#1329 Arthur Hayes | Bitcoin Is Going To $1 Million!

Arthur Hayes is the Co-Founder of BitMEX and CIO of Maelstrom Fund. In this conversation, we talk about bitcoin, macro environment, banks, Microstrategy, Altcoin ETFs, stablecoins, various playbooks different nations are using, bull market predictions, portfolio construction, and more. ======================= Base is making it their mission to bring a billion people onchain. But what exactly is Base? It's an Ethereum L2 offering a seamless experience for both builders and users. With near-zero gas fees and rapid transaction speeds, Base is shaping the future of the onchain world. Base is a canvas for everyone, with hundreds of apps in the Base ecosystem, whether you're an emerging creator, a seasoned developer, or someone exploring the onchain space for the first time, Base is designed to bring your ideas to life. So, if you're looking for a platform where the future of onchain is being built daily, Base is your destination. Join in and make onchain the next online. Learn more at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠base.org⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and follow along on Twitter at @BuildOnBase to see cool things to do onchain, everyday. ======================= Introducing Espresso - the world’s most interactive portable display. They have a portable screen that is incredibly light, comes with a nice stand, and the user interface is very easy. Anyone who listens to this podcast can go to ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠us.espres.so/pomp⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. They have a brand new offer waiting for you. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Today's episode is with the one and only Arthur Hayes. Arthur Hayes is the Chief Investment Officer of Milestrum, and he is the co-founder and former CEO of BitMax. Arthur is a legend in the cryptocurrency industry, and he does not disappoint in this conversation. Today

• 0:47Anthony Pompliano?

  we talk about it all. We go through Bitcoin and the macro backdrop, why dropping bonds and buying Bitcoin may be a better strategy, the death of the 6040 portfolio, what he thinks about Michael Saylor and MicroStrategy, how he thinks that Bitcoin ETFs and altcoin ETFs may play out in the market, what are his thoughts around stable coins, property rights, his favorite assets right now, what's in his meme coin bag, what is the craziest investment he's made, where has he made the most money, and what does he think is going to be the price of Bitcoin as we get into this bull market? Arthur Hayes, literally, has been in this industry longer than most. He built one of

• 1:28Anthony Pompliano?

  the most important and largest companies, and now Arthur shares all of his thoughts on the current environment with you. Here is my conversation with Arthur Hayes.

• 1:40Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 2:05Anthony Pompliano?

  Today's episode is brought to you by Base. Base is making it their mission to bring a billion people on-chain. What exactly is Base? It's a layer-two offering, a seamless experience for both builders and users. With near-zero gas fees and rapid transaction speeds, Base is shaping the future of the on-chain world. Base is a canvas for everyone, with hundreds of apps in the ecosystem, whether you're an emerging creator, a seasoned developer, or someone exploring the on-chain space for the first time. Base is designed to bring your ideas to life. So if you're looking for a platform where the future of on-chain is being built daily, Base is your destination. Join in and make on-chain the next online. Learn more at base.org, or follow along on Twitter at BuildOnBase.

• 2:48Anthony Pompliano?

  Again, that's at BuildOnBase, to see cool things to do on-chain every single day. Today's episode is brought to you by Espresso, the maker of the world's thinnest portable display. Now, listen up. If you're like me, you feel like you are at a command center when you sit down at your desk. I got a gazillion tabs open and different windows for different activities. There's my web browser, my text messages, I have Slack open, and I got a Notes app. I normally work on a desktop, and it can be very, very productive. But everything falls apart the second I leave my desk. If I'm traveling, if I go to a coffee shop to do some work, or just want to work from the kitchen table, my laptop doesn't have enough screen space. I lose my command center, and my productivity falls off a cliff. It's a major problem. But this is where Espresso comes in.

• 3:32Anthony Pompliano?

  They have a portable screen that is so beautiful that you think Steve Jobs came back from the dead to create it. The thing is incredibly light, it comes with a nice stand, and the user interface is so easy that I figured it out, how to do it in less than three minutes. If you listen to this podcast, you know that's not an easy feat. So the Espresso team and I, we became friends. I got to know them because I really liked the product. And those screens, they now want to offer them to any fan of the podcast. So we struck a little deal. Here's how it works. Anyone who listens to this podcast can go to us.espress.s Or, if that's too confusing, just go click the link in the description. If you go to Espresso's website, they've got a brand-new offer there sitting for you.

• 4:15Anthony Pompliano?

  You get a little discount, and you'll get a beautiful screen. Trust me, I use mine every day. You'll love the Espresso screen, and I think it'll make you more productive. Go check them out today by clicking on the link in the description.

• 4:29Anthony Pompliano?

  All right, guys. Bang, bang. Arthur here. Arthur, the macro environment is insane. Everyone seems to be buying Bitcoin. Some people say it's because the ETF. Some people say it's because they think inflation is coming back. Other people are just buying it because that's what all the cool kids are doing. What the hell is going on with the macro environment and why is Bitcoin now becoming part of the legacy financial system?

• 4:48Speaker 02

  So first of all, and I'm going to write about this, probably my, my next essay. I think it's very, very simple and the simple answer is that real yields in the US, EU, China, Japan are negative and have been negative since the global financial crisis. And at a simple basis, I define the real yield as a government's 10-year bond minus nominal GDP. And so at a theoretical level, it's very simple. If I'm going to lend the government money, I at least should be compensated at the rate at which the, that economy is growing. Very simple. And so if the 10-year yield is below that rate, then the government is profiting off of bondholders.

• 5:33Speaker 02

  And if it's above that, it really is positive, then bondholders are profiting at the expense of the government. And it's just that simple. Now, obviously, if you're a politician, the goal is to keep yields lower than the, where the economy is growing on a nominal basis, because that means that you can spend money like a drunken sailor and it's profitable for the government to do so. And obviously, as we know, the best way to win an election or, you know, and generate the support of your population is to give them free shit. Now, obviously, nothing's ever free. You're paying with it via financial repression. But that's sort of the goal. And so every single different sort of major economic block

• 6:12Speaker 02

  has a different flavor of a way that they financially repress savers to make sure that the government bond yields are below how fast the economy is growing. So take the US for example, very simply, it's the Fed. So the Fed since 2008 has been printing money. I think the down bounce is whatever 8 trillion it is. Up from like one or two trillion at the start of the, the GFC. What do they do? They bought bonds to do what? To make the interest rates go down. At the same time, the US economy on a nominal basis has been growing ever since 2009, apart from the COVID lockdowns. So it's been very, very successful. And what do we see as a result? Bitcoin is the sort of release valve, or the most popular one since 2009. And you

• 6:57Speaker 02

  know, it's gone up the most of any asset class ever in human history, which makes sense because the United States has printed the most money that it's ever printed in its entire history. If you move over to China, similar sort of situation, their entire industrial policy is centered around, let's make sure that we borrow money from the people through the banking system at a lower rate than which the Chinese economy grows. So China's economy on a nominal basis has been growing, you know, five to 20% every year since the mid 90s. But on a bank balance, you get, you're lucky to get more than four to 5% as a saver. And so what happened in China? Obviously, there wasn't a Bitcoin back in, you know, the year 2000 when they joined the WTO, or even now today, it's, you know, difficult to buy Bitcoin on share in China. They bought

• 7:42Speaker 02

  property. Property was the one asset where the government was encouraging the price to essentially reflect the amount of capital that's being created and the growth in the economy. And as we saw, like, you know, property markets zoom in China, and obviously, it's going through a bit of correction right now. But you could understand why a Chinese person, if you see the economy growing at 20% a year, and you're only getting 4% in your bank account, you're going to do something else with your money. Japan, the BOJ, has probably printed the most money in nominal terms of any central bank ever. They own more than 50% of the bond market. Same deal. Nominal GDP growth is growing in Japan, but yields are negative on bank balances. And they've been holding 10-year yields at around, you know, 1% to 1.5% for the last few decades. Again,

• 8:26Speaker 02

  same thing. The Nikkei has actually, obviously, taken off as, again, has weakened. And then Europe, similar deal. The ECB is buying all the bonds of the governments. And on a nominal basis, you're still, the growth is still growing in Europe. So it's the same story everywhere in the world. The question is, when are investors going to realize that holding bonds is for dumb people? And so, great, you can realize that. But then what are you going to do as, as an investor? Before these Bitcoin ETFs in the US and obviously soon to come in the UK and probably China as well, there wasn't really other many options. Okay, yeah, you could go buy some gold, but then you got to store it somewhere. It's a pain in the ass. You could buy some stocks by the NASDAQ. Obviously, good managers did that.

• 9:12Speaker 02

  Buy S and P, that's outperformed. But at the end of the day, you're kind of stuck in these shitty things called government bonds. Then along comes the ETF, which is finally traffic saying, okay, well, we recognize this situation. In the past, the government leans on the banks to finance the government and it hurts the profitability of the banks. And there is a, I think he's a Columbia professor, Charles Colarmus, Colarmus, I can't pronounce his fucking name, whatever. He wrote a paper last summer about fiscal dominance and the theme of the paper was because the deficits are so high, the federal government in the US essentially merges the Fed and the Treasury

• 9:52Speaker 02

  and they lean on the banking system with their banking reserves, which is around $3 trillion right now, to provide financing to the government. Now, the problem is that banks, at least in the US, are for-profit entities and the shareholders want to make money. So they don't like it when the government basically says, yeah, okay, you have that great business going there, but what you're really going to do is just buy our shitty bonds. And they've pushed back on this. There was a recent, I guess, proposed legislation from the Fed saying, hey, why don't the large banks provide more capital? You have to hold higher reserves. The banks did a full court press, some sort of lobbyists, and of course, it was defeated. They don't have to provide more capital. They don't want to provide more capital because that hurts their profitability.

• 10:37Speaker 02

  So at a higher level of why not support a Bitcoin ETF? All of a sudden, you know, BlackRock files a Bitcoin ETF last summer, took the Wicco clowns 10 years, they still don't have one. They're thinking it's one in six months, right? And so now all the banks have a way to Give these bond investors something else to buy. We know that's negative yielding. We know that the government deficits are going to continue to go higher. Taxes are not going to get raised enough to cover them. Spending is getting out of control. No presidential candidate is campaigning on, I'm going to balance the budget. Not a single one of these clowns are. So it's not going to change. People are starting to realize this and now they've got a product leased for a TradFi,

• 11:20Speaker 02

  fund manager, they can allocate to a Bitcoin ETF. They don't have to change their prospectus. They don't have to worry about custody. They don't have to worry about any of the things that make Bitcoin special other than the fact that they did the back tests and it was negatively correlated to certain things they care about. And it's performed well as rates have been negative. So I think that's the macro backdrop. And that's why I think these flows are going to continue as the global investor class realizes that this time, you know, they're going to eat a massive amount of shit if they keep holding these shitty bonds. Maybe it's something to diversify. Here's an option and it doesn't entail any career rest for them to buy a Bitcoin ETF because it's being sold by BlackRock. You don't lose your job by buying one of Larry Fix's products as a fiduciary.

• 12:05Speaker 02

  So I think that's sort of the macro backdrop, which is why I think people need to not take any chips off the table. It's time to even add more because now it's a reflexive price movement. The more the price goes up, the more people hear about it, the more they look at their bond before like, well, what the fuck? I'm down 50% over three years. Worst bond market performance since the war of 1812 in the US. Why am I not owning this Bitcoin thing? All I gotta do is like click two buttons and buy this ETF. And all of a sudden I've, you know, got the best performing asset in all of TradFi in my portfolio. So I think that's the sort of the backdrop, very favorable, and it's going to be a fun, bold market. So let's talk about individuals and maybe like institutional investors. Historically, they followed portfolio theory, 60-40 global portfolios.

• 12:50Speaker 02

  That's 40% in fixed income. Most of, if not all of that being bonds of

• 12:55Anthony Pompliano?

  Some kind. Uh, is there a world where they just drop all the bonds and put 40% Bitcoin? Or how do you think, you know, let's say that they all come to the realization, they say, I need to act. What does that look like, you know, five, 10 years from now?

• 13:09Speaker 02

  So I don't think that you will be, everyone will be able to get out of the 40. The people who act now will be able to get out of the 40. But if you are, you know, just dragging your feet or, you know, being honest with the Vanguard CEO that I'm never going to look Bitcoin in my portfolio, blah, blah, blah. His ass was out in a few weeks. Um, then you're, you're going to be sitting there a few years from now, like, fuck, I really want to get all these bonds. But guess what? As the government sees that the traditional holders of their securities are no longer willing to buy them at these low rates. Then they change the accounting rules to make them do it anyways. Right? So if you're a pension fund, you can only invest in suitable things.

• 13:51Speaker 02

  Well, I bet you that a Bitcoin ETF is not going to be suitable, um, soon enough because they want you to stay in those bonds. Or in your retirement account, yes, now you can allocate to a Bitcoin ETF. Maybe you won't have that option in a few years' time as it's not deemed as suitable. Was deemed suitable, a low yielding government bond because it's safe. Right? And so that's how they make sure that if the 40 starts leaking into Bitcoin and NASDAQ and AI or whatever it is. And not buying bonds when issue is just wrapping up around the world. Then they just change the accounting rules and because all the money is in the TradFi system, the TradFi fiduciaries have to follow these rules. And therefore the capital is stuck. So I don't think there's any world, there's no world in which the entire 40 of fixed income gets into Bitcoin.

• 14:35Speaker 02

  But there is a world where there's a rush for the exits now. And if Bitcoin's at, I don't know, a few hundred thousand, a million, and whatever it is in a few years' time. And, you know, there's wars to be funded on every side, you know, China, US, Europe, Japan, everybody's at war with everybody. And you need to print money to support the military effort. There's no way in hell that they're going to let that 40 just walk out the door.

• 14:59Anthony Pompliano?

  What about the banks who are right now, many of them would be insolvent if they were marking their bond portfolios to market. They're sitting with tons and tons of these bonds. Are they, one, going to be able to get out? Two, will the government let them out? And three, will the banking regulation have to change in order for them to buy Bitcoin and put on their balance sheet?

• 15:20Speaker 02

  I don't think that they'll let them out. So what they'll do is they'll make it very profitable for them to hold bonds on an accounting basis. So what you're starting to see now, there's a letter from ISDA, the Swap Steals Association, I think last week or the week before, basically begging the Fed and the Treasury and the regulators in the US to reinstate the supplemental leverage ratio, the SLR exemption for US Treasuries for bank holding companies. What does that mean? It means that if I hold the Treasury right now, I have to hold a bit of capital against that because it has a certain amount of risk. Now, it's very low, but it's still greater than zero. If the SLR is reinstated and these Treasuries are no longer considered risky

• 16:02Speaker 02

  assets, then you can hold them with infinite leverage. And so then, yeah, I can have a one or two basis point arbitrage with a bank. I can create money out of thin air because that's what I can do as a bank, and I can buy these bonds and show an accounting profit with no accounting risk. Obviously, there's an economic risk, and that economic risk will then be hoisted on to the taxpayers because every time the banking system goes underwater, central banks come and print money to save it. So the bonuses for the bankers, they'll be compensated for doing something that's economically stupid but accounting wise sound. And that's how the government will keep the banks in the business of buying their debt.

• 16:41Anthony Pompliano?

  Now, another group is corporations. Many corporations, when they report, they say cash or cash like instruments and whatever kind of bureaucratic nomenclature they'll use. Michael Saylor and MicroStrategy, they seem to be epitomizing the like drop bonds, buy Bitcoin. He's taken almost his entire Treasury now and put it into Bitcoin. What do you think about what he's done?

• 17:06Speaker 02

  Well, I think he's obviously, it's a great strategy, right? You're borrowing money in a depreciating asset and investing it in a finite asset. It's like what Warren Buffett did with Japanese trading companies, right? Borrow at 1% in yen in a company that has a 5% dividend yield. It's a genius strategy. Now, obviously, I don't think most corporates are going to have the ability to do what Saylor's doing. Saylor is the board. It's essentially his company. He can do what the fuck he wants, right? A public company, if you make cars, is not going to be able to let me go issue a bunch of like 10-year debt and go buy Bitcoin. It's just not going to happen. Will they diversify into, you know, holding Bitcoin as an asset? I mean, unless they're just trying to pump the markets, but I don't really see corporates engaging

• 17:47Speaker 02

  in a microstrategies type situation because they're not really owned by, I guess, one person who just believes in Bitcoin and can do whatever he wants.

• 17:55Anthony Pompliano?

  Now, what do you think the risk is for Sailor specifically? Like I saw, I think in the last couple of days, somebody was pretty short the stock and it looks like they're kind of trapped and there's a little bit of a short squeeze that's happening. That obviously, if those shorts had been, you know, maybe more overwhelming, they could have had some sort of impact, but that's just stock price. Like, do you see any actual risk to the business itself and the efficacy? Or is everything that people are going to kind of critique microstrategy is its volatility, it's your short sellers, it's things that have maybe short-term impact on price, but there's really not a risk to the strategy itself?

• 18:30Speaker 02

  I mean, I have to really depend on, I know he has an operating business. How much cash does that throw off? What's his interest expense, right?

• 18:38Speaker 02

  And whatever that ratio is, if he's, if he's paying out more money and interest and he's earning in the cash flow from the software business that he has, then yes, there is a risk if the price of Bitcoin goes down. Can he sell enough Bitcoin fast enough to pay back a loan? But I'm not really sure on the cash flow implications. I think it's not going to matter. He's probably issue stock. Like, there's so many people, he's created a meme around himself that like, microstrategy is the badass, you know, Tradify corporate dude who's buying Bitcoin. I think even if his business was of negative carry in terms of cash flow versus the interest he's paying, he could probably meme himself in a way to dumping a bunch of stock and some Robin Hood Muppets buying it.

• 19:19Anthony Pompliano?

  The Bitcoin ETFs obviously have been very successful. I've been surprised at how much inflow they've gotten so far. And also, I think the impact on price. You know, my thought process was, hey, we'll, we'll definitely go up when they're approved, but unlikely we'd hit a new all-time high before the halving. And obviously, you know, we've kind of blown through that. What do you think? Like, is this what you expected? Do you expect, you know, $100 billion to flow into the ETFs more?

• 19:46Speaker 02

  I mean, I was definitely not expecting it to be this quick, like fastest growth in AUM ever for an ETF complex. It's like the best performing product in terms of AUM growth for I guess probably every single one of those major asset managers. So obviously, it's hit a nerve. It's the timing is right. Everybody's freaking out about these massive, well, not everybody, certain investors are freaking out about these massive deficits. There's this inflation issue ever since COVID. There's a general mistrust of the government. They lied to us about vaccines and all sorts of other things, right? And then you have contentious presidential elections around the world. People want something different. And I think this taps into sort of that narrative. And then you have, you know, the entire Trad5

• 20:29Speaker 02

  financial press pushing this narrative of yes, Bitcoin's a good inflation hedge. Guess what? Here, buy this product over here, pay these guys some money to manage it for you, right? So now all the interests are aligned. And now you have CNBC every day spitting out messages that you and I and others have been talking about for decades, right? So it's just that incentives are aligned. And so it can continue as long as the narrative holds. What does that mean? I don't know. But I think that we're just at the start, right? If you think about how people allocate to these things, that's they go to their HR department, they get a form, they check some boxes, it's fucking annoying as hell. And then, okay, then money just starts trickling in from their 401k. So once you've made those

• 21:11Speaker 02

  allocations, then it's just on autopilot. And that's the beauty and the, I guess, the bad things about passive investing is it's just a continuous stream of cash. Once you get into these very sticky flows of retirement accounts and pension funds and all these sorts of things. And then you're going to start seeing people do, take this ETF and do some financial engineering around it. Maybe if there's some other like listed options, you can, I think there's a cover call, you know, structured product like. Then you get the private net, the high net worth sort of groups creating all these structured products, auto collables, range accruals, all these sorts of things that you can start to do once you have this liquid security that everybody can trade the same things that they do in S and P

• 21:54Speaker 02

  and Kospi and HSCI and all these other indices. Like there's a whole group suite of products that are yet to come. Now that this thing is trading a few billion dollars a day in flow, you can start building these complex derivatives on top of the ETF. So I think it's only an increase of volatility of Bitcoin and there's going to be more funds flowing into it, at least in this particular juncture of the cycle.

• 22:18Anthony Pompliano?

  Yeah, one of the things that I figured would happen over the long run, but I've been surprised how quickly is non Bitcoin funds like the income, you know, strategic income opportunities fund at BlackRock or Fidelity's got a fund in Canada, them saying, we're going to take our other funds and we're going to buy some Bitcoin through our ETFs. And so it's not just net new inflows where somebody's saying, hey, I've got cash in the bank, I'm going to go and I'm going to buy Bitcoin ETF. It's actually, I gave Fidelity money for a fixed income strategy or some, you know, opportunities fund or whatever. And then they're taking that capital that's already in that fund and they're buying Bitcoin as well. And it feels like that is a sign that Bitcoin will end up in a lot of these portfolios as, you know, a small percentage within a basket of goods that these asset allocators are really just looking to juice their returns with.

• 23:02Speaker 02

  Exactly. It's just math, right? You run the correlations, it makes sense. They allocate their, you know, receiving on right hand, paying on left hand. Everybody's happy because they make fees.

• 23:12Anthony Pompliano?

  Now, is there a risk with, you know, BlackRock's got 1%, Michael Saylor's got about 1%. If you add up all the ETFs, they're creeping up, you know, 3%, 4% of all circulating supply. Is there a risk with ETFs that like they could get too big?

• 23:28Speaker 02

  Of course. I mean, you look at how the percentage of passive investors in the traditional stock market across the world, it's destroying price discovery. The stocks that are highly valued are highly valued because they're highly valued, not because they're good companies, right? So if you're in the S and P 500 and you're a top market cap, then you get more money just because of how the index is weighted. And so that's going to happen in this passive situation, right? As, you know, people just tick the box and the money keeps flowing into Bitcoin and they keep accumulating or get Bitcoin while this narrative holds. They don't do anything, right? So Bitcoin is one of those monetary assets where it has to do something for it to be valuable because if it doesn't move, then the miners don't get paid. Passive investings like BlackRock do fuck all. Their point is I'm going to create this vehicle.

• 24:13Speaker 02

  You can put your money in, I'm going to charge you some fees and I don't do anything else, right? It's a great business, but they don't care one way or the other about Bitcoin. They're not going to do anything either good or bad to further or, you know, put a detriment the movement of Bitcoin. And so that's the issue, it's just not going to move. So if it gets too big and there's not this movement, then you know, we have this whole segment of the market that has no connection to what's actually going on. And that could be an issue if there's some contentious sort of things that need to get approved on the network level. Maybe there's some privacy things, security things, whatever it is. And these passive investors, because like, well, I, this is not my job. I just sit here and accumulate assets, right?

• 24:57Speaker 02

  And so that's, I think, the risk. Are we anywhere close to that? No, but it's Bitcoin, right? The whole point is everyone should be able to buy it for whatever their purposes are. And we've, and we hopefully we've created an economic game such that we still get people to use the asset. And if we don't, then the game is faulty and we have to go back to the drawing board and do something else.

• 25:16Anthony Pompliano?

  Do you think that Bitcoin ETFs and kind of the rise of that passive persistent capital flow, will it dampen volatility? And dampen volatility could be, hey, it's not going to actually be as volatile in both directions? Or could it potentially dampen volatility on the downside? So we won't see those 80% drawdowns, you know, kind of on the other side of these bull markets. But that persistent flow just leads to kind of a grinding up of the price over time? Like, how do you kind of think about price action? How it used to work and now like post ETF launch, how it could work?

• 25:47Speaker 02

  I think it's really going to depend on the types of derivatives that take off on Bitcoin, right? So we're seeing in the zero day options world, obviously in the US. And you know, as you've seen, if you've ever traded Cosby in Korea, like, once you get the retail into these sort of highly leveraged options strategies, the volatility obviously spikes up because what do you do? You buy out of the money, call and put a lot of tickets, right? And that forces dealers to gamma hedge these things, especially if they're very short dated. And so if we get like zero day Bitcoin options trading where you can essentially have like, you know, 100x plus gearing on your position, you're going to start to see some wacky moves in, in the price. And so while, yes.

• 26:31Speaker 02

  You know, a very passive, steady stream of money coming in that might be a bit sticky, might dampen volatility to some extent. But remember that once we have these derivatives on top, those ETF trading flows are going to fling up and down. And you're going to have very big traders having to hedge their positions in the spot markets and in the the non sort of like TradFi type derivative markets offshore. So I think the volatility probably increases as we get more different types of people trading highly leveraged derivatives on the back of the Bitcoin ETF.

• 27:06Anthony Pompliano?

  The Bitcoin ETFs have been successful. One of the areas where I think we move next is altcoin ETFs. Now, obviously, there's a lot of speculation whether ETH is going to get approved and kind of the individual ones. But the altcoin ETF issuers, there's currently the BlackRock's, they're trying to get the Ethereum one approved. But there's companies in Canada like DeFi Technologies, which, you know, we've worked closely with and their whole strategy is like, there's a bunch of D gens on Wall Street that want access to this. They can't go and sign up for a Coinbase account or a Binance account. So if you can get the first ETP or ETF into the market where somebody can go buy that brand new coin they just heard about, obviously, that's going to attract capital. How sustainable do you think that game is? And like, is the altcoin ETF market going to be just

• 27:49Anthony Pompliano?

  as big or bigger than kind of the Bitcoin ETF conversation and flows?

• 27:54Speaker 02

  Yeah, I mean, I guess if you are a managing director or some senior person at any of these funds, you're like, okay, well, this is the most successful launch ever. It's Bitcoin. There's fucking like 3,000 of these shitcoins out there. You know, there's an appetite for people to trade these things. You're going to watch as many of the fucking things you can. Do you give a fuck what's in it? No fucking chance. You don't know what it is. It doesn't fucking matter what it is. You know, it's custody of the right way. Tick the fucking box you gotta tick. Watch it. And so I think obviously there may be a little bit more resistance. What's the Ether one if it happens? If that happens, then the floodgates are open, right? These guys are making so much money, are

• 28:34Speaker 02

  attracting so much AUM, their stock prices are going to perform alongside this crypto narrative. There's going to be no incentive for TradFi not to have as many of these assets stuffed into these vehicles that they're comfortable with as possible, because at the end of the day, it's just more and more fee income. And then on the other side, if you think about the dealers like the JP Morgans, the Citi's, the Goldman's, the Morgan Stanleys. They love this. BlackRock is probably the most important client on the street in terms of paying commissions because the clients just sit there and the money is there and they, you know, they rebalance, they trade in and out, right? And now you have a whole crypto portfolio, shit that moves up, you know, 30% in a day just because somebody sent a tweet. Like, it's like heaven for these banks, right? It's completely a disjointed,

• 29:18Speaker 02

  opaque market where they can charge whatever the fuck they want. And the end client is just so happy that they're able to buy a shitcoin in their retirement account. So nobody is fee sensitive across the entire curve. It's a bonanza for TradFi. And so, yes, there's going to be all coin ETFs and everything they can get their hands on. Of course, it'll be overdone, but there's this pent up demand to have something that moves because central banks have destroyed price discovery and every other asset class out there. This is the one thing where they're not leaning on it with all sorts of manipulations. And so the people watching want to trade it. And now Wall Street can make a lot of money helping them do it.

• 29:54Anthony Pompliano?

  This is exactly what the, this one company, DeFi Technologies, is exactly what they're seeing. It's just, it's like a magnet. People just say, hey, I need to buy that asset. I can't buy it in, you know, my regular account. Where's the thing? And they're going outside of their geographies. They're going to different platform, like whatever they can do to get into these assets, I think will continue. Stablecoins are interesting because I think there's really two narratives. One is like, stablecoins are obviously the killer app for payments when it comes to crypto. They're by far the most popular. And so crypto people, some of them, you know, kind of the hardcore Bitcoin maximalists are still, they want to ignore that data point for the most part. But also, stablecoins are almost becoming too important for the legacy financial system. I think stablecoins that collectively are

• 30:36Anthony Pompliano?

  the 16th largest holder of US Treasuries in a world where Japan and China are actually decreasing the amount that they're buying these Treasuries. Like, in some weird way, the stablecoins are bailing out the government because they're just buying so many Treasuries. And so how do you think about, like, stablecoins as payment, but also stablecoins becoming, like, could they become a systematic, kind of important player that's, like, too big to fail?

• 31:00Speaker 02

  So I think that, and I talked about this in a recent essay I wrote about Tether and Athena. I think that the Fed and the US Treasury, to take them as an example, do not like stable coins. It has nothing to do with crypto and everything to do with the sorts of things that the Fed has to do to control short-term interest rates and bail out the banks after the global financial crisis. So quickly rehash, 2008, banks ran out of reserves because they invested in dodgy mortgages. So the Fed said, we are never going to let the banks run out of reserves again. So we're going to do QE. So we're going to buy bonds from banks and credit them reserves at the Fed.

• 31:43Speaker 02

  Now, the problem with that is that the bank could take that reserve and lend it out and, you know, increase goods and services production in the economy, which obviously creates inflation. So the Fed said, okay, well, we need to bribe the banks to not to lend. So we're going to pay interest on these excess reserves that they held at the Fed to make sure they don't transform those into credit in the economy. Now, when their interest rate was 0%, it doesn't cost the Fed anything. At 5.5%, the Fed is paying out hundreds of billions of dollars a year in interest to the banks for doing nothing. The banks could lend the money, but then that creates inflation. So the Fed instead says, we'll pay them billions. And now the Fed is trading at a loss in terms of their net income. On the other side, you have reverse repos. It's another function of the money markets.

• 32:28Speaker 02

  They have to pay a rate at this reverse repo facility to keep the short-term rates at their policy rate. And it's a similar sort of situation. All this capital that they don't want to go out into the system to create inflation, they need to pay an interest rate on. And then the third piece is short-term T-bills, which essentially trades at a slight yield premium to interest on excess reserves and reverse repos. So it's all related. And so if you take this whole thing together, as the Fed has been raising rates... They're paying out, Fed and Treasury are paying out, you know, over a trillion dollars in interest income to wealthy savers and the banks. And so along comes stablecoins. The banks have no competition.

• 33:08Speaker 02

  They have no interest in providing a 24/7 currency that trades around the world because why would you do that if you have a monopoly on transfer payments? And so then you have the tethers in the circles and the first digitals and all these other stablecoins say, hey, great, we're going to take this Ethereum, Tron, whatever blockchain, stuff some money in a bank account and let you move this around. The crypto ecosystem, great product. However, it's been so successful that now it's exacerbating these negative income issues that the Fed and the Treasury have, which is it's just stuffing more dollars into these facilities that they don't want to have stuffed in there because they have to pay interest on it. And as inflation is not going down, rates are going to stay high, they're going to keep

• 33:50Speaker 02

  paying out trillion dollars a year in interest income. So that's why the Fed and the Treasury don't like what's called narrow banking or fully reserved banks, which is essentially what a tether is. It's, it takes money into a bank account, it makes no loans, it stuffs the money back into the Fed or the Treasury, you know, reverse repos or short-term T-bills. So, but they don't like it, but on the other hand, they didn't do anything about it. And so now they hold some, such a large position in treasuries. If they cut them out of the market, number one, obviously that further erodes the protection of property rights that is supposed to be a bedrock of Western financial capitalism.

• 34:31Speaker 02

  We know that's dead, what happened with Russia and other countries, but again, a bunch of motherfuckers sitting down in Bahamas who just had some dollars in a bank account and now they got them frozen, maybe further people, maybe more people don't want to hold treasuries if that's how they're going to act. And then if they make them sell their treasuries, just shutting them down, well then everyone in Russia, the exit, tether D-PEGS, big redemptions, and then you cause havoc in the treasury market as tether goes and tries to dump a hundred billion dollars of the treasuries. So I think that's in this kind of stalemate situation where they don't really know what to do. Maybe they're going to allow a JP Morgan or a Citi to do the same thing because if they offered a similar product, you'd obviously use their product versus Tether because they're

• 35:13Speaker 02

  essentially risk free. They're an arm of the US government. And if they're offering a $24.7 that trades on a public blockchain, I would rather trust JP Morgan than Tether as a customer. So I think that's where we are.

• 35:27Anthony Pompliano?

  On that one, real quick, I wrote this, I don't know, four or five years ago, I called it the corporate like money printer or the corporate central bank playbook or something. And I was like, if I'm JP Morgan, I'm 100% launching a stable coin that's backed by dollars. I'm going to get all my customers to use it. And then at some point, I'm going to say, well, now I'm the gonna act like the government and I'm going to unpeg it. And now I got you guys all trading around this shit coin that's not backed by anything. And you got JPM Coin and like you trust it. But now I can print as much JPM Coin as I want. And again, I don't know what the regulation, how they would treat this. But the idea that, you know, we don't have rules where if you launch one of these and it's backed by a currency, that you could

• 36:12Anthony Pompliano?

  unpeg it in the future, seems a little bit crazy because it kind of is almost us going backwards in history where there was, you know, a bunch of competing currencies from individual producers or kind of publishers of these currencies. And so it feels like once the large banks and kind of, you know, economically incentivized people get involved, there's a lot of crazy shit that they could do that we're just like not prepared for. People don't really understand yet what's possible.

• 36:36Speaker 02

  Yeah, I think the bigger issue is that the central banks around the world have not made the decision on where they want currency to sit. Should it sit with, should it be a private thing that's created electronically? Should it be a commercial banking thing? Or should it be a government thing? And that's sort of the debate that's going on the central bank digital currency world, which is, you know, wholesale or retail, retail being. The Fed or PBOC or BOJ offers an app and all currencies held directly with the central bank, which automatically puts all central commercial banks out of business. Now, the commercial banks are the most powerful entities in every single economy in the world. Nobody goes against them at the government level, not even in fucking China. Are they going against the banks that the government even owns to do this and offer currency directly

• 37:21Speaker 02

  to the people by an app? Everyone's going through a convoluted wholesale thing to give the banks a reason to exist in this digital realm. So I think it's a confusion on policy because what banking system do they want to have? And while they can't decide on whether they want to put commercial banks out of business or not, the private market's saying, well, fuck this. I don't want to deal with nine to five, some like asshole teller who like takes five hours for lunch. I want to move my money 24/7. And look, there's this thing called a public blockchain and the issuers are bringing up these products. And so, you know, governments are going to have to decide what sort of bank, you know, banking system do they want? And the tethers and the circles and these physically dollar-backed

• 38:03Speaker 02

  or fiat-backed stablecoins are pushing the issue and showing them, well, if you don't do something, then all this money's going to accumulate here and we're going to exacerbate some fundamental issues with your money markets that you've created to essentially print money to save the banking system post the global financial crisis.

• 38:20Anthony Pompliano?

  When you mentioned earlier property rights, describe why you think that is being eroded away. And I think that you're alluding to kind of Russian billionaires that, you know, aren't part of the government, but they had their private property taken, seized, frozen, et cetera. But are there other examples or things that?

• 38:38Speaker 02

  No, forget the Russian billionaires. The Russian state, a state act or a sovereign country that holds debt, right? What did Russia do? They did what they're supposed to do. They produced oil, they sold it in dollars, they earned dollars, they bought treasury like a good little country. And, you know, when they did something that the Western elites didn't like, they said, oh, those are nice bonds you have. Thank you very much. We'll take them, please. There was no due process, no, not even a kangaroo trial to like convict Putin of being whatever the fuck he's supposed to be, according to the Western financial media. No, we're just gonna take this shit. And there is no property rights, it's whatever we say they are. That's the problem is that if for whatever reason you fall out of favor with the political

• 39:20Speaker 02

  elites in, you know, in the US or in Western Europe, that these bonds that you dutifully bought so that you don't have a balance of payments crisis when you're paying for goods that are priced in dollars and euros are now of null and void and you no longer have access to your money. That's what I mean by property rights being robed. And so if you're China, if you're Japan, if you're Saudi Arabia, if you're anyone who earns lots of dollars, like, well, they did that to Russia, they could do it to me, right? If it's a presidential election year and for whatever reason, like, the color of my skin or my passport is what gets all Americans riled up, my ass is gonna be grass and there goes my property. And so I think that's one reason why if you're, you know, a sovereign entity that's used

• 40:05Speaker 02

  to earn dollars and buy treasuries, you're like, well, hold on a second, maybe I shouldn't be investing my economic surplus in this asset which can be confiscated with no due process at all. And I've seen examples of it most recently with what's happened with the sovereign state of the Russian Federation.

• 40:21Anthony Pompliano?

  So what's interesting about this is, on one hand, I think that nation states can come to the conclusion like Bitcoin is kind of this sanctions hedge. There's a guy at Harvard School of Economics here with this whole paper about like, oh, people might start buying Bitcoin and putting in their treasury because of the ability to kind of resist the sanctions and that's really attractive. On the other hand, you know, I always remind people that like, there's like two guys who tried to price oil in something other than dollars and they're both dead now, right? And so like, there's this element of if you are too big of a country and you do something that could be interpreted as an abrasive movement, then obviously you are subject to the full wrath of the US government, whether directly or indirectly. And so the ETFs-

• 41:00Speaker 02

  Well, I mean, I challenge, that was true, right? Because, you know, Gaddafi and Saddam, right? They tried to do a gold dirham and all sorts of things and, you know, they found out how, what their friendship was worth, as we were gunned down in a hole. But-

• 41:15Speaker 02

  Saudi Arabia recently, yeah, they're doing swaps with Inyuwan. India is buying oil and rubies, right? The global south, the countries with the population growth, with the economic vitality are like, well, fuck this, we're going to start buying stuff on our own currencies so we don't have to hold as many dollars instead of, you know, and so that's already happening. The percentage of oil transactions in non-dollar currencies, I think, was reported like 20% last year or something very high. So, yes, I would agree with you. Back in the, you know, 90s and early 2000s, people were afraid of becoming like Saddam and Gaddafi, but I think that fear is eroded and now people are, well, the empire is declining.

• 41:59Speaker 02

  Let's stop using this currency that is not useful for us in an economic sense.

• 42:04Anthony Pompliano?

  Yeah, what was interesting at the same time that maybe the oil, non-US dollar transaction volume is increasing, the international transaction volume for US dollars is continuing to explode. I think it's like 48% of all international payments are still dollars and that's been increasing in the last couple of years. And so I think people are like, I don't want the shitty currency, right? But I may want like another good major currency is kind of the point. And so whether it's Saudi, whether it's India, et cetera. But I do think that there's this like new, I don't know, a chess piece on the board, which is if I'm a country and I want exposure to Bitcoin's price, but I don't want to buy Bitcoin and then have the US like knocking on my door being like, hey, what are you guys doing with that? Are you thinking about leaving the dollar?

• 42:48Anthony Pompliano?

  Are you thinking about going somewhere else? The ETFs now allow my sovereign wealth fund or other capital pools to get price exposure without actually taking ownership of the Bitcoin. And I do think that the US probably looks at it very differently is if your sovereign wealth fund is, you know, hoarding Bitcoin, taking self custody of it and, you know, I don't know what the threshold is, but at some point you would do so much Bitcoin and take control so much of it that they eventually would view it as some sort of abrasive, you know, kind of positioning towards the dollar? Or do you think that, no, it's overthinking it and just the US is too concerned with its own problems and doesn't really care what these countries are going to do with Bitcoin?

• 43:25Speaker 02

  I don't think Bitcoin affects into the decision making of, you know, what a sovereign country does. I think I think they're more concerned about gold than they are with Bitcoin, right? There's a, I don't know, five or 10,000 year history of gold, you know, in, you know, the, you know, however old these people are, these sovereign wealth funds, they understand gold, gold standard was the name of the game until 1971, right? And so if you're a, so you can see since 2008, the percentage of gold as FX reserves has been growing across the world, especially in China and non-aligned countries, they're buying gold. Will they buy Bitcoin? I don't know, maybe, maybe not.

• 44:07Speaker 02

  There's certainly, if they're really concerned about having a, an asset that is outside the US financial system, they certainly don't be buying a BlackRock Bitcoin ETF, right? That's not to say that they don't want to custody Bitcoin, but I think as a central banker, you understand gold, your country has a history of owning it, the general population understands it. And so I think that if you're going to express that view, and people are expressing that view already, you're going to buy gold and you're not going to buy Bitcoin. Maybe you buy some Bitcoin here and there, but it's not going to be a core thing that you diversify your savings into, I believe. Which is why I own a lot of gold, because I want to be on the same side as of central banks, who are going to depreciate currencies in gold terms as well.

• 44:52Anthony Pompliano?

  So let's take off our intelligent hats now and let's put on our fun hats.

• 44:55Speaker 02

  Let's curb this shit.

• 44:56Anthony Pompliano?

  Yeah, let's fucking go. What, what's, uh, what's Bitcoin going to in the bull market?

• 45:02Speaker 02

  Uh, a million.

• 45:05Anthony Pompliano?

  You think, you think Bitcoin hits a million dollars in this bull market?

• 45:08Speaker 02

  Absolutely. I think people are not, I don't know, I think people have a big enough imaginations right now. Oh, I need to like take some chips off the table. Oh, it went so fast at 70,000, like, no motherfucker, like, why did it go so fast at 70,000? Because a bunch of people now can like click a but, check a box and buy some Bitcoin ETF. Like, there's this whole government issue of like, too much debt. There's elections around the world and what's the message? I'm going to print money and give you stuff. Roto, you know, supporter, whatever. Please support me. Right, that's happening. People understand it. It's visceral. We are entering this phase of inflation and populism. This bull market is just getting started.

• 45:50Speaker 02

  I don't think people have the right imagination about how ridiculous it can get. So, yes, a million dollars is my price target.

• 45:57Anthony Pompliano?

  Are you planning to sell? Do you have a plan to take risk off? Is there a timeline? Is there a price point? How do you think about the Bitcoin that you have today in terms of ever converting it back to dollars? Or just, I'm holding it and I'm going to die with it?

• 46:11Speaker 02

  So, I think this is an intellectual thing I've started to think about is, I don't want to sell Bitcoin for fiat. I want to sell Bitcoin for energy. Right, because at the end of the day, why, why is Bitcoin a good thing? It's because it's pure energy in monetary form. A dollar used to be worth that when it didn't have any other competition. Now there's competition. Gold is very heavy. I have some of it, not as much Bitcoin, but again, same issue. So, if Bitcoin gets to a silly value in energy terms, then I need to sell it and I need to own something, some sort of way to have access to primary energy. Is that, you know, ExxonMobil? Is that, you know, buying a power plant? I don't know.

• 46:52Speaker 02

  I haven't really thought about it that much, but it won't be that I sell Bitcoin for dollars. I'm going to sell Bitcoin for some primary energy source because that's what I'm trading in. That's what I'm trading. If Bitcoin's worth, you know, 500 barrels of oil today and 10,000 tomorrow, well, at some point, this is a little ridiculous. How much oil should a monetary instrument be worth? Maybe I should just own the, own the actual energy itself because I've been able to get it at such a cheap price, relatively speaking. So, that's kind of where my mind is at. And then all these shitcoins I own, I'll sell for Bitcoin.

• 47:28Anthony Pompliano?

  If you sell your Bitcoin and buy a power plant, the headlines, the people will have a field day with you. All right, before we get into shitcoins, let's talk Athena. You mentioned it earlier when we talked about stablecoins. I know you're very bullish on that. What is Athena? And why are you so excited about it?

• 47:42Speaker 02

  So Athena is another stablecoin in the line of coins that have essentially taken this idea of if I combine, say Ethereum and a short perpetual swap, then I have a native yield if the swap has a positive funding rate. And so I'm going to take this, this construct crypto plus derivative hedge, and it's a synthetic dollar, and that's going to back a coin that's going to hopefully retain a one-to-one peg with the US dollar. And so Athena holds staked ETH and short ETH US dollar perp swaps on a number of centralized exchanges. So the reason why I like this idea,

• 48:22Speaker 02

  and I've written about it many times over the years, is that so ETH as an asset has a native yield, it does not coming from outside. It's the protocol itself is paying people to validate, which is great, and it's around 4%, whatever it is. And then because of the deflationary nature of Ethereum as a currency, every block, more ETH is burned than is created, because the network is being used, on a forward basis, the ETH US dollar exchange rate should trade expensive, because the dollar is inflating, ETH is depreciating, there's less ETH around. And so it's a structural reason why there should be a positive yield. This yield should be higher than US treasuries, or some other strategy you could do on sort of a delta neutral basis.

• 49:07Speaker 02

  So packaging that up, putting it in a stablecoin, makes Athena a very good product. And at a fundamental level, the reason why I don't like the physically backed stablecoins like Tether and Circle, is that without the TradFi banking system, Tether and Circle don't exist. So why am I trusting this very important feature of the crypto ecosystem, which is moving a fiat derivative around for payments and for trading? Why am I entrusting the TradFi banks, which I want to destroy and disintermediate, with upkeeping this vital part of the trading ecosystem? It doesn't make any sense. Why don't we trust something like Athena, which is saying, I'm not decentralized, I'm trusting these centralized exchanges to pay out on their derivatives,

• 49:51Speaker 02

  to hold the collateral in a responsible manner, but at the end of the day, I'm trusting crypto To help forward crypto versus trusting banks to help crypto, which doesn't make any sense. So that's why I'm a big supporter of Athena. I'm an advisor, got a bunch of tokens. And I mean, they're kicking ass. I think they just crossed a billion US dollars of circulation. So their number six stablecoin on the list. I think that they could overtake Tether and become the biggest stablecoin within a few years. Because I think that as a crypto ecosystem, if this narrative catches hold of let's support something that is essential to us, but is safe, keep by other counterparties that are in our ecosystem rather than the banks who we want to disintermediate. So I'm super bullish on Athena. They're doing a really good job.

• 50:36Speaker 02

  Obviously, it's not without risk. Nothing is, but I think this is the risk that I'd like to take.

• 50:42Anthony Pompliano?

  What is, uh, let's go through your shitcoin lottery in your portfolio. Uh, what's the number one, your first round draft pick of your shitcoins, uh, that you're most excited?

• 50:51Speaker 02

  So I think that, uh, Pendle is going to be a standout shitcoin. And the reason why I say that is so Pendle is trying to create an interest rate swap market. And if you take a look at derivatives in traditional finance, you know, FX derivatives are big, right? That's what we have now. Perp swaps, Bitcoin dollar, shitcoin versus Bitcoin, blah, blah, blah. Right? Big market, you know, I started in 2013. It's grown massively. You know, spot was a big game back then. Now derivatives trades were the five or six times on a daily basis with the smart markets do. Now, the interest rate market is like orders of magnitude bigger than the FX market. If you think about the largest or the biggest or most traded futures contract in the world is a Eurodollar contract.

• 51:35Speaker 02

  It's not the S and P 500. And so interest rates are essential because it, money is the most essential thing in human civilization because it's how we price our energy and our time. And then what is time worth is very important, especially in a crypto ecosystem. If you want to have a, you know, farm to table use of Bitcoin, Ethereum, or whatever cryptos, we need interest rates to borrow and lend amongst the ecosystem. And so we're starting to see that Pendle is pioneering that. They've created some fun things with ability to separate out a fixed yield and sort of trading the yields on like points allocations for certain protocols. They've created sort of a proto

• 52:15Speaker 02

  yield curve using the stake Athena dollar and different expiries that can fix the yield on sort of essentially a variable rate. They're going to be coming out with their version of a leverage interest rate swap and some of the next versions of Pendle. So I think Pendle could become the largest exchange for derivatives in the entire space, whether centralized or decentralized, if they're really able to take down this interest rate narrative and build a the native yield curves across the ecosystem for all the different Bitcoin, Ethereum, and the other shitcoins. So that's probably my number one pick out of my portfolios and doing very

• 52:58Speaker 02

  well. Obviously, I'm an advisor. I got bags. That's what we do. So yeah, first number one draft pick.

• 53:06Anthony Pompliano?

  All right, let's do two more. What's the bag number two and bag number three you want to talk about?

• 53:12Speaker 02

  Um, let's see, bag number two.

• 53:17Anthony Pompliano?

  You lit up when I said you could talk about your shitcoins. You got so excited. So let's hear them.

• 53:26Speaker 02

  Yeah, so Filecoin, obviously the AI narrative, I think it's it's still it's still going, right? And you're seeing all this energy in sort of the traditional stock markets of all these AI companies valued at obscene prices. Sam Altman wants to raise seven trillion or whatever, whatever number he put in the FT of all this money he's going to raise for his next AI venture. And so I think we're just getting started in this this AI bubble and people are going to start reaching for, okay, well, if this crypto thing's taking off and I can see that AI has validated it because there's all this money going into it. Well, like what AI coins are there around? Filecoins, one of them. Obviously, there's others. I own a Filecoin mining business as well, part of one. So that's

• 54:10Speaker 02

  sort of my pick for the data part. Obviously, AI training models is very data intensive. So I think Filecoin is going to be a rock'em, sock'em robot this this cycle in terms of doing well in the in the portfolio.

• 54:25Anthony Pompliano?

  All right. What's the craziest one you own? Well, actually, you can tell me if you don't want this in the podcast, we can cut this out later. But you and I went to dinner in Miami and we were there with a bunch of very nice, kind of older guys, super successful in the traditional world. And we were kind of joking to each other because they were asking us about crypto stuff. And as soon as you said, the rocks, the Ethereum rocks, I just lost it because you, you had them literally, they had a million questions. What's going on with the rocks? Why is the rocks valuable? Whatever. And so you got anything crazy like that, that you're holding now?

• 55:00Speaker 02

  Not yet, but I think obviously we've made an investment in oil, which is going to be a new wallet for Bitcoin ordinals and BRC 20 and that sort of stuff. That's going to be massive. We're able to bring like internet NFT culture to Bitcoin. It's going to be all sorts of things that are going to proliferate on that chain because it has the most amount of assets. You have all these very, very wealthy people in Bitcoin terms who now can buy a part of this internet meme culture. And so I think that that's going to be a massive ecosystem. Unsure how it's going to play out in terms of like, you know, trading versus lending, borrowing and blah, blah, blah. What, you know, how are the projects going to be successful? What are these projects going to offer in terms of like features?

• 55:42Speaker 02

  Who knows? But I really like the fact that ordinals are digitally scarce at a protocol level versus a lot of the NFTs that you're buying on other chains. It's basically like this digital receipt that points back to some centralized database that's holding an image or a file, whatever it is, right? And so that's why I like the purity of ordinals matched with, we have the richest chain in the world is Bitcoin. So there's lots of people with money who want to spend it on art that speaks to them as sort of a Bitcoin maxi for some of them, I imagine. So I think that ordinals are going to be massive this cycle. And we're going to see some new ways of launching artistic creations directly on the Bitcoin blockchain.

• 56:26Speaker 02

  That's going to be different than what you've seen with punks and, you know, bored apes and all this other stuff that came last cycle. Now, obviously I own apes and punks and all that kind of shit too. That's just going to moon. Maybe one top single is when I know my ether rock is, I don't know, like 50 million bucks or something stupid like that. Then, okay, well, people have gone, gone nuts. They just tried to dump the rock and, you know, do something else.

• 56:49Anthony Pompliano?

  It was, it was hundreds of thousands last, last cycle, right?

• 56:52Speaker 02

  No, I think, I think the top sale was like three million something dollars.

• 56:57Speaker 02

  I think the rocks are gonna go, you know, into the decamillions.

• 57:02Anthony Pompliano?

  Really?

• 57:02Speaker 02

  Of value.

• 57:03Anthony Pompliano?

  You think the ether rocks could be worth 10 plus million dollars?

• 57:06Speaker 02

  Yes.

• 57:08Anthony Pompliano?

  Wow. All right. What do you think about like these like culture coins like uh uh Zen and other ones like that that are basically trying to take things from the existing worlds? They're not like new memes. It's more so uh existing memes. I saw uh the other day I tweeted about the Reddit IPO. I got bombarded with all these people talking about a Reddit coin, which has nothing to do with the company. They basically just realized like if the stock goes up, the coin's gonna go up more. So we created a coin that is the exact same ticker symbol. And so obviously people are like creating these coins that are completely untethered to reality. But it feels like, you know, kind of things have value that people believe have value and people seem to be going towards these like culture type coins.

• 57:50Speaker 02

  Yeah, and I think at a very fundamental level, it's a big fuck you to TradFi. It's like, hey, you've destroyed the dignity of my labor, of my time as a human being by printing all this money and saving these bankrupt banks. And you're telling me that I need to own, you know, a very balanced portfolio and stocks and bonds and oh, fuck you. I'm gonna buy some Dogwith Hat. I'm gonna buy some, you know, coin that has no economic value other than other people think it does. And other people want to say, fuck this fiat shit that I have in my wallet. I'm gonna buy this because I don't believe in the system. And so I think that's at a very fundamental level what this is all an expression of. And why would you buy something that has essentially no fundamental value, even in like a crypto ecosystem sense?

• 58:34Speaker 02

  Well, because you don't value the piece of paper in your in your wallet. Because the government has devalued this thing over and over and over again and rewarded the same motherfuckers who keep bankrupting the system over and over and over again. Well, I'm tired of this. I'm not going to invest in your stock market and your bond market. I'm gonna buy these meme coins. And guess what? Some of the people doing this are getting fucking rich doing it. Better than doing whatever else they were doing before. And so I think it's validating. And obviously that's a function of the bull market. But again, I think there's this anger that's at the bottom of it of like, why have you destroyed what it means to be a productive member of society by printing all this money? Here's a way that I can express my frustration.

• 59:13Anthony Pompliano?

  I also think there's this element of like entertainment value like the Zencoin thing. I know the guy who started it and a couple of other guys I know were like buying it. They were talking about a bunch. I was like, I bought some, right? Like, let's see what happens because I just want to like be part of it. And it's kind of like, I used to tell people all the time, um, when your friend starts a company, you should always invest, even if it's a small amount of money. Because if it works, then you celebrate together. And if it doesn't work, you suffer together, right? But like, you're kind of in it with your friend. And it does feel like there's some of this of just like, well, all my other friends are doing it. And so I want to like have fun with them. But rather than like, I don't know, go to the movies, like do normal people shit. Like you just buy some shit coin, get on the internet and like, you know, shill it to all your other friends or something. I don't know. It's a very dystopian, but also it's very clear what's happening in the, in the.

• 59:59Speaker 02

  Yeah, but it's very human at the end of the day. Like, why, why do we buy like leather goods with letters on them, right? It's the same dumb shit, right? Like, why is that worth $5,000? And why do people, you know, think that they're the hot shit just because they, you know, have a shirt with some alphabets on it, right? It's the same thing. It's just part of being human. And now we're moving that from the physical space to the online space. And obviously it's correlated with how wealthy you believe that you are. So as the market keeps going up, we're going to keep seeing more of these because people want to diversify. And they're like, well, okay, well, I made this much money trading Bitcoin ETH. Maybe I'll just take a flyer on whatever it is this new thing is because I think other people are going to do the same as me.

• 1:00:40Anthony Pompliano?

  Yeah. Well, and also I think that the asymmetry and I asymmetry may even be an intelligent term for the ridiculousness. Like I think it was Avi Feldman tweeted out and he was like, you know, I put a thousand dollars in some shit coin. I came back a couple of months later, I got 150 grand. Like you just, people see that, like, that's what they do. They're going to go take 100 bucks. I'm going to go spread it out, you know? They're going to take a thousand dollars, put a hundred dollars in 10 different projects. Hope they come back in a couple of months, it's up 150x, right? It literally is no different than buying a lottery ticket or anything else. And for what is a relatively small amount of money for people like, kind of why not? I think is the conclusion people make.

• 1:01:15Speaker 02

  Yeah. And what's, what's the other alternative? Stick it in the bank and make 5% when the economy is growing at six or like seven? I mean, might as well take a flyer on something.

• 1:01:25Anthony Pompliano?

  Yeah. What is the actual portfolio construction you have? So like, maybe we'll separate it in two different ways. Like, what is the traditional world percentage versus like crypto world? And then how do you think about what assets you're either allocated to now or considering allocating to?

• 1:01:40Speaker 02

  Yeah, so obviously, you know, you should hedge everything. There's no such thing as an absolute on anything in life.

• 1:01:48Speaker 02

  And so like, do I hold treasury bills? Fuck, yeah, I've got a lot of treasury bills. They pay my rent, pay my credit card bill.

• 1:01:57Speaker 02

  Do I have stocks? I own two stocks. I own CCJ Kamiko, which is a uranium miner. I believe that uranium is nuclear is the future. If you want to, you know, provide energy at a low cost for more people around the world. And I own a punt of a stock, Fannie Mae, because I believe that the conservatorship of the

• 1:02:19Speaker 02

  GSC is going to end with either Trump or Biden. Doesn't really matter which. So just a CEO that I'm taking. So yeah, treasuries, a few stocks, that's sort of on the traditional side. I've got vaults full of gold because again, I want to own the thing that the central banks will depreciate via currencies with. That's what they've done most of the time in the past. Even the US government has depreciated the dollar against gold multiple times. So I want to trade on the same side as central banks. And then obviously I own a lot of crypto, well more than any of that other stuff. But the volatility, you know, my Delta trades on my portfolio is insane.

• 1:02:57Speaker 02

  Not that I care, but again.

• 1:02:59Anthony Pompliano?

  What was the breakdown in crypto? Like how much, what percentage Bitcoin versus like maybe ETH versus like the long tail stuff?

• 1:03:07Speaker 02

  I'd probably say Bitcoin is like 90% ETH is five. And then, you know, Maelstrom has a lot of early stage investments, right? We're obviously we're up a lot over what we bought them at during the bear market. But again, imagination, this bull market has not even started yet. We're going for 1000 X's, 10,000 X's on, on some of the stuff that we own. And so that portfolio could be worth a lot of money in 25 and 26, if things play off the way I think they are. So that, that mix could change considerably if Maelstrom and the guys there are doing their jobs correctly. Cause at the end of the day, my, my.

• 1:03:49Speaker 02

  Challenge for them is, well, why didn't I just buy Bitcoin and ETH? You guys need to outperform those assets. So that's what you do. And so down to date, we are doing that. But I think we can do, we can do more if we continue holding throughout the cycle. Some of the stuff that we were early in, starting in like 2022.

• 1:04:09Anthony Pompliano?

  And then one of the things we haven't talked about Solana, which obviously had an incredible year last year. What are your thoughts on Solana versus ETH and kind of what Solana will do?

• 1:04:19Speaker 02

  So I don't think anything's going to beat ETH. I'm a, I guess ETH maxi on sort of the usefulness of the decentralized computer. Maybe that's because ETH has the most dedicated developer community. And then if you think about the primitives for DeFi and sort of all this decentralized, the DApps. The first version is always on Ethereum. It's not on Solana or on AVAX or on Cardano or any of the other blocks. It starts on Ethereum. Maybe there's some reasons for like network load or gas fees or whatever. Then they move over to Solana or one of these other chains. But you're not seeing a new primitive emerge on non ETH chains first.

• 1:04:57Speaker 02

  So that's, if I start seeing that happen to me, I'll have to change my mind on my maximalist position on ETH. Does that mean I don't trade in these other L1s? Fuck no, I'll trade all this shit, right? I think that Solana has a great community, very energized. I don't know who said this, but it was a, you know, great point. Solana feels like it's a bunch of younger people who miss the buying ETH at like, you know, 10 bucks or a hundred dollars. But now they see Solana and like, okay, I can buy it at five, six, seven, you know, down the like last year or even at 140 today, right? You look at, well, Solana is a better version of ETH, you know? I disagree, but that's what they believe. And so if Solana is a better version of ETH, then surely it should trade to 5, 10,000 in this cycle.

• 1:05:40Speaker 02

  So buying it at 140 is a great asymmetric risk profile, right? And so I think that's the mentality and to Solana's credit, the UX and UI on the apps built on top of it is fucking mind blowing. It's better than anything in the ecosystem. It's easy to use. And so that's why I think that Solana is going to be a very good performer during the cycle.

• 1:06:05Anthony Pompliano?

  And when you go and look at investments, how much of it is like fundamental analysis versus like, what's the meme? Buy or sell the meme?

• 1:06:17Speaker 02

  It's first it's cycle. So right now, when we really started investing, it was depths of the bear market. And I was like, okay, we need to allocate now, right? Projects are desperate, valuations are down, lockup periods are short. This is when we deploy capital. Now that we're in starting the bull market, you're seeing three product, you know, 100 plus million dollar FDB

• 1:06:45Speaker 02

  projects, right? I don't want to invest money now because I'm not going to get my coins until 27, 28, right? Fully unlocked, which will be after the cycle is finished. So it's first cycle. So if I'm right in the right part of the cycle, then it's okay. What is, what do I think is going to be the next narrative or useful product in the next cycle? So obviously, we were big on E3 staking. We have a number of projects that are focused on that and liquid staking derivatives, that sort of thing. And so I think that the cycle, the cycle is the most important. And the example that I like to give people is Amazon, you could have bought it in

• 1:07:25Speaker 02

  2001 or whatever was 2000 at the time. There was like $96. It went down 95% in the next like two, three, two years. And now, obviously, on both whether you bought in 2000 or bought it in, you know, 2003, you're up massive. But how many people can hold something, be down 95%? Hold it for another, you know, almost 30 years, right? Very few people have that sort of ability to do that with a portfolio, because most of the time, it's down 95% because it's going to zero, not because it's going to go up another like 10,000%. So price is everything. I don't like investing when everyone else is investing. So now all the VC funds are raising money,

• 1:08:10Speaker 02

  you know, throwing money at projects. This is the worst time to be allocating to, to the space, because the only you're not going to get liquidity until after the cycle, you're paying a very, very high price. If I really like something, then fuck it. I'll just buy it when the token launches. I won't get the the super cheap price that some other early investor got, but I also can sell it whenever I want. And so on a risk adjusted basis, you know, we're going to be shifting more of our focus to what's liquid. What do we think is a good project?

• 1:08:42Speaker 02

  Let's buy it, risk manage it, and then be able to sell it when we think that the cycle is topped. And then get back into the business of writing, going into term sheet things in after, you know, the market's down 95% and everyone's not trading crypto anymore. So I think it all starts with the cycle first. And obviously, I don't get into the details on sort of the individual investments. I take a cycle hat and I'm just challenging an outshot on the other guys like, look, how are you getting out of this position? None of you get paid unless we sell anything. So they're very incentivized that I need to have an exit strategy for every investment that I'm in. Because, you know, as in a selfish perspective, I don't make any money unless we're able to sell it at a profit. Whereas other funds, which is, you know, LPs and all this kind of shit, right? It's different sort of model.

• 1:09:28Anthony Pompliano?

  Do you have like a framework? One of the things I hear a lot of people talking about, whether it was Bitcoin early on or now, you know, many of these meme coins, etc. Somebody will buy something that'll go up 10x and they're like, should I hold? Should I sell? I saw somebody else went up 10,000x. You know, if I double my money in the traditional system, a lot of guys will like rebalance or, you know, take half off and just have house money. Like, how do you think about kind of getting out of positions or selling? Especially when you're up and it seems like the price is continuing to move upwards?

• 1:09:57Speaker 02

  Well, I think about it from a macro says, do I believe that the cycle is turning and crypto is no longer a thing anymore? Right? So I, in 2021, you know, I didn't call the top exactly, but I came this, I remember, you know, reading my regular macro stuff. And I came this relationship, well, hold on, like, credit creation is going down. Go for them too is trending downwards. Why am I holding all this stuff? So I dumped everything except for Bitcoin and ETH, because I was perfectly happy to hold it through now down 90, 75% unrealized through the cycle. But all the other shit coins are on, I can dump them all, right? So that is the situation I'm looking for. Am I going to, are we going to tie in the top on every single one of these tokens?

• 1:10:42Speaker 02

  No, but I'm perfectly happy to let them run because, you know, a rising tide lifts all boats. And so if it's a quality project, okay, maybe I don't top tick. The largest market cap that it gets to. But if I have a general feeling that the time is now to rotate out of the riskier cryptos, because I think that the macro environment has changed, then then I guess take all the chips off the table, put it back into Bitcoin. And then again, as I was saying earlier, I need to figure out that sort of theoretical, like, what is the piece of energy infrastructure that I'm going to buy with all this Bitcoin that I have?

• 1:11:17Anthony Pompliano?

  Last question for you. What's the best investment that you've ever made? Like, tell us the story behind it.

• 1:11:23Speaker 02

  The best investment that I ever made?

• 1:11:25Anthony Pompliano?

  Yeah, I know you've got some crazy shit.

• 1:11:28Speaker 02

  Well, I'm gonna, I'm gonna maybe move it to more philosophical level. So it's my, my time, right?

• 1:11:36Anthony Pompliano?

  Don't cop out. Don't, don't, don't cop out.

• 1:11:37Speaker 02

  No, I'm not covering out. I'm gonna get to that. I'm gonna get to the investment. So, right? So I lost my job in 2013, working for a bank. And I was very fortunate at the time, being a, you know, young, late twenties person, no wife, no kids, no, no one that I had to take care of with my, you know, monthly or yearly salary. So it was the best investment I made. I invested my free time into crypto and started BitMx, right? I could have obviously gone back to TradFi and got another job. You know, I was broke as fuck for a long time. Definitely an investment, because, you know, you see your friends out there making, you know, a few hundred grand, millions of dollars, whatever it was, at the banks.

• 1:12:21Speaker 02

  And your ass is not going to the bar buying drinks and, you know, just do what you gotta do, right? And so that was the best investment that I ever made, which is believing in myself and had this vision for creating BitMx with my other co-founders and being willing to be very poor for a while to make it happen. Because there was another, there was another option. It wasn't like I had to do that. So I think that was the best investment that I ever made. And obviously, that's allowed me to do all the other things that I've been able to do post that fact. So that essay is, you know, being able to be broken, you know, be okay with it. That was the best investment that I ever made.

• 1:12:57Anthony Pompliano?

  What's interesting about it is it probably also created the most wealth for you, right? Like, like in a weird, in a weird way.

• 1:13:06Anthony Pompliano?

  Being an investor, like an actual investor where you're allocating capital is great. But as an entrepreneur, if you're right, like really right one time, you'll create way more wealth doing that than most investors. And so it is this weird thing of like, um, what is the thing that you've done that's created the most wealth? It's not a thing where you put money. It was the time, it was the effort, like all these things. And so it's not just like, hey, it like got me out of the system. It got me into this other world, but also like just on a pure like dollars invested versus return. It was by far the best investment.

• 1:13:40Speaker 02

  Yeah, I mean, look at Lauren Warren Buffett. He's made the most money he's ever made. And he's in his, what 90s or eight, like, yeah, it takes a long time. It's not like you just wake up and, okay, great. I'm going to like invest in undervalued companies and all of a sudden I'm going to be Berkshire Hathaway making a hundred billion dollars in free cash flow a year. No, like that motherfucker works hard for decades to build up the capital to achieve the kind of returns that he had because he was a professional investor. He wasn't a builder of businesses versus someone like Zuckerberg, right? Who by the time he was, I don't know, 35 or whatever was worth 20 or 30 billion dollars, right? By creating a company. Now, obviously it's, both are hard. You know, the percentage success rate is very low for, for, for both. But again, it's, it's one of those things, right?

• 1:14:24Speaker 02

  Building something you can create wealth faster than being an investor. You get to the same point, eventually it depends on the journey that you want to have.

• 1:14:32Anthony Pompliano?

  That, uh, that makes sense. We're, uh, we're creating people to find your writing. I know that, uh, we get more people over there to read that.

• 1:14:39Speaker 02

  Uh, so Crypto Hayes on Substack or on Medium, you can find it.

• 1:14:45Anthony Pompliano?

  All right, we'll do it again in the future, my friend.

• 1:14:47Speaker 02

  Awesome. See you, man.