#698 The Future Of Crypto Banking w/ Bill Barhydt

Bill Barhydt is the CEO of Abra, where you can buy, trade, borrow and invest on crypto. https://www.abra.com/ In this conversation, we discuss macro economics, the inflation lie, reaction to the Bitcoin Futures ETF, and Institutional Investors coming into Bitcoin.

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. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Bill Barhite is the founder of Abra, a simple to use cryptocurrency investment platform. After working for the CIA, NASA, and Goldman Sachs, Bill decided to join Netscape, working on telecom and internet banking deals mostly in Europe. After the AOL acquisition of Netscape, Bill founded Webcentric. The technology for Webcentric exists today in SAP's online portal services. In this conversation, we discussed everything from macroeconomics to monetary policy, to the looming issue for fixed income managers and pension funds. We also discussed Bitcoin, Bill's deep belief in the asset serving as a global store of

• 0:46Anthony Pompliano?

  value, and what the latest is on Abra. I really enjoyed this conversation with Bill, and I hope you do as well. Let's get into the episode, and I hope you guys enjoy this one.

• 0:55Speaker 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.

• 1:18Anthony Pompliano?

  We have Bill here with us from Abra. How are you?

• 1:21Speaker 02

  I'm good, man. How are you?

• 1:22Anthony Pompliano?

  I'm excited.

• 1:23Speaker 02

  Yeah. What a week, what a month, what a summer, what a fall.

• 1:27Anthony Pompliano?

  Let's start with this. I was telling my brothers, a very interesting background that I don't think a lot of people don't know. Explain what you did before Abra.

• 1:34Speaker 02

  Well, I'm old in crypto years. So I've been around the space for about 30 years. By the space, I mean crypto when it was cryptography. I was at Netscape after the CIA, and a stint at Goldman, where I worked in fixed income, which we'll talk about this morning. And yeah, for the last 15 years, I've basically been working on mobile banking, obviously Bitcoin, crypto, and now Abra for the last six years.

• 1:58Anthony Pompliano?

  Okay, and then Abra is what? How do you describe it?

• 2:01Speaker 02

  I describe Abra as a crypto banking service, right? We let you buy, sell, trade about 100 different cryptocurrencies. We have a high yield service that lets you earn anywhere from Four to eight percent on crypto. We just announced a new rewards token, which I'll talk about more. We run a lending service for both retail, which is booming now, and I think that's going to be the future of what I call crypto banking. And also an institutional lending service, which is all part of how we generate the yield that consumers make on the crypto holdings.

• 2:30Anthony Pompliano?

  All right. I want to talk about the macro environment because it's absolutely bonkers what's happening right now. We've got five percent plus CPI inflation. We've got four percent core inflation. We have about four and a half to five percent of unemployment. We have 11 million open jobs.

• 2:46Speaker 02

  That's what they admit to. You don't have five percent CPI.

• 2:49Anthony Pompliano?

  Okay, explain.

• 2:50Speaker 02

  Bunch of bullshit.

• 2:51Anthony Pompliano?

  Okay.

• 2:52Speaker 02

  I mean, I've been saying this for, I mean, how long have you and I have talked about this? I've been saying this for a couple of years now. Even before COVID, the inflation numbers were a bunch of nonsense. And now it's, I'm guessing, based upon all the data that I see, both anecdotal and literal charts and everything else. When you look at specifics, the only thing that's dragging it down is productivity in tech.

• 3:14Anthony Pompliano?

  Okay, explain what you think it is.

• 3:16Speaker 02

  I think in real world terms, inflation is well over 10% right now. Okay. I'll get into like just anecdotes on housing, myself having been outbid by like six homes in the last six months and finally just overpaid like an insane amount of money just to get a house. Okay. I, the reason that I think that it's not even higher is because there's a counterbalance on, on tech growth, which is exponential and has a, you know, a counterbalance in terms of the increases in productivity you get. But it's not enough right now to deal with the staples that are going up in price, the home prices that are going up. Just, just the lack of workers. You can see people are not willing to work for $12 an hour anymore.

• 3:57Anthony Pompliano?

  Correct. McDonald's is now paying $21 an hour, I saw. They're paying $21 an hour just to get somebody to come in, literally be the cashier, wash dishes, run the fry machine, or try to fix the ice cream machine.

• 4:09Speaker 02

  Try, try getting a home remodel done today. Try getting the basics, the wood, the, you know, the materials, the workers. I mean, and compare it to what it would have cost two, three years ago. I mean, people are anecdotally saying, we're literally talking 50, 60% more for the same remodel as two to three years ago. Right? Just because, you know. Get in line, first of all, right? The workers are unavailable and the materials are either unavailable or the prices have gone through the roof. Food, I'm, I go shopping.

• 4:42Anthony Pompliano?

  Unreal.

• 4:42Speaker 02

  It's unreal, right? So I don't know how they do this calculation, if they just literally pull it out of their ass or decide arbitrarily what to take off the list. But like I said, the only reason that I think it's not being reported as 10 plus percent is the counterbalance in tech. But I, I, I don't think that they're being intellectually honest at all with the numbers that you're seeing.

• 5:02Anthony Pompliano?

  So you're on the best business show and the best business show, you might not know this, has the best research team. And one day we went and we broke down the CPI rent index and how they calculate it.

• 5:11Speaker 02

  Yeah.

• 5:12Anthony Pompliano?

  It literally on a monthly basis, they survey, it comes out to like 10,000 homes and they're in predetermined areas that are determined by, what was the 1990 census? Or something is where they've decided to count from.

• 5:23Speaker 02

  Yeah.

• 5:24Anthony Pompliano?

  And the current CPI rent index, when we did the analysis like a month ago, is under 2% increase, but Zillow is almost 10% and apartments.com was 14%. All right. And then you say, well, how does Zillow calculate this? Like, oh, we have a hundred million data points that we look at in real time.

• 5:40Speaker 02

  And I would say one thing too, is when you talk to like individual business, business owners, the responses are completely different, right? So I was talking to a buddy of mine, uh, who John knows also, and he runs a meat distributing, packaging and distribution company. So if you go to the grocery store and you see basically meat that looks like they made it in the back, that's what they do and they deliver it to the stores. He said, not only can they not, they're looking to hire like 50 workers, can't find anyone to do it, right? For the amount that they were paying before. And then he says that when they aggregate everything together, their inflation percentage for their business and the goods that they're buying is 20%. So just completely different than five.

• 6:12Anthony Pompliano?

  Uh, the shout, shout out real quick. Uh, there's somebody here who owns two restaurants, Tocology and Cantina, which he's going to be excited that we're talking about it. And we, we were recently eating there and, and he, uh, yeah, and he came to, uh, say hi to us. And while we were talking to him, I just asked him, I said, hey, what's going on? And he was like, can't find any workers, right? There, anyone who wants to come, he's like, I offer them, you know, $10 to wash dishes. He's like, we'll do it for 16, right? He's just like, this is nuts.

• 6:37Speaker 02

  Yeah.

• 6:37Anthony Pompliano?

  And then steak up 100%.

• 6:40Speaker 02

  Wow.

• 6:41Anthony Pompliano?

  Ray, he's like, by the way, like literally, he's like, what am I supposed to do?

• 6:43Speaker 02

  I forget how long he said he had been doing it. I think it was, you know, 10, 20 years or something like that. And he said it was the first time in his career that he's had to hire an outside agency to find workers for his business.

• 6:52Anthony Pompliano?

  Yes.

• 6:52Speaker 02

  Which is crazy. Think about the problem that the government has created for themselves. I started using the word stagflation months ago when everybody said the economy was about to boom. I actually think the economy is about to retract. And the problem is, is that with rising prices, for this reason, they can't raise rates. Mm hmm. Right? So they've put themselves into a corner right now where fixed income is just, is already worthless. And, and I don't know if there's degrees of worthless, but if it could become more worthless, it's about to become more worthless. And I just tweeted this out based on what you were saying earlier. It's not a Bitcoin right now. To me, the narrative is wrong. It's not about replacing gold. It's about replacing the hundred trillion dollars of fixed income in portfolios that is completely worthless. Right?

• 7:35Anthony Pompliano?

  And explain this to people because people don't understand. If they're not in the investment world, they don't understand what that hundred trillion dollars of fixed income is like. Who has that money? And what are they trying to accomplish by allocating it to fix?

• 7:44Speaker 02

  The mass, the biggest part of it is obviously US debt, but, but the 130 plus trillion represents a global debt footprint, whether it's corporate debt, individual debt, mortgages rolled into bonds, uh, you know, federal debt for multiple countries, European debt. Uh, but in the aggregate, it's over a hundred trillion dollars and that debt is effectively, in my opinion, worthless. Okay? Uh, and, and at some point, uh, we're all just going to mentally write it off. I don't know what that actually translates into in terms of depression, war. And it worries me because Dalio has talked about this in terms of being in these late, late stage debt cycles. And traditionally those have ended in war, which is obviously not what we want. But what we have now that we didn't have last time is Bitcoin, right?

• 8:24Speaker 02

  And this massive movement towards decentralization, which I think could be this planet's saving grace versus this worthless debt that we're all burdened with right now in our portfolios.

• 8:33Anthony Pompliano?

  So we now have a couple of data points on this, right? So we have the Houston firefighters are coming out today. So they put $25 million into Bitcoin and Ether, uh, which on average, we were just talking about the average public pension funds go out 50% into fixed income type assets. PIMCO, one of the world's most famous, largest 2.2 trillion dollar. Asset manager that specializes in fixed income now saying that they're going to start getting into cryptocurrencies in general. I think right now they own equities that give them exposure, but now they're actually going to start buying and trading in the actual assets themselves. Is this just like the crack in the wall? And when you get one or two public pensions, putting it directly on their balance sheet, you get a PIMCO, they start playing. And then all of a sudden here comes this massive tsunami of money.

• 9:13Speaker 02

  The dam analogy with a couple of small cracks is probably the best one. And, and the cracks are basically like scratches. The, the, the dam is made of iron. We've just started scratching it with a nail and, and it, when it opens and, and the floodgates are, are it's, it's you can't, there's no going back. Right? The dam is broke forever. And I think, you know, late last year, people thought that institutional money was coming into Bitcoin. I would posit that wasn't really true to the extent people believed. I actually believe it was mostly high net worth money, family offices and a lot of futures and, and, and basically playing the arbitrage that was driving the price, which is fine.

• 9:48Speaker 02

  Now, because so much money has come off of exchanges, we are getting institutional interest because with a $2 trillion asset class, a lot of these institutions can look at Bitcoin and they couldn't before because it was simply too small. I mean, if BlackRock wanted to basically put 10% of assets in Bitcoin, that it's, it's not possible. Even today, it's not possible.

• 10:06Anthony Pompliano?

  It's the only asset in the world that as it gets bigger, it actually becomes more attractive to these investors.

• 10:11Speaker 02

  They're not interested, I mean, they're not interested in a 300% per year return. They're interested in principal preservation and a reasonable, you know, alpha versus the market that they can show that they're adding value somehow to justify ridiculous salaries and other comp, you know, what that they have. Right? That's it. And that is fine, right? But Bitcoin now represents, right? A way to get around the 40% of these portfolios that is going to effectively show no return. There's going to be a blip because they're going to try to basically do quantitative easing 76,000 and squeeze a little bit more out of, out of the bond markets. And the government will keep buying as it has been, but, but effectively it's, it's more lipstick on a dead pig.

• 10:51Anthony Pompliano?

  Yeah. So when, when they start to come into the market, how do you think that they're going to actually play this? We see, you know, PIMCO is just one of many fixed income asset managers. Okay, let's buy some equities that give us a Direct exposure, they've been able to do that. Now we've got this Bitcoin futures ETF. Eventually, I'm assuming we'll get a Bitcoin spot ETF. I can go buy the assets themselves. I could allocate to a manager and they can go do it. Like, how do you think about their entry point into the market? And then what is the impact or the pros and cons of each one of those?

• 11:16Speaker 02

  Yeah, it's a great question. Well, first of all, I'm very disappointed. I mean, look, as somebody who is irresponsibly long Bitcoin and has most of his net worth in Bitcoin and Abra's stock, anything that promotes Bitcoin, I'm happy about. But, you know, the government is, the federal government, I won't pick on the states because some of them are getting it right. The federal government is batting a thousand when it comes to this stuff. They get it wrong every fucking time. And to create a futures-based ETF as the first product, I'm sorry, it's just so dumb because the average retail investor has no idea what they're buying. If you explain to them like, okay, do you know what contango means in terms of what's happening? Their hedge will spin.

• 11:53Anthony Pompliano?

  And these are the people that just They think it's a dance move.

• 11:54Speaker 02

  Right, it's a dance move, exactly. And they just put over a billion dollars in this in 36 hours. It makes no sense, right? But that's the overlords telling us that they're going to protect us from ourselves, right? As opposed to actually creating a spot product where you can actually audit the custody and send in the IRS to do their BSA audits and whatever it is that they do to protect retail investors and create a damn spot. And I actually don't think we're going to get a spot ETF anytime soon because I think they still believe they're going to protect us from ourselves, which makes no sense. Okay, so put that aside. Institutions that want to invest in Bitcoin don't need the securities markets to do it today.

• 12:33Anthony Pompliano?

  Correct.

• 12:33Speaker 02

  And they're probably not going to because of the inefficiencies and the fees associated with it, right? No large institution is going to pay 2% to grayscale for custoding Bitcoin.

• 12:45Anthony Pompliano?

  Most of the inflows to grayscale, I think, and this is a testament to the product that they built, was because there was no redemptions, there was the premium, and so people were arming the premium. And then once that flipped, that's where then all of a sudden people said, wait a second, this might not be the best way to get exposure from this.

• 12:58Speaker 02

  Yeah, and that was a big part of the run-up last year. Just, you know, intellectual honesty, right? I mean, that was definitely part of what was going on. But there are

• 13:05Anthony Pompliano?

  Thank you, Barry.

• 13:05Speaker 02

  Yeah, for sure. You know, full disclosure, he's one of my first investors. Love Barry, great guy, great product. Very smart, but it's not a good institutional product, right? I mean, there are very simple ways through prime brokers now to get exposure. If you look at what, you know, Sailor did, MicroStrategy, I mean, they don't disclose it until afterwards because they don't want to drive the price up because they want to buy at the lowest price possible. But they're just spreading the orders around prime brokers, which is exactly what Tesla would do. And all of these institutions are literally, they actually publish, not, not like, not a figurative playbook. They literally publish the playbook on how to do it. So now these institutions know exactly which prime brokers to go to. They can also work with companies like Abra and BlockFi and others to actually borrow against those holdings now,

• 13:49Speaker 02

  which is that's, I think that's becoming the mantra of how you replace fixed income with Bitcoin. Hold the appreciating asset, borrow the shitcoin depreciating asset and run your business that way. That's the future of fixed income. Now, that's a 10, 15 year transition that's just starting this year.

• 14:07Anthony Pompliano?

  Yep.

• 14:07Speaker 02

  Right? The idea of what we're talking about would have been impossible years ago. The asset wasn't worth enough to have any meaningful borrow.

• 14:14Anthony Pompliano?

  How do you think about these people coming into the market with trillions of dollars? And Bitcoin today, sitting at, you know, near an all time high. Is this something where it has a short term impact or is the long term play?

• 14:25Speaker 02

  Well, I still think we get those kind of, the volatility via futures markets that the retail investors mostly don't understand. Meaning if there's so little Bitcoin on exchanges that everybody talks about supply shocks. Will comes on, talks about supply shocks. Why the hell does the price go down 20% on occasion, right? Why doesn't it just keep going up in a straight line? Well, you have this tension between, you know, overbought futures and liquidations that happen. And the fact that, you know, SPOT basically has a supply shock, a permanent supply shock now, right? I think what's going to happen is, is as the price and the market cat goes up, futures ability to have a, a short term, big impact on, on pullbacks is going to get diminished. And then you're going to basically see, uh, you know, the price just go up, up, up, up, up to a point

• 15:09Speaker 02

  where even stock to flow and other kind of on chain economic models don't really do much anymore. And, and that's when the floodgates are really opened because it becomes a, a negative. Negative feedback loop where institutions are now going to be motivated to buy because you're going to have a $4 trillion asset, a $5 trillion asset. And all those other metrics are going to go out the window. Futures won't matter anymore. You know, then it'll be about macroeconomic black swan events. You know, are we going to, is the United States going to war with China? That will drive pull down, pullbacks at that point, when it really does start to replace fixed income. And I think we're several years away from that happening.

• 15:47Anthony Pompliano?

  How high can Bitcoin's price go?

• 15:49Speaker 02

  Well, if it becomes the collateral for the future of fixed income. I mean, in today's dollars, that's 100 trillion. But at that point, I don't know if the measurement in dollars matters anymore. We would measure Bitcoin in Bitcoin, right? Meaning this item costs this many sats, right? At that point, who cares what a dollar is worth? Now, business may still use the dollar. Like, I think Michael Sale and I, we've talked about this, he and I, a few times. I think we disagree a little on this. He thinks the dollar is going to be around forever. I, I'm not so sure, right? But, you know, at some point, you certainly can see it becoming the collateral for all of these debt obligations, which puts it in today's terms at well over $100 trillion.

• 16:32Anthony Pompliano?

  So that would put Bitcoin, no public math, but about $5 million or more per Bitcoin.

• 16:37Speaker 02

  Yeah, you get to the point where it's like on par, sats are on par with pennies and dollars, right? Which is a couple of orders of magnitude from where we are now.

• 16:46Anthony Pompliano?

  So basically, you're talking about if Bitcoin becomes the collateral for the fixed income market, everyone takes their fixed income and says, hey, this is all trash. I'm going to go and I'm going to move to this new asset. When they do that, if we get to 100 trillion or so that comes into the market, we're four and a half, five million dollar Bitcoin price. You think that's like a next five year thing or that's like a 15?

• 17:05Speaker 02

  That's a 15 year thing. It'll certainly replace gold in market cap long before then. But that's not the big play. That's, that's not the measuring or yardstick that matters to me personally, right? Because to me, it's about the future of the internet, having money for the internet first and foremost. And we're there now, right? Lightning is working, you know, and if you look at other crypto models, stable coins are working. Layer twos are working across the board. We'll see if they scale quickly or if it takes a few years, but the software engineers will figure it out. And then ultimately, it's about dealing with this this late stage debt cycle and how we, you know, China is worrying me right now. Right. And so how do we, well, I mean, if you look at the moves that they're

• 17:48Speaker 02

  making in terms of, you know, just pulling in capitalism, you know, looking at how to manage resources, because I think that that the planners, the people who plan ahead there believe that we're about to have a massive resource supply shock on this planet, and they're preparing for a fight. I really believe that they think that the worst case scenario is a fight over global resources. And if you look at the investments they're making in Africa and other places, we're asleep at the wheel, totally asleep at the wheel, the US, Europe, nobody gets it. Right. Everybody's fat and happy right now and not paying attention to the big picture. And I hope that this global movement towards decentralization that we're in the middle of saves us, but it's not guaranteed. Right?

• 18:27Anthony Pompliano?

  When you think about those investments, do we think that China's ban on mining is pushing, let's call it everyday citizens and kind of retail investors in China, pushing them out of a market where there's freedom, technology, there's censorship resistance, there's kind of an immutable public ledger, etc. But actually, the politicians are just sitting there and they hold a bunch of Bitcoin as well?

• 18:46Speaker 02

  I think they look at Bitcoin like a company in that regard, and they've banned Twitter, they banned Google. As a matter of fact, it's the best proxy probably over the last 20 years as to where to make your bets. Right? Just look at what China bans, make an investment in it, you will have the best returns. There should be a fund, it's called the China Ban Me Fund. And you should put all of your money in that fund. It's probably close to Arc minus Tesla, right? And it's just a price go up fund, because, you know, there's a reason they can't control it. If you're in a totalitarian society and you can't control something, well, you have a problem. Because what you're all about is control. Yeah. So it's obvious what the problem is. Right? And so Bitcoin represents

• 19:29Speaker 02

  the opposite of what a totalitarian system stands for. And that includes, by the way, the overreach in control in a democratic society. Right? Because we had a pendulum swing. One way, post World War II, up until seventy one, seventy two, right, when we came off the gold standard, which was peak centralization, right? And the pendulum is now slowly swinging the other way. And the overlords don't know how to deal with it.

• 19:54Anthony Pompliano?

  Yeah.

• 19:54Speaker 02

  The movement towards decentralization is orthogonal to how a federal regulator thinks about anything. Because their goal ultimately is to is perceived to protect the consumer from themselves.

• 20:05Anthony Pompliano?

  Do you think they actually believe that they're protecting people? Or do you think they're?

• 20:08Speaker 02

  Hundred percent they do. I don't think these are. Look, I have I have people. I talk to people at all these regulators all the time. They're not evil people.

• 20:15Anthony Pompliano?

  Yeah, I agree with that.

• 20:16Speaker 02

  Yeah, and and I think that they do genuinely believe that they're there to do good and that people need to be protected. Like, I have friends that I disagree with at the CFPB, Consumer Financial Protection Bureau. It's it's a bunch of nonsense to me. That doesn't mean that they're dumb people. I I have friends there that, you know, law degrees from Harvard, math degrees from Harvard. You know, these are not stupid people. They they just see the world differently than I do, right? And I'm guessing the way most Bitcoiners do.

• 20:40Anthony Pompliano?

  If you were the President of the United States, what would you do? How would you just go and buy a bunch of Bitcoin and put it on the balance sheet? Like, what would you do?

• 20:46Speaker 02

  Well, I would certainly be putting a bunch of assets on the balance sheet in Bitcoin. And and I would try to figure out how to replace the Fed with something that actually works long term, given where we are in this debt cycle. I would be very focused on that. And and it would probably make me very unpopular with both parties. Because ultimately, when it comes to money, there's very little difference between the two parties, right? It's it's more about social issues and other things and centralization versus decentralization. That is is the big difference. But that's that's what I would do first and foremost. Then I would look at tech policies that embrace exponentially growing tech and and reestablish the US's footprint as the global leader in anything that represents exponential change,

• 21:29Speaker 02

  whether it's robotics, crypto, Bitcoin and banking, you know, AR, VR, healthcare, you know, genomics, all of it. I would make the US the the tax, the best tax deal hub for anything related to exponential tech. And the problem is, is you have all these old people that don't get it.

• 21:48Anthony Pompliano?

  Yeah.

• 21:49Speaker 02

  All right. And then I don't know how you solve that problem.

• 21:51Anthony Pompliano?

  Some of them still use flip phones. I've seen them. Joe, John, what questions you guys got?

• 21:55Speaker 02

  I don't know about the flip phones. But so it goes back to your estimate for 100 trillion, right? How do we have to get there and what kind of stages do you see over a period of time? Yeah, so so I think that and what's really cool about this is you can go back to the 1970s and Austrian economists wrote a playbook for private money that this is playing out to the letter. And people don't actually realize it's out there. And they had, there was no internet, obviously, therefore, no crypto, no mobile smartphones. And yet, these people had the insight to say, what would happen if we had private money that was guaranteed deflationary with no opportunity for a print button? Right? They said, well, first, it would be hoarded. It would be hoarded because, you know, everybody would say, hey, this is the most valuable

• 22:40Speaker 02

  money we've ever had. And that's exactly what's been happening. Right? Now, because it trades 24/7 in the futures markets we talked about before, it on the way up, you know, the price we pay for being on the front lines of that is the volatility. But effectively, what they said would happen is has been happening so far, which is step one, it will be hoarded. Eventually, it will be worth so much, right? That the purse strings will have to be loosened a little, and it will make no sense just to hoard it forever. Right? I don't know what point that is, but that point is coming. John, what do you got?

• 23:14Speaker 03

  I'm curious about what are your, I guess, hesitations around Bitcoin, right? So you're obviously very bullish. Is there anything that scares you about the asset?

• 23:21Speaker 02

  About the asset? No. About, you know, Bitcoin is software. Use it or don't use it. I don't, look, I was on the other side of the debate in the in the block size wars. I lost in terms of like, what I would have done, right? If I was an open source developer, I don't code anymore. But Lightning is working so far. We needed to scale like infinitely higher than it is now in order to get to like that next part of what I talked about in the Austrian playbook, which is we can at global scale loosen up the purse strings. If a billion people wanted to spend Bitcoin today, it wouldn't work. Right? Even with Lightning. And that's not a bad thing. It's just where we are and its development.

• 24:05Speaker 02

  And I'm all about software. My whole career has been about software, but that's the next step. We need that software to scale. And so it's not a worry so much as just, hey, this is matter of fact where we are and this is what needs to happen. And I also think we're heading towards a multi-chain world, which is the other offshoot of or output of the 2017 wars, which is that there's different types of crypto platforms that can solve different problems. And a lot of my friends that are all in on Bitcoin and I'm all in on Bitcoin don't like that narrative. But again, it's just software. Use it or don't use it. And I do think that Ethereum, for example, is solving really big problems in the banking system. And a lot of my maxi friends don't like that, but it is true.

• 24:47Anthony Pompliano?

  When you think about the institutions that are coming in right now, they're going to go, they're going to buy Bitcoin, they're going to put on the balance sheet. What happens to the rest of their portfolio? How are they affected by this? Are they going to have to move from kind of traditional stocks to something else? Does equity get hurt? Venture capital, I'm assuming is going to continue to do well for the foreseeable future. Are there other parts of the portfolio that get affected by all this?

• 25:08Speaker 02

  Yeah. So one interesting question here is what do the top companies in the Fortune 100 actually do with their own balance sheet? How does that affect the stock market? Right? I was tweeting yesterday about the fact that Apple, Microsoft, Google, Facebook still own zero Bitcoin and are holding tens of billions of dollars in what effectively is trash, right? Why are they doing this? Right? I think what the reason that they're not buying Bitcoin is is because the accountants and the tax lawyers are telling them, well, watch what happens when you get these pullbacks. You have to basically report that it's a negative impact to the balance sheet, but you don't get to report the benefit when it goes up. That's just a nonsense gap accounting issue, which is going to be fixed, right? So I think that these companies are going to have no choice but to start buying Bitcoin.

• 25:51Speaker 02

  And then Bitcoin becomes intertwined with the stock market. Right, which MicroStrategy showed us, you know, what can happen for one company when it gets intertwined. So I think what happens is, is that we start to see more and more companies put Bitcoin and Ethereum, by the way, institutions are gonna, a lot of institutions are skipping Bitcoin and going Ethereum. We can debate whether that's good or bad, but some are, okay? Especially funds. But I think more large companies that have a treasury perspective on this will be buying Bitcoin instead of Ethereum. I think hedge funds may look for outsized gains on Ethereum versus Bitcoin. But I think you're gonna see a market where public equities become intertwined with the crypto narrative because so many of them are gonna be holding huge sums of Bitcoin on their balance sheet going forward.

• 26:34Anthony Pompliano?

  Are we at a point now, I was talking yesterday about public company CEOs who do not address the cash and cash equivalents being 100% of their balance sheet, are they violating the fiduciary duty?

• 26:45Speaker 02

  I think so. I mean, that's what I wrote yesterday. I, like, this is not just a bill pumping Bitcoin thing. Put Bitcoin aside for a second. If you have, if you're holding an asset, right, if your business is growing 10% a year, which is, you know, what you look for in a, in a, in a growth public company, and you have an asset which is losing 10% of its value a year that you're holding your profits in, well, you have a problem. Because you're basically doing a Fred Flintstone in your car, spinning your wheels, going nowhere. Right? So what is your responsibility at that point? Well, it's probably either to grow the value of your treasury, invest it in something that has higher growth than, you know, what you're doing with it, which is nothing, or give it back to your shareholders. And of course, they don't want to give it back to the shareholders,

• 27:29Speaker 02

  they want to buy more shares ultimately to make themselves richer. That's part of the problem. Right? Is, is they, they just go back to the easy solution, which is, oh, we'll just buy back the shares, make ourselves richer, and when the stock price goes up, everybody looks good. Short term, we're in this interesting mode, where we're in one of these rare scenarios, where for the next few months, everything you own is gonna go up.

• 27:48Anthony Pompliano?

  Yep.

• 27:49Speaker 02

  Including bonds, by the way. Right? So even though it's trash, I think bond market is gonna go up for, for probably a few weeks, maybe even a few months, and, and then it's gonna revert back to the mean, which is shit. And, and at that point, you know, I don't know if, if, if it's gonna happen in 22. That the fixed income markets really start to think about, okay, you know, we need to basically enable RIAs and others to own to own Bitcoin and to replace the 40% or people and companies just do it on their own. We'll see.

• 28:19Anthony Pompliano?

  Yeah, it's fascinating when you start to think about, um, you're basically going to get not just drop gold by Bitcoin, you're going to get drop bonds by Bitcoin.

• 28:30Speaker 02

  Hundred percent.

• 28:30Anthony Pompliano?

  You're going to get dropped like, like all the trash assets that are sitting there.

• 28:33Speaker 02

  That's it.

• 28:34Anthony Pompliano?

  And part of it, we were just talking about like these public pension funds that are essentially locked into these investment mandates or these asset allocations. They got a lot of work to do because they're going to go change the investment mandate. They got to educate their, uh, you know, their board. And there's a lot of people who, hey, don't rock the boat here, right? Like, like, let's not get fired. Let's not kind of screw up a good thing. This has been great to us. But they're looking at the past historical analysis. They're not necessarily looking at the current environment.

• 28:57Speaker 02

  Yeah. And they're also not even like close to this discussion yet.

• 29:00Anthony Pompliano?

  Yeah.

• 29:01Speaker 02

  There's a lot of people in that world and I used to work in fixed income that don't even follow what we're talking about yet. All that means is, is from a contrarian investor perspective, there's nobody on the bus. And when you have conviction for an investment and there's nobody else on the bus, that's when you should be the most excited.

• 29:15Anthony Pompliano?

  Yeah.

• 29:15Speaker 02

  So we, we who are in the middle of this, think that it's like late in the game. It is not. When you look, I mean, the game is just starting from, from a macro perspective, right?

• 29:27Anthony Pompliano?

  Yeah.

• 29:27Speaker 02

  And, and that's why I think folks like, you know, Ralph Paul is so excited because they understand the rest of these global markets that have no effing clue about what's going on in our world. They're just starting to see that, hey, this thing's worth $2 trillion. What's going on?

• 29:41Anthony Pompliano?

  Yep.

• 29:41Speaker 02

  Right? That's the beginning of the game.

• 29:43Anthony Pompliano?

  All right. Before we bring Kevin O'Leary on, tell us real quick about Abra, kind of what you guys are doing right now. I know you guys have made a bunch of progress, raised more money and assets seem to be going up.

• 29:51Speaker 02

  Yeah, we just closed our series C, 40 million. Um, we are managing well over a billion now. Uh, and it's all retail, which is really hard. And we have a developing markets business, which is killing it. Uh, we actually really unique in that we service very high net worth clients in the US and in Europe. We also have a developing markets business in Asia and Central America, all exactly the same products, you know, buying and trading crypto, Bitcoin, Ethereum, a bunch of other cryptos, uh, the ability to earn. Earn yield. We just launched Cardano yesterday, so you can earn interest on Bitcoin, Ethereum, Cardano, 8% on dollars. We also launched, announced a new token program. We partnered with a new group out of Switzerland called the Crypto Banking Alliance. It's going to be kind of a quasi

• 30:31Speaker 02

  education lobbying organization to help promote DeFi, Bitcoin, Ethereum, within the banking system. And they have a rewards token they've launched and they're giving 30% of that to Abra customers as a reward for, you know, using Abra and then other companies will be able to apply to grants from that alliance. We have no ownership in it. I have no oversight of it. It'll basically do grants to whoever qualifies. And yeah, we've got a bunch of other products after that coming out. So our lending product, which we announced in March, is now live in like 44, 45 states in the US and 50 countries. That's been our fastest growing product the last few months. And every product we have has been profitable for the company. And we've been profitable for about a year now. And probably 10x the revenue over the last year or so.

• 31:17Anthony Pompliano?

  When you see that, how is the institutional market from not just hey, buying the assets? I'm assuming that we've seen a massive explosion in venture capital type investment, even like the late-stage growth investors, they're all now turning and saying, whoa, hold on a second here. We know that there's going to be continued demand increase. The market cap is going to continue to grow. That means the infrastructure businesses are going to continue to grow. And so they're plowing capital in as well.

• 31:39Speaker 02

  Yeah, we're making a transition from, it's kind of like what happened with the internet, right? In the early days, people probably never heard of VeriSign and some of these early like infrastructure companies that got the big bets early and then later on came Google and then Facebook and then the kind of the apps built on top of the internet. That hasn't happened yet at scale. We're still now seeing late-stage money come into, you just saw FTX, I think raised looking like 450 million. And to me, that's infrastructure, right? The ability to have those derivative products and trade. The next generation is like what I'm talking about for Abra and the BlockFi and the others that are basically building banking services on top of that layer, right? That's, I think, going to be a much bigger business even than the exchanges themselves. And we haven't even started to see real late-stage money come into that market yet. It's just now

• 32:24Speaker 02

  starting to hit the exchanges. Three years ago, there was no late-stage funding available.

• 32:29Anthony Pompliano?

  Yeah.

• 32:29Speaker 02

  In crypto.

• 32:30Anthony Pompliano?

  True.

• 32:30Speaker 02

  None, right? And so how fast things change, right? And, and so now it's going to start to go to applications of the crypto with crypto banking, I think, being the big first beneficiary of that.

• 32:41Anthony Pompliano?

  How do you guys think about your balance sheet in terms of Bitcoin, cryptocurrencies and cash? Do you have like a treasury policy?

• 32:48Speaker 02

  We do, we do. So the only crypto that we hold in mass is Bitcoin on our own balance sheet. And it's a lot. And then, you know, the rest is in cash. And honestly, I'm trying to, you know, get everybody comfortable with us holding more and more and more in Bitcoin and putting our money where our mouths are. But we generate our profits actually in Bitcoin because of the way our trading and yield system works. And most of it, we just never sell.

• 33:08Anthony Pompliano?

  Yeah.

• 33:08Speaker 02

  And so that just keeps growing. And then the question right now is we just closed our financing. So we're actually going through the permutations of, you know, how much of that do we move back to Bitcoin versus?

• 33:18Anthony Pompliano?

  How much do you want to move?

• 33:19Speaker 02

  Sorry?

• 33:19Anthony Pompliano?

  How much of it do you want to move into Bitcoin?

• 33:21Speaker 02

  I'd move probably 80%. You know, there's a velocity of money in our, in our company in terms of how we deal with ad spend and other things which have to be done in cash. But I'd be comfortable with like 80%.

• 33:33Anthony Pompliano?

  Yeah. And on the balance sheet itself, is that about how much of the balance sheet currently is in Bitcoin?

• 33:37Speaker 02

  No, no, no, no.

• 33:38Anthony Pompliano?

  Okay, much lower.

• 33:38Speaker 02

  Because up until now, it's only been revenue.

• 33:40Anthony Pompliano?

  Got it.

• 33:41Speaker 02

  Right? And so, you know, we were a small company up until 18 months ago.

• 33:45Anthony Pompliano?

  Yeah.

• 33:45Speaker 02

  And all of a sudden, we were profitable, generating cash, which is staying in Bitcoin, and just raised all this money. And so now it's the new money that we're, we're trying to decide treasury policy for.

• 33:55Anthony Pompliano?

  It's fascinating because Michael Saylor talks, you know, a bunch about like, hey, we have our business and we're going to try to grow our business and drive more kind of financial performance and do what shareholders think of like, quote, quote, the business. But then we have to have a treasury policy as well. And in some weird way, like your experience, having been an investor and working kind of in more of like an asset allocation kind of world, you start to think about like, okay, well, what are my liquidity needs? What are the risks I'm willing to take? What's the upside look like? What are my opportunity cost?

• 34:19Speaker 02

  Yeah.

• 34:20Anthony Pompliano?

  Like that treasury policy is starting to look a lot different than just, hey, let's buy cash, cash equivalents and we'll be fine.

• 34:25Speaker 02

  Yeah, it's great that we have companies in the crypto space that are dealing with this issue now because it's also going to show the non-crypto companies how to deal with it.

• 34:33Anthony Pompliano?

  Yeah, it's fascinating. You guys got any other questions?

• 34:36Speaker 02

  No, thanks for coming, Bill. My pleasure. Appreciate it.