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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 will soon be developed is a reliable E cash. Welcome back to another episode of Final Settlement. Today is Monday, July 14th. I'm joined as always by my Co hosts Liam Nelson, Michael Tanguma. Michael, you were just saying the worst part about new all time highs is what as Bitcoin crosses 121. I think it hit 123 earlier this morning. But what's the worst part about all time highs? Mike, I think if you're. Outside the industry, it's it's fun to sit back, but when you're in the middle of it, there's just so much going on that there's just a lot of stress and anxiety. And I genuinely appreciate when the awareness from the world isn't on this asset class. So that's what I was referring to. I will also share that I feel a little bad for Jackson because we had the the great BPI RIP early in the week. So we kind of missed a lot of this, this all time high and Jackson was really hurting because he he loves to just talk about price. And so we almost did an emergency plot on Friday. We didn't. And and then we got to record first to talk about what the hell is happening in Bitcoin. I think like overnight maybe got up to close to 123. Is that right? Yeah, I think 120, a little over 123 on some exchanges is what I saw. But yeah, to last week, I think we'd recorded, as you mentioned earlier in the week and then we were kind of just watching the price on Thursday being like, should we do an emergency pod? And Jackson had put the level out there of 115 and it eventually did cross 1:15 that evening, but it was already a little late in the evening to, to jump on an emergency pod. So we get the honor of, of speaking to new all time highs. We're at 121 seven right now. What do we what do we think's happening here, boys? Any, any notable catalysts? I think partly some people are trying to attribute this to some some words and thoughts and rumors around Powell either resigning or having necessary cause to fire him that that could be part of this. As I like to say, this is this is just more buyers than sellers. If you just want to boil it down to sellers getting exhausted at these levels, which we've been talking about for weeks, sort of the coiled spring, which I actually wrote about in last week's newsletter that came out around noon on Thursday right before it kind of started taking off. So some prescient commentary there. But any any thoughts around what could be driving this? Yeah, I think it's the same as always. It's just price goes up, it educates more people in the market and there's a ton of new vehicles to get exposure, whether it's the ETFs, which we're going to go into, all the new treasury companies, there's options on the ETFs. And so everybody's kind of been seeing this arbitrage strategy both on the publicly traded company side as well as just, you know, the, the good old arbitrage strategy of buying Bitcoin waiting until the price goes up. And, you know, some people end up selling at, you know, price XY and Z. But really the, the big arbitrage strategy is just Bitcoin has only some amount of units and dollars and Fiat is, you know, not constrained by any math or anything. And so people are just being more educated on what Bitcoin is, the different vehicles out there. They're educating the rest of their teams if they are on an investment team or whatever else it is on the value proposition, either you know, if they're completely neutral to Bitcoin or if they want to be long the asset class and it's just bringing in more liquidity, which brings in more liquidity. And the the two big value drivers of Bitcoin are its ability to transact and store value throughout time. And it only gets better at storing value and and transacting as more liquidity comes into the asset class. So it's doing a fantastic job. Doing a fantastic job at storing value right now Mike. Any thoughts? Yeah, I think, I think, I think there's a confluence of things happening. One is naturally like more buyers and sellers. It ate we chewed through the $100,000 kind of hundred 110 just like price point. Think we kind of maybe missed the mark. There are a lot of individuals thought 100K was that price point. Think long term it'll be that price point to show people can get to 1,000,000. But in the short term, there was a lot of downward pressure from O GS and people just needing to sell. I think there's something completely outside of Bitcoin, which is just what Brian referred to as like more the macro landscape, whether it's almost everything at all time highs in the public markets, coupled with what's happening with pal. I think what's what's interesting about this time is we've already seen Bitcoin behave as like a true risk off asset or almost a true risk off. But it has been super, it's been resilient and off the face of like what happened with the tariffs in Iran. Like so we've kind of seen glimpses of, you know, it can play in both directions, but I think right now the direction is risk on. And then yeah, of course the pub Co stuff is a lot of downward pressure. The thing that's the most interesting for me or upward pressure. The thing that's most interesting to me is the, that there's no retail like, and, and I don't know if it's a mix because retail's eating up the pub Co stuff. I, I don't think that's the case because it's just, nobody's talking about Bitcoin. Like it's very outside of the traditional squawk box CNBC in a couple of the corners, like nobody cares that the Bitcoin price is $123,000. And it's fascinating. And I don't know what like if it's FTX just kind of like pushed everyone, it's like, screw it. This thing's all a Ponzi. Or if it feels like there's something that happened between 22 and 25 that has put people like blinders on to certain, like mimetic. I don't know. There's something here right now that is going to take a while before the masses really come back. And I'm not really sure what it is yet, but it's going to be exciting. It's going to come out of left field probably. I think that's definitely true. But I, I do think that there is a caveat there of like the, a lot of the ETF flows over the past, you know, 12 months have been what you would typically call like a retail buyer that's just buying the ETF through their brokerage account. And so I think retail just looks a little different. But I would agree generally speaking, that in in terms of like the broader zeitgeist, like the normie brain, it's still very sort of off the radar, like no one's talking about Bitcoin on 21. I agree, but I think that that's like a good barometer for me is if you go to the grocery store, you go get your hair cut and you ask somebody what Bitcoin about Bitcoin, They're they crypto and then they'll also when you tell them what do you think the price is? And then they go, holy shit. And that's the proxy of retail that will get everyone else to ape in or like that analogy will like get the traditional advisors and people that are off the street that had never heard about Bitcoin. I think the demand that this is was like pent up demand from people wanting to get exposure and their financial advisor. Because a lot of financial advisors historically have told their people like, look, don't go into it or wait for it to come on platform or it's risky on these other ways. And so this was kind of like the the demand that had existed previous that was also locked up in traditional like tax advantage accounts or off like personal account. So it is retail, but it's a different kind of like net new marginal buyer that is I guess what I'm referring to it like retail when we generally see all time highs hit in these markets. Yeah, no, that's totally fair. It's not necessarily like net new people who are learning about Bitcoin for the first time. It's it's more so other pools of capital that were, you know, trapped in, in various accounts that can now get exposure. But Liam, you had referenced the ETF flows. This is a pretty remarkable chart just showing I bit and just, you know, clearly demonstrating these are the most successful financial products ever launched. I bit alone is over 80 billion. I think the entire spot ETF, Bitcoin ETF complex is closer to 150 billion now, but we have any thoughts on on what we're looking at here. Yeah, I mean, two things. One, the unit bias is extremely real. Seeing 120 and so $1000 on on a Bitcoin seems completely out of reach for most people. They don't even know that there are Satoshi's or you can buy a part of a Bitcoin, but they do see Bitcoin ETF and so they'll just buy that. And then #2 to the FDX point earlier, that is certainly something that's real. They just think that all of the industry is primarily a scam. For the most part, if you're out from the outside looking in and it does either end up in a landfill or you know that it just they, they just take your Bitcoin and run away with it. And so, you know, just having the name of Fidelity, BlackRock, etcetera on your investment account is just going to drive significant flows. The options on IVIT I think are, are really underrated how much demand they've driven and that chart is just like absolutely vertical. It's it's really like people are say we're saying this is priced in. You know, I don't, I don't know what to say to that. This is going to be a continued bid for a very long time. I think it's just, you know, people continue to want more exposure and it's increasingly available. Yeah. The it's, it's an interesting thing you bring up about, about UNIBIAS, because I never thought about that in terms of like the ETF stuff and the flows. And it kind of further underpins. I was thinking about the other day, like how do we put out a call like for like, I wonder if there's like a bounty we can do of it was I was thinking about financial literacy and unit bias, right, Because we all know and it's really sad, but like somebody can really pull themselves out of, you know, some deep stuff if they just realize if they've stacked 510, whatever it is. And I was thinking about it because my wife just jokes around, she's a cash app and there's like significant money and she hasn't put a lot of money there. She's just been doing it one off like for the past five years. And I was like, that actually is material for most Americans and but there's no like financial literacy that's really tied into that from exchanges. So I'll make this short like there, there just needs to be and I don't think it costs a lot. It can probably built off a lot of like the rails we've created, but it's just a SAT space exchange. And then it just focuses on like financial literacy and like how you save and preserve wealth. Like nobody does that and it's such a no brainer anyway. So that ties into the to the. Yeah, I was listening to Bill Gurley's pod over the weekend and and he was talking about, I guess an initiative that he's been very close to is effectively trying to have all high schools, I guess, have some sort of financial literacy education. But I think there's a massive gap there still because I think what he's talking about is like, you know, how to how to use a checkbook, how to have like, you know, checking your savings account. It's like, you know, you actually need to go a little bit deeper than that and like understand what money is to have like true financial literacy. So I think it's a noble effort, but I think there's still massive gaps in terms of how people perceive like what you know, what is what do people need to be learning about in terms of personal finances? It's like there's, there's the first layer of just like, you know how, how credit card debt kill you, but then you take it a step further and like understand, well, how do you actually save in a form of money that can't be debased? And so I think there's still some some additional learning that that needs to go on there, but a noble effort nevertheless. That was, yeah. It's the pod that made me think of it. Like, again, I was listening to the same thing. Sorry though. Yeah, I did this well, but it's it's completely disconnected or like you can't teach that financial literacy because people will naturally ask like, OK, well, I just made money. Like, why can't I just save it in dollars? And the answer is it goes down in value over time. And, you know, the natural answer is, you know, we need to put that money to work into something else. And the reasons for that are essentially just speculating on, you know, the S&P 500 will continue to go up over time through monetary debasement. And I, I think that's completely at odds with, you know, public government education of financial literacy. And so I, I'm just like not very optimistic that that will happen in a meaningful way, unfortunately. There was the other related initiative, I forget, I'm blanking on what they called it, but they were originally referring to it as like the Trump accounts. But it's like these saving accounts for all kids in America. They'll have access to at least, you know, a starting amount of like $1000 that's put into the S&P. It's like, OK, that's a step in the right direction, but like you should have the option to put that in Bitcoin, not the S and. Pi think to Liam's point, I think to Liam's point is we were this is like way off topic. If we got to figure out the the but like this is, it's just effectively like socialism, like what he's which we're describing. And because it's making the case that we can't actually make the money and then like give back and deliver better serve like we can than the government. Because like what Brian's pointing to is whatever that Gerstner and Dell did is like, it's like when you're born, you get $1000 and then it compounds and you get access to the equity market. It's like that sounds good at face value until you realize, well, that's coming from somewhere. It's not free. And then, well, why am I giving it to you versus I'll figure out how to give it to you. And I, I anyway, I'll bring it up later because there's a, there's a deep rabbit hole I went into like, you know, the Great Depression, Roosevelt and like all this stuff has just been this long game of socialism to mask kind of like the debt. And they make up these reasons like, Oh, it's OK, It's a little debt for the kid. But then like there's all this other, you know, stuff. But going back to the ETF, the volatility and options, I think that's something that has been under discussed is the institutional capital and products that have come into this space. It will probably material dampen the volatility and we've kind of seen that more like recently and I think it's been pushed over to it won't be forever. Like I do still think we'll see substantial volatility, but it won't be like what we historically saw with these headlines where Bitcoin would move in 10 to 20% in a day. We're seeing this in the like equity markets now with the OR specifically with the Bitcoin treasury markets where the volatility has moved over. And I thought that was just like an interesting aspect. Like this has been a pretty steady climb to 123. I've never seen it like this from, you call it beginning of last year to now. There hasn't really been wild moves outside of, you know, 5 to 10% over the course of a couple weeks. Yeah, also we're sharing we haven't made a new new all time high in gold terms, which I think is is just worthy of, of pointing out. You can see there's sort of a, I'm not a, I'm not ATA guy by any means, but there is some resistance at these levels here in terms of Bitcoin Express in gold. So something else to to take note of as well. Where do we, where do we want to go from here, boys? We had we had a few few things on the list to get to we Michael, I was going to go to your tweet, but. Let's do it. I don't even know what we put do these things and then I love when they get to come back. You you wanted to share a tweet from yourself? Oh, well, it's not really from me. I just I just post this stuff because we need it somewhere that's concise. So the the quote is allocation as an art. It's a beautiful, impressive thing, though unfortunately it increasingly it is increasingly less applicable a term to what venture capitalists do. This was from Kyle Harrison, who I think is probably one of the best kind of writers thought leaders in the traditional venture space. He's at contrary research. He's been a number of venture firms before. They write really great memos, but he put out a piece this Sunday and it was referencing that, you know, again, allocation is a beautiful thing, but he's he refers to it. It's not what venture capitalists do. And at face value, you'd be like, well, that doesn't make sense because they're allocating capital. And then he kind of further goes to say, don't get me wrong, venture capitalists have capital. They allocate in that sense that they have it and then they don't. But what makes allocation such a magical concept is the strategic implications of how the capital is allocated. And I think this is really kind of, maybe it sounds pedantic, but it's really fundamentally different than somebody just deploying dollars because true allocation has to have the context of not only where the capital goes, but whether it's timing or synergy gets thrown around a lot, but how it compounds with others. And I think that people often forget how amazing allocators like Jeff Bezos and Mark Zuckerberg and Jeff Bezos in particular, because I think people don't know that he owned at one time like 5 to 7 1/2%. He was one of the earliest investors. I think he invested it was so 5 million. I I think it was $5,000,000 valuation into Google. And but then post that he then this right here that in O six, he did this pivot for taking the warehouse infrastructure and moving into AWS. And this was a big investment and everyone looked at it, including Wall Street, like it was crazy. And then similarly, they, they look back at Zuckerberg and Instagram. And I just thought this was an important thing to call out because it's one thing to allocate capital and and try to go back into dollar terms. It's another thing when you kind of look at a business and an opportunity from the vantage point of where the market sits, the unique opportunity that we understand the money is changing. But then also as you're building businesses, you can kind of spot the angles on it, how compounding forces will occur that most people don't because they're looking in almost like a 2D fashion of how do I like get my return profile versus a long game that these guys are ultimately playing long games. And it's no question these the Jobs, the Zuckerberg, the Basil Rolls are Co founder like CEO. They're not people that were managers that got put into these positions because they just can't help but only see the world in a certain like transactional view versus people like this. You know, it's super interesting. I mean, in that context, what do you make of Zuckerberg's latest sort of capital allocation decision to basically Aqua hire folks from Open AI and other places for, you know, hundreds of millions of dollars in in salary? Is that a logical use of, of capital in this, in sort of this, you know, this race that we've talked about past few weeks in terms of just throwing piles of cash at AI in particular, do you see a shift in his mindset in terms of like how he's how he's thinking about allocating capital if he's willing to do that? It's a great question because I think we're like in a transition phase and I haven't heard this. If you curious you guys thoughts like there's the traditional sense in the Fiat tratify world that the dollar is your return. And then these guys are playing for something else that I don't know what it is. I don't know if it's IPAGI, there's something else. And at the end of the day, they're all going to realize they're all playing for Bitcoin and we're in a transition phase. And so like they're not like thinking in dollar terms. I don't think they're thinking in dollar terms or in Bitcoin terms. They're thinking in like total addressable market ownership stake in like global commerce. I don't think they're looking at this because these numbers keep changing, but if you had to like do a return on investment, I think that the total allocation, I saw it written somewhere that was like 1% of Facebook's total market cap for this bet to win AI. So it's pretty that's like that was the most straightforward that I saw. It's like, so it's 1% of its total business to win potentially AGI or win whatever they're competing for. It's pretty good, right? You know ROI. It's one aspect that I thought was interesting too is essentially there was somebody who was thinking about this a little bit differently and would be curious if you guys thought it's like if essentially 1% of all venture investments drive all the returns. It's not that illogical to think about it from an employee standpoint of there are significant people who can make outsize contributions to a company and the direction of it. I do think that they need to have a, a massive stake in the vision of where things are going, like the, the Jobs, the Zuckerberg, the basis of the world. But I can understand from that perspective why they would be willing to pay that much money. I, I don't know. I don't have a strong view yet because I don't know what they're playing for. And, and I'm not that deep in the space, but it's interesting for sure. The other interesting just just about this, this tweet that we still have up. If you think about the the Instagram acquisition, one of you know, I think most would perceive as one of the greatest acquisitions of all time in terms of its IRR, 65% IRR over 13 years. I don't have the exact numbers in front of me, but I think Bitcoin's IRR over 13 years is probably closer to 100%. I know it's 65 around the past five years or so. So even even if you know one of the greatest acquisitions of all time would have underperformed, just buying Bitcoin worth pointing out. With that said, but I think that's where the allocation decision comes in because you can make the case that Instagram delivered more enterprise value than that return, I guess if I've read that. And well, that's revenue per year, but we don't know like the creative value. Like that's the thing with money is it's just money. So it's not it gives you optionality if you didn't have any. But this would potentially be more Bitcoin terms if there would have like spit out more capital to buy more Bitcoin. Right. Yeah. Hey, guys. Thanks again for tuning in to another episode of Final Settlement. We had a awesome pod talking about all the things happening in the current market landscape. Just this morning, I believe DCG filed for IPO as well as the price. I think last night top ticked close to $123,000. It's a very exciting time in the industry and no better time to learn about multi institution custody and everything that we're doing at on Ramp. Folks may be interested. I've heard of us would encourage you to schedule some time or look at what we're building in the institutional, kind of private institutional across the board custody landscape. But if you're not ready and you just want to follow along closer, we just recently put out a really great report with the Bitcoin Policy Institute. We worked on it with them and had them on the podcast last week. Zach Shapiro, Zach Cohen specifically talking about the strategic Bitcoin Reserve playbook, the toolkit for adoption for all states, including the United States, and multi institution custody was a big component of it. We like in and joke. If multi institution custody is good enough for a sovereign, it should probably good be good enough for a few individuals. And so we'd love to talk with you if you're interested, schedule a time with us via our website. You can book a time directly on the web page or you can just sign up and go through our onboarding flow. All right, on to the rest of the show. Next one on the list, Michael, I think this is one of yours, but VCs on which crypto companies could IPO next any anything worth pulling out of here? So I'll wrap, I'll wrap two parts to this. So the first one is this is a block article referencing the crypto VCs. They were pontificating on what companies are going public next. It was funny because this came out, we were going to talk about it and then it came out this morning that I believe DCG is going to be filing for an IPO. If you Scroll down, I think it's talking about the multi year multi. I think we paused right there. Yeah, if you go up, so I forget who it was quoted, but it was explaining basically we're in a multi year kind of market for IP OS, which I think is true. I think it's going to be very fascinating to see what happens just given what we see behind the scenes. I feel like we this, this is an extended. Can you keep it there though? Because I wanted to go and we're an extended. There's just BC it'll be interesting to see how far this market runs with Bitcoin. And then I think the market as Bitcoin runs, everything else follows, including the amount of companies that'll be able to IPO. They reference OK X Uphold, Falcon X Ledger, chain analysis, fire blocks consensus and then DCG as another one. So I think it's going to be interesting. I think this extends not just a crypto, these are just a crypto piece. But I think in general, the amount of, I think Circle is a great proxy for interested in this digital asset space. The thing that I think most of these firms are missing and it's going to be very interesting, like we got to figure out a piece on this. But I'm confident the way people miss Bitcoin and they're still not woken up is going to be how these people like in this world missed underlying custody. Because right now everyone's talking about stable coins. Everyone's trying to figure out their stable coin game plan and the securitization. And they're all going to like net settle or end up trading like the real anchor pair is BTC. And then you want to get closer to that. And none of them are actually focused on underlying. Like how do you get a position of the 21 million? And that's like the biggest asymmetry once you understand Bitcoin if you're building infrastructure and none of them care about it. And so that's another just like unique opportunity that we're really kind of focusing on right now. I I love that you brought that up because I have kind of two things that come from it. One, yeah, the, the first people who came through the door in these in the crypto space, they naturally got distracted with everything else. And so at the same time, I think there are new entrants that are, you know, coming in now. I think, you know, Bitcoin dominance is 65%. All of the, there's a lot of noise in the market, but you can tell by the Bitcoin ETFs versus everything else that Bitcoin is completely different than, you know, institutional demand for Ethereum, et cetera. And you know, from a personal anecdotal side of things like the retail interest isn't there. I'm not sure how many texts you guys get from, from friends and those who are just interested in Bitcoin, but it's probably not a lot. What I have seen is my friend who's, you know, VP at a private equity firm, he's, you know, looking for a new job and he's like, OK, here's an investment firm that they that I applied to, but they have a corporate development role. And the corporate development role is just buying AI companies. And they're also going to implement a Bitcoin treasury strategy. And so he went out to me and was like trying to understand what is the arbitrage play that they're doing? And and obviously happy to explain that to him. But I think the some of what we've been talking about of the illiquidity of private equity investments and them staying private for longer will change as some of them, you know, as we've seen with Figma just buying Bitcoin and you know, keeping that as a small amount as well as some of them going public. And most of I think there will be more than we anticipate or more than most people anticipate in terms of returns driven through portfolio companies of venture and private equity firms buying Bitcoin as well as selling some going public because they have not given money back to investors yet. And so naturally when you do that, the investors will ask the question of well, why are you having the company buy Bitcoin? Like why can't I just do it myself? And not as especially because many of these publicly traded companies, their main KPI is just like, how much more Bitcoin am I getting? Over time, the LP's will naturally ask that same question and that's kind of why. And then that will be something that the general partners have to naturally change as well. They're going to have to change their carry and hurdle rate to be higher than Bitcoin. Otherwise, people can just buy it themselves. And I just thought it was super interesting that the early rider's thesis that we've started to talk about like a year ago is coming out to not just Bitcoin companies, but pretty much there are early signs that it's going to transition to the rest of the private equity and venture world as well. Yeah, that's super fascinating and yeah, something that I think we would all expect to see continue head that way. But it's it's interesting to see that sort of specific anecdote from someone in more of the traditional PE space kind of realizing like, you know, this is, you know, obviously becoming potentially an overcrowded saturated trade of just like, you know, spinning out public Bitcoin treasury company type deal. But I think you're going to, you know, we might still be in the very early innings of it is, is really the take away. It could extend a lot farther. Than we think well every company is going to buy Bitcoin too. I mean the the premium may or or may not be saturated, but the owning Bitcoin itself is is still very early in the trade for every company A. 100. Percent yeah, I think I think the big question for me on the the Pub Co stuff is it if it ends up in a it's going to burnout. I can make any bet it'll burnout. It's just does it burnout like with a bang or does it like with a whimper? And what I mean by that is does the market naturally de lever because there's some kind of like understanding if somebody gets rugged with counterparty risk or they all start to play a trade because this is what happened in 22 with everyone in the three AC and that's what caused the systemic risk problem. And so does it all just like de lever at once. It probably ends up like that because that's just how this industry works is as quick as it goes up, it goes down. But the alternative of way, and it's not to say they're mutually exclusive, but the the alternative whimper is what Liam saying is like, it's just going to be understood that whether it's in bonds, whether it's in insurance and specifically pub public equities and private equity, you just have to hold Bitcoin and you just have to hold it. And they'll just make up all those BS reasons why it'll be like AI and you got to like preserve and like it'll make all these reasons. But I think the day they'll come around to like, oh, this is just like a savings account. And then you'll just have some premium on, we'll make up new numbers like on, you know, you know, whether it's DCF or multiples, like we'll just come up with new numbers on what the underlying business coupled with their Bitcoin treasury and then how much Bitcoin they're creating. And then that'll be like what the equity market will absorb. But again, you can see how it goes that way. But between now and there, there's going to be a lot of education on who's actually delivering value and and who's not. Yeah. It's just going to be multiples on how much Bitcoin you can deliver per year and if that is sustainable or if you think it increases or decreases over time. Yeah. And to to Mike's point, like the the big thing that nobody's even talking about is just counterparty risk. And like that, that probably if there is some sort of deleveraging event in my mind, it's probably related to that where some custodian fails and some some way shape or form. And then there's a a recognition from everyone who's invested in these proxy exposures of, well, who's my underlying counterparty layers to need the surface. My bet is it is it's, it's probably, it could be custodian. I, I think it ends up being just somebody gets on the risk curve, like you can always know it's suspect if somebody doesn't want to show you their balance, if they're a public shareholder or they have shareholders, because you know, that just inspires and invokes confidence, especially in a world where this does happen. And the reason why they don't is because they naturally are going to want to extend leverage and not want you to see or have optionality for leverage. And so that optionality is ultimately going to end up in a rugging because that's what happens in that's exactly what's happening for 15 years is when people are naked with the Bitcoin, you end up losing it all. And so that'll happen. And then that'll be when the people start waking up to like, where does the assets sit? And then we'll probably end up for a longer run because then it'll be like, oh, they have it here, but then like who's auditing? Where is it on chain? And then somebody else will rugby, they'll say it was there, but it wasn't there. And then you all kind of end up until like a more transparent way. And we've all talked about the custody with what we do. So we don't have to probably go deep. Well, slight transition. We had referenced some noise. Generally speaking, I, I would, I would categorize this as as some noise in the market, but pumped up fund raised 500 million in a matter of minutes in a, in a token sale. Any thoughts around it? We've sort of talked around this of like the, you know, broader crypto X Bitcoin is sort of out of narratives and it's either stable coins or literal casino gambling a la pump fun type websites. And so yeah, I I think this is just an indicator that that is the case. You know, outside of Bitcoin stable coins, really the the use case for all these crypto networks is, is predominantly gambling. And as we've discussed, the sort of expected value on this form of gambling is actually worse than stepping foot in a casino. And so it is very representative of sort of broader financial nihilism, which we've spoken about. And people feeling like this is their their only way out, their only way to accumulate some Bitcoin is to to gamble on pumped up fun. Any thoughts on this? I think it's all kind of gambling and nihilism. I kind of like the, the, the like the pump fund versus the, the treasury just because it's so shady and like quick and and fast. Like it's just like get in and get out. I think, I think it's all, I think what's fascinating to talk about this is just how the market structure around venture capital in the digital asset space is, is kind of not transitioning, but like morphine. So you got like VCs that are going into these pipes, right, because there's no real opportunity. So now, like venture capitals are going into the pre funding of these treasury companies to return. They're now called digital asset, they're called Dats, just in case anybody's curious, if you're listening. So the digital asset treasury companies, because they're not, you know, just a Bitcoin now. So you have I think this week or this past week there was Solana theory, I guess hyper liquid, another couple, but there's these are will continue to grow. I think I think we'll see more of this, which we're describing with a pump the because I know we've had this discussion on like the, the dominance level with Bitcoin. And I think ultimately we'll see the dominance top out at whatever point that actually, I can't pick the point outside of we'll start to like see it flow into the crypto market, start to speculate more outside of the traditional equity markets. And I don't know what that looks like, but you're going to see the transition of like there'll be the Bitcoin equities and then the crypto equities. And then you'll see like different layer block chains. And then they'll start to like absorb them into these. They'll be like a recursive loop. And then we'll start to see that transition. Where is it at right now? I see you pulling it up. What's the number? This is this is X stable coins and it's around Look it looks like 76%. It was as high as close to 80 couple weeks ago. Let's come down a little bit, but I remain bullish Bitcoin dominance. I think, you know, I, I understand the arguments around these other treasury companies being spun up with other assets. I think they're de minimis in scales relative to what MSTR and others are doing. I also think like, you know, as we've talked about in the past, people are expressing their views in different ways and it's not necessarily accruing to the native tokens. Ethereum, Solana, you know, Ethereum is, is languishing at at this point. And you know, I think around like 3K and the last time, you know, it was at 3K, Bitcoin was at half this price. So that is, you know, reflected in this sort of slow grind upward in terms of dominance. And in order for this to top out, as you're sort of alluding to, like you would need a massive shift in terms of institutional appetite for Ethereum effectively, which I just don't necessarily see on the horizon. You've got the Tom Lee's of the world showing what they're doing in terms of, you know, trying to do an MSTR strategy with Ethereum. I just don't think that that's going to have the same appetite because it's just, you know, what we've seen with the ETF flows. There's there's been almost no. Yeah, one thing to say is I can see a world where that's right, like where there's a top five, you know, basket of crypto and then they it ends up playing into dats or whatever. And then people are really the volatility, like we talked about ends up going into private and public equity businesses that are traded on, you know, whether it's on the stock market or, you know, these other block chains that are going to be trading. I, I still hold out that that's not the case simply because like I kind of want that to be true. I just don't think it'll be true because if we're all set and we agreed no retail is in like this is just smart money, then, then then of course they're not in like this garbage. But if we are going to come back to a crypto bull market where everyone comes in and everyone's cab driver, Uber drivers is they're not going to understand any of this shit. That's always, and that's been my case this whole time is the price is going to RIP. And then naturally people in the crypto market cycle into these other assets. Other things get spun up, other means get spun up and vibes and then you naturally end up in that like reversion back to it. That's the case that I've made and I still make his retails. Not here. If we were at like $550,000 and this thing was at the same place or moving up, then I'd like say OK, but we just all admitted like nobody in retails here. So why would? Here's the here's the counterpoint that I think is going to happen is, you know, if you're not one of those dats, I guess then then no companies are going to buy like Ethereum or or Solana or any of this stuff. Like I think that the bid from privately held companies with no plans of going public as well as just investment firms that want exposure to Bitcoin is going to be larger than retail demand for all coins because you know, retail will will gamble. But I think that the long sovereign private company bid and investment bid for Bitcoin. Well, it's just like too big and and larger than retail interest that will inevitably go into all coins and I think that's just kind of a maturation of the market today. Yeah, that's it. Yeah, that's a good take. I mean that that's kind of been my thinking is like, even if you do see that retail bid for all coins, it's going to be just magnitude smaller than the pools of capital bidding Bitcoin going forward. Like if we get to 500 K per Bitcoin like that, that is going to be in part due to a sovereign bid in my mind. And like sovereigns are just not going to be bidding all coins. So it's just totally different pools of capital and the sort of magnitude and size of them. I think it'll be very difficult for the altcoin space to actually eat into Bitcoin dominance going forward. Yeah, I, I just, I, I think that it's, it's, it seemed right. I just can't help but feel that the institutional capital that will make up stories to sell like the what was the recent stuff that JPM, I think it was JP Morgan did. It's like an internal Ledger, like there's just going to be so many. Yeah, they came out with something either yesterday or the day before saying like something about bullish about Ethereum. So I I hear that side of it. I just don't think I don't think enough capital is going to actually buy the story this time. Because if you look at Ethereum like it's actually losing it sort of protocol wars to Solana or hyper liquid, like it's not even it's not even the best bet if you're looking for a bet on those protocol networks. And because it's still the second biggest, like that's where the big delta is, because in order for Bitcoin dominance to actually come down materially, like it actually has to come from Ethereum, because if Ethereum is just losing ground, then you would need like massive, massive adoption of Salon or it's one of these other networks to actually eat into dominance. And if this ends up playing out, then my instincts would tell me that the capital that's all on the sidelines or supposed to be allocated to the space, it ends up merging. We're like crypto because we agree like a theory of Salon and some of these others aren't going to go away. No, probably others merged. You end up having them be baked into like equities and that's what gets the volatility in trading. And so this is just going to turn into like this other thing of like because you don't know it's you're moving. It's much easier to bet on Robin Hood, Coinbase or Circle than it is to like, oh, I'm going to. I'm going to pick which one of these protocols is going to win. That makes them. It makes a lot of sense. It's also very scary for a lot of people. Everyone, hope you're enjoying the podcast. We had an exciting discussion talking about all things related to digital assets, Bitcoin and market infrastructure and capital markets. It was an interesting conversation around the amount of hours worked per Bitcoin. It's a it's a trend. I think we'll increasingly see those metrics as discussed on the pod. It's something we've looked at very heavily as far as early riders and the way we look at the world when it comes to investing, building and how do you effectively return more Bitcoin than Bitcoin invested. And and that's a proxy for how do you return more value than time invested. And so if you're interested in learning about anything we're doing on the early writers side, we want to check out our research. I'd encourage you to go to earlywriters.com. We have no shortage of materials as well as newsletter that comes out every week, and we're consistently looking for entrepreneurs building in the space as well as folks looking to get involved in other ways. So you can reach out at earlywriters.com. You can shoot me a note at michaelearlywriters.com as well. On to the rest of the show. Yeah, yeah. All right, switching gears a little bit, Michael, you shared this tweet from our boy Matt Pines. What is he talking about here? Yeah, so Matt Pines retweeted. I don't know who Pippa Pippa Mulmagrin is, but whoever he was retweeting, she had tweeted about AI outsmarted 30 of the world's top mathematicians at a secret meeting. If you go back to the Pines tweet in the In This Long Form article we can link to, it said the mathematicians who participated had assigned on disclosure agreements requiring them to communicate solely via the messaging app Signal. Other forms of contacts, such as traditional e-mail, could potentially be scanned by an LLM and inadvertently train it, thereby contaminating the data set. And so Pines is effectively saying that he or he says exactly there's an underappreciated near future dynamic is 1 where human surveillance, the capital capitalism is replaced by AJI panopticon, where every packet is sniffed out by networks of autonomous LMS hungry for every digital morsel, where the Internet becomes a dark forest. And I thought this is important to call out because I think that we we talk internally and externally a lot about the underlying asset as a store of value. But I think we all agree and know that the Internet in its first version wasn't really built out and baked out correctly. And we've seen the centralization of these large, you know, behemoths like a Twitter or X or Facebook, among others. And there's a number of reasons why. And over time, there's going to be an encroachment on privacy and just, and we've seen this in other states or other countries specifically, we all know about China, but then even in the EU, it's increasingly becoming harder to, you know, with a censorship among other things. And this notion of privacy leveraging the Bitcoin protocol, I think will naturally emerge. And so I just thought it was a fascinating thing. I don't think it really plays out until we get more like things will get worse. And then also as things get worse, a lot of the people that built these existing worlds will also be adopting Bitcoin. And I think Jack is the the perfect example of this. And that's what you know, Pines references is Jack who recently put something out which was like an encrypted chat. I don't even know exactly how it works, but maybe Brian you've looked into it could share. Yeah, he's what? What Pines alludes to in that tweet is Jack came out, I guess over the weekend with a messaging app called Bit Chat that doesn't need Internet or cell service. It works over Bluetooth networks. And so this is sort of along those lines of, you know, broadening and thinking through ways of enhancing peer-to-peer networks that don't necessarily rely on centralized servers. So this is this I thought was pretty interesting and basically allows people to communicate via Bluetooth networks. Now there's some obvious like constraints around that, like you need to be near people, but the overarching idea is that similar to sort of how the Lightning network works, you could have basically hops that allow you to spread out this sort of mesh network of Bluetooths and, and any phones that are connected to it. And so sort of just interesting along some of the lines of like as this digital panopticon and, you know, the perhaps perverse incentives of of AI start to take hold, there's going to be sort of a, a, you know, work that needs to be done counter to that to preserve people's privacy and preserve decentralized networks that work in peer-to-peer fashion. And so this is, I think a step in that direction, but expect to see more things like this as sort of those risks materialize. All right, let's see what else we got on the list here. This was an interesting chart we're sharing sort of, you know, similar to the previous we were talking about earlier in the conversation. Just hours of work to buy one Bitcoin is ripping. And this is, you know, really indicative of just wages, you know, not keeping up with inflation generally speaking. And just that will make it harder and harder for people to accumulate one Bitcoin based on what they're earning in Fiat terms. Any. Thoughts on this? Yeah, this one stood out. I think there was 2 reasons. The first one was like, I think the version you hit on, which is just the measurement of amount of output for one Bitcoin. So we've talked about it, which is the measurement amount of investment into early riders versus amount of Bitcoin return. Like that just makes sense, right? But how much Bitcoin can I get if I put my Bitcoin at risk amount of time of your personal time at risk amount of number of employees to make one of those Bitcoin, right? Like there's a lot of like versions that I think that will just grow over time. The other one that is a little bit more of like A, and I don't want to say meta abstract is this notion of as it starts to increase the number of hours, like there's going to be a natural push pull between hours of Bitcoin to work and it'll go up and then it's going to go down and it's going to go up. And that's how the world gets more efficient because what's going to happen is people are inefficient today. This is a product of like too many, too many dollars. And this again, it sounds like theoretical until you kind of are inside an organization building it and you kind of think through, OK, how can one person produce more? And how can they do the work of 10? And then they naturally would take less number of hours to produce that Bitcoin. So the idea is today it takes a number of hours to produce that Bitcoin because the price is rising and they're inefficient. And they'll try to get that Bitcoin at reduce work. So they'll be higher, more efficient to produce the same amount of output. And then that'll like start to drift because now you're, you're, you're basically becoming more efficient as the price is going up. So it commands more hours. And that's just basically like this edging all the way out into how we end up like in a different universe, if that makes sense. It does, It does. I think what what you're sort of describing is that this chart at current is not reflecting necessarily the go forward efficiency of a single person and their ability to leverage deflationary tools in order to you know, buy one Bitcoin faster than they currently can today. And so, yeah, to your point, this will be a very interesting chart to monitor going forward because I think if you see dips in this chart, it's not necessarily that Bitcoin prices going down, it's that we're all overall becoming more efficient as workers doing more with less excetera. Yeah. And then which causes more, you're doing more with less. And then then it gets harder to buy the Bitcoin because the bitcoins price is rising because they can purchase more. And this is like, this is the whole beauty of a finite supply. It's a really like heady thing to think about. But that's what I really thought of when I see this is because it won't always go up into the right like this. It will until, yeah, it's, it's one we got to like work on because I could see like in dollar terms, it'll go up into the right. But then eventually it'll be like a different metric. Or maybe it'll always be hours because hours are hours. But. Yeah, very interesting. One more deal that I thought was worth referencing was Core Weave to buy Core Scientific, the Bitcoin miner. This was a deal that was initially proposed last year actually I think for evaluation around 1 billion that got rejected. It's now they're now buying Core for around 9 billion, I believe. And I, I found this interesting just in the from the perspective of I think there was a lot of talk around basically miners on both, you know, on the Bitcoin side, diversifying to service various forms of AI compute. And this is sort of that, but in the other direction. So, you know, an AI focus company acquiring the infrastructure of a Bitcoin miner. This is also interesting because Core Scientific went bankrupt, then restructured. I think they emerge from that restructuring in the beginning of 2024 and that's when they sort of started their own internal pivot more to the AI side of things. And so you could see that as sort of, you know, the initial stages of moving towards this type of deal where they would just get acquired by an AI company. And so that is now occurring. I think the other take away from this to me is sort of just points to the ruthless competitive nature of Bitcoin mining space where I think you're going to start to see less super large Bitcoin mining companies like core was. And basically, you know, see over time Bitcoin mining pushed to smaller scale operations more on the the edges. And part of that is also just from the competitive perspective of the largest variable in Bitcoin mining being your, your energy cost. And as nation states get more involved in Bitcoin mining, they will in all likelihood, you know, have access to energy sources which are 0 cost to them. And so that just makes it harder for a, you know, public miner, whether in the US or otherwise to compete if they are, you know, have some amount of cost relative to their, you know, to their infrastructure, to their electricity costs, I should say. And so I think All in all could be a positive sort of trajectory in terms of the decentralization of mining, not having it as concentrated with these super large sort of mega farms. Any thoughts on on this deal or or sort of how the mining space is evolving? Yeah, I completely agree with it will decentralized over time. I think this is this is kind of a Trojan horse for all these AI companies starting to learn about Bitcoin and the importance of it as a strategic treasury asset. Because naturally if you buy a Bitcoin miner, they drive all of their revenues in Bitcoin. So they have to make a conscious decision, do I sell my Bitcoin or do I keep it in Bitcoin? And they will naturally do the analysis as part of the due diligence. Has that Bitcoin gone up over time and performed better than cash? Or like how do we think about selling Bitcoin as a treasury asset in order to cover expenses? Because, you know, their expenses are still dollar denominated. And once they do that analysis, they're going to realize that over a long period of time, holding the Bitcoin is better than selling it for dollars, especially if you don't have expenses that you need to pay right away. And I think this is one of the Trojan horse ways in that the AI industry understands that having Bitcoin is is very important as a corporate. Yeah. I don't have much else to add other than I think it's going to be extremely fascinating the confluence of sovereigns, AI data centers and then Bitcoin and how they just naturally integrate together. Because to your point, like it makes zero sense for any AI data center company to not have any like R&D or understanding of how Bitcoin mining works because it's pure optionality. If you need to basically like move over for whatever reason, whether the the Bitcoin price rises to a point where it makes it economical to switch that to giving you opportunity to just even negotiating. And so, and that's just one aspect that's like not even talking about the intersection between AI and Bitcoin. A few things before jumping. It's just like a crypto crypto corner over here that I thought was interesting and it just relates to Bitcoin that I guess this is crypto week. So they're supposed to be the genius act, clarity Act and then the anti CBDC and my understanding, curse your understanding is genius looks good, which is a stable coin bill clarity, which is more market structures, probably not anywhere near on the table to be done. And then the anti CBDC I don't actually know. And then the other thing was related to I don't know his exact. I got to look it up, but it's his name is Jonathan. I want to say gold maybe, but he's the new OCC head of the OCC. He was a proponent put together a piece about halting choke point 2.0 and then he was actually the last person, I forgot what his role was previously at the OCC that approved Anchorage for the banking side. And I think those are all super just fascinating when you think about the growth in maturation of the industry because you've seen what is it bit go Coinbase and maybe one other circle looking for bank charters. I think we're going to naturally start to see this convergence between digital asset firms and bank trust and what does it look like to hold deposits, lend against them. And, and it's kind of like it goes under the underlying thesis of we just like end up in an extended bull market into probably like late next year, if not even further. Because there's just a lot of things getting executed and delivered to the market that still aren't priced in or the flows haven't been brought in yet. And there's not much leverage is the last piece. Like I don't think we've seen a lot. There's not much leverage in the system yet. Yeah, so you're saying super cycle? No. I think that there's. Probably a lot of leverage. Outside of the system, on the Bitcoin treasury companies, etc. Possible. Not not even that the Bitcoin treasury companies are too leveraged. It's the people that are buying shares of the Bitcoin treasury company are too leveraged. Yeah, I mean, there's that and there's definitely a lot of, you know, dear, dear diligence, but a lot of treasury companies that have Bitcoin that's not their Bitcoin. They have some, yeah, 33 different levels of Bitcoin lent to them and how it's structured. Even private companies that say they have a bunch of Bitcoin, that's not their Bitcoin. So that that's a component, but it's what we call it healthy leverage right now. Intelligent. Is it intelligent? Leverage is the real question. But no, I'm glad you brought up crypto week. That is another thing that people are pointing to around like what's driving price? Just general bullishness, optimism around crypto week in DCI. Think there's also should be some form of a report that's due at the end of the week. So maybe we get an audit, maybe we get an audit of how many, how many Bitcoin the United States government owns all I'll believe it when I see it on that, on that front. But I think that was part of the original sort of timeline that end of July ish, we would get some sort of reporting so there. There, we'll see on that, on that. There's a there's a fantastic book that Prince recommended. There's two, but the one that I started reading was The Secret to the Federal Reserve and super fascinating, like the way that it was written, researched and the guy that like wrote it was like locked up and it like Ward and he was like a guy that helped Ernest Hemingway and like all these people, right. It's a very like interesting reason. It's really it's all research, but point being is they breakdown how crazy for first since like the Jekyll Island meeting to the inaction of it in 1913. And it made me feel very crazy or like not crazy, but like even sitting here because I usually don't jump into the conversation about Musk and and the what is it called the the debt doge and all of it because it just didn't feel like earnest. It just it feels like like WWE or wrestling. And I feel very vindicated. Like I encourage you guys to read it because the amount of like manipulation of how they like took out at the time, I forgot who the president was and they inserted, I believe it was Woodrow Wilson who came out of nowhere. And like Roosevelt came in for a bit just to steal the votes, the votes. And then the both bills were basically the same but called different names. And then how they just like moved it. And then they did it on Christmas. There's a lot of these things that you get you hear about. They did it literally on the Christmas week. They were all supposed to go home and they like rushed it past and it just reminded like they were doing this thing 100 years ago. And it also really ties into the capital because when you go how deep, like owning the, the, the ultimately the cost of capital. I think we kind of joke around and like we talk about interest rates and all this stuff, but it's like we would laugh if somebody said you're going to put a price on bananas or the laptop, like versus the free market deciding. And that's effectively what's happening with money. And when you do that, you basically can control the world. And if you understand the amount of time it went through, then it kind of makes your sense that it'd just be fine with it going to Bitcoin. And then that's when you start to go into the pub coast stuff because you're like, well, there's obviously something. But so anyway, there's your weekly book, book reading secrets of the Federal Reserve. It's it's really fascinating, but it's also just kind of a it's just crazy because it's all like out there, but nobody ever looked in. And then we won't, we'll won't say anything. But you know, the, the the Titanic happened previous to this to 1913, and that was always something that was floated around and they kind of like break it down to that, that book. We will look at a new show notice and maybe we have a a final settlement book club. I think we I think we should all read this one and and bring back thoughts for the audience. You should get print. In the financial literacy course too. Yeah. That they teach in schools. You. Can just give them a Thomas Sell book for that and we'll think what's what's his good one? There's like a very basic, basic. It's like basics of economics. Have your or you know, that's Henry Haslett. It's a that's a good book. We should we should recommend. It's like the window. The window theory right off the bat is like an economist will say a window productivity. If you break the window and fix it, it's like, well, let's let's get back to the basics here. That's there's nothing anyway. All right, boys, that's a good place to rabbit. Thanks for joining us. We'll see you next week. Thanks. 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.
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