how do you get a yield on your Bitcoin? It's not just by levering it up. Yes, that's one way to do it, but in our minds, the the real Bitcoin yield is is going and deploying that Bitcoin into the real world to produce value to accumulate more incremental Bitcoin like that is a a pure form of a Bitcoin yield in my mind. But just going back to to Liam joining, we're very happy to have him and you know, he credit to him. He saw the vision early when he read the the white paper of ours and also just put in the proof of work to start working on these ideas with us and thinking through things in a really analytical manner. So very happy to to have him officially on board now. And before we jump into the list of things, I I do have a question for you, Liam, just because you are you're now the closest to having left stratify world. I'm a few years removed now. So I'm curious like as you are leaving, what is the sort of what's the, what's in the air at the Tradfi firms, the point 70 twos of the world, the private equity funds of the world, how are they thinking about Bitcoin? Is it being talked about more? When you told your former employer you were leaving to go do something Bitcoin related, did they think you were insane? What is what is the general zeitgeist in Tradfi world right now with respect to Bitcoin? Yeah, I think it was a mixed opinion depending on who you asked. Definitely got some responses that everything in Bitcoin is fraud, which is which is fine. You know people, people if if you're making money and you are doing extremely well in your current position, like there's no reason to spend a lot of time to understand why Bitcoin is different right? I just tried to understand it at a deep level because I thought it had the best risk adjusted returns and that was really interesting to me. I think more and more people are trying to understand what exactly is interesting about Bitcoin at the moment just because it's gone up so much. So there are people that I think really want to do the work and, and think this is interesting and, but are scared to financially be involved just because they think they can, they should get in at a better price or they've missed the boat. But there are also people that are very, very skeptical still. So still think there's a bit to do on the educational front and people ultimately will come when they're ready. I mean, on that thread, it's a, it's a great one to start with, Brian, is how do you see the role of altcoins versus Bitcoin? Because I think like when you're in the the middle of it, you kind of see it escaping from the pack. But then reality is like my, my instincts tell me it hasn't and that there's still going to be a lot of kind of touching the stove before people coalesce around Bitcoin. But curious, like, you know, I'm assuming with the price appreciation, your network has been a little bit more interested in the space. How have they come to like the different assets? Well, there was also a point at points of an ETL where there's a town hall asked the town hall question asked to Steve Cohen, pretty much what is your view on Bitcoin headed into the next year? And the answer was, well, I don't really have a view on Bitcoin. I'm really looking for the regulatory clarity related to crypto in general, right? And so I think there's starting to be some additional regulatory clarity. He may have switched his view since then, but in general, I think people are generally confused right now. Like there's Trump coin. All my friends that you know, know that I've been very interested in Bitcoin for a long time and I always clarify it's Bitcoin only have asked me, you know, what's your view on Trump coin? What's your view on Ripple? And I think they think of everything just in the same exact boat when we obviously know that that's not exactly the same case. Yeah. I think part of it, at least from my perspective of having lived in that world for a long time, I think part of the skepticism around Bitcoin specifically and not being able to discern Bitcoin versus crypto stems from effectively like living in this world of, of traditional finance or asset management. There's, there's sort of this air of sophistication that comes with any investment strategy, right? Like if you're a talented portfolio manager with a great track record, like you have some edge, you have some advantage in the market where you know, you're, you're finding undervalued opportunities before anybody else. Bitcoin kind of flips out on the head on its head in that. Well, one, this has been adopted by individuals first around the world, globally. And you know, there, there isn't necessarily an edge outside of deeply understanding it. And the other component when it relates to crypto is like, it's kind of these these shiny things that people get distracted by. But to that, to that person that has that errors of sophistication around investing, they almost feel predisposed to say, oh, well, there's all these different assets. So what's my edge? How can I find an edge in understanding which of these assets are going to is going to outperform over time? When in reality, like they should just be focusing on Bitcoin and Bitcoin only because it's fundamentally different. But they get lost in the this sort of asset class of all these different crypto currencies and trying to have an educated view on which specific crypto currencies are going to excel and and outperform. And so I think it's they almost without knowing it do themselves sells a disservice and don't and aren't able to see the genuine differentiation of Bitcoin versus everything else because they want to almost feel that that air of sophistication like they have in their traditional world in this new quote, UN quote asset class of all these different crypto. Currencies, yeah. And just to that point, I would say, you know, Bitcoin is completely decentralized. There's no CEO, there's no marketing department. Whereas for some of these other coins, there is actually a company behind the issuance. There are insiders that get allocations of the coins prior to being able to give them to the rest of the public. And so I think there is a big demand for the essentially inside baseball of crypto from a lot of VC and financial firms or as they do not have that same opportunity or exposure in Bitcoin. And so I think it's just fundamentally different. And you know, another reason why it takes some time to understand Bitcoin is there is it's completely different from the model of, you know, 2% inflation rate. There needs to be everything is benchmark to the 10 year yield plus maybe some equity risk premium. It's just completely different than what they're used to. It's. Actually a great call out what you just said about like what we see as a feature they see as a bug because it's a bug that there's no owner, so you can't get in early. And what's interesting about that is like, because it's, it's actually really like interesting thought experiment in that on the Bitcoin side, what other thing that exists that very notable individuals credentialed have been saying positive things about it for effectively 15 years. And then you can go back to very early days and there's notable folks that have been adopting and not even like pre Bill Miller and you know, the Strand, the truck and Miller's Paul Tudor Jones. It's really weird and nonsensical when you think about like, it's, it's like 1 aspect to just be like, look, I didn't get in early and that's why I want to touch it. But it's another one to think like it has no value. But that's what I feel like majority of people sit there, but there's just this whole like body of work from individuals that have staked their careers and their names and their businesses on it. What do you think of Fidelity? It's just like, so did they just like concoct some like ghost of an asset in their mind that's going to go to 01 day? Like it's just it's a very interesting dynamic that plays in the markets. And I think it has to do with what you're describing and also just as a symptom of how messed up the whole financial world is that like, you can't wrap your head around this thing that is so fundamental to like, societal growth is like having a good form of money and not being able to be debased that you're like, wait, this doesn't make sense. Like, this just is. I can't wrap my head around it because it when you lay it out that all the proof is there from all these individuals and corporations and ETS and presidents and people still are like, yeah, I don't know about that thing. It's just, it's so insane. Yeah. I think part of it is part of it's like what, you know, people often talk about. Like, on its surface, it does. It does sound too good to be true to some extent, like the idea of Bitcoin, the idea of digital sound money open to everyone, fair launch, all these things that sort of have occurred to to get us to this place where we are now. It does all somewhat on the surface. If you if you haven't done the digging into it feel a little too good to be true. And then the other side of that is, Michael to like sort of what you're alluding to is like, it takes a good amount of, of killing one's ego to admit that they were wrong about it. Because up until this point, if you haven't adopted it and you've been skeptical of it, you're, you know, you're basically saying it has no value. Like if, if you haven't bought it or you're, you're saying, you know, it's a scam or a Ponzi, in order to then adopt it and buy it, even in a small, you know, percentage of your portfolio, you have to then admit that you were, you were wrong, right. And, and most people don't want to do that about anything and particularly this asset that's being adopted globally by institutions, corporates, nation states, etcetera. But as that continues to occur, it basically, you know, it becomes more palatable to say you were wrong about it because basically more people are saying they were wrong about it. So it there is that there's that sort of element of a feedback loop where once enough people are willing to say they were wrong about it, it becomes more acceptable. So I think that's, that's kind of how I perceive it is like there's this massive barrier inherently to someone adopting Bitcoin, particularly if they come from the Tradfy world, because they have to admit that they were wrong for the past 10 plus years. And and that's just something that most people in that world. William, to your earlier points, like if you've been very successful in Tradfy, you've made a ton of money in private equity or stress credit or, or wherever else you know, it's you have a certain view of the world and a certain view of your own sort of talent and edge in that world. And admitting that not only did you not have an edge on this asset, but you were actually wrong about it for some time is a difficult leap leap for some people to make. Yeah, and I would. OK. I was just going to say nobody gets fired for being consensus and wrong. You get fired for being, you know, the only one on an island and you're wrong. And it just makes no sense to everybody else. And so there's both like career risk to being the only one or, you know, one of the few people that think about Bitcoin or any asset in a different way than everybody else. But as it becomes more consensus, there's less career risk, there's less political risk because I'm sure we're going to talk about. And I think that more people are willing to not be on the island by themselves, even just like having a couple friends that you know know about it and can speak to you about it is makes it less risky in your mind. Yeah, And I know this isn't a topic of the show, so we can move, but I do want to call it like there's a big percentage that we haven't of this, like adoption that hasn't happened simply because it's an ephemeral asset and it's not tangible and you can't touch it because that's just a mental barrier. It had me think of like thought exercise, where what do you get something that looked like a bar of gold and just put a piece of Bitcoin on it and parked it in a cave? Like, would they be more apt to adopt it? Right, Because people do that with gold doesn't have any kind of like value outside of, you know, a little bit but not much that we know. But people are just like, it's just like it's always elusive, it's always out there. How can I allocate where is it exist and just by like anchoring the real world and it's. So it's just an interesting it's an interesting asset. Yeah. Well, let's get to the list. Michael, you sort of alluded to one of the stories that I wanted to talk about earlier around. So this week U.S. equity markets were a bit turbulent and the main sort of culprit was effectively a new AILOM model that got released out of China called Deep Seek. And the effectively the claim is that they used way less capital to build what seems to be as good, if not better model than ChatGPT and other models being built in the West who are obviously spending 10s or hundreds of billions of dollars to build these things. The alleged claim is that Deepseek only spent about 6,000,000 with an M dollars to build this model. Now that is obviously coming from China. So it's it's hard to be super confident in that number. But I think at least for me, you know, the first sort of near term take away is that if this is to be any sort of directional truth in that they did this with way less capital, then it sort of, you know, brings into question the valuation of all the companies in the West that are building these models using way more money. So you saw NVIDIA and a lot of of the other sort of AI related stocks in the US sell off this week pretty materially as a result of this. The the takeaways for me are are a few fold. 1 is, you know, a lot of this relates to, you know, a theme that we have sort of internalized at early riders is that companies in this sort of new age are going to continue to do more with less. And what that really means is leveraging deflationary technologies and tools to be more efficient. And so AI is a great example of this. And this is an even more sort of micro example of this particular company in China, you know, using less capital effectively to build a, you know, just as good, if not better LLM model than what currently exists. And so, you know, I think this is just a prime example of what we expect to continue to see around, you know, companies just being more efficient as they leverage these tools like AI and Bitcoin. But I'll pause there to see if you guys have any any thoughts on this in general. Yeah, I mean, there's a lot. There's a lot, especially when you don't really there's like half what you can learn and then the other half that's probably not even true yet because of where it's come from. And the the implications are feel so multifaceted. The thing that I think ultimately comes to mind, and I don't know, like again, how true this isn't Brian, you sounds like you free us chatting. You've done a lot or at least a little more research than we have is that they ultimately had constraints and their constraints allowed them to build this with a lot more than less. And that's ultimately what Brian's referring to is at the end of the day, well, that sounds paradoxical. If you give somebody $1,000,000 or $100 million and tell them to go figure something out more, 9 times out of 10, on a long enough time horizon, the person with a million that is going to come up with a more efficient and optimized way to do it. Because that's just a natural order of things. Like when you have abundance, that's what breeds all this craziness. And it was always part of the discussion that like opening eyes kind of really strange if you're raising billions and billions of dollars every, like, you know, a few months because the definition of having something is you don't give it away. So if you're consistently having a raise, well then what do you really have? But then tying back to the constraints, it's like, well, if you have less capital and then you can optimize for the best outcome, well, then the best outcome. The reason you would optimize for that is naturally because you have the constraints, but you also are trying to return some capital back to yourself or your shareholders, which ultimately means that you're trying to get to the fastest way to do that. And it's interesting because we joked before this, we were talking about it if they weren't Bitcoiners. I can guarantee you the people that are Bitcoiners can build at half the cost that they did if they got to that point. Because if they were spending dollars or yen or whatever the local currency is, and now they're sitting on a money that we know went from 50, let's say they started working at this and the price was 50K and they had this long term thesis of Bitcoin. Well, they're looking at everything like shit, do I spend this Bitcoin today? Because it's going to be 60708090. And so every decision would have been over optimized. And that's effectively what the whole position here that early riders is, whether it's a venture allocator or an entrepreneur, you have to have the individual cannot just be the capital stack. You can give the best you have like an entrepreneur $100 million in Bitcoin. It doesn't mean they're going to go optimize and build a war chest you I would take the other person that was a better entrepreneur with 100 million in USD. They'll still run laps around the person that's the BTC because it's not enough just to have the better form of money. You have to have the individual that is able to optimize in their brain and how they bring products and services to the market. And it sounds like these guys just hit it like at some capacity. Again, we don't know what the motivation was because I think that's the big missing part in all this. Just like what's the actual motivation where they just doing it? Are they really just a hedge fund or is it something more? Yeah, I think there's, there's still some unknowns, but I, I, when you hit on I think is the most important thing is that this this notion of constraints breeding creativity and actually forcing you to be more efficient. And so there was a, a, a great write up by someone Jeffrey Emanuel basically wrote the the short case for NVIDIA stock. I'll I'll link it in the show notes. But he he describes part of what the unlock was for Deepseek in in figuring this out. And he goes the technical breakthrough here was their novel approach to reward modeling. Rather than using complex neural reward models that can lead to reward hacking, where the model finds bogus ways to boost the rewards and don't actually lead to better real world model performance, they developed a clever rule based system that combines accuracy rewards. So verifying final answers with format rewards, encouraging structured thinking. So this simpler approach turned out to be more robust and scalable than the process based reward models that others have tried. So basically because they had these constraints, they had to figure out a way to figure out a better reward reward system to train the model, and that's what they ended up doing. And so it's just like if it hadn't been for those constraints, they probably don't get to that conclusion. Yeah. And Liam, I'd be curious your thoughts because something that I haven't really shared out loud and like it's a little bit on the edges, but there's something I believe to it is so you come out of 21 and 22 and that 21 vintage, everyone knows if somebody raised and allocated a fund in 21 that pretty much like write, write it off or write it down or definitely write it off because of the the valuations there. And so money tightened up from LP's and also venture firms. And so 22, there was really only one narrative to the back end was like AI. So you had all these funds that were either being raised or deploying on that. And then there's all these companies that naturally pivoted. So there were existing AI companies or there were companies that put some tent of AI, right? Everyone had something there. But when this goes back to the incentives, so you know, whether they had called the the venture funds where they had called the capital already had the commitments, they have to raise that money because they're looking at the management fees for either their existing, you know, partnership structure to pay on any other expenditures, liabilities, but then also to grow. And so they needed this narrative. Like it was almost like AI was the valve for this capital to naturally go to. So everyone was incentivized because like this didn't just can't, it can't just pop up out of nowhere that what you just described and nobody pick up on it or build. It's like everyone was incentivized to play the game because when you're an entrepreneur and everybody's raising money, it's like, sure, I want more of that money and you're AVC and more LP's are looking and sovereigns are looking for the next AI breakthrough because they are by nature unsophisticated in the sense of this. That's why they're picking specialist funds to understand this. So it feels like everybody was playing along in something that was never really like sound like, I think it's the end state, right? So open source is going to inevitably be the solutions when it comes to these models. So just curious, Liam, does that like I mean, I haven't fully worked through that one, but it feels like there's something there that everybody was just incentivized to play this game in the same way everybody's incentivized to put all the money in the S&P even that we all know it's overvalued because it's just like a quasi money in store and savings. Yeah. I think for anybody that manages money, you really if some view is consensus, you really want to be on that consensus view, right. I think that there are, if you, you're going to, you have career risk if you underperform the S&P on a really strong year and you have career risk if you significantly underperform in a really bad year. But you don't have career risk if you pretty much do the same thing as the S&P. And so I think that was a narrative at the time. There was a lot of capital that was being allocated into the space. And so essentially you had to just get on board. But ultimately many of the things that you're talking about too don't just apply to AI specifically, but actually apply to every single company based on what the AI models are providing, right? Like Deep seek, providing open source models that I believe can be self hosted are pretty interesting and pretty much can help every business be more efficient no matter what kind of business they are. And we just keep seeing everything from, you know, the printing press to now deep seek open source self hosted models allow every company to be more efficient over time. And that contrasting with the fact that consumer prices of great only gone up over time just doesn't make sense. People and businesses continue to be more efficient and utilizing a money that doesn't allow you to benefit from that just honestly makes no sense to me. What? Do you, what do you guys make of the fact that, you know, I think prior to this happening this week, I think there was a perception or thought that everything that China was going to do from an AI perspective would be closed source. And they kind of, you know, obviously flipped that narrative by open sourcing this model. Do we think that that is what do we make of that one? And two, is it sort of like a purposeful just shot across the bow to the West to say, you know, you're whatever Moat you think you have around these AI models, which you know, most of them in the West are closed source. You know, open AI and ChatGPT being sort of the the one that's most adopted that is closed source. You think that's just a shot across the bow to say like, you know, those those valuations for these companies are are probably excessive because the the moats or the barriers to entry you think you have really don't exist. So that's the hard part because we're definitely over my pay grade. I think ours and it'd be interesting to have somebody on the pod because I think there's so many different geopolitical implications that like whenever you see something pick up a narrative so fast as deep seek, I'm always questioning like, well, what what's happening here? But then also post Trump and inauguration, it's like, well, that's interesting because we're Silicon Valley freedom oriented, all the things. But then they came out and did this. Like is there re questioning who are the leaders in the free world when it comes to innovation? Like that's an angle. I have no idea if that's true. Just sounds kind of good. So like, I don't know, I don't, I think it's hard to like really, again, it's so multifaceted to know what the implications are and it's both. There's multiple orders of it. Yeah, it's definitely above my pay grade. But I thought it was interesting that it came out pretty recently after the Stargate announcement of $500 billion to be allocated to the picks and shovels and essentially GP US that are providing all of the models for all these AI algorithms. Especially just given this company at least says that they were able to do it for significantly lower cost. Do you think I'll leave it to you, Brian, if you want to go deeper here, But I think there's something to bring up that's a corollary to to what Liam said, that this exists across all the markets. Like there's insane inefficiencies because the existing system rewarded just malinvestment across the board. And it's just like we're putting this together. But like I had a hint, it's like this recursive feedback loop where VCs don't really know what they're doing. So because they're not natural builders, like there's only so much capital that really should be out in the real world. So when you put all this capital out there where you have to park it somewhere, then you give it to people that shouldn't have it, then they're building solutions that are not the most optimized. And the example that I think of this is super taboo, but I'm confident it's true, is like all these exchanges that pop up, whether it's Coinbase and you're listening to this, you're like, how can Coinbase have a long standing business? Because if their revenues predicated on trading and then ultimately have custody ends up decentralized because it's not sensible to think of global money ends up as Bitcoin, that Coinbase with hold it all that means it failed. Then it's like, how do you underwrite that valuation? And that's like at the far end of the margins now, like look at any Bitcoin only SAT sacking business and it's like, OK, well, you're investing in it. And then what's the next move? Like raise another ground And then you have to go acquire more customers because it's a compression game on fees. And then they don't custody assets to tell them to all go hold them. But then also is not great because the people holding them are getting their fingers sent back increasingly as ransom goes. So it's like, well, what is that entrepreneur actually planning on for the launch standing business? Are they going to hold all the Bitcoin? Because again, that doesn't tie to like how money is going to end up there because we know where gold failed and so that's sold to LP's and investors. It's like we're going to go invest and do additional rounds. And so I think it's just like these inefficiencies are everywhere. And that's what ties into once the entrepreneur really Crocs like a Bitcoin. But then why you want more of that, you're naturally going to build the most efficient business that actually can have not only winning the client, but then ultimately having the best form of like long standing relationship with them basically. And it doesn't have to be in Bitcoin. This is just the example of like brokerage and how nobody has really figured it out yet. Well, well, maybe pulling on that thread, you know, you sort of mentioned, how do you have a long term view on Coinbase? Coinbase, for example, as a sustainable business model? Well, one you you need to ascribe some value to everything they're doing X Bitcoin, right? Like that is a lot of what they've built their business on is effectively pushing people out the risk curve, getting them to trade all these other assets and think much shorter term than, you know, what they really should be doing is thinking long term about Bitcoin specifically. And then you you sort of tie that into maybe we can we we can bring up SAB 121 being repealed. Well, OK, the other the other component now too as well. If banks are going to custody it, then why do you need a coin base necessarily to, to custody your, your Bitcoin or your other digital assets if all the banks are going to now get involved? So maybe maybe we can pivot there a little bit to some of what's been happening over the past week or two with the creation of the Digital Asset Task Force as well as repealing Saab 121. Any general thoughts on on all of this? I know, you know, there was sort of some talk on Bitcoin Twitter, some people were upset that they didn't name Bitcoin specifically and a lot of this stuff. I think that's just to be expected. Like I, I think it would have been insane if they had called out Bitcoin specifically, you know, whether it's talking about a stockpile or or whatever, mainly because we already have seized other digital assets. So it'd be kind of crazy to just single out Bitcoin at this point in time. But the task force being put together Lum misleading that SAB 121. Any thoughts on on general developments over the past couple weeks? So I've go ahead, Liam, you could kick it off. I mean, well, you can't really talk about this without talking about Trump launching a coin and the fact that essentially the sitting president launched a meme coin and now like, I think it passed 14 billion in outstanding value. Rumors are that he sold $500 million of that. And that's essentially what we're we were alluding to earlier with 80% of the supply is allocated to insiders or hasn't been issued yet and then the remainder is just sold on to the public. And so everybody wants the inside baseball of being able to allocate early and then, you know, they sold, including the person who actually created the coin for them mentioned that he sold. And then right now it's like, you know, not not quite dead, but kind of boring has got has gone down a lot. And I think that kind of ties back into, you know, the, the model that Coinbase has of, you know, they now want to to be able to have a faster process to issue 1,000,000 new coins that are being issued for per week, which just, you know, the everything right now in crypto innovation seems to be launching a meme coin and, you know, being able to sell it to the public. With respect to Trump, I think his executive order on digital working group or digital asset working group is to be expected, it sounds like. Oh, the one other thing that I forgot to mention is Trump, Trump Media Company is now acquiring Bitcoin and other digital assets as well. So it seems like he's getting some information from somebody near his group that is into digital assets, right. And you know, that may or may not include Bitcoin, I mean. It's Sax in large part right? Like he's the AI Cryptozar. Like I think he's at least one of the one of the primary people in his ear. I wouldn't necessarily just put it on Sax. I mean, I think that there's a component of that, but it's really just the natural. Like it's known within that administration. People close like for what however they're going to do it. Bitcoin's rising this year. So by nature of that, you're just getting proxies whether Sax is in his ear or not. I don't, I think it's actually less sax. It's more of you're just buying exposure in the same way like 10 T and tap arrows funds like thesis was we're going to go to pensions and all these funds that can't get exposure to spot Bitcoin and we're just going to buy in the growth companies of the Gemini's and ledgers in these firms pre IPO because the sector lists as bitcoins price lifts. That's what it feels like in those because I think that post from their company was like, we're going to invest in like exchanges and stuff versus like crypto coins. Yeah. And and to the point earlier, I think that, you know, most of the exchanges and other coins are, you know, either going to underperform Bitcoin because they're not correctly allocating capital or have insider allocations that are going to be sold to the public without significant real value. And so, you know, there was no mention of creating a strategic Bitcoin reserve that many people are hoping for, but I think, you know. While it's probably a little early for that, it's ultimately going to happen like I'm sure of that because essentially that's going through every single person's journey. You know, I mentioned, you know, Adam back initially dismissed Bitcoin because it had like no value. But then once it got bigger, he was like, OK, this is kind of interesting. Let me do some additional research. And that's same with me. That's going to be same with the United States and every other country in the world, because once they realize that this is a decentralized asset which anybody can plug a note into, it can not be censored, it cannot be seized, and you can send value anywhere in the world within 10 minutes. That's a value proposition. That's while it sounds too good to be true, once people actually understand why it's how it's created and the rules that enforce it, everybody essentially goes to it in the end. Yeah, I think, I think the other, the other component to note here with respect to, you know, the the idea that there would be an executive order specific to a strategic Bitcoin reserve, I think was always a little off in the sense that you'd you'd actually much rather that come through, you know, bipartisan congressional support for an actual bill like Lummus's bill as opposed to an executive order. Because if it's just an executive order, then that is basically a, a less robust form of legislation that in four years, you know, if party flips, then they could just get rid of that and then sell the Bitcoin. And so I think the, the idea that it was going to come through an executive order was, was somewhat misplaced. And it actually makes a lot more sense to come through, you know, something like the, the bill that Lummus has put forward. I think the other aspect, though, is like, I think the number they floated is 157 million from like the crypto industry was in invested or helped support Trump. It's like lobbying effort too many. Yeah, yeah. So it's like, well, even if they want to do this and it's only Bitcoin in there, like they have to throw these people a bone. That's why you see these events in the crypto ball. It's not the Bitcoin ball because they just gave you all that money. So you have to like same way he kept his promise and did what he did with all these other executive orders. It'd be kind of shitty if he if you know, because bitcoiners didn't do the whole 157. It'd be lucky if we did half. The reality is, is the way A16Z has a huge lobbying and and political arm in DC is because of that. So kind of makes sense why there's just like naturally all of it. One thing I just want to share, Brian and Liam though, is the asymmetry and like information in the bank stuff at the margins. Maybe there are certain banks that are somewhat sophisticated and there probably are because of just law of numbers. But anecdotally, I talked to somebody today, friends with I think a top ten bank and talked to his buddy there. And this is like in good authority. It's like they don't even know Fab 121. Gotta feel talked to another firm, family owned. It's been trying to get into this space hard since FTX got slapped down with the regulators been very careful and was talking to them in the middle pre all this FDIC stuff. So you always knew something was wrong, but you couldn't really couldn't talk about it. And so super excited, reached out to them like, hey, this is done, let's talk. You know, there's a lot of opportunity in the space and they're like, hey, let's, let's just wait. You know, they said this pre when we started looking like Trump was coming in and then they said this even after, because there's so much scars and battle wounds of like the past few years. And then to the point of what Liam said and what we've talked about, it's there's still so much learning of like why one asset versus the other. And before you even get there, then you or after you get there, then you have to figure out custody. And we all talk about here. But like the difference between multi party computation and multi sig, like we still have such a slow burn into that. And the best way I can describe is like in proportion of how much dollars or the system is in proportion of how much, like craziness will happen over the course of the next 10 years as it relates to crypto and infrastructure and vulnerabilities until the signal comes out the other side because there's just that much noise in the system. Yeah. I mean, the other thing to me around just just Saab 121 and I think there's an assumption in the market that like, oh, yeah. Like, thanks for just waiting for this. And now they're ready to turn on Bitcoin custody. It's like, well, no, not necessarily. Like unless they've had, you know, unless they've really been focused on it in preparation for this for the past several years. Like I don't know if these banks are ready to turn on Bitcoin custody. I don't know if they're ready to secure private key key material where they have to go out and hire people to to figure out that that out. Or if like, you know, BNY is the one that's that's floated as like the most ready because they got the exception or whatever, you know, prior to this being repealed. But I, I, and this is a blind spot for me. I just don't know how much work they've done to actually be able to, to custody the asset. And Michael, to your point, it's like, well, you know, if they're not even going to be discerning Bitcoin versus crypto that do they just go down the MPC route multi party computation. They don't actually even use Bitcoin native multi sig to store their Bitcoin. Is that who you want to be partnering with as your as your bank, bank grade custodian? If they're using MPC with like an Anchorage or like a firebox, like is it really even that differentiated or are they just going to outsource its Coinbase like the ETFs? Like there's still be all these massive outstanding questions. And I think the perception is like, Oh yeah, game on. Banks can now hold the assets like, well, how, how are they going to do that? Because I don't think they have the expertise in house. 100% and one thing too. It's still not. It's still politically risky to custody Bitcoin if you're a bank. Anybody who's been paying attention to the Bitcoin space and in particular has been following Caitlin Long in custodia knows that she's been trying super, super hard to get a Federal Reserve master account or something similar. I may be misremembering, but she hasn't been able to. And, you know, even despite a more friendly incoming administration to crypto at large, you know, the Federal Reserve hasn't changed over. Jerome Powell is still the Fed chair. And in order to be custody consumer assets, you need a Federal Reserve master charter. And then there are just concerns about, you know, the relationship with other government entities should any bank try to custody Bitcoin. Yeah. And this is such a great conversation because you don't get to talk or hear about it a lot. But like Brian's signal, there are like they're close. They were close back in the day. They this SAB, the bulletin really messed up their launch, BNY in particular. But State Street's we're going to roll out stuff. There's other firms, but to Brian's point, there's multiple levels to this because just because even you even get the tech stack right, they're not equipped to like actually provide the services that an individual that owns Bitcoin wants. So there's always at the margin is going to be people that look at a name like AB and Y and go there. But then the end of the day, like these institutions leverage generally omnibus account structures and they're not equipped mentally or the technicals to actually create what in Bitcoin you just know as a wallet, which is an SMA and like the traditional finance base in the segregated parts. And a cousin of this is where this like conflation of ETFs letting you take delivery means you can go and put your own Bitcoin in or take delivery of the underlying like the authorized participants may do cash or Bitcoin settled and Bitcoin in, but independent of even if they knew how to send the Bitcoin, there is so much compliance perspective, compliance problems when it comes to OFAC sanction address, Where do you send it? Logistics, where does it go that are frankly impossible at this point for anybody at that scale to manage. This was like one of the big dirty secrets of why GBTC could not get unwound. There was a number of them, but one of them was like the level of counterparties from the brokerage. You bought it from the intermediary, which was effectively Grayscale or yeah, grayscale. And then Coinbase sitting there. Imagine the complexity of having to take those UTX OS, send them to somebody's address that you had to make sure wasn't sanctioned by Iran or Venezuela. Like all this plumbing is so far away that these people doing it is just like it again, it's just it's awesome to see because if you know the market and the majority of the market sits with Bitcoiners that are quote UN quote sophisticated, they had to be because they had to hold it this long and not get rubbed at the margins. Again, they'll go into these accounts because they have the names, but then as the price appreciates, they're going to look around and then be like, either AI need a better solution or I need to get it off there because then the balance sheet risk becomes real because the name doesn't matter because the math is a math. If they mess up that omnibus account, all their funds, right? Exactly. If they're doing it omnibus, you know, how are you? How are you going to have assurances that they're not, you know, fractional reserve rehypothecating the Bitcoin like that would be a natural sort of assumption of, you know, if they're going to if they're going to map their traditional banking practices to this new asset Bitcoin, you know, yippee, now they can they can custody it. Well, why wouldn't they just do the same thing they do with other assets where they're going to lend out your Bitcoin? It's going to be in an omnibus. You're not going to have any transparency to say, you know, here's my segregated wallet. So I think, yeah, those are all huge outstanding questions in terms of how this this begins to play out. Yeah. And there is FDIC insurance of up to $250,000 for dollars, right? Because, you know, dollars can be printed, you can't print more Bitcoin. So if your custodian loses your Bitcoin, you're kind of done. Maybe you can get some dollars back, but you're not going to be able to get the same amount of Bitcoin. One of the biggest unlocks for me, and this will be fun when we create a piece around it and talk about it more, is that, you know, price is set at the margins, Bitcoin is adopted at the margins and ultimately the Bitcoin products that will win will be built at the margins. And it sounds like, Oh yeah, that makes sense. But like it's so counterintuitive to everything else. That generally happens when you think about the top down structure that was being created from traditional finance and ETFs and four O 1 KS and all the products that exist all the way to like Facebook and Google. Like the whole thing gets shifted because again, talking about this, it's just like, you need that whole of the individuals to adopt the, the, the app, the standard or they just won't because the status quo has kept their Bitcoin safe. And so this is like The funny thing. It's, it's fun to go talk to these institutions because some laugh and they're like, I don't get it. And then the other ones are like, oh, that's actually interesting because I can't afford to not like be right here. Yeah. And maybe one other thing I wanted to bring up sort of relates to, you know, what we're talking about from a regulatory perspective, the, you know, the new administration being more favorable. I think it's worth pointing out that this isn't happening in a vacuum and other people are watching, other nation states are watching, and we had a report I think yesterday that the Czech central bank chief calls for them to buy billions. This says crypto reserves. I believe he said Bitcoin specifically. I could be wrong on that, but any thoughts on this? Just general sort of sovereign game theory, which we've talked a lot about people waking up to, you know, even if even if the messaging has been somewhat mixed from the Trump administration on Bitcoin crypto. I think other nation states can sort of see the forest through the trees and say like, you know, Bitcoin is, is the reserve asset that we need to be accumulating, particularly if you know, the US is going to have this much more favorable stance towards the industry. Yeah, I think some people saw El Salvador, heard about it last cycle in 2021. And we're like, oh, that's kind of interesting, but it's not big enough for us. Or, you know, it's, it's maybe a scam, maybe too good to be true. And then, you know, the price went down. They were down on their holdings, and then it went back up. And now people are taking another closer look at it, and they're trying to understand what exactly this is. And some people are fully there into understanding that this is going to be the best way to store value over time. I think that is kind of the natural step. We've seen, I think 15 states file for strategic Bitcoin reserves at the state level as well. And I respect, I expect most of those to be rejected. We've seen, you know, I think shareholder proposals to acquire Bitcoin from Microsoft, Amazon, Meta recently, and they're likely all going to be rejected until I'm proven wrong. At least that's my base understanding. But I think it generally is shifting the Overton window a lot in terms of what is acceptable, what is reasonable, and people are getting more educated on this. Yeah. Can you, can you close that one out real quick, Brian, I want to show, I want to pull something up. I've never viscera, this is probably naive on my side, but I've never viscerally felt that 21 million is such a small number until hearing really like thinking about all the tailwinds happening right now, right? Because we have individuals, we have the ETFs, we have corporate treasury narratives, we have sovereign narratives, and then we have everything in the middle of all of that, whether it's a managed wealth management insurance. Like that 21,000,000 number is really actually super small when you realize like where we're at. And to Liam and Brian points like it's been kind of like de risk. It's increasingly becoming de risk and it's going to eventually flip, probably sooner rather than later on. Like, wait, you don't have any exposure. Like how the hell are you supposed to outperform anything else? It's pretty wild. Yeah, it is crazy. I mean, it's, and it's like, you know, it's, it's the number, right? There's 21 million, but it could be any number. Like it's just the finite nature of it that that's what's critical for, for folks to grok around. You know, I, I talk about this a lot, but it's like, you know, if I'm describing the Bitcoin thesis to a, to a normal person or someone who's on the periphery as I was doing this past weekend, I was, I was out in Texas and, you know, having some conversations with some normal folks who were, were genuinely curious, right? Because I think that's one thing that is certainly, you know, we're in the midst of, of seeing happen is, is people getting more curious about it because it is so overtly in the zeitgeist right now. And so there is the curiosity. But where I always sort of come at it from is just like this is supply and demand. We know, we know the finite supply cannot be changed 21 million. But like I'm saying, like it could be one, one coin like it. All that matters is that it's finite and we know that and it's predictable and immutable. And all you have to assume is that demand increases and everything the market is telling us is, is a signal that demand is increasing from the individual level to the corporate level, to the nation state level. Demand is increasing. And so the price necessarily has to go up. And so, you know, over what time frame does, you know, do we get to a million to 10 million a coin? I don't know. I, I don't have a, you know, magic, magic 8 ball to say exactly when that happens, but I know the trajectory. The trajectory is simple supply and demand, you know, economics one O 1. And so that's that's, I think you know what I always sort of anchor to when I'm speaking to someone who is really just beginning to understand this thing is like that, this notion of a finite asset has never existed before. Like that in and of itself is a is a powerful thing to bring to someone and bring to the fore. And then you say, OK, while that that is true, it's also true that demand is increasing. And So what does that mean? Price goes up over time. The scary part in that in like is if you don't play offense, like you lose because like, I think that's the big problem is people think like, you could just like bypass it and it's cool and like you and I'll get it later, which is true. But if you're in a competitive world, which we just like naturally always are, whether it's like your dollars are competing for goods or your business and somebody's competing against you. If you don't figure this thing out, you just are going to be, you know, a victim of like inflation and fee compression or price compression, degradation of the goods and services. This is all the things that are happening, right? And like, this is where we see, you know, all the different tailwinds from interest rates high rising and people being laid off, companies not doing as well, tax receipts, all of those things. So like, if you don't play the game, you, you basically are like you're, you're done. And so it's just a, it's a crazy like dynamic because there's the the price and that's what everybody gets attracted to. But the thing that they don't realize, and I think it's a big part of like what we're doing here and, and why it's important and where this is the end state for capital formation is you have to adopt A Bitcoin standard is because you're just going to out compete the other person. And it's not enough just to have the standard. You have to have the mindset to like build on it. But that firm is going to go just run laps around everyone else. And then, and then it comes down to, well, what investments are you making? And you better pick the right ones that are going to be able to build for the new world. Like the only thing more finite than that than Bitcoin is literally those humans that get it because the whole world has been full of like the opposite. So it's been like, you know, it's kind of following like not the best to save. It's like, you know, it's kind of the different gender coming to play in a in a game like you just dominate because you're just, it's an unfair game. But what happens when you have to go play with your standard, the individual that you're you're supposed to be playing with? Like when the standard changes, you're just basically like, oh shit, you go from being number one to basically last. And that's kind of this angle of like you're used to deploying dollars, building on dollars, returning dollars, But then you wake up and you're like, wait, wait, the markets actually going to coalesce around the benchmark as Bitcoin. I got to build with this. I have to be constrained in my whether it's capital allocation or business building. And there's very few people on the planet earth today can really like manage that. It will occur recently grow, but that's where we're all that's where this all heads because you have to wash it out, right. All this money has just been like there's been noise there. So you have to reduce it. So it's just going to be a fascinating like 5 to 10 years, that's for sure. Well, I know we're we're coming up on an hour. Any other sort of final thoughts on Liam, you just joining the team or, or anything else that's happened over the past couple weeks? Generally speaking, boys, dude, there's there's there's too much we get on calls and catch up since like, I can barely keep up. I'd flip it to you, Brian. And then maybe I'll think because there's no shortage of like interesting things that have happened since, I would say the beginning of the year. Yeah. I mean, Liam sort of mentioned it is like we, you know, it's hard for us to talk about any of this stuff happening with the new administration without like recognizing that the president of the United States launched a Beam coin. Like that is, I think, just a perfect microcosm of like where we are with the crypto industry. And just the, in my mind, the tacit admission of broader crypto that like, there's no utility here. This is just pure degenerate gambling. This is a big casino. And like, Trump launching a meme coin is, is sort of like the epitome of of that realization of all this stuff from, you know, Ethereum calling themselves ultrasound money to, you know, moving away from proof of work to prove of stake. Like all of this stuff was nonsense. It was all just them trying to find new narratives to to sell their altcoin. And now they're kind of in the place of sort of just admitting like, yeah, you know, this is just gambling. Like where, you know, meme coins are, are the thing, you know, less and less people are talking about like D5 protocols or NFTS or all these other sort of promises made by the crypto industry over the past several years. And so I think we're at this very interesting juncture where on one hand, there's an increasing recognition that, you know, Bitcoin is different. And I think the biggest sort of signal of that is like ETF adoption, like people sort of forget that like they also approved Ethereum ETFs and the flows have been like almost non existent to those products. I think that's a pretty big signal that at least at the institutional level, like what people care about is Bitcoin. But at the same time, you have like this continued conflation of like the literal president of the United States launching Bitcoin. And I guess my hope is like, it's so overt, it's so in your face that this is speculative that people wake up to the realities of Bitcoin being fundamentally different sooner rather than later. But that's that's kind of, you know, what's been on my mind the past couple weeks is like, I mean, it's first of all, it's just wild to to think we're on this timeline. If you rewound one year, even two years ago and and told me like, you know, not only is the government considering buying Bitcoin, but yeah, the president launched a meme coin. Like we're just, we're just in an insane timeline right now. Yeah, I think broader crypto at large is definitely more. So just leaning into gambling is like the narrative, which is fine, but I think I just saw a stat yesterday. I think out of all of crypto as a whole, Bitcoin is now 62% of that. And just because I say that it will probably crash, but I ultimately think of Bitcoin more as competing with gold, debt, real estate, stocks, anything with a monetary premium. Unless you're actually doing the real work to evaluate a company yourself or evaluate the asset by itself, you're essentially giving it a monetary premium. So everybody that just puts their four O 1K into the S&P or any similar type index is giving it a massive monetary premium. And I think Bitcoin just competes with that moving forward more so than traditional crypto. Yeah. I think the the thing that's on my mind having time to think about it is it's it's somewhat related to crypto, but more of like this, this whole multipolar world we're heading to. And like Trump's immediate past three weeks of like it feels like it ties into a little bit of the deep seek stuff of there's no more like exporting inflation. I mean, it is going to be somewhat, but exporting IEP and all this stuff. It's like this realization of wait, now we have to be first and be best across national levels. So we've seen like what the Columbia, you know, president, all where that's going, Mexico, China. It's like this version of not only accruing or aggregating Bitcoin, but it's aggregating the best talent, the best people, the best businesses are going to start to competing versus just being able to like, you know, kind of play nice or be incentivized to play nice because everyone's playing the same game now. Everyone's like, wait, we're not going to play the same game anymore. We have to think about like national or country 1st. And that ultimately goes back to doing more with less, right? Because now everybody's incentivized to actually be the most efficient and most optimized. So it's a very interesting time where that always ends up back to like, how do you get more BTC, which is a fascinating because our whole lives we've never lived in that world. First one, RIP. Excited for this going forward. So Brian, what's the deal like we're going to do next? Are we going to do with a guest from the industry talk about it? Yeah, I think on an alternating basis. So in two weeks from now, we'll have an external guest on and then two weeks from there, it'll be US3 internal RIP again and it'll sort of oscillate back and forth between those formats. Yep. And to be a little cliche, like this whole funny thing about you can just do things, it's pretty funny because you really can. Liam reached out. We had a chase, but the one that comes to mind, everyone's shown this proof of work. I think about Ralph, who reached out when he knew we were working on some stuff and honoring Mina. And Ralph's an incredible asset. If you're in the Middle East or even anything interested in that region, I'd reach out to him. But similar if you're interested in building this space or the concepts we're talking about. Like obviously we're going to get more and more inbound from across to get interested, to get involved in early writers and build, but the you can reach out. But the thing that's the differentiation and some that William had done extensively and Ralph was just proof of work. Like everyone has their unique backgrounds and professional experiences. And if you can translate that and didn't have to be with us, I've always talked to folks wanting to break into the Bitcoin industry. It's like they really need you, even if they don't have any roles that exist. You just have to show what you know and why what they're doing could like utilize it. And then if they're a good entrepreneur or a good founder, they'll be like, well, of course I need that because you just helped me see something that was a gap and everyone has them. So I'd encourage anybody that's looking at if either sounds captivating or interesting to reach out to the folks you look at or admire because there's a lot of work that's going to need to be done. It's very well said. You can just do things, so do it. All right boys, thanks for joining us and we'll be back in a couple weeks later. 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 on rampbitcoin.com/contact to schedule a consultation with one of our private Client advisors.
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