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. All righty, gentlemen. Welcome back to another episode of Final Settlement. Today is Monday, November 3rd, 10 O 7:00 AM Eastern Time. Big show. I think we've got a great show, A lot of links, a lot happened over the past seven days since we last last spoke. And we're going to start off hot. We're going to go to some big deals, the first of which is MasterCard to buy 0 hash for $2 billion. There's some back story to this in terms of some other deals that almost went through and now, you know, Coinbase and B, MB, MB, K, which we'll get to, but we'll start with this. MasterCard poised to acquire crypto, start up 0 hash for $2 billion, sources say. Mike, I'll kick it to you for initial thoughts. Yeah, so there's there's a lot here. Maybe before jumping into it, we were talking about, you know, we always before getting on what are what's the hottest thing? What's the thing that gives momentum coming into the show? And there's discussions. Do we talk like deeper into Bitcoin or do we talk about this $2 billion acquisition? And we're not sure. We're not sure yet. So as you listen to the end of this podcast, drop a comment, let us know if you want to go deep into Bitcoin on the the top of the hour or really like huge news that I see that ties into Bitcoin. It's just 2nd and 3rd order effects. So this 0 hash deal really like was huge in my mind seeing it come across the screen there. There are a number of ways to look at this. We'll talk about stable coins, we'll talk about market infrastructure. The thing that I mainly took at this is how miss underpriced the future Bitcoin companies that are building will be in the acquisition sprees. And the reason why I say that is because 0 hash, there was a few things that went into this deal. Brian alluded to a little bit that there's a lot of acquisitions specifically on orchestration, creation of digital dollars, movement of capital. You saw this with the Bridge acquisition about 6 to 12 months ago and then rumored BB and K is being shopped around or being acquired by Coinbase. But it was rumored that MasterCard lost out on this BB and K deal and this is where the 0 hash deal came in. Now 0 hash hash is interesting because they bank or like provide infrastructure, crypto infrastructure for a lot of notable people. But I don't think most people know about like DraftKings, Cal Sheet, Interactive Brokers, Franklin Templeton, Stripe along with other big partners. But why this is important is because they enable buys like you know they enable $10 buys, $100 buys, they provide infrastructure, there's a lot of tooling MTLS, there's a lot of value for a legacy firm like MasterCard to acquire. But the point is that these around like capital flows from dollars to BTC, which is generally a retail application through these apps and then you know some payment orchestration of wallet infrastructure. But the point being is right now, stable coins are the hot thing. We'll run through later in the podcast a number of just, it was crazy last week, the number of fundings that happened and there's so many use cases. So I do get how it's very interesting from a crypto made of VC perspective and a Tri 5 VC perspective to invest in these assets. They're going to have markups, they're going to have exits to large fintechs. But I just can't help but, you know, feel how big of a mess that's happening right now because Bitcoin is just effectively lulled everyone to sleep. It's it's at 110 K. And all these institutions just fundamentally believe that the market structure around custody is just figured out. We're going to trust omnibus wallets, ETFs are going to handle it. People are going to hold a hardware device and we're just good to go. And nobody talks about what we're talking about here when it comes from the Bitcoin native side, they're focused on God knows what. And then you have the crypto side that's focused, you know, again, on the things we're just chatting about. And there's just this real reality that Bitcoin next to stablecoins and especially Bitcoin with sophisticated products like multi institution are the things that banks are going to want to pipe in acquire. And it's very bullish in my mind. I was, I was thinking about this a lot this morning and over the weekend. And it's just a huge opportunity if you have the right lens of like stable coins will matter, They will move capital, they will provide value, but that value is going to net settle in something that is not a dollar. And that like blending of those two is just so missed right now in the market. What, what do you think the timeline is on that? Because I, I hear what you're saying and I would generally agree. Like we've talked about this in the past around this notion of stablecoins, this notion of digital dollars sort of normalizing digital assets to some extent. And then the extension of that is you, you ultimately figure out and get to, you know, the end truth that you want to save your, save your store your value in Bitcoin. And maybe it's marginally more efficient and cheaper to transact in some form of digital dollar. But all of these acquisitions and deals seem to be missing that to your point, like what is what is the timeline of, of people realizing that? Is it, you know, the next 12 months? Is it longer than that? Like what I'm trying to gauge, like how you think this actually plays out in terms of people recognizing that they're missing, you know, you have to get closest to the Bitcoin. I mean, it's, it's such a loaded question, I think because when you, when you think about it like people use dollars for a number of things. And so the thing that I think most of these firms are mostly interested in, in stable coins is really, really, I mean, there's multiple, there's remittances, but I think one of the main ones is like B to B flow international for multinationals because of the amount of, you know, efficiencies gained and that are captured in the traditional Visa Amex systems. But like there's multiple levels. The, the initial ones that come to mind is if you are the stable coin issuers will end up passing back to yield, they'll end up juicing the yield. And naturally the yield comes from somewhere, right? And so as investors learn, you know, that nominal yield isn't keeping up with inflation, is in a better unit because of counterparty risk, they'll naturally sink some seek something that's a little more stable. Very similarly with banks, you will start to see banks bifurcate where banks will offer and go a little bit harder on the Bitcoin side and offer better, best in class custody. They'll get known for that. The the alternative will be crypto forward banks and they naturally won't have the sophisticated offerings and maybe they don't fit the user that is needed or they go belly up, they get hacked. There's multiple angles on how this like kind of blends together. It's the same way of like the question is very similar to like, how does Bitcoin become ubiquitous as money, right? It's like, well, it probably willpower agentic AI. It probably will be used for some level of remittances. It will probably be used for backing credit. You know, it's just like, well, which part is the most relevant and how will it happen? And it's like, well, the number going up really has the best entrepreneurs coming in. The the last thing I'll say though, is this is really what's bullish about the crypto. I I find crypto in like fintech and all this crazy VC money super fascinating because it's not completely crazy. Like when you listen to them, they're very sophisticated, they're very smart, they have very strong thesises. They're just missing like that fundamental grok, you know, like what is value, what it derives, how it does it not settle? But the point being is that these things when you get the most sophisticated people that finally get that it's the denominator and it's the underlying. That's when these the best in class net new. I hate using them, but I'll just use them like the Googles. The Amazons will be built. We've been led by a hobbyist industry. We have crazy people making Spacs and all this crazy nonsense for like just the thing that don't make sense. We talk about that later if you guys want, but the point being is there's just all these products and services that nobody uses, nobody's willing to pay for because the only thing to do with Bitcoin is to buy and hold. But they will be inserted into the traditional finance system. They will be inserted into fintechs, but they have to be done at a very elegant way that meets the market where commercialization has existed. And Bitcoiners haven't just really built in the real world traditionally, they've just known Bitcoin. So how can you build that? And that's why these payment systems are becoming very interesting because you have crypto natives building stable coins and everything else related. And now you have Tempo and Stripe and David Marcus and like the big boys coming in. And this was always the case that the your first 15 years hobbies have led the industry. And then the big boys are to come in and just mop the floor because that's just what happens when you have actual professional experience. Yeah, that makes sense. Liam, do you have thoughts or I was going to move to a few different coin base headlines from last week. They reported earnings beat estimates. I think the stock was up on the day, but then there were some other DealNews, DealNews as well. But we have any thoughts on on any of this? Yeah, just on the 0 #1 it's interesting too, because most of these folks just generally will focus on one part of the digital assets market. It's typically either, you know, at least these startups are tokenization stable coins or you know, digital asset exchanges is generally the essentially the three verticals in the digital assets space almost. And I think they, they essentially bought 0 hash because these traditional finance folks don't generally know which one for sure is going to be the hot one in the future, right? They're, they're just trying to get exposure to the digital asset industry because they see that they're taking share and they don't necessarily have the, you know, real understanding of the Bitcoin and digital asset space and how this is going to play out over time. So I do think that there is a lot of truth there of just like the payment and stable coin infrastructure is going to be significantly better than what we have today and that's going to be a big driver in the future. But also just even having any sort of digital asset and and Bitcoin exposure is going to be a net new benefit to those folks. Just because you know, most people aren't like us and they don't think about Bitcoin extremely deeply. They just want to get exposure to it. But then the tokenization, I think is going to be something that is going to see a lot of value destroyed, not because tokenization is completely worthless by itself, but there's just not a lot of value to be captured there. And so when kind of taking a step back and looking at a bunch of these different types of folks and what we can talk about it soon with the Coinbase Q3 earnings, they're kind of hedging their bets on where this industry is going to go moving forward. Is it going to be people that just want to create value by offering low lower fee stable coins, especially for international payments? There's going to be tokenization and then there there's going to be trading and just holding the underlying as well. And this industry has been run by hobbyists for sure. But also a lot of these net new folks don't necessarily have the whole vision for where everything is going. I think that they kind of see parts of it, but not necessarily the whole picture of everything not settling into BTC etcetera. Yeah, but the kicker is you don't have to. You can be both because you can have been playing around in your personal account, understanding all these primitives and then left Stripe and left Google. And that's the point is like people will get like the golden handcuffs ripped off because their crypto bags or Bitcoin bags are heavy enough where they can leave with the air cover. The other aspect of this, and it, it goes back to first principle of like just financial services is there's two ways to make money. You can get closest to the asset from a savings perspective or, or, or storage or closest to the movement. And right now everyone's making bets on the movement. And to Liam's point, they don't necessarily know where, but they know it's going to be moving, velocity is going to be faster. But the other side of it, like the call to make is that whether it's 6/12/18 months as Bitcoin goes from 1:50 to, you know, 250 or whatever, everyone's going to start to make their bets on the custody because it's going to just become apparent of like, holy crap, there's actually better, more sophisticated ways that people are demanding. And then you're going to see the shift. And then it's going to be like, well, where does the custody sit? Because there's only 21 million of these. There's infinite number of digital dollars that can be created and it all starts to just become commoditized because they're all looking for also distribution, which is the big problem. It's not actually the tech anymore, it's the distribution that matters. Yeah. Those are all good points. And, and on the Coinbase front, as as we alluded to, they reported last week, I believe they bought more Bitcoin during the quarter, the quarter. So there has been a nice pivot at least in terms of Coinbase's treasury management that they're appreciating Bitcoin a little bit more than they historically have. You know, I think the reality on the ground is that they should have way more Bitcoin in their treasury than they do today. So they're sort of playing catch up in that regard, but reported a good quarter. And then a few other headlines from last week around Coinbase was Citi and Coinbase joined forces to boost digital asset payment capabilities for global clients. They will collaborate to develop digital asset payment capabilities. The collaboration will first focus on streamlining Fiat pay in payouts and payments orchestration, enhancing the bridge between traditional and digital finance for Coinbase's on, on and off ramps. Thoughts on on on this deal or there was another one that I'll pull up here, Coinbase Asset Management and Apollo Partner to develop stablecoin credit strategies. So more on the stablecoin side. Yeah, I mean, I think the net, the net net is Coinbase is really becoming a juggernaut because they're playing, they're playing the right angle of going at it from like bidirectionally, meaning they're digital native, they're they're building digitally native products. You know, Coinbase it what's interesting, and I heard this from somebody else. It sounds like talking our book, but it's like the institutions are focused to use Coinbase, but any sophisticated Bitcoin investor doesn't use Coinbase. At least that's what what was understood. But they're building the products on this side and then they're taking those digital primitives and then exporting them out to allow other firms to use like the city banks and Apollo's. But I think it's fascinating is they're going to start to import more of what city and Apollo do into their services, because that's really where the the game is going to like end up converging is the digital native versus kind of like the incumbent and who can race to take, you know, from a first principles perspective, the best products, the best services, the right client services, the right distribution, and then when where we're going in the future. And so it'll be interesting to see sign up. But it makes sense like if somebody wants exposure to a credit fund and you can now that it makes sense. But it makes sense that why Coinbase would want to either adopt like Kraken did and or Galaxy and letting people trade equities and the same way they would let people come to Coinbase to get access to credit funds versus having to go directly to the credit fund. Issuer and taking a, you know, a percentage of it. Got it. Yeah, I think it's taking a step back like, yeah, right on their latest earnings, it said we provide a trusted venue for individuals and institutions to trade in custody assets. And then they go into that's like the first step of getting people into the space or bringing people on chain is whatever they say. And so I think that they, they've essentially tried to say like that's been figured out, like we, we do that and you know, they do just because people do trust them. And you know, that's why the ETFs have so much Bitcoin in them. I think it's, but to your point, it's mostly those legacy or those institutions that just say, these are the guys who've been in the industry the longest and haven't blown up. And so that just gives them a lot of branding credibility for net new people into the space and they're doing a great job of getting the partnerships. And so they're going to be able to get a ton more of the flows between those other, I think they're calling it like crypto infrastructure as a service with PNC, etcetera. So they're, they're doing very well. And then the Darabit acquisition seems to have gotten them a ton of different options flow underneath. So it's there. We're seeing a lot of different net new folks come into the space and they're going to want a ton of different types of products, everything from the stable coins, derivatives and ETFs. And Coinbase has actually done a, a pretty decent job of, you know, catering to all of them, but just not necessarily. And they're starting to focus a little bit more on Bitcoin just given how much their treasury is inquiring. So we'll see. I would hate, I would hate to be a financial service incumbent right now because think about it like there's no, there's no move to make that is inevitable outside of like Bitcoin. But even that is in their mind, the work hasn't been done. So they look at that as, you know, whatever their, their total ceiling. But think about it like if you're a, you know, highly reputable firm that's been around for a long time, do you launch an ETP? Do you launch Solana and staking like, well, everyone else is doing it? Do you launch a stablecoin? Do you focus on launching other people's tokens like digital, you know, RW as like, there's just all these things that you can beat. You're getting pitched, you're getting talked about and it's it's just an interesting deal because if you think about like if somebody just had somebody inside that was like, look, we can make these assumptions, they're all assumptions. But the one thing we know is this thing's market cap weighted acts, has the volume, has liquidity, has the custody. We should really go deep here and make sure we're just best in class here and then we'll let the chips fall more than they were around everything else. Obviously it's oversimplifying, but nobody's really doing that. And yeah, it's fascinating. Yeah, yeah, it's. I was just going to say it's like the default has become, you know, effectively for those types of firms like announce, announce a partnership with Coinbase effectively. And I think, you know, that that sort of trajectory probably would have played out regardless of what happened with the Bitcoin ETFs. But I do think that Coinbase being the custodian for, you know, 9 out of the 11 or whatever it is of the ETFs was a strong signal, strong sort of piece of air cover for folks to say, you know, what we always say is like you won't get fired for going to BlackRock or you won't get fired for going to Coinbase. Like that is where the air cover is in addition to the administration air cover, right? Like there, there's a confluence of factors here, but it has put Coinbase in this position where, you know, a lot of these incumbent or, you know, tranfy firms just feel like, you know, they basically need to announce something with Coinbase, get something in process. Because to your point, like, yeah, ideally they build out custody themselves, but like, you know, that would take a number of years just given what we've seen, you know, in terms of the likes of Fidelity building out themselves, right? Like that was a several a several year process. They didn't just stand up a custody business overnight. And so there will be partnerships, there will be acquisitions, but it does seem like Coinbase is sort of the preeminent cover your ass partnership to to go with. Sorry, Leon, I'll cut you. Off No, I was just going to say it's funny too, because JP Morgan and Jamie Dimon was obviously the one who was most adverse to Bitcoin in general, but they seem to be like they're going to be the first. It's actually going to offer clients to lend against their Bitcoin directly. And so by proxy, they're going to be able to get close to those who have some sort of capital and and trust JP Morgan just because they're, you know, almost too big to bail. And so while they're they would get bailed out that Bitcoin wouldn't directly, but they're going to be able to learn a lot more about what the clients actually want and care about from a custody perspective, who the larger players are, etcetera, just because of that. So I would say that's one of the interesting ones and the tried by space. And that's that's what I would honestly maybe focus on if I didn't actually, you know, want to go out and build the the custody or just like how many reps doing that? That's like a relatively low lift way to get into space a little bit more. Yeah. I mean, the the net of all of this is to simplify it as everyone's short Bitcoin. Because if you really think about it, if the market wasn't from an individual to an institution perspective, they would come to these conclusions. Like it's not hard to recognize well, if somebody or a large percentage of U.S. citizens, just as an example, hold 10 to 50% of their wealth in Bitcoin and every custodian looks exactly the same. And this is digital bearer assets. So you're bound to have either social engineering or physical attacks and hacks and then assets go missing. People will ask for differentiated models, right? Like, you know, as long as that continues down that path. But like again, every the why it's not rational, why it's not understood is because most people have these institutions and most individuals that work at them do not hold material balances of Bitcoin. So it just is easier to go with the status quo, which is building omnibus wallets or a sub custody in the underlying. And that's the advantage for kind of a lot of the things we're investing in right now. Yeah, another deal, Michael, I think you put on the list. Herkel has raised 60 million in funding led by F Prime with participation from Fuller Venture, Full, Fulger Ventures, Exponential Science and previous investors. What does Herkel do and and why is this relevant? Yeah, so Herkel was on a list of just an A bunch of almost everything tying next to stablecoins. So there was I'll I'll list out a few and then we can talk about any of them. Standard Economics, which is a stablecoin remains app. They raised 9,000,000 bucks this past week. Czar by A16D they raised it's a stablecoin on ramp network. They raised 13 million from a lot of the traditional crypto VCs. There was Percol and then there's Tesser, which is an institutional stablecoin payment platform for another one of like orchestration. The net of it is a lot of these firms are figuring out the use cases from payment movements. And I think the three main trends are around cross-border. And then sometimes they couldn't they they kind of intertwine. So like cross-border, which is like remittances, but then cross-border and B to B and then really orchestration, right. So how do you actually pull everything together from in like Anchorage is being a become a big player in this world. I think that's one to talk about because we touched briefly about it ties into this, which was Western Union's play into stable coins with Solana. And I guess I had heard and I I directionally confident enough to say it, you probably dig it up is like Solana paid him like 25,000,000 bucks to become yeah, sure, which is pretty straightforward in front of like, you know, business relationships. But the reality is, yeah, a Western Union launches the stable coin on a salon. But then there's the intermediary orchestrator, which is effectively Anchorage. So Anchorage has their kind of like, you know, the similar to like a Paxos. And yeah, I think that's the the net trend. What we're talking about is that so you have these larger incumbents that know they need to make moves, they're generally not going to go at this level because unless there's real product market fit in traction like a bridge or Privy, you're going to go and even overpay at the time, which at the time it looked like a crazy deal. And I think now most participants would be like that was pretty cheap for Stripe to buy bridge. And the point being is, so you have the incumbents layering in on what exists. You're Aqua hiring the teams and then you have net new players stepping in to try to figure out how to basically disrupt them and move money from from the very base layer to start. That's as much as I got. I don't know where this goes. It's not as much as I focus on. I the thing that I focus or I'm, I'm mainly been thinking about, and this is kind of a call and, and we'll start putting more ads out for the, the stables and the entrepreneur in residence is really, and I've talked to Abu Baker about this, which we probably talk about on a future pod with him, is there's really just a need for Bitcoin and stablecoin infrastructure to sit next to each other. It's just, it makes so much sense when it comes to if you're already in Bitcoin, you can have that sitting there. If you need access to stablecoins, there's a whole shortage or slew of opportunities to get dollars against your that'll look like savings account where you can like have very low margin accounts for dollars. And then naturally, if you're not even ready for Bitcoin, but you're going to be moving capital and then you can basically swap in a BTC quickly. It's a perfect use case. And you don't see those blending together because usually it's the stable coin players that are so focused on like crypto and money movement. And then it's the bit corners that are so ideological that they don't see any value in stable coins. And I think that there's going to be a lot of opportunities to put those and blend those together. Hey, everybody, hope you're joining the episode. Lots of interesting dialogue going on this week around stablecoins, AI and a lot of the M&A activity that's happening in the industry. Quick word from on Ramp and specifically around our inheritance product. We have no shortage of net new clients and existing clients that came over to on Ramp specifically because of inheritance. We've all been in this current situation where generally Bitcoin is male dominated. Our significant others are perfectly fine with us allocating or even over allocating depending on who you are to the asset, but they also don't want any exposure. Have to deal with management of private keys, what to do if something happens to the individual hardware devices See phrases. All the things that account for self custody. And so while clients sometimes feel perfectly fine with self custody for themselves, it really comes to legacy planning, whether it's with inheritance, the dynasty trust release that we had, inheritance comes with every product and every multi institution account included with also insurance, Iras and trade. But inheritance is the thing that I want to call out simply because as the price appreciates, as we get older, we start to recognize that we have to legacy plan, we have to be more mature with this asset. And so onrip really provides Peace of Mind there. Even if you're not necessarily ready for something like honoring, but you want to learn more how we solve for that and some of the other, you know, financial products we offer. As Bitcoin naturally matures, it needs serious products and solutions. I'd encourage you to book time or you can reach out to me directly, Michael, at honor@bitcoin.com. We're actually piloting out some flat reduced base pricing that we're testing out this quarter and we'll go into 2026 with. If you'd like to opt into something like that, reach out and we'll share more. All right, hope you enjoy the rest of the episode. Yeah. That's well said and I think maybe to round out this conversation around the broader crypto space and what seems to be now, you know, the trend is stable coins, real world assets, tokenization, all these things, the money movement as as we've been talking about, I saw this thread yesterday, which I I found pretty interesting. It's titled why crypto can't build anything long term and it's written somewhat ironically by someone in crypto. So the head of growth at 10 protocol, not exactly sure what that protocol does, but nonetheless, there's it's I found it interesting because there's some self-awareness in here and there's some sort of truths and have truths around what he's saying and and why the crypto industry is very sort of hype cycle driven, narrative driven. And I think this is just genuinely true when you think about the IC OS in 1718 and the NFT sort of hype cycle defy summer and now it's stablecoin, real world assets, tokenization. And if I'm giving sort of the broader crypto industry some credit, I think that is a healthy progression from more pure speculative type endeavors towards something with at least some, you know, marginal utility, marginal benefits as we've just discussed around all these stable coins and money movement sort of initiatives. But some of what he does call out in here is kind of spot on just in terms of the misalignment of incentives with a lot of crypto projects, token sales insiders, these basically these short lived cycles and, and really a compression of cycles. Like if, if you think about the 1718 ICO era, you know, those were a little bit longer dated in the sense that, you know, you could have some paperware project exist and, and hype A narrative for really like 3 to 4 years. Whereas that that sort of hype cycle has compressed where now, you know, it seems like it's really more of like 12 to 18 months in terms of like what's hot, what's new, what's getting funded before a pivot. And like, you know, part of what's referenced as more recently is not only the same point stuff, but in like prediction markets, like that's in vogue, that's getting funded. That's what the new sort of in vogue trend is. And so I thought this is just interesting in the context of everything we're discussing in the sense that I think we do need to sometimes zoom out and just think high level about, you know, the stablecoin stuff. I I do think is innovative, like there's some marginal utility to be and and value to be created there, but it is just sort of the next thing in the crypto market. So I would say like, you know, to Liam, your point earlier, like there is going to be a lot of capital destroyed just like you know, all of these other hype cycles because that's kind of just how these things go. And there was a related thread here that just talked more specifically about the the notion of crypto companies selling both equity and tokens to investors is the single biggest unforced error holding the industry back as an investable asset class. And I thought this was also kind of spot on in the sense that like this is this has sort of been part of the issue with the broader crypto space in general, is that, you know, these things really look like unregistered securities. And if you're going to sell both equity and a token, then you're really sort of, you know, saying the quiet part out loud that they are some form of, of unregistered security. If there's also a token attached to, you know, a company that has is selling equity as well. So this all just comes back to the short termism in my mind in the broader crypto space. And so I would just, I would say like I would, I would agree with most of what we've discussed around Sablecoins and, and all of this money movement. That's, that seems to be the new hot thing, the new narrative. And there is, I think there's an argument to be made that it's more legitimate than Pratt past sort of crypto hype cycles. But just wanted to sort of zoom out and give that context. I don't know if you guys have any thoughts on on any of that. Yeah. I mean, all this stuff is so like it's nuanced because when you sort of like if you think about like a spectrum and at the far end over here, you put like David Marcus down the journey. And then over here you put somebody that's like crypto degen, the sophisticated investors in crypto like the dragonflies and people have been around long enough to survive ever like pivoting to come more of this way, right? So they started to look at like fintech infrastructure. What does it look like? But they still kind of believe in this other world of decentralized future. And then there's over here that's like, you know, kind of crazy developing tokens, credit markets and all of it. I think the big thing they mess outside of like Bitcoin obviously is the notion of like all these things are monies are competing to be money and money is based on trust and and we're not there as a society. Now, I'm not saying we'll never get there, but to put like trust all in code. So when you develop financial products, whether it's money movement, border movement, you know, institutional buying of hundreds of millions, if not billions of dollars, credit markets, you need humans, you need to like get on a call with them. You need to see licenses, you need to see money transmission, you need all the things associated with that. And that's really where this side over here like can't bridge. And so that's like one example. The other one, and I forget who had this tweet last week, which is really good about, you know, like the key to winning in almost any endeavour is just like sticking around long enough because most people just get bored and they get bored because they get too successful and they sell. They get bored because they weren't on the right track and then they leave. And the point being is like these crypto firms, they continue to go away because the fundamentals are lacking or the traction's lacking. And so they go into the need to understand and have the right lens of where the future's going is how you win in this market and pivot. But to your point, if crypto is built on unsound foundations with an unsound premise, then it gets really hard. And to your, the last point is like we've been saying this a lot, like all these cycles in growth of this asset class is just a fractal in, in the fractal is whether it's just in the, the, the common thread is destruction of capital, right? Because it, not only is it, there's two things happening. One is there's more dollars in the system. So all these valuations are greater, but there's also more people coming in with larger balance sheets. And so that's just more people come in with the same fractal of like misnomer of what this asset is and what's happening. And it just gets bigger and bigger. So it truly is just the Wild West And like there's going to be some people that stumble and pivot into success and there's others that are just going to be missing the, the boat and the, I haven't fully got the analogy, but it reminds me the most of Blockbuster Netflix. And if there was like Blockbuster trying to set up a consortium to like, you know, get a car to drive all the, the, the, you know, like the tapes that were out of stock into the next one. You know, they were thinking about this like physical world on how to manage it while like somebody just went online and completely like bypassed it. It's very similar. What I think is going to happen here is all these people are trying to build these networks. And then David Marcus to the last point being on the other side of it was like he had to go through that whole traverse through the whole thing to see the other side of like, oh, shit, this is just an open network. You can't stop it. It's interoperable. There's going to be multiple implementations. Everyone's going to have their own version of on ramp, off ramp, how you move capital around. And it's similar to the Internet. It just makes sense to plug in, not compete with it. And that's why this stuff gets hard to explain. How the hell do you explain where are people at in different parts of that journey? And then it's also relevant to their background, their business and where their sit in, in the local economy because somebody in Latin America is commands a different experience than somebody in the US versus Nigeria versus Asia Pacific. Yeah, it's well said. A couple things there too. I mean like this this year alone, we've had like a multiple different cycles. We've had like pumped off run and you know the paper Bitcoin summer, that summer etcetera. And there's been a lot of different hype cycles that have kind of come and you know some are sticking around longer than others etcetera. But at the same time, to your earlier point, Michael, like, yeah, David Marcus is super sophisticated and had to go through the whole journey. And we're going seeing more and more folks like that come into the space now. But they're also going to need to go through their own journey. They can kind of like learn and get a little bit of that by, you know, actually hearing the story of David Marcus and other people who have done XY and Z and crypto, etcetera. But like, you know, you can't really fake that experience, right? Like, you can learn from others who have done things wrong, wrong, but a lot of these people will learn, like, do the same mistakes that have been made in the past and, you know, have to just come to that conclusion by being in the market for longer. So you just can't really fake being in, you know, the broader digital asset space. And some people have gone too far and, you know, continue to think of tokens as the only thing. And, you know, selling tokens for a company is not going to go away. I mean, Coinbase's acquisition of Echo is a point that's, you know, going to bring more legitimacy from, you know, selling tokens from, you know, the perspective of businesses. But I also don't think the the MasterCard of the world are going to go out and try to sell MasterCard token just because they don't need to. They're they're going to be able to fund their business themselves. And it's not worth taking that risk in order to do so. And it yeah, to the last point, I think people don't put all their trust in code unless it's been battle tested and around for a long time. Like Bitcoin being around for 17 years now makes it just like have that level of trust that you can't really just bake or buy by spending up your a network of your own, despite you know how robust that code may be. Just because there there's no such no alternative for the Lindian, you know, just being around for a long time, just just like we've seen with gold. Yeah, those are really good points. Go ahead, Mike. No, the only thing I was going to say is, is more around like once you get to material balances of 1's wealth, they generally need somebody, not just the code, IE like BlackRock ETF $100 billion, right? Like there's a notion of trust that's relayed and then specifically when you get to like the easiest one that's closer to us is like Bitcoin back lending. There's apps out there that offer like DLCS and all this stuff on Bitcoin, but those are always for the foreseeable future going to be low liquidity, you know, relative to like C5, you know, centralized finance around somebody putting their name, their balance sheet, their reputation, their equity, their cap table. There from an institutional perspective is I think the big thing because I think somehow like nobody's ever given the example. They just say that we'll go to a decentralized finance future when it comes to like perps and swapping of equities and all of these things in like Franklin Templeton, there's all this stuff that's being discussed, but somebody has to still manage all of that. And like, what happens if it goes down? How do you like plan around? And that's why, like Solana, I think is very interesting for a lot of these firms because there is somebody there, it goes down, you turn it back on, like there's still some trust that's built into it that it's not like, oh, if this thing goes down, you know, there's not somebody you can't point at. And I think that's going to be a big part of all of this. Yeah, for sure there. You want somebody to help you because a lot of people are still in that new into the space or don't necessarily want to just be out on an island, you know, trying to read whatever code in order to figure out like, wait, how do I actually move my money around, especially when it's a very significant amount of your capital or or the capital of other people who are your investors on the line. Yeah. All good points for particularly around, you know, David Marcus and, and his journey, his learnings that led him to the point of saying, no, we need to build on the soundest, strongest, most robust, resilient foundation and everything is going to map on to that. It's very salient. And I think, you know, it's obviously a function of what he went through. And I think you're right, Liam, that like, you know, people aren't just going to take his word for it to a certain extent, like you, like, I think they, they will need to sort of proverbially put their hand on on the stove themselves and figure that out. Because, you know, Dave Marcus, it kind of feels like he's screaming into the void on Twitter, like no one's really picking up what he's putting down, at least in the crypto and tried by space. But the other thing too is like, you know, it's a very good point around the Lindy, the 17 years, it never going down because like just this morning I saw some tweets around an Etherium based Defy platform Bancorp was exploited for like 100 million. And so like that, that just points to smart contract risk, that non resilient, non battle tested protocols that are being purported and used for these types of things, whether it's real world assets, stable coins, D5, whatever it may be. Yeah, I think there's going to be some hand on the stove moments, some rude awakenings for people that realize these things aren't as robust and decentralized as they're necessarily marketed. But where do you guys want to go from here? We can talk a little dats. There's a few headlines around MSTR and some other DAT news. There were some AI things to get to some gold plumbing. Where do you want to go? Please no dats we can do a little bit but. Can we talk the credit rating? Can we talk the credit rating for just a second? I don't want to talk the car. I think it's interesting. I think it's interesting. Yeah, we can. We can do it. So let's just, let's just make sure we cut, let's just make sure we cover enough time for the AI layoffs in the impact of business. Because I think that's honestly probably like the highest signal thing out of everything that's happened here more than even the BB and K and 0 hash news. Because that is a structural shift that nobody's talking about and nobody actually has given a good answer on why these layoffs are happening. And I, I think I have a pretty decent one to share. I don't know if we've talked about it. Right, we will get to the AI. We'll keep this quick. Essentially, global ratings aside, strategy AB minus credit rating. Now the reason I think this is interesting is because of basically how it was interpreted based on who you are, where you sit and how you're incentivized. So everyone who's involved in Bitcoin treasury companies was cheering this on as as like the best thing ever to happen, a monument monumental moment, when in reality, like AB minus is effectively a junk rating. And if you look into the details of how they assigned this rating, they're basically digging them for the the Bitcoin collateral that's on their balance sheet. They're not saying it's a benefit. They're not saying it's a good thing. They're saying it's actually a bad thing, a detriment. And that's what resulted in in the rating that they received. Now they also call out interestingly, from a custody, from a custody perspective, this highlighted line here, if private keys for digital wallets are lost, stolen or destroyed, the company may be unable to access at least some of its Bitcoin. So they're calling out the custodial risk of, of the setup. And really this applies to pretty much all Bitcoin treasury companies and that people are trusting single counterparties. And so that it was also a factor in this credit rating. And so I'll, I'll leave it there. Any thoughts before we move on to the AI stuff? Yeah, Just real quick. I mean, there's there's a lot of, there's a lot here. This is a sign that despite the fast beat rule changes, like other companies that are in the S&P 500 that are thinking about not going in and doing full dat but just having a little bit of Bitcoin on their balance sheet, They're going to see this and not be super psyched about it, right? Because and they're not going to be able to, you know, issue debt at the same amount of, you know, credit rating. Just if they count the Bitcoin in their potential treasury is not being able to be credit rate rating worthy to get some actual debt against it. Like you're not going to see more of the Tesla's of the world go out and be able to just let you know, put a little bit of their capital into Bitcoin. And so it's not a great thing to see that they're essentially counting their Bitcoin is is pretty much not on their balance sheet. So it's it's going to take a lot of education. We're just so far from, you know, having the deep understanding of of Bitcoin, the asset and why it actually is, you know, liquid 24/7 365. But yeah, that's that's going to be an impediment for, you know, real businesses that are publicly traded adopting the asset that many people aren't really talking about. And then yeah, definitely there there's always a risk of private key loss. You can mitigate that by, you know, using multi institution custody. But yeah, this is this is not going to be something that's going to be looked on favorably by non dots. Yeah, I think the the quick hits are, I was mainly hesitant to talk about this because I was realizing the biggest annoyance of Dots is the amount of time we've had to talk about how they don't make sense. The second part is the credit rating. I never understood it because these are the same credit rating businesses that, you know, did everything weird in 2008 and continue to and they say everything's whole and up to par. And then you wake up one day and you're you're holding a big goose egg. The last part is, yeah, absolutely. Like this is how early we are that the consumers and the investors in these products do not demand best in class custody that does not lose the asset. Like the fact that you have this amount of just Bitcoin speaking, forget about the crypto ones in publicly traded holding Bitcoin and cannot credibly a say where the Bitcoin sits, that it's on chain. And then that if the assets are lost, they will be made whole is a huge flag because for 1517 years at this point, there's been close to $700 billion in total losses. If you lose all the money, all the shareholder value disappears. So it makes complete sense that that would be the risk because nobody has secured Bitcoin for long enough. And so anyway, yeah, like all that makes sense that if you're going to do a strategy long term, you're going to have to be able to credibly know, you know, show the market that where the coin sits or at least where the revenue is if you're generating some kind of yield. And then also leverage something that you can't get knocked out of the game. But again, we're that early that it's not really appreciated. Hey guys, hope you're enjoying. The podcast wanted to give a quick word from early writers. We've had no shortage of exciting announcements the past few weeks. Last week we announced an investment in audio, a Latin American based on ramp in based in Mexico City and El Salvador. Wonderful founders multiple exits had formerly exited verifiable Bitcoin and and launched Swapito, which we ran into audio last week and then also Argos Sprott family company incredibly excited about the intersection of gold and Bitcoin and what does that look like for managing and protecting wealth over the next coming you know call it decade and beyond. We've included a no shortage of research investment memos around those company fundraising processes, just so folks understand how we think about companies, what we're looking at. If you're looking to build and are trying to get early writers involved, we'd encourage you to reach out. We'd love to speak with you as well as if you're looking to get involved with early writers, we'd love to talk with you. We have no shortage of other opportunities. We're actively looking at a very exciting 2026 is upon us. And as we talked about during this episode, there's no shortage of M and A a lot of these companies, the reality is they can't really build. They're going to have to eventually buy companies to really insert best practices, best teams, best infrastructure. So we're incredibly excited what we're building. We're looking for best in class talent and folks to get involved. And so if that's you, please reach out Michael at earlywriters.com or you can reach out via the contact form. All right, guys, we'll talk to you later this week on the last trade and I hope you enjoy the rest of the episode. Almost said, and we can move on. Let's go to AI, let's go to layoffs. I'm going to bring up this tweet around what Amazon CEO Andy Jassy had to say and kick it to you, Michael. Yeah. So I don't know if you guys have any of the tweets in front of you, but there was like last week, call it, I don't know, 10. There was a tweet that had like 10 major companies all the way from like 60,000 to like 10,000 layoffs across the board. In parallel to that, this all happened within like 24 to 72 hours. There was Chipotle taking a huge hit because they came out in their earnings report about, you know, the market getting squeezed and people middle, middle class, not being able to afford a burrito. And what I yeah, here it is. So just pulling for anybody listening, it was UPS 48,000, Amazon 30,000, Intel 24, Nestle 16. And then, you know, going down Accenture, Ford, Microsoft, and there was a lot of conversation around is this AI? Is this, you know, they've already been replaced. Is it earnings? There's all these different things. And, and I don't think there was also something that came out yesterday about how 97% of companies aren't even efficiently using or using AI. Think that was more of like somewhat FUD. But I think there's still truth in that in the sense that artificial intelligence and streamlining and, you know, offsetting human production is not implemented at these firms or others. What I think all of this is about really comes down to we talk about it a lot in the market structure, especially post 2020 in the amount of monetary units inserted in debt that the inflation only accelerates from here and you see this. So if you're an individual going to the grocery store or if you're a business and you have your inputs and your outputs and they keep going up, you have to be prepared for that. And you're also doubling down on infrastructure to help automate some of these processes. You have to get ahead of that because as the cost of your goods is continuing to go up, you're also reducing the amount of revenue or purchasing power from your employee or from your your clients of your services. So even if your revenues going up, this again goes back to real versus nominal. So like earnings can be going up, but in real terms they can be going down just because they've raised the cost. But less people are buying the same good and services and there's less actual, you know, profit margin into, I think this is what this is about. It's a, it's a convergence of the recognition that the unity economics of the business are no longer sustainable because of persistent inflation, because of all the other macro tailwinds and geopolitical tailwinds. And then there's the other side of it of investing. The only real way it's like cutting off your arm to save your body. It's like, OK, we got to get this right. And so that was the crude version of what Andy Jassy, CEO of Amazon said here. The last I'll just read the last part of it says, I don't know if there's ever been a time in history of Amazon or maybe business in general with technology transformation happening right now were important where it's important to be lean, it's important to be flat, it's important to move fast and that's what we're going to do. This is basically the early rider thesis. Like the only companies that will win in the future are the ones that embody that. You have to that's business one O 1. That's not like 2025 one O 1. That's not 19101 O one. That is just business one O 1 that you have to consistently produce more value at a lower cost or somebody else will come in and eat your lunch. And so in an era reserve is ending and where the reality is, you need the best entrepreneurs that can run a tight ship and deliver best in class services and continue to get better and lower the cost of the people that will win. And Amazon might be that, maybe not because it's not Jeff Bezos running the show, but point being is there's a lot of companies that are effectively going to go to 0 because they cannot operate. It's basically a different planet. And I think that's the biggest take away is all the things that we wrote about and we took discussing around like the denominators broken structurally real versus nominal. But then ultimately in this world where inflation is persistent, so you have inflation running one way and then you have deflation of the technologies to build. Businesses are going the other way. And you need people to be able to build with the best in class technology while offsetting, you know, making sure that they're staying efficient to offsetting the inflation by holding a harder form of money like Bitcoin will be the early riders of the future. And I think this is just what we're starting to see play out and it'll just accelerate from here. Yeah, there was a few other articles and headlines around this over the past week. There was 1 in Reuters which are pull up right now that was basically saying this is, you know, the Kodak moment of sorts for the consulting industry. And this was in reply to the this article. So the article is basically saying, you know, AI is killing consulting, which makes sense, right? Like if you just think about the, the sort of value product that consultants have historically put forth, it's something that could be very easily sort of disrupted by artificial intelligence just in terms of, you know, for a long time. I think there's, you know, efficiencies to be gained from hiring consultants. Maybe you see some some value creation from them, But the reality is, is that you're probably paying way too much for it relative to what you could be, you know, paying, you know, an AI subscription for to get, you know, very similar results. And I think what we're seeing is shown here on the on the screen in terms of a lot of these consulting companies, public companies, you know, down anywhere from 25 to to 50% year to date or over the past year. And so, yeah, I think this is a, a, a natural sort of area to start seeing early signs of disruption. But I think we're still very early in a lot of this, like all the layoffs that we just had up on the screen earlier. Like, I think we're just scratching the surface of a lot of a lot of what this is going to look like going forward. Well, yeah, I would also say it's still unclear how much of it is, you know, AI driven versus just the absolute bloat, in fact that recruited all these publicly traded firms, you know, and you know, almost a decade of the syrup era. But I would also say it's going to be very manager dependent on like what what do they actually do with this this excess savings? Like Amazon, especially with Jeff Bezos is like always been one who's been OK, we'll cut the costs and then through, you know, being able to have better unit economics, we can pass that savings on to our customers and then we can reinvest in the business and then that'll grow our revenues and actual profits of the business as well. And then you can, you know, create better products and services, invest in more distribution centers, etcetera. And then there are going to be others that are seeing that are like CE OS of publicly traded companies and seeing all these other layoffs and feel like they're going to get dinged from being a public company if they don't actually make any of those same, you know, cuts. And some will have a strategy of how to reinvest the capital. Others will just, you know, hold that in a melting ice cube on their balance sheet. And some will cut people just because I feel like they have to cut people and not actually, you know, have any plan to offset them through increased efficiency of other people out there. So I think it's going to be, we're going to see a lot of like massive divergences in the effectiveness of, you know, managers who are, you know, just love running a team of people and trying to get them all on board of, you know, being able to execute a plan versus people who actually know how to reinvest in the business and can deliver more value to our customers. At this stage. I think right now what we're seeing is just the the step one of like, OK, we need to cut more people because that's what the market's doing. And I think it's going to be TBD like the Elons. And, you know, I, I would imagine if Amazon doesn't, you know, be able to reinvest the business effectively that Jeff Bezos will come in just because I could see him getting bored. But we're going to meet see massive divergences of the output of what this cutting actually does. Yeah, I mean this, this ties directly into the difference between like a founder LED CEO and a managerial CEO. You know, if you if you started the company, you understand the company like the most simplest version is from the tribal knowledge of how things were built. And then like where you can actually reduce and you effectively like build the house, you know, the foundation, the studs and where there's weak points and where you can get efficiencies. And you know, tying that analogy, it's very similar to if you're taking a firm and you have all this excess blow and you stepped into it, you basically you're going to cut things that you know, maybe should have been cut, but also shouldn't have been cut. You're not necessarily going to know where. And this just ties around to value again. And you've seen like the Zuckerbergs, the Bezos, the, you know, Larry and Sergey's. And so to Lillian's point, I think you probably maybe do see some of that, but then you also just see these companies again out competed by other net new firms. I forget where it was. It was like Starbucks brought in a management consultant, I think that was made at Starbucks that recently brought in a management consultant completely like, you know, just like whiffed across earnings and much other stuff than he, he was like cut. But point being is that like the stakes have just never been greater is the net net, when you think about inflation coupled with inflation coupled with just the purchasing power of individuals are being reduced. They're not all holding Bitcoin. So you have, you're getting like pressed from both sides and everyone's going to get forced to make moves. And they're some of them are not going to all make the best moves. Yeah. I think that's that's certainly fair to say. All right. Well, we're around an hour. Is there anything else you guys want to cover on the on the AI topic? I did. Did you guys see this extropic announcement from last week, Michael or Leo? No, you, you were talking about it a little bit. Yeah, I, I, I do think it's somewhat notable. So like this was announced last week, this company Extropic that's basically built a new type of computing that is purpose built for basically, you know, running AI models. And what they're claiming is effectively a 10,000 times increase in efficiency of these units that will allow basically, you know, AI to scale much faster. As you know, the sort of part of the, I guess, concern or, you know, question around all this AI infrastructure build out has been, well, we just, we don't have enough data centers, we don't have enough energy to actually scale any of these things to the, the extent that everyone needs to, to do all this inference to do all this modeling. And so something like this would be, you know, a pretty big deal if it were to be true, right? And so the, the rub on Twitter over the past few days has been like this does have some sort of Theranos vibes to it in the sense that no one's seen a working demo or maybe a few people have, but it's not on video. And so no one really knows if this thing is real. Elon was on Twitter this morning sort of fighting it being like, does do you have something that actually works? So just thought I would bring this up in the in the at the tail end of this AI conversation, because all of this AI stuff is due to accelerate regardless. But something like this would accelerate it even faster in my mind if this is legit. Yeah. And regardless if this is or isn't, it's just an example of essentially how the world is moving into a different direction and using all the same frameworks that you have for, you know, zerp and, you know, money that can be easily debased and, you know, having exceptionally high amounts of debt in dollars isn't going to necessarily work in the future just because it's you're not going to be able to breathe and compete. Just like the same way of like in a world where AI is proliferating everywhere, like using, you know, general GP us for this type of hardware is going to be like incompatible just because you're going to be out competed by others who necessarily know know how to specialize in in their field. And so I don't know naturally if if this one is going to be something that is worth the actual hype, but it's it's worth tracking and, you know, keeping up to date with. Yeah, No, I think that's, that's well said. Regardless of whether this is legit, I, I think something some development like this is to be expected over the next decade, call it. So more, more to come there and we'll wait and see on that one. But all right, I think we can wrap it there. Thanks for joining me, Liam. Michael has a jump and see you guys next week. Thanks guys. 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 Rat 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.
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