#1363 Quinn Thompson | Bitcoin's Future In America Is BRIGHT

Quinn Thompson is the Founder of Lekker Capital. I think he is one of the more interesting investors in crypto, he takes a macro overlay and puts in on this industry. In this conversation, we talk about the relationship between the macro environment and the crypto industry, where he is allocating capital, how he evaluates different assets, data points he looks at in the macro environment, global vs. United States, upcoming election, and meme coins. ======================= 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. ======================= Meanwhile is the world’s first licensed and regulated life insurance company built for the Bitcoin economy. Protect your loved ones with sound money built to manage life’s uncertainty and a broken financial system. Their BTC-denominated Whole Life Insurance policies allow HODLers to pass more BTC on to their loved ones and a tax-advantaged way to access BTC for liquidity during their lifetime. Visit their website at https://meanwhile.bm/ to join the waitlist for a policy and to learn more. ======================= 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. What's up guys? Today's episode is with Quinn Thompson, the founder of Lekker Capital. I think he is one of the more interesting investors in crypto. He takes a macro overlay and puts it on this industry. In this conversation, we talk about the relationship between the macro environment and the crypto industry, where he's actually allocating capital, how

• 0:47Anthony Pompliano?

  he evaluates different assets, what data points he looks at in the macro environment, how the global world is related to here at home in the United States, how fiscal and monetary policy both implement into the crypto investing. And then we get into some fun stuff like the politics of the incoming election and also meme coins. This conversation was a lot of fun. I learned a ton and I think that you guys will really enjoy it. Here is my conversation with Quinn Thompson.

• 1:13Speaker 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.

• 1:36Anthony Pompliano?

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• 2:53Anthony Pompliano?

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• 3:35Anthony Pompliano?

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• 4:17Anthony Pompliano?

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• 4:26Anthony Pompliano?

  All right, guys. Bang, bang. I've got Quinn here with me. I thought a great place to start this conversation is understanding how does the macro environment influence crypto? And then maybe also how crypto is starting to influence some of the macro environment?

• 4:39Speaker 03

  Yeah, absolutely. Thanks for having me. So it's Bitcoin is interesting, and I kind of think everything stems from Bitcoin. And how I view it is sort of like 50% gold and 50% NASDAQ, where it has these attributes that at different times, it's more correlated to different parts of the market. And kind of breaking down that further, if you look at gold, the traditional correlation between gold is an inverse, inverse real rate hedge, basically. And so, you know, when real interest rates are rising, which is nominal interest rates minus expected inflation, those are rising, gold suffers, because it's, you know, the cost of capital is rising,

• 5:21Speaker 03

  and it makes this asset that produces no cash flow, doesn't really have a ton of utility or earnings power, less valuable. In those cases, NASDAQ, you know, when interest rates are rising because of a strong economy, earnings are growing, stocks are performing well, the economy is strong, and you see, you know, it's almost balanced out. So I kind of think of it that way, where you have, it's like a more levered gold, there's a lot more upside with the technology component. But there's also this risk on, you know, tech stock element that that you definitely need some animal spirits for the asset class to do well. I think how,

• 6:03Speaker 03

  you know, how it impacts macro is it's too small at this stage to really, to really have knock on effects in other places of the market. But one thing that, that whether crypto natives like to admit it or not, is it really is a byproduct of the easy monetary policy for the last couple decades. And that's not to say it's doesn't have the use case, the technology isn't good, or, you know, it's not going to be a pivotal thing in the future. But if you would have had sound monetary policy, for example, and, you know,

• 6:37Speaker 03

  Not this excessive spending and really this global issue, you probably wouldn't have had the same level of innovation and technology advancements with Bitcoin and crypto.

• 6:47Anthony Pompliano?

  So if you wouldn't have as much innovation, as much kind of technological progress without the easy money, is that an argument as to like maybe why easy money has been a positive thing versus negative thing? Like, most people focus on the negative and they say, hey, you're debasing the currency, you're hurting, you know, 50 plus percent of Americans. Things aren't always black and white. And so is that the positive like impact of the easy money?

• 7:08Speaker 03

  Yeah, definitely. People are looking for this life raft away from the traditional system where if you even look in the last two years, again, the trend is the top 1% wages, the highest earners in the country are growing at a much faster clip and the bottom 50% incomes haven't grown. So, you know, obviously the headline inflation numbers have come down and that's a function of, of, you know, some of the supply chain issues being worked out and, and the fat, you know, tightening policy. But we're actually seeing a relaxing of that tightened monetary stance, not just in the US, but globally, it's, it's an important factor as well. And it bodes really well for crypto and really anything,

• 7:50Speaker 03

  houses, real estate, and we're seeing in commodities that you can't print, things that are nominal, nominal hedges.

• 7:58Anthony Pompliano?

  When you say that this stuff is good for houses, Bitcoin, et cetera, anything priced in dollars seems to just go up over time. And I think historically, people thought if inflation was high, you would buy kind of true inflation hedge assets, things like gold or real estate. I think Bitcoin is trying to enter that conversation or maybe has entered that conversation. But also, stocks seem to now be, you know, somewhat of an inflation hedge. And what's interesting to me maybe is like the historical stock valuations seem to be less valuable because there's almost like a monetary premium being put on stocks as well, where people may not just be buying it purely for the valuation of the individual company, they actually may be trying to hide from some of this inflation or debasement as well.

• 8:44Speaker 03

  The other thing to look at is equity and stock performance in real terms. So if you, you know, we're back at right around all time highs that we reached in 2021 and in the S and P and a little higher for the NASDAQ. But if you look at those levels in real terms, adjusted for the, you know, 4% inflation last year and 8% in 2022, we're actually not yet at all time highs. So what tends to happen in these inflationary regimes is nominal, as you said, stocks, you know, their, their earnings are nominal. So when there's inflation, their, their earnings rise and in US dollar terms, those all go up, but they don't have as much of lift off when, when inflation's high.

• 9:28Speaker 03

  And actually, one of the interesting things and, and kind of feeds into, I think, what we're going to see over the next, you know, number of months and years is we had this huge inflation surprise and, you know, the Fed called it transitory for the better part of, until 2022, when it was way, way above target. And, and inflation volatility, so the, the standard deviation of inflation, you know, we went from like zero to eight and then we've come down to three. And this market's in a transition where, okay, everyone's kind of coming to the conclusion that we're not going back to two, like, like monetary policy authorities are, are targeting. But we're also not skyrocketing back to six.

• 10:10Speaker 03

  And you can have healthy equity and risk asset markets when that standard deviation, the volatility of the inflation isn't six, four, eight, two, like, if it's just steady at three, you know, the Fed talks about price stability. They don't necessarily, price stability doesn't imply, you know, something about the growth rate, it implies a steady growth rate. And so what, you know, one of my arguments is that they're actually okay with inflation in the three to 4% range and, and volatility is back down to like 2020 levels, which is actually all right for companies who can pass along those price increases and they have earnings power and operationally they're levered.

• 10:49Anthony Pompliano?

  Yeah. When you think of Bitcoin, maybe versus some of these other assets, it feels like, you know, S and P and kind of traditional stocks, NASDAQ, gold and Bitcoin, all are benefiting from this currency debasement. Bitcoin is just like the most asymmetric of them? Or like, why are people allocating to Bitcoin? Maybe then some of these other assets with people who either say have been around longer, you know, maybe lower risk or potentially have, you know, different ways to value them?

• 11:16Speaker 03

  Yeah, to me, there's a couple of characteristics that make it really unique. One is the global accessibility. When you think about how traditional financial systems are controlled, it's really top down. And that's one of the biggest beefs, right? With, with how the rich have gotten richer and the wealth inequalities. And crypto Bitcoin inherently is a grassroots movement. It started with the, you know, one to hundred dollar, you know, investors and traders and builders that, that brought it from the ground up. And, and that's where you've seen this just virality of it and, and why it's grown like wildflower wildfires, because you can, it's just much more, you know, support conducive to mass adoption in that sense. And it's, it's just a fraction of the size.

• 12:00Speaker 03

  And I think there are these technological tailwinds behind the industry. You know, the AI, the tech movement. The one thing that the positive of, of, you know, suppressed interest rates for, for a long time is, is it's lowered the cost of capital, allowed tons and tons of investment to flow into technology and more speculative ventures, which has very, you know, significantly progressed the advancements we've been able to make on that front. And, and there's meaningful tailwinds behind, you know, that, that USDC campaign is an example from Circle, you know, pushing this new money. And, you know, it's natively global, whereas stocks trade for six hours a day, five days a week in one country, and it's difficult to access. So I think there's all these innate characteristics of the asset class that make it much more

• 12:45Speaker 03

  accessible. It's much, much less controlled by, you know, centralized authorities. And so it has some semblances of, of like the last free market that, that kind of exists.

• 12:55Anthony Pompliano?

  So there's a lot of different ways to invest in Bitcoin and crypto in general, right? There's people who just frankly, they're not doing any work. They're just buying something somebody told them to do and maybe it works, maybe it doesn't. There's people who may be a little bit more sophisticated and they've gone and they've read white papers or tried to understand the technology. And so they're buying technology, but not necessarily markets or kind of financial price movements. There are some people who are doing actual valuation methodology or, you know, technical analysis, et cetera. And then maybe even there's some like quant folks that are, you know, kind of trying to ingest data and figure out what to buy, sell, hold, et cetera. You all at Lekker Capital have somewhat of a nuanced kind of view as to how to trade or invest in these assets. My understanding is that you're basically taking this like macro

• 13:39Anthony Pompliano?

  overlay, but still allocating to the crypto industry. So describe a little bit as to like, why is nobody else really doing this? And then why do you think it's so advantageous to take this approach?

• 13:49Speaker 03

  Yeah, good question. It is a unique strategy and there's not many people really looking at it this way. I would say, so my background is traditional, you know, Wall Street fixed income and credit, where I spent the first seven years of my career, you know, underwriting and in the capital markets. I've been in crypto for the last five years and, you know, obviously always kept that traditional approach with me and how I evaluate, you know, value and fundamentals. Crypto is such a high growth industry that, you know, there's a lot of speculative component as well. But basically, my view is that there's some very, very strong correlations between the

• 14:30Speaker 03

  asset class and traditional macro variables, interest rates and the cost of capital, what inflation is doing, what overall risk sentiment is. And that that produces some very supportive environments to be long crypto assets and also some very non-supportive, as we've seen in, you know, what some would call these four-year cycles. Within that, I think that from some of the work and research and years of kind of refining my process in this S class, I found that those variables, what makes it confusing is they change from time to time. You know, sometimes interest rates spike and it's bad for all risk assets. Other times, it's a low growth environment, which like 2019 can

• 15:13Speaker 03

  be bad for crypto because liquidity is falling out of the system and, you know, crypto is kind of the tip of the spear for liquidity. So what we found is that overall, you know, we kind of take this macro approach that tells us risk on, risk off signals that informs, you know, do we want to be positioned in Bitcoin? Do we want to be positioned in cash, you know, broadly? And then based on, you know, the intensity or lack of risk on signals, you know, that tells us to go further out the risk curve than Bitcoin or, you know, kind of, you know, play defensive. And really, I think the core tenet of my thesis and the understanding is Bitcoin is, we think of it like gold. We think of everything else is

• 15:55Speaker 03

  tech. And, you know, from the outside looking into the crypto industry, everything looks like a coin and a token. And that's just, it'd be like if you said, because the gold ETF and Nvidia trade on the same exchange, that, oh, those are both public securities. And it just, there's so much nuance. And so I think that's confusing people where we've had this environment that's been really strong for Bitcoin and actually not that strong for the other crypto assets. And there's, there's underlying fundamental reasons for that. And, and so we're looking at these things and making decisions on allocation and, and position sizing based on, you know, this macro informed view.

• 16:34Anthony Pompliano?

  Walk me through your process. Like, what are the indicators or data points you're looking at on the macro side that are really informing to be risk on or risk off?

• 16:42Speaker 03

  Yeah. It starts, so you hear a lot about liquidity in the system and crypto really is this tip of the spear liquidity. You need way more liquidity in the system for crypto to perform well than you do for stocks, for example. There's much more earnings power and cash flow associated with, with publicly traded equities than there is crypto. But ultimately, they're both expressions of a risk on trade. Some of the things that we look at are real interest rates and the cost of capital. So an example here is in 2021, what produced such a positive environment was we had inflation rising. So companies are being able to raise their prices, their revenues increasing on

• 17:25Speaker 03

  a nominal US dollars price basis. And normally associated with rising inflation is monetary policy that's restrictive. 2021, they called inflation transitory for the whole year, and it was just until December when they started even stopping their asset purchases on the Fed balance sheet. And that was really the slow-moving ship that if you took a 30,000-foot view, there was no surprises as to why tech and crypto had a 2022 like they did. Idiosyncratically, there were some credit events. I call it the great financial crisis moment for crypto when we had all these kind of banking blowups. And those were byproducts of some of the

• 18:08Speaker 03

  over-leverage and problems in the space. But at a broad level, they started because of the shifting macro environment. And the Fed went on this warpath to correct the inflation problem, raising interest 500 basis points. And then we saw a relaxing of that in October 2022, as yields spiked and we had a crisis in the UK gilt market. Fast forward through the US banking crisis, inflation came down. And here we are today where inflation hasn't gone to two, it's not going to two, and the Fed is actually relaxing. And so this is an environment similar to 2021, where you have inflation steady to maybe increasing,

• 18:52Speaker 03

  and the Fed not doing anything about it. Again, this is an environment strong for anomaly price assets, stocks, crypto. And so that's one of the examples. You do look at broader economic strength. Why? So I just explained why this isn't a 2022, because the Fed isn't correcting this inflation problem. It's more akin to 21. Why this environment is not a 2021? 2019, you know, echo bubble is is because the US economy is actually still strong. And in 2019, you had fading liquidity, an actual quite significantly slowing recession even before COVID, leading into the September 2019 repo market liquidity crisis that the Fed ultimately resolved.

• 19:35Speaker 03

  So there's all these different factors and it's kind of bundled together as just liquidity. But when you look at the measures of liquidity, they're coincident. They're not forward looking indicators. And so you have to kind of project some out some of these variables like inflation, interest rate, earnings growth, economic strength to kind of come up with a view on what is going to happen six, 12 months out.

• 19:56Anthony Pompliano?

  You've talked a lot about the US economy and kind of what the Fed's doing, interest rates, inflation here. One of the things that you also mentioned is just how globally accessible an asset like Bitcoin is. And so in a time where the US Fed was trying to drain liquidity, you know, increase interest rates, sell assets, it seemed like maybe some central banks globally didn't get that message. And you know, China, for example, was pumping less liquidity. And so how much importance do you put on what the US is doing versus maybe like the global liquidity situation or specific other markets?

• 20:26Speaker 03

  The US is the leader because most currencies and central banks are followers in the sense that when when Fed policy is tight, for example, the UK and the EU and the Bank of Japan are unable to significantly ease policy because it would sacrifice their currency. And so it is very important to kind of see the US as the bellwether. And it's a little bit like the cleanest dirty shirt in the laundry. There's some, you know, the dollar milkshake, some of these theories out there about what, what, you know, implications for a strong dollar. And that's something that's probably thrown traditional macro investors off a little bit who haven't been as attuned to the debasement theory, which is

• 21:09Speaker 03

  When every global central bank in unison is expanding their currency base, you know, the relative, you know, dollar yen, dollar euro, dollar, you know, and inter currency relations matter a little less because they're all kind of deflate, you know, inflating at this same rate. So it is very much important to look globally. I think that's one of the catalysts coming up where we've seen both in October 22, and we've kind of seen it recently where Japan, who's one of our largest allies, one of the largest, the largest holder of US government debt is facing a currency problem. And right now, their, their interest cost annually is 25% of their, their annual budget.

• 21:52Speaker 03

  And they're basically at like between zero and 2% rates. So they can't really meaningfully increase their interest rates. And they have to do something to stop their currency. And one of those things would be weakening the dollar. And then, so we've seen some coordination between Japan monetary officials and the treasury and Fed here to take steps to do that. And in some ways, if the dollar kind of relaxes monetary policy of the US, it gives a green light for China, Europe, UK, Japan to stimulate a little more. And that's overall, you know, very positive for, for risk assets.

• 22:29Anthony Pompliano?

  Now, when you see the United States spending as much as we are in terms of the fiscal policy, it feels like the Fed was tightening. Politicians didn't get that memo either. There's proxy wars going on, southern border, obviously entitlement programs. Like, there's a bunch of reasons why we continue to spend. And sometimes it feels like maybe we're spending to try to drive GDP growth. Other times, we're spending because people are trying to buy votes. Other times, it feels like people are spending, because they don't know why they're spending, right? But it's just like, this is what we do. If, you know, you give me a hammer, I'm looking for the nail. And so. Is that keeping us out of a recession? Like, is it actually the government is hiring people, the government is spending money? And like, that's why you mentioned that the economy is so strong?

• 23:12Speaker 03

  Yeah, pretty much. It's, uh, and it's not just the government spending, but it's also the knock on effects from that. You know, when, when the government is spending, they're, they're building bridges, they're building roads, uh, they're investing in AI and, and new, new infrastructure plants. And, and a lot of that gets funneled to the private sector who then pay salaries. Those salaries go to stimulate the local, uh, you know, uh, grocery stores and, and taverns. And, uh, so it's, it's this very, not just first order stimulation, but, but second and third order as well. And that is really, in my view, what has kept the US economy so much stronger. You know, undeniably, the question for the last year plus has been, how has the USD coupled so significantly from the rest of the world?

• 23:56Speaker 03

  Uh, Europe, UK, Japan, China, all the big developed nations are, are facing much slower economic growth. Um, and the answer to me, and I think most people agree is, is on the fiscal spending. We're spending on an annual basis as much as we do in wars or deep recessions, which is, is very unheard of and atypical. What I would say is, is the actual question that's people more hotly debated is why can, why has this been able to sustain itself, uh, in, in emerging markets and other places where they spend hand over fist and, and therefore have to finance these large deficits? It usually creates problems for the currency because you're printing, uh, you're issuing

• 24:40Speaker 03

  so many, so many sovereign, uh, debt issuances that, that it puts a lot of pressure. You need extra buyers to come out of the woodwork. The price of those instruments has to fall to, to find the marginal buyer. Um, and in the US, we haven't had that problem. The dollars, you know, as strong as it's been in, in a long time and our interest rates, you know, they're, they're higher, but they're not, you know, blowing out. And to me, the answer to that is, is in the piping of the Federal Reserve. Would, the reverse repo facility is something that gets a decent amount of attention. Um, but if you look at the trend between, uh, In COVID, they actually stimulated so much that they stockpiled 2.4 trillion of excess reserves in 2021.

• 25:22Speaker 03

  And they started draining these in late 2022 through 23 and into this year. And that's to me, what's what's supporting things from a liquidity perspective. When when the treasury goes to issue all this excess debt to finance these deficits, they actually don't have to take all that money from the the private markets. They're they're getting some of that from these excess reserves at the Fed. But but that runs out at the end of this year, probably, or, you know, sometime between now and the next nine months. And so that's kind of where the fork in the road, I think, is for policymakers.

• 25:50Anthony Pompliano?

  Now, as the macro environment is kind of playing out, you know, in this way, people obviously are buying a lot of crypto. But we're at 2.6, 2.7 trillion dollar kind of liquid market cap now. When you all say, hey, it's a risk on environment, we want to allocate and get out of cash, buy Bitcoin, buy Ether, buy Solana, buy a meme coin. Like, how do you think through, you know, kind of your addressable market? And then risk reward of each one of these types of assets?

• 26:19Speaker 03

  Yeah, so we're all liquid investors, so we don't do any private, private deals. We have a bias towards liquidity and, you know, investments can rotate. You know, we kind of take, you know, one to three month views typically and think of the world in that sense. So definitely have a bias towards quality where, you know, we're not day trading. We're not, you know, just playing pure momentum and narratives. We you want to be able to sleep at night and long things that, you know, will be there in 12 months. But with this dispersion we've seen in the digital asset space, there is a lot of alpha to be had in asset selection, which is, I think, also a more unique and really how most markets trade.

• 27:03Speaker 03

  But it's different than, say, 2021, where everything just went straight up. So we view the world in both, you know, tokens and also traditional crypto related securities like Coinbase stock or Robinhood or or micro strategies. And You know, there's, there's huge discrepancies in the reward potential of all these, you know, what's the adoption and usage, what's positioning and ownership like, and where the momentum and thematic growth names are. But, but we take a very kind of acute approach to downside protection as well. And I think in the, in the, in the space, if you survive and make it cycle over cycle, and you're structurally long, you're, you're going to do well. Where we see, you know,

• 27:48Speaker 03

  time and again, people not doing so well is, is giving back those gains. And so, big focus for us on capital preservation and, and, you know, making sure we're in the names that we think will be there in 12 months and, and, you know, basing our analysis around that.

• 28:02Anthony Pompliano?

  So when you start to look at, let's just take tokens first. Bitcoin, Ether, Solana, maybe are like the big three that, that people have been allocating to.

• 28:13Anthony Pompliano?

  Ether sentiment was horrible. People, I think, were very excited about Bitcoin because of the ETF approvals. Solana up a lot, seems to, you know, people believe that it could be the next Ether, or at least from a price action standpoint in this cycle. How do you think through those three things and maybe like the pros and cons of allocating to each one? You know, maybe through the end of this bull market?

• 28:36Speaker 03

  Yeah, I view, I really view Bitcoin as the, the digital gold. I view that as your almost risk-off way to play the industry. And, you know, I'm still very risk on if you're long Bitcoin, but, but you get what I mean. And Ethereum and Solana is you go further out the risk curve, but those are more, you know, you know, Mag7 type of, type of names. They're more App Store, Internet of Things type of internet computer, you know, you hear all these different nomenclature. Solana to me has implanted itself as, as one of the big three with Bitcoin and Ethereum. That's an asset I think is, is here to stay. The, the, the longer it, it shows its prominence and its activity, you know, it's, it's a core part of the ecosystem.

• 29:20Speaker 03

  I think what is an interesting question to ask right now is what the total addressable market is of a Bitcoin versus Ethereum, or, you know, you can talk about Solana, but those are really just the two largest. And, and to me, I really do think, over the long haul, that the leading smart contract platform surpasses, well surpasses, the market capitalization of Bitcoin. Because if I'm, if my view that Bitcoin is digital gold and gold is a $15 trillion market cap asset, you know, you combine the the meg sevens and, you know, what's built on the value of the internet, and, I mean, it's just a significantly way higher, way larger, there's just such more to do. You have banking and money and financial services and social media and everything built

• 30:04Speaker 03

  on top of this and value accrues to that base layer. So I think that question's been plaguing a lot of people, though, with the dominance of Bitcoin. So we've obviously had the Bitcoin ETF, which has led the way this cycle. And typically, when crypto is expanding, other things besides Bitcoin outperform. But my argument would be that we're actually, you know, always up until we get to all-time highs in Bitcoin is kind of like more of a recovery than it is, you know, breaking out to new highs and people betting on this new technological innovation and promise of the industry. And so we're kind of in this recovery mode up until most, most recently, sentiment's been very Bitcoin-driven. And then you add on top of that the ETF, you know, that's funneled flows into Bitcoin,

• 30:48Speaker 03

  and those flows are going into an ETF passive vehicle, those flows aren't going to on a crypto exchange that can then get rotated into other risk assets. So to me, this is a turning point. I've been known to say last, about the last week, it's probably the turning point where momentum for Bitcoin specifically has peaked in the cycle relative to everything else. And I think, I think as politically, the situation is changing very significantly and rapidly, you want to be looking out to these things that were most, you know, most harmed and disadvantaged with a more strict political regime regulation. And those, we know Bitcoin's the most sturdy, and you look at the smart contracts, the DeFi, the things like that, that stand to benefit the most.

• 31:33Speaker 03

  And so I think, you know, it's the time to go a little bit more out the risk curve and into these other, you know, technology avenues.

• 31:40Anthony Pompliano?

  And then stablecoins obviously have become incredibly important in crypto. But now we saw the former House Speaker Paul Ryan say, hey, wait, maybe the stablecoins could like save the treasury market. I've previously written a number of times about the fact that China and Japan used to be 22% of all treasury purchases. Now they're down to about 7%. Stablecoin collectively, I think, are like the 16th largest holder of treasuries. It feels like maybe stablecoins are just important to crypto, like they're becoming important to the global financial system.

• 32:09Speaker 03

  It's, it's pretty remarkable, this whole topic, because we're, we're living in it day to day, you know, we, we send stablecoin transactions, we've done it for years, and we're in this echo chamber of crypto enthusiasts. But when you zoom out and you say, there's this new technology that was created, really became large over the last four years, basically one presidential cycle amount of time, essentially, you know, 2020 was when stablecoins kind of really took off with USDC, particularly in the US. And you think of it like a sovereign, think if, think of a country started five years ago and grew so quickly, they were the 16, 17 largest holder of the US's debt. US would be all over them.

• 32:50Speaker 03

  They would, that guy would have a permanent room at the White House if he, if he was gobbling up your debt like that. And then here, the politicians are, they're, they're like, we hate this industry, it's so bad and fraudulent. And you're sitting there, you're like, all right, we, we have all our policymakers sitting on record saying, we have a debt problem. Yellen's making trips to China and Japan, begging everybody to buy our bonds. And here's stablecoins, Jeremy LaRue and, and the tether guy's like, hey, guys, just, just give us an avenue to, to operate legally, under a regulatory framework. You know, we'll give you all the bad actors' addresses, we'll stop every criminal's transactions, we'll report all the tax stuff we need to, just, just let us operate and let us have

• 33:35Speaker 03

  an on-ramp and off-ramp to the banking system. That'll be much safer, you know, less, you know, behind the, the, you know, doors and, you know, illicit activity type of stuff. And we'll be here and we'll be, you know, instead of 16, we'll be your fifth largest buyer of. Buyer of debt. And so people are picking up on it, you know, it's taken many different forms. The arguments shifted. The industry's figured out now in a much better way how to collaborate with regulators. We saw the Circle campaign and, and you know, the big regulatory push on that front and getting people involved. And when they that green light comes, that's like the iPhone moment for crypto because the regulators are going to love it. The politicians are going to love it. Users are going to love it because they're not scared of, you know,

• 34:20Speaker 03

  losing all their life savings in SVB. And it's a win-win-win. So I think that's the, that's the big theme of the day and the last week is, is how quickly that shifted and stands to benefit the system.

• 34:32Anthony Pompliano?

  I always think back to 2020 in one of the original bills around COVID. They mentioned digital dollar payments, like instantaneous digital dollar payments. And then it got taken out in like a second draft and everyone's like, well, we don't have that right type of thing. But you could see politicians be like, wait a second, we're like physically mail checks to, you know, 100, 200 million Americans. Like, are they going to get them? Right? You know, what's going on? Like, it just became very clear that if you want to do something like this, you're going to have to move to the digital dollars. And it just feels like since then, more and more use cases. It's just like the technology solves problems. And for an industry where people will constantly critique it and say like, oh, everyone's just launching coins. They don't really solve problems.

• 35:13Anthony Pompliano?

  It does feel like stable coins have this great product market fit and you see in the usage data, right? You know, I think USDC, USDT combined do as much transaction volume as Visa on an annual basis. And again, like, you know, Visa is a different system. What are people doing with the stable coins? There's a bunch of questions that folks have, but just the fact that you can get, you know, 10, 12, 13 trillion dollars of annual transaction volume. Seems like a pretty big number.

• 35:38Speaker 03

  Yeah. And Visa's been around for how many decades, right? And then stable coins have been around for, you know, less than 10 years. And that, that growth is just astronomical and it's difficult to not, to deny. And that's why we're seeing it become such a political hot button.

• 35:50Anthony Pompliano?

  Yeah. What about the public equities? Obviously there's, you know, very large companies like Coinbase, based here in the United States. Historically, there's been a number of opportunities in public markets outside of the United States as well. Like, how do you all look at maybe what the investable universe is and then, you know, sifting through where to invest and where not to?

• 36:07Speaker 03

  Yeah, it's been a not a huge asset-rich market in terms of the publicly traded crypto activities. We saw a big, big boom in 2021 with SPACs and just broader IPOs. A lot of those were Bitcoin mining companies. They were kind of the most prominent, largest organizations in the space at the time with, you know, corporate finance functions that were ready to go. Also, the big users of capital, you know, it's a capital expenditure-intensive business line. They needed to tap into those public markets to be able to grow and expand. We've seen, obviously, a huge, not just in crypto, but there hasn't really been any tech IPOs since 2021. The window really closed. And, you know, it's something that

• 36:50Speaker 03

  that the broader macro environment, you know, started, but then the regulatory environment, you know, Galaxy Digital's, you know, one based here in New York, that very, very reputable business, but they're listed in Canada. That's so that's been an avenue. A lot of people have listed on the Toronto Stock Exchange, but but it doesn't come with the same liquidity and credibility benefits as if you're listed on the NASDAQ or New York Stock Exchange. So I think that could be a big driver of momentum and growth for the industry because what makes the US economy so strong is the efficiency and depth of our capital markets, the ability for entrepreneurs to say, I have a really good idea, check it out, I'm going to sell you on my idea and go get funding and build that. And in crypto, there's been

• 37:31Speaker 03

  a ton of venture capital investment into the space, but there hasn't been a liquidity avenue to rotate and reinvest that capital like you see in other industries. And M&A and IPOs are so IPO going public or M&A, and oftentimes M&A is facilitated by being a public company and accessing the capital markets, is a big facilitator of that, provides liquidity, provides investors returns, reinvests, you know, all those strong things you need for a healthy, functioning economy. So the public crypto market's been starved. Hopefully, Circle can can get it done this year. You know, it's really the regulatory environment that that needs to be changed because they tried Circle, for example, tried going public with a SPAC.

• 38:13Speaker 03

  And I think it was just a little too complex for the SEC to approve. So I could see that as being quite a big driver. You have businesses like Kraken and Gemini and Chainalysis and some of these larger businesses that definitely are big enough to go public. There just needs to be more investor awareness, more acceptance in the space. And slowly but surely, we'll get there. So it's not a huge environment today. Like Coinbase is obviously the leader of microstrategies. It's not an operating company per se, but there's some interesting things there. Robin Hood's getting into crypto and starting to look more at like the PayPals or the adjacent crypto businesses. But it's still such a small percentage of their overall operation that it doesn't,

• 38:58Speaker 03

  they don't really move with crypto. So we tend to focus more on the crypto natives that overlap.

• 39:04Anthony Pompliano?

  Politics seems to be playing in. There's been regulation that people have been really worried about and wanted clarity. I always remind people that, you know, the clarity you get, man, it'd be the clarity you want, but clarity is coming. But now politicians seem to be doing a 180. And, you know, my recollection of events when I explained to people is pretty much both political parties were absent a couple of individuals on each side, pretty much like, these people are full of shit. I don't want anything to do with this. I don't think it's good for Americans. I don't care how many of them are using it. Like, we're just not going to play this game. Trump at an event in Mar-a-Lago with a bunch of crypto people present, all of a sudden,

• 39:47Anthony Pompliano?

  I mean, kind of out of nowhere, was just like, I'm going to be the crypto candidate. The Biden administration, they don't like this stuff. I like it. Send me your crypto, right? Like, you know, I think that you guys should be able to do this. And obviously, you know, somewhat pandering or playing to the crowd, but. It seems like that is like kind of the shot heard around the world because when he did that now he is accepting crypto donations, you know, kind of two weeks after he said he would do it. It seems like a lot of the Democratic Party now is like, oh, wait a second here. We can't like give this guy a gift and let him be the pro crypto candidate and then Biden run as the anti crypto candidate because this group on the internet obviously

• 40:28Anthony Pompliano?

  has influence. They're very loud. They're very good at memetic creation, amplification, you know, all these things and they have money, right? Because of the value created there. And so the Democratic Party seems to have kind of 180ed. And now you're seeing this flurry of like bipartisan support for crypto, which kind of feels weird to be honest, right? Like, how do you read what's happening?

• 40:52Speaker 03

  It is a whirlwind. And we could sit here and argue all day long about who actually believes in the tech and who actually doing it for votes. And we all know kind of where that answer sits. But the reality is, is what's going on. And the ETF is kind of the, it's the tip of the iceberg where it's, it's the shot heard around the world and the loudest that made headlines on the Bloomberg terminals and in bank research reports. But it's really what's going on underneath the shifting and Democrats really aligned hard and heavily with, with the Warren Gensler camp. As recent as, as two or three months ago, Warren's big campaign for reelection was, was her anti crypto army and

• 41:35Anthony Pompliano?

  There was ads, literally ads on building an anti crypto.

• 41:39Speaker 03

  Army. And then, then we had John Deaton running against her in her, in her own district. Supposedly, you know, that kind of stirred some things and, and you've just had this big shift with, with Trump kind of putting his foot down, probably huge props to Vivek for, for, you know, making that a core policy. But it's really turned into this, what I call a lose, losing situation where it was a political issue, very, very, you know, one side Republicans kind of latched on and, you know, we're pro crypto and innovation and regulatory red tape and the Democrats were digging in and you know, maybe it had to do with the relationships with with SBF. So that that's a very ugly environment because it's just it's

• 42:24Speaker 03

  no one gets anything done. There's really no merit involved. It's just ideological and pander, you know, pandering there, but it's now a win-win. And to me, this is put the macro aside, put the macro aside from from the bull case here and for risk assets broadly. This is this is paramount to the longevity of the industry, bringing entrepreneurs back on shore to the US and stablecoin adoption. Banks, you know, the FDIC chairman resigned, who was day one, he came in and made the the organization anti crypto. So now banks will be able to custody the asset

• 43:04Speaker 03

  class. And and trust me, when when banks start making money off this, you know, Jamie Dimon and these guys are going to change tune real quick. So

• 43:14Anthony Pompliano?

  But they kind of already are like this is this is one of the other things that forget any one bank, but a lot of them are saying negative things in, you know, congressional hearings or in interviews, but they have teams working on this stuff.

• 43:25Speaker 03

  Yeah, it's great.

• 43:27Anthony Pompliano?

  And so it's kind of like, you know, don't listen to what they say, watch what they're doing a little bit. And then obviously, if all of a sudden you can drive earnings for your next earnings report, you probably are going to be pretty interested in what you could do in this space.

• 43:38Speaker 03

  You bet. You bet that everybody at these large Wall Street institutions are seeing Coinbase's earnings and Coinbase's, you know, EBITDA 5Xing in a year type of thing and saying, these guys from from California came out of nowhere and are kind of stealing our lunch. So it just opens up so many more avenues. I mean, I was saying this the other day where if you gave me a white sheet of paper and said, write all the really constructive things you possibly could think of, you know, line of sight to a stablecoin bill that allows Circle and these stablecoin issuers and banks to tap into the Federal Reserve directly. The SAB 121 that allows banks to custody crypto, those two alone are just monumental. Mix in, you know, the ETH ETF, which personally thought it

• 44:23Speaker 03

  was probably a 2025 event. And and then you put those together and the implications, I mean, let's not forget, the SEC has active litigation against

• 44:33Speaker 03

  Basically, all our industry leaders Coinbase, Robin Hood, Consensus, Uniswap, these are some of the, if you talk to anybody in the space, you're like, wow, those are the stand-up citizens of our industry and, and they're being made look, made out to be criminals in, in Washington. And, and so people have recognized that and, and it's becoming a, you know, incentive, how do we get more votes and, and this win-win? Now you're seeing Democrats, Republicans compete to be more supportive and, and that's just a different operating environment for everybody. And I think it is one to keep paying attention to.

• 45:04Anthony Pompliano?

  We saw this at the state level and the city level. Um, you know, I wrote recently that, uh, I think it was in 2021, Texas, uh, Governor Miami Mayor and New York City Mayor. At one point they were all like chirping at each other on Twitter, talking about who like was going to take more of their salary in Bitcoin, who was the bigger like Bitcoin city capital, you know, all this stuff. And so we've seen it kind of at the city and state level. Now it feels like at the national level, the, the two parties are really going at it. And, and also, you know, the independents like RFK, et cetera, like they've pretty much been in on this. So this is really the, the two major political party candidates now are kind of joining that. Um, but now I start to think like, is there a global domino effect where if the United States goes on this, I looked it up earlier today, there's

• 45:47Anthony Pompliano?

  17 countries that currently are banning Bitcoin cryptocurrencies in some form or fashion. Does that number go to one, you know, zero, two, right? With the United States all of a sudden starts to embrace it? Like, does everyone kind of fast follow? Um, and then also the countries who were, you know, kind of one foot in, one foot out, hey, we're not going to ban it, but we're not really going to embrace it either. Kind of what the United States was doing. Um, do they now swiftly become embracing as well? And, and actually in a weird way, Trump's speech at Mar-a-Lago not only forced the hand of the Democrats, but the chain of reaction of events is actually going to force all of these countries to become more kind of sympathetic?

• 46:26Speaker 03

  That's a really good point and it has to carry some weight, right? I mean, it's a very, very globalized world we live in and. Social media and the internet creates the virality of everything. So you've got to imagine, you know, populism is kind of the, you know, regime we're in in US politics. I actually don't think Biden and Trump are all that different candidates. They're, they have more similarities probably than differences. And, and that's a theme globally. That's a theme in Europe, in the UK. And, and, you know, you have to imagine people are like, oh, wow, you know, they, Trump just like on a dime turned millions of voters into Republicans for this election.

• 47:09Speaker 03

  And interesting stat, it's the 2024 is the most, the largest number of people in the world ever in one year are voting for their, for their national leader. So it's the biggest global election year ever in the history of, you know, advanced society, whatever that means. But that, that it's going to become an issue everywhere. And I think, you know, crypto isn't, isn't a US thing. It's, it's global. There's times where the US leads the market and when we have the ETF and there's times where, you know, Asia, Europe leads it. And I would imagine you'd see more of this. And yeah, another tailwind to add to

• 47:44Anthony Pompliano?

  the list. It's also interesting to me that people are like, oh, this is new. Like, you know, there, there was a opinion piece that was written and everyone freaked out over about, you know, basically if you are a one issue voter, you're an idiot. I think it was almost like the title, right? And I kind of laughed to myself because I'm like, wait a second. People have been one issue voters for a long time around their wallet.

• 48:04Speaker 03

  Yeah.

• 48:04Anthony Pompliano?

  Sure. There's like, you know, wackos who will pick some esoteric, you know, topic they really care about and they'll, you know, go to the mat and argue over. But your wallet seems like a pretty universal thing that people really care about. And so is the economy better off with one president over another? Is, am I personally in a better financial position, right? Like, do I pay more taxes or less taxes? Like, these things that, again, maybe they're nuanced in terms of the topics, but they all revolve around like, who is best for my wallet? Almost feels like if you had to pick one thing that people have been voting along forever, it's that, right? More so than any other topic or anything. And so crypto is just like, maybe like the digital manifestation or like the newest, you know,

• 48:48Anthony Pompliano?

  version of this. But really, that's what people are doing. If there are a single issue voter on crypto, they're just a single issue voter around like who's best for my wallet or who's best for my portfolio.

• 48:56Speaker 03

  Yeah, I think that's right. And, and it's also just, there's broader, I think, depth to the topic of, You know, more libertarian views versus versus last and you know, I think what crypto voters aside from just like, I think everyone agrees that, you know, no matter how important crypto is to their life, maybe they work in the industry, maybe it's their livelihood, maybe their family's involved, like, uh, maybe they need to send payments to, you know, their Mexican immigrant or Filipino immigrant, and they have to send payments back, back home and they don't want to pay 10% of that, that lump sum every time. So there's a lot of different, I think, angles that people come to the industry from. But to me, it's, it's, it's more of the bigger

• 49:36Speaker 03

  picture in the sense like, you know, I, I want the choice of how I invest, of how I custody my, my, uh, you know, wealth and, and money and how I, how I use financial products. And I want the best availability. I don't, I'm never going to use every financial services offering available, but to limit what people can and can't do based on, um, sort of an ideological belief, uh, I think is, is what really people are pushing back against. And then what that means for the rest of their decisions they might make in their day to day life of around of free choice. And, and so it's really should not be a bipartisan topic at all. I mean, it's, uh, there's something for everybody in it. There's, there's the freedom of, of financial

• 50:20Speaker 03

  services, uh, that, and accessibility. When we're seeing banks, less and less banks in the US, you know, these local and small towns have, uh, you know, small, they used to have a small branch, now it's obsolete, it's in the big city, they don't have access to the same lines of credit. Um, it's tougher environment for small businesses and crypto and decentralizing the financial services industry improves accessibility tremendously and lowers the cost. So it's good for, you know, what Democrats would believe in and on the, on the, you know, traditional conservative side, uh, it's freedom of money, freedom to choose what, what, how you kind of use your, your resources. And so it's nice to see some of that, you know,

• 51:02Speaker 03

  rivalry kind of toned down because there's really a lot of good here. And if they knock their heads together, they can, they can create an environment that's benefits everyone.

• 51:11Anthony Pompliano?

  Last thing I want to talk about is, uh, the memes. The meme coins seem to, um, be the other side of the barbell, maybe, uh, in a weird way where, um, Bitcoin, ETH really has lagged. Solana has obviously performed well, but let's call them like the large caps with maybe Bitcoin being the dominant performer there. And then the other side of the market, like really it's meme coins. And that seems to be where capital is flowing, attention is flowing. Even I would argue, kind of the eyeballs of VCs, they may not be investing as much in it, but like they're, they have to pay attention, just given the performance and kind of watching what other market participants are doing. So how do you evaluate that area of the industry?

• 51:54Speaker 03

  Yeah, I don't, you know, for the fund, we don't really do much in it. We are aware of it. It's, it's definitely speculation. It's definitely, there's a component of gambling. I think there is some meaning to it and reason for it happening. It's, it's a, it's a byproduct of, I mean, we're seeing even in the traditional world. So I like how, you know, Dog with Hat and some of these make Bloomberg headlines, but you know, it's, it's what's been happening in the traditional world. In 2021, another kind of analogy to that environment with GameStop and AMC. So I think there's a reason for it. You go into these subreddit groups and it's some of the most, you know, cult-like, tenacious, you know, collectives of tens of thousands of people.

• 52:36Speaker 03

  And you're, you're reading these posts like, you know, I don't have anything to my name. I've, I've been screwed by the system. And so it's again, a kind of a function of this populist movement. And in the crypto market being sort of the home to, like I said, grassroots, you know, participation, it's not an institutional top-down thing. You're, you're just bound to see more of it. And so people have lashed on. I think it's, you know, there's a component of it that's a little bit rebellion to the top of the crypto industry too, the VCs and so on, who have been funding these large, private, private protocols that have then launched tokens and, and maybe not done so well. And retail participants have gotten hurt there. So I, we're observing, I think, I think there is meaning to it.

• 53:22Speaker 03

  It's tougher to say there's valuation backing it up or fundamentals. So I tend to not really traffic in that area, but I think it's interesting. My take would be that when the cycle is over, it, you know, people who are investing in memes probably get hit pretty hard. And so it's one of those, you don't want to be the last one at the dance. But it's kind of entertaining and, you know, coming into a political year where there's all sorts of weird things that happen, it's probably a fun space to keep an eye on.

• 53:51Anthony Pompliano?

  Where can we send people to find you, either on the internet or find out more about Lekker Capital?

• 53:55Speaker 03

  Yeah, yeah, just follow me on Twitter, reach out there. I produce Substack writings and I'll be putting my monthly letters up for the public pretty soon here as well. So yeah, always happy to chat with people in the space and thanks for having me on.

• 54:07Anthony Pompliano?

  Absolutely. I think you're one of the most interesting macro investors right now who's just focused on crypto, so excited to talk to you.

• 54:12Speaker 03

  Appreciate it.