ROLLUP: The Debasement Trade is Back | Bessent Put | Tokenized Stocks | AI Capital Crunch

Bitcoin may be entering a new cycle just as the Treasury starts pushing back on rising yields. Ryan and Haseeb break down the Bessent Put, the return of the debasement trade, Coinbase’s tokenized stocks push, Ethena’s token reset, and whether AI is starting to consume the world’s capital. --- 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium --- BANKLESS SPONSOR TOOLS: 🔓 NEAR | TRADE CONFIDENTIALLY, GET 20% BACK https://bankless.cc/near-pod 🔑 BITKEY | GET 10% OFF USE CODE: BANKLESS | #bitkeypartner https://bankless.cc/bitkey 📊 BITGET | TOKENIZED STOCKS 2.0 https://bankless.cc/bitget-stocks 🎯 THE DEFI REPORT | ONCHAIN INSIGHTS https://thedefireport.io/bankless 👑 BANKLESS CONTENT MCP https://www.bankless.com/premium --- TIMESTAMPS & RESOURCES 0:00 Intro 0:31 Crypto Energy Shift & Bitcoin’s New Cycle https://x.com/hosseeb/status/2091945147357675623 https://www.theblock.co/news/markets/2026-08-23-bitcoin-record-weekly-dollar-gain-412547 5:55 The Bessent Put https://www.cnbc.com/2026/08/24/bessent-1-trillion-treasury-general-account-bond-buybacks.html https://x.com/DeItaone/status/2091852135675658265 https://x.com/CGasparino/status/2091918792146247833 14:11 Druckenmiller vs. Bessent https://x.com/NickTimiraos/status/2092023686148817227 23:31 Debasement Trade Returns https://www.cnbc.com/2026/08/26/debasement-trade-to-take-bitcoin-to-300000-in-2029-bernstein-says-.html https://x.com/TimmerFidelity/status/2092991527127789913 https://x.com/fundstrat/status/2091895628003528804 30:03 Coinbase Tokenized Stocks https://x.com/base/status/2091918696620896485 41:14 Ethena’s Token Reset https://x.com/EthenaFndtn/status/2092976592738001383 https://x.com/hosseeb/status/2090828427574268023 53:59 AI Capital Hunger https://x.com/RaoulGMI/status/2092704327227867585 --- Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

• 0:04Speaker 00

  Bankless Nation, it is the last week of August. It's time for the Bankless Weekly Rollup. David is out, he's at Burning Man, somewhere in the desert, I'm sure, right now. We've got Haseeb Qureshi filling in, back by popular demand. A lot of exciting things going on in crypto in the week. We gotta talk about the Bessent put. It is week two. Is Bessent really gonna use $1 trillion in the treasury? In order to impact and enact yield curve control? We'll talk about what he's actually saying, how the market's interpreting it, what this means for crypto, whether the debasement trade is truly back on. And his former mentor, Stan Druckenmiller, give him a little slapdown on the week. So there's some drama going on.

• 0:47Speaker 00

  Also Coinbase entering the tokenized stock wars in a big way. Can they win the market? Athena turning on a fee switch. It's up 20%. And toward the end, since we have Haseeb on, I gotta ask him a question about the AI trade. How long it can continue before it eats up all the capital in the world? Stay tuned for all this. Haseeb, it's great to have you back on. Am I imagining things? Or has there been a big energy shift back into crypto? And I'm not just talking about prices. This is more than prices, isn't it? What's happening here? Are you feeling this energy shift?

• 1:23Speaker 01

  I'm definitely feeling it. I think we have to give a big salute to all the people who left the industry over the last six months. I was thinking about that this morning of just all of the, all of the big like blog posts that people wrote and the Twitter was like, oh, so long, guys. You know, this industry is not for me anymore.

• 1:41Speaker 00

  All the haters, all the losers.

• 1:43Speaker 01

  All the haters, everybody who quit at the bottom, look, we needed you. We needed you to move on so that we could be here now. So salute to everybody who moved on because it, you know, look, a forest needs a wildfire in order to stay healthy.

• 1:58Speaker 00

  Yeah. So is that a bit of a victory lap coming from you? Is this earned?

• 2:02Speaker 01

  A little bit.

• 2:03Speaker 00

  But like, seriously, I mean, is it just prices? Or is there something fundamental going on here? What do you think has been the driver of this energy? Is it just, it's time now, the builders are building? Or was there something fundamental that's happening?

• 2:17Speaker 01

  Well, I mean, look, we're gonna start with this, obviously. Macro is what initially catalyzed this move.

• 2:22Speaker 00

  Okay.

• 2:22Speaker 01

  But it's clear, the macro part is done, right? It's not like there's more yield curve control. I mean, there's more, it's not, you know, it's not, the story's not over yet. But a lot of this is that crypto is intrinsically reflexive. Reflexivity breeds reflexivity, upward moves breed upwards moves. And the reality is that the sellers are done, sellers are exhausted. It's been, it's been so many months of just everybody telling you crypto's dead. And there is, you know, the, the bear market ends when the last seller sells, when the last weekend turns over. And once that's done, it's just like, yeah, what else is there to be sad about? Who else is there to exit? Who else is like, yeah, you know what? I'm done at 80K, that's all I wanted, I'm out.

• 3:04Speaker 01

  I think the reality is that you, you need this clearing of a full cycle to give the next cycle permission to begin.

• 3:12Speaker 00

  Maybe this is why we always have cycles in crypto. We're gonna start in the markets. Before we do, wanna thank our friends and sponsors over at NEAR. And gotta thank them for releasing Iron Claw. So 1.2, Iron Claw 1.2 just launched. This is from NEAR. If you guys are giving your AI logins, credentials, keys, that is a very bad idea, okay? This is a, an AI, it's a cloud-based company. Iron Claw is the way to lock all of this down. No custodian, they hold your credentials for you. Iron Claw 1.2 was just announced. So this allows multi-user secure agents. You can integrate these agents directly where you work, like into Slack, into Telegram, wherever.

• 3:56Speaker 00

  Your whole team, your whole group chat can benefit from this. It's still secure, so it's multi-user, but you don't have to hand the AI your secure keys and credentials. That's what Iron Claw delivers. Also, a cool superpower, Bankless just launched its MCP. So if you wanna tap into our 200, 2000, that is, podcasts, all of our transcripts, you can do that. Hook up Iron Claw to the Bankless MBC. If you have a Bankless Premium subscription, there's a link in the show notes. Love what NEAR is doing in AI, Haseeb. I know you've been a fan for a while of the NEAR team. So really cool to see them in AI.

• 4:31Speaker 01

  Shoutouts to NEAR.

• 4:32Speaker 00

  Okay, let's take a look at the charts here, cuz we gotta do it. Man, seven days looking good. Bitcoin up another 10%. It is hovering just above 80K at the time of recording. ETH got a big bump last week. Another smaller bump continues, so up about 7%. Solana was a big mover on the week. On the seventh day, it's up about 20%. Last week was the largest weekly dollar gain in Bitcoin history, okay? So in absolute terms, in dollar gains, it was a 14K up week. That is absolutely massive. But we also have to zoom out a little bit here, Haseeb. And we have to look at prices from a year-to-date perspective.

• 5:16Speaker 00

  This felt huge in the last two weeks, but we are back to approximately May 10th pricing? Okay, so we just went back in time about four months. What do you think of these price moves? Like, do you think we've seen the lowest of lows on Bitcoin for the cycle? That would have been, I guess, 630, June 30th, Bitcoin hit about 58K. Is that as low as we go in the cycle? Is it kind of up from here, at least above 58K from here?

• 5:48Speaker 01

  Look, I think so. The reality is there's, there's clearly a lot of resistance around the 80K level. We've been hovering around 80K for a little bit. If you look at the options markets, they tell you a lot of information about what the market believes the likely outcomes are gonna be. So actually, if you look at Polly Market, Polly Market's nice for dummies like me to just congest, uh, what, condense what the, what the options markets are saying about the likely moves for Bitcoin from here. So yeah, if you look at Bitcoin in 2026, you'll see that it's about equally likely that we hit 100K as that we go down to, I think it was like 65-ish or like 67 maybe.

• 6:31Speaker 01

  So, actually no, below 65, so closer to 60K. Like 60K to 100K is roughly even odds of where we end up on the year. So I, I think where we are set up right now is clearly Bitcoin's gonna move. It's not gonna sit here at 80K. Now, a lot can change in macro, a lot can change in crypto, period. But I think it's very unlikely that we tread below 60 this year. That to me feels like it's behind us, again, because of just the seller exhaustion.

• 6:59Speaker 00

  Seller exhaustion. Do you also think some of the actions of Bessent, this, this treasury put that we're gonna get into next are part of this? This is a Bernstein analyst, and of course, you know, they're bullish when things are bullish. So take this analysis with a grain of salt. But a lot of people are calling for the debasement trade, saying that trade is back on. Here's a headline from CNBC from Bernstein analyst. "Debasement Trade to Take Bitcoin to 300K in Three Years," Bernstein says. Let's talk about what they're calling the Bessent put, this, this treasury put. And just to recap what happened last week and to bring us to some of the events that happened over the weekend and then on Monday.

• 7:42Speaker 00

  So we had the 30-year bond market, so yields on the 30-year. They tagged on August 18th about 5.3%, which is a 20-year high, the highest since 2007. So people monitoring bond yields kind of freaking out. This is notable, this is interesting. On August 19th, Treasury then doubled its long-end buyback. So it was doing some buybacks for market liquidity. Went from about $2 billion, those, those buybacks, I think it's per week, to about $4 billion. Okay, so immediately yields on the, on the 30-year dumped, uh, but then they bumped back up.

• 8:24Speaker 00

  And so Bessent came out and said, we will continue to do this. On Sunday, August 23rd, the 30-year yields went back to all-time highs. So Bessent called a Monday press conference, and that's where we got the news on the week. In the Monday press conference, Bessent said that the $4 billion per week was kind of a minimum. He called this, his brand for it, wasn't the Bessent put, it was the treasury twist. That's what he's trying to meme into existence. He said, "We routinely do buybacks, and we're going to increase the size of the buyback. It could be more than $4 billion per issue."

• 9:03Speaker 00

  So he's saying now, this $4 billion that he put in place last week, well, that's more like a floor, it's not a cap. And he sort of implied they're gonna do what it takes to keep yield within lines. At least, that's how the market interpreted that. And then finance media kind of ran away with this a little bit. It's hard to know what happened. But I saw this report earlier this week in CNBC, said, "Bessent could tap nearly $1 trillion in the Treasury general account to fund buybacks," sources said. Okay, this wasn't Bessent actually saying this, Haseeb, but this was, the story was citing two senior treasury officials, like anonymous people, who knows who these people are,

• 9:45Speaker 00

  who did not rule out tapping the TGA, which is a $950 billion account the Treasury manages for liquidity purposes. It's not been used to purchase long-term bonds in this way, but it could be. So you kind of wonder if, you know, they're, they're trial ballooning this a little bit, putting this out there to see how the market reacts. What's your take on this? Because the market took this and said, debasement trade, it's all in. We're gonna talk about Stan's piece in the Wall Street Journal in a second. But is this what Bessent is really doing? Is this yield curve control? Or do you think financial media is kind of running away with this story? And the market is misinterpreting what's going on here?

• 10:30Speaker 01

  Well, so let's zoom out a bit and give some context to the story. Part of the reason why this story is kind of scandalous, it's a little bit of a full circle for Bessent is that Janet Yellen was doing the exact same thing. And Bessent famously was very critical of Janet Yellen, saying that, oh, this is messing in the treasury markets, like, this is never going to work, this is an ineffective strategy. And so him doing the same thing, and now giving it a different name of calling it, oh, it's the treasury twist, you know, this is not quite exactly what she's doing with yield curve control. It's a little bit like, okay, you know, you step into the ring, it's very easy to criticize on the sidelines, but look, when you're the, you know, you're the head of the treasury, you report to the president.

• 11:14Speaker 01

  You are there to fulfill the president's demands. And if the president wants the bond market to, you know, drop the long-term yield, and to basically allow him to finance the government long-term at a lower rate, like, the reality, why is he doing this? He's doing this because the current debt in the country is not going to go down anytime soon. Our deficit is massive, and there is just no appetite for any kind of austerity. And so the only way that you can keep this alive is by not getting eaten alive by your debt. And if it costs you, you know, 5% plus, 5.4, whatever it is, to finance your 30-year bonds, that's just a nightmare. And so he's in a situation where, okay, if I refinance that debt, I mean, what is he doing? What is yield curve control? It's basically refinancing the debt.

• 11:59Speaker 01

  It's saying that, okay, I've got these 30-year bonds, I'm going to go and instead buy those and reissue those as short-term bonds, right? The problem with the strategy, one, he's doing it with very small amounts, right? So doing it with a few billion dollars in the treasury markets is nothing. It is a very small amount of money. It's symbolic. And initially, when he did the symbolic thing, Marcus reacted and said, oh, wow, you know, the government really wants to get these long bonds down. But it's, in reality, so small that it doesn't affect the market. It's a little bit like the Dats, right? When the Dats start buying tokens, people are like, oh, my God, the Dats are buying. But then you realize that, wait, the Dats are so small relative to the volumes, they don't really, you know, they can't really make that much of an impact, unless it's like, a very small asset and a very big debt.

• 12:43Speaker 01

  So what Bessent is doing right now is more symbolic than it is actually going to move the market in terms of flows. And that's why you're seeing the market more or less reject the story, and also reject the underlying implication is that, okay, is Bessent actually going to, quote unquote, do what it takes to, you know, move some of that yield away from the 30-year and pull it into the, you know, the 5 and 10-year? And the answer is, yeah, they don't believe him. They don't believe he's going to tap the TGA. They don't believe he's going to do everything it takes. They think, look, this is what the market thinks the yield ought to be, so that's what it's going to be.

• 13:19Speaker 00

  Do you think that's all part of the strategy, is to float these things out there and say, you know, look, like, I could do this if I wanted to, to scare off the bond vigilantes? Tom Lee's logic was something like this, you don't need to actually tap into the TGA, you just need the market to believe that you might, or you could, at some point in time. But you, I'm almost getting the sense, every time yields have floated on the 30-year to this, you know, 5.3% zone, something has happened, right? Like, they've done something about it. So you kind of wonder if this is kind of a ceiling that they don't want to hit, and

• 13:58Speaker 00

  they actually would tap into some sort of measure in order to suppress these yields down. Do you think he's bluffing, or do you think he would actually do it? Do the thing, which is actual yield curve control? Because that's what the market seems to think he might do, you know, and they're kind of testing whether he's bluffing or not.

• 14:19Speaker 01

  I think that's exactly the right instinct. Again, it's a little bit like Trump on Iran, is that the threat is most effective when you don't have to use it.

• 14:28Speaker 00

  Yeah.

• 14:29Speaker 01

  When you start actually having to go in and say, okay, we're going to buy 2 billion, we're going to buy 4 billion, that's when your credibility really starts to weaken. This is a tool you never want to actually use, because of course, it's a one-time intervention, like, once you, once you get through the treasury general account, now you're out of money, you're out of bullets. This is something that you really want to threaten and never actually break the glass. So I think he's in a very tough situation, because again, the real thing that matters, the real thing that's doing all of this, is not that, okay, the, you know, that they're not being intervention, they're not being interventionist in controlling the yield curve. The real problem is that the debt is too high, and the deficit has, shows no signs of going down. That's the underlying problem, and Bessent can't control that.

• 15:14Speaker 00

  $40 trillion to remind folks, also, a massive deficit on the fiscal spending again this year continues to compound. Druckenmiller rebuked him in the Wall Street Journal. I know you read this opinion piece, because I saw you comment on it. Hazib, some quotes from Stan Druckenmiller, and I should give some personal context here. So Bessent actually worked for Druckenmiller. Of course, Stan Druckenmiller, notable investor, he's just one of the legends. They worked together with George Soros. These two actually broke the Bank of England, you know, that famous trade back in 1992? They did it together. Druckenmiller is kind of a mentor to Bessent in a number of ways.

• 15:56Speaker 00

  So this is an interesting public rebuke for Stan to deliver. He said this, "The long-term treasury yield is the most important price in the world. It is also the only fiscal disciplinarian the US has left. Every basis point of artificial yield suppression is a subsidy to procrastination. If the 30-year must trade at 5.5% to clear, that isn't a crisis, it's an invoice." So he's saying, basically, Bessent, you got to pay up. Stop doing this suppression stuff. It's not going to work. It's a bad idea. You're just continuing to kick the can down the road and make the problem worse. Why do you think Druckenmiller is smacking him down publicly, Hazib?

• 16:41Speaker 01

  I think it's kind of the circle of life. It's your turn, you know? You become Treasury Secretary, you got to do this shit. And yeah, you get to get criticized by the people who actually participate in financial markets. Like, it's part of this yo-yo, right? When, when the yields are this high, Bessent comes in, you know, all this thunder and fury, he announces, okay, the yield must go down, and it goes down, and it yo-yos right back up. To why? Because that's the market clearing price. That's what long-term investors demand from US government debt. Because the reality is, look, a lot of what's happening is not just people are worried about the expanding debt of the US government. That's part of it, but that's not the only thing. The other thing that's happening, which is also, again, fundamental to the supply and

• 17:24Speaker 01

  demand of capital in the world, is that government debt is being crowded out by the hyperscaler debt. Hyperscalers are issuing debt because of the AI trade, because of all the capex that they're pouring into AI. They're issuing debt at magnitudes they have never done before. And the reality is that a lot of these allocators are asking themselves a question, which one do I think is better credit? Would I rather buy from, you know, from Amazon and from Meta over 30 years, or would I rather buy from the US government? You know, once upon a time, that was an obvious question. But with the deficits and the debts as large as they are, even if you think there's 1%, 2%, 3% chance that the US government defaults, you know, that's not a high chance, but it's

• 18:06Speaker 01

  enough to significantly change the yield that you're going to demand from that government. So the reality is, that's why the yield is so high, is not just because people are losing confidence, but that there's, there's this crowding out that is being caused by the AI boom. And that's not going to go away. There's only a fixed amount of money in the world. And if somebody else is willing to pay higher yield, because they can get a higher return, if the hyperscalers believe, look, the AI boom is going to make me a lot of money, I think my return on equity can be, you know, 15%, 20% for investing this stuff into data centers. Well, then, yeah, I'm happy to finance that at 5% over 30 years. So the person who's normally buying only government debt, now they're looking at the

• 18:49Speaker 01

  most valuable companies in the world, with incredible cash flows, incredible balance sheets, very low leverage, and say, yeah, I'll buy that instead.

• 18:56Speaker 00

  That is a huge point, I think a really important point. I want to come back to that near the end of the episode, but what you're saying is basically, you know, 30-year bonds, you know, long-term US bonds are basically the cost of capital for the market. And it's not just a basement that investors and bonds have to worry about, it's the natural cost of capital rising up, because AI is basically sucking in all of the world's capital right now, and generating incredible returns on that capital, right? So like, the number, this is why I think, actually, the bond market is kind of, it's almost coming back into investor markets, and just markets in general is a main character. Like, this chart, I never used to look at this.

• 19:40Speaker 00

  This is the 30-year yield chart, and now it's like a main character, because I think there's an AI cost of capital story, I think there's a debasement story, I think crypto gets tailwinds from all of this. So it's incredibly fascinating. Also, on the week, I want to ask your opinion on this. So this is coming out of Bessent. He announced, he calls it this, D-Day, an economic D-Day for Iran. So this is an economic onslaught against Iran's financial connections around the globe. We're going to sever every economic lifeline. He identified five targets: technology, gold, aviation, and shipping, and also, Hazib,

• 20:24Speaker 00

  digital assets. He's saying, the treasury is going to use OFAC sanctions, all of the means of their, that they, that they can, essentially, to freeze Iran's financial connections around the globe, and also, anyone that helps them. Luke Roman pointed out, it's very telling that he mentioned gold and digital assets, didn't mention oil here. Maybe that's because treasury doesn't have a grip on that. I was thinking back to the 2022 and 2023 economic sanctions against Russia, coming from treasury in the US at that time, and the rout in...

• 21:04Speaker 00

  Countries' willingness to hold US debt as a result, because it's China looking over at the US, it's other countries, sovereign nations, looking at the US and saying, "Well, if you can asphyxiate and choke out these countries, then you could do the same to me. We don't want US dominion there." And so I almost wonder if this economic sanctioning, the announcements coming from Bessent, he knows that this is going to decrease demand for long-term bonds. He's also trying to get ahead of that by doing, putting some of the suppression measures in place and signaling to the market that they're willing to do what it takes to keep yield at 5.3% or whatever, because these sanctions are coming down the pipeline.

• 21:48Speaker 00

  Anyway, what do you think this means? And how does it fit into the story? And the fact that they're talking about digital assets, I mean, has that been a main vehicle for Iran in the past? And will it be in the future?

• 22:04Speaker 01

  Not that I know of. So the story for Iran, of course, was that they were, at one point, trying to charge for ships going through the Strait of Hormuz in Bitcoin or in yuan, the Chinese RMB currency. Now, my understanding was that people were not paying in Bitcoin. They were mostly paying in RMB. And then, of course, the payments for going through the Strait of Hormuz got stopped because of the US ceasefire terms. And now that's all topsy-turvy. Iran, look, they're resourceful. They're going to find whatever mechanisms they can. De facto, if you were doing business with Iran via crypto, you were already sanctioned. It's unclear to me that this is new or that it was already perceived as being okay for the exchanges

• 22:49Speaker 01

  or for any financial institutions to be doing any business with Iran. This probably applies more with respect to secondary sanctions. And so this was the real heft of the threat that he was making. Who is banking Iran? Obviously, it's not American banks. It's not multinational banks. It's maybe a bank in the UAE or it might be a bank in Bahrain or in Egypt or something like that. And then, of course, the primary business partners of Iran are Russia and China. So, okay, what exactly is Bessent threatening here with respect to China, which is the primary economic partner of Iran at this point and the biggest buyer of their oil? We don't have a good answer yet. He has not made clear how big his balls are

• 23:33Speaker 01

  with respect to how far is he going to go in this Operation D-Day thing? I think the market doesn't buy it. They don't believe that he's actually going to start sanctioning a bunch of Chinese banks. That would obviously, with the coming summit between Xi Jinping and Trump, that would be a very aggressive move into so far what seems to have been a detente between the US and China and a little bit of Trump crying uncle in the trade war. So I suspect that actually, he's not going to go all the way. And the reality is that we don't really have the capacity to do that from an economic perspective. Like, we're going into the midterms. We kind of can't take a lot more economic damage without basically conceding the Republican Party

• 24:17Speaker 01

  to just irrelevance in the second inning of Trump's presidency. So he can't go too hard. And because he can't go too hard, again, it's a lot more thunder and fury than it is actual going all the way on something like this.

• 24:32Speaker 00

  Maybe that's why Trump is now taking it all out on Canada, trying to name Lake Ontario to Lake America. As I just read this morning, and my Canadian family is texting me about it. Are you guys serious? What's happening here? Anyway, let's talk about what all of this means for the debasement trade. This is an analyst from Fidelity saying, "The market senses a slippery slope towards fiscal dominance, a clear negative for the dollar, clear positive for gold and by extension for Bitcoin, of course." This is Tom Lee saying that this is positive, all these Treasury actions for all long-duration assets, equities, crypto, gold, and real estate. Can we call it? Is the debasement trade back on? And does this mean Bitcoin,

• 25:17Speaker 00

  as you said earlier, you don't think it'll drop below 60? Are we above 60 now? Because the market has realized, "Hey, debasement is a thing. We've been ignoring that for a while, chasing the AI trade. But look, $40 trillion. The only way out is debasement. Therefore, crypto has to go up." Is that what's happening here?

• 25:35Speaker 01

  I think that's true, but it's also not that simple. Because if you remember, beginning of this year, gold was rallying on a similar kind of narrative of, "Okay, debasement trade, gold is going to degrade." Bitcoin didn't move. Bitcoin did not participate in the rally that took place earlier this year when gold went to all-time highs. Why now? Why does Bitcoin get to experience this one and it didn't experience the other one? I think the reality is that Bitcoin kind of has this affinity vibe that sometimes it feels like gold, sometimes it feels like a risk asset. And the unique character of this particular story is that it actually stimulates both. It stimulates both the gold-like aspect of Bitcoin as well as the risk asset nature of Bitcoin.

• 26:17Speaker 01

  Both of them are getting called by this particular rally. So the debasement trade, right? So the fact that Bessent is like, "Look, instead of actually having some kind of constraint on spending, let's just buy back the bonds and try to control the yield curve." That's basically him saying, "Yeah, we're not going to control spending. Instead, we're going to do this kind of hocus-pocus stuff." That doesn't give financial markets a lot of confidence that governments are going to be thoughtful about their ability to actually pay back this debt. That's part of this debasement trade. That's why you see gold rallying as like, "Shit, this is not the kind of behavior that you see from a robust country. This is the kind of behavior you see from a small country that's like, hey, we're just going to go intervene in the market and we're not going to listen to the market.

• 27:01Speaker 01

  We're going to tell the market what it's supposed to think about us." Again, like a DAT or even like a protocol, buying back a token and saying, "No, this token's too cheap. It should be priced here." It's like terror behavior. It's like, come on, just let the market do what it's doing and you can respond to the market instead of trying to control the market. So that's one element of the debasement trade. But the other element is the fact that when you take long-duration yield, long-duration assets, like a 30-year bond, you buy that back and you reissue that debt as a shorter-term bond, right? So as a T-bill or as a 10-year, 5-year, whatever, this is a more liquid asset. You are transforming the asset supply into things that are closer to near money, right?

• 27:46Speaker 01

  They're more liquid. And when you're doing that, you're basically increasing the money supply, de facto. Longer-duration assets are less like money. Shorter-duration assets are more like money. So they're effectively increasing the money supply. And when you increase the money supply, that means, we remember what happened in COVID when the money supply increased, is that it moves its way into financial assets. And crypto, Bitcoin, all these tokens, they're financial assets. So that increase in liquidity naturally reflects itself into crypto in the risk side as well as in the kind of long-term debasement trade, gold-like substitute side. So both aspects of Bitcoin are being buoyed in the story. That's why it's doing so well, and I'd expect that trend to continue.

• 28:28Speaker 00

  And I think if you combine the debasement trade with the seller exhaustion that you mentioned, where we are kind of end of the bear cycle, then you get what we got, which was a 20% move. And we'll have to see whether that can be sustained or not. Hazeeb thinks it can. We got more to discuss, including Coinbase's big entry into tokenized stocks. We'll discuss that. And Hazeeb, I want you to explain Hyperliquid's L2, if you can, what this thing actually is. All this and more. But before we do, we want to thank the sponsors that made this possible.

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• 31:11Speaker 02

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• 31:16Speaker 00

  We have Coinbase tokenized stocks. They are live on base. Here's the tweet from base. Stocks have been updated. Coinbase tokenized stocks live on base, available 24/7/365. Composable base. DeFi, own the underlying share, held in a regulated trust. Back one-to-one, live now. New stocks coming soon. I think they got the big stocks, the big tech stocks on this right now. First question for you, Haseeb. How big of a deal is this?

• 31:44Speaker 01

  Uh, look, candidly, I don't think it's that big of a deal.

• 31:49Speaker 01

  They're the end player to do this. Stocks have been on chain for a while. Obviously, they're, you know, they've, we've had X stocks for quite a while. Robinhood got in the game. Now Coinbase is getting in the game with base. The reality is that stock tokens, which are, you know, they're not actually underlying stock. Most of them are these kind of debt instruments that mimic the underlying stock.

• 32:09Speaker 01

  They are okay. They're growing at a decent pace, but they're still very small in absolute terms. I think what you see is that there's much more demand for the derivatives. So if you look on Trade XYZ, way more activity happening on Trade XYZ or on variational or on lighter with respect to RWAs than there is with respect to the underlying stock tokens. So people don't really necessarily want to be sitting around holding the stock on chain. They more want to trade it. That's what the appeal so far of RWAs have been. And that's why you see so much more volume and even open interest in RWA tokens than you're seeing in trading volume on these tokenized stocks.

• 32:46Speaker 00

  So you're not just throwing a little bit of water on, on base and Coinbase doing tokenized stocks. You're throwing a little bit of water on the entire category of tokenized stocks on chain, whether it's Robinhood or, you know, anybody else that tokenizes stocks. You're just saying that you don't see the big demand. I think there are some in crypto who would say, no, Haseeb, this is the future, right? We're going to tokenize everything. US capital markets are absolutely massive. Look what we've done with stable coins. Look what we're starting to do with treasuries. We've got billions in treasuries right now and stocks are just the next in line. You don't think so, though. You, you think there's more demand for the perps and exotic and fast trading things? And you think this is a slow uptick?

• 33:30Speaker 01

  Okay, so I'm, I'm making a descriptive claim, not a prescriptive claim. I'm not telling you what you should want or what the market's going to do in the future. I'll tell you, here's the reality right now.

• 33:39Speaker 00

  That's what I want.

• 33:39Speaker 01

  Reality right now is all of the demand is in perps, right? So, okay. Now, long-term, I do agree with the core of the point, which is that, like, what would compel somebody to hold the spot as opposed to hold a derivative or to trade a derivative, right? For trading spot is really not preferable to derivatives. It's just, you know, it's going to be less liquid. It's going to face more slippage. It's getting more fragmented in a lot of different places, right? I just talked about all the different platforms that have some of these tokenized stocks. You know, some of them are trading on AMMs, which are obviously not the most capital efficient way to price these things. And there's not a lot of liquidity. So you're going to face a lot of slippage if you're trading any of these things. There was a viral post of somebody trying to buy like 50K of Nvidia, and it had like 70% slippage because.

• 34:22Speaker 00

  Is that on base or is that?

• 34:24Speaker 01

  I don't know where it was. It was somewhere, right? Somewhere on some platform, somewhere facing a lot of slippage because the liquidity just isn't there. So now, all of that being said, long-term, there are going to be savers on chain. And the reality is there's not a lot of savers on chain right now. There's a lot of traders on chain, a lot of speculators on chain, but people who are like, hey, I'm going to hold the equivalent of my retirement savings on chain using a portfolio of stocks that are not going to be held on exchange, but are just going to be held on chain. That's not really happening yet. And that's what this is for, right? I think, you know, if you give it three, four years, I think you can start to see that kind of behavior with more regular type folks who are not looking for a lot of risk, coming on chain and starting to own some of these products.

• 35:08Speaker 01

  But of course, you know, they have to be KYC'd. These are securities. And, you know, it's not going to be this kind of YOLO type experience that somebody's getting going on Trade XYZ. So that's, I think, a big part of the story why we're not there yet right now for there to be a large addressable market for tokenized stocks. I do think they will get there, but it's a longer-term story than it is for perps.

• 35:30Speaker 00

  Well, there's also the point, even for crypto natives, they already have stocks available for them in other platforms, say in their brokerage. Like, what is going to, even for a crypto native who has stocks and say their fidelity platform, they can already get this in their brokerage. They don't need to go to Coinbase. Whereas like perps, for instance, if I didn't do a, you know, 10x perp or something on 10x long on SpaceX, I can't do that in fidelity. I have to go to, you know, lighter or hyper liquid or somewhere on chain where I could do that. But I just want to hold something like SpaceX. I don't need a tokenized stock on base. Yeah, I guess it's cool that I can, you know, take a loan out against that in AVE,

• 36:14Speaker 00

  but I also have some of those options within my fidelity account too. So there's almost an element of, I wonder how much tokenized stocks are kind of a me-too product. Like, we already have that. I mean, the thing you can't do in a brokerage is meme coins, you know, NFTs, like some of the crypto native stuff. And you certainly can't do some of the perps the way that you can on these open crypto platforms. So maybe it was destined to fall flat because we're just kind of copying what we can already do in TradFi on chain.

• 36:46Speaker 01

  Usually getting to feature parity is not the way a product grows.

• 36:50Speaker 00

  Right.

• 36:50Speaker 01

  Feature parity is a defensive move, not an offensive move. So being able to say, look, you can also do that. You can also hold stocks on chain. Isn't that amazing? And it's like, well, it's not amazing. That's, I guess, solid. It's better to have that than not to have that. I think the reality is that the way this grows over time is that you have some of these neo-banks and these fintechs that are offering people, you know, dollar-denominated accounts overseas. They start offering, you know, dollar-denominated stocks, right? They start offering US stocks to also be held as part of a financial portfolio you can hold in these neo-banks. And that's a feature that these neo-banks can start offering they couldn't offer before. But they have to start rolling that out. They have to start doing the customer development. They have to start getting people to want to do this, to feel that it's safe, to know this has existed for multiple years.

• 37:34Speaker 01

  All this stuff is really brand new. And so many of these assets are not even real underlying stocks. They're like these weird kind of debt instruments that mimic the underlying stocks. And they kind of do these, it's all kind of untested.

• 37:49Speaker 01

  But, you know, long story short, there is a future here. Almost certainly, this will be part of how crypto and dollarization happens in the future. Is it's all going to be together in one big commingled universe. But, you know, it's going to take time for that to develop. And as an entrepreneur, I mean, you know, I'm a VC, so I spend a lot of my time talking to founders. As an entrepreneur, you have to keep in mind that, look, you can't rush the market. The market develops as the market develops. And if you're thinking three steps ahead, you know, somebody building hyper liquid in 2018, they were just too early, they didn't get to win. You know, it's, it's like, you know, if you, if you are going to be a bankor instead of being Uniswap, you're too early, you don't get to win. That's just how it is.

• 38:31Speaker 00

  Speaking of hyper liquid, let's talk about them next. So an L2 for hyper liquid? Tell me that's possible, Haseeb. I didn't know. So Elysium, this is the post. A new era for hyper liquid. Connect, which is a, already most of the hyper liquid EVMs, TVL, they're launching something called Elysium, which is a high-performance EVM co-located with Hypercore. They're doing something from the Ethereum world, which is they're using Hyperliquid's native token hype as gas. The order book is a native oracle. They're trying to get good at the areas that hyper liquid doesn't necessarily have covered,

• 39:11Speaker 00

  which is for traders and builders, at least the hyper EVM. What do you think about this? I've, it's uncommon, coming from an Ethereum world, it's uncommon to see another ecosystem starting to launch layer twos. Do you think this is going to take off? What's, what's your take on this?

• 39:31Speaker 01

  Yeah, it's interesting. It's certainly an angle of attack for a startup that I haven't seen other people try to propose doing this. So I laud the attempt. So far, what we've seen is that these kinds of L2s, they haven't really worked, right? There've been a number of these Solana L2s that try to build on top of Solana. They haven't really gone anywhere.

• 39:49Speaker 00

  Yeah, I'd forgotten the names of these. Yes.

• 39:51Speaker 01

  I've forgotten the names of them as well, to be honest. But the, you know, doing this on Hypercore does make more sense because HyperVM, or HyperVM, it got a lot of hype. People were very excited about it. They thought it would be very successful. Turned out to really underperform. It had, just in broad terms, actually very bad performance. It was very slow. The fees on it were very unpredictable because of course, most of the throughput on Hyperliquid is going to be for Hypercore itself, the actual exchange, and not dedicating a lot to the EVM that's built on top of it. It just never really worked. It's, you know, it kind of requires a different skillset to build an L1 than to build a PerpDex. So, you know, maybe unsurprising that the team that built the

• 40:35Speaker 01

  great PerpDex doesn't quite have the, you know, sort of angle of attack they would take to build the next big L1. So, a team coming in and saying, hey, we're going to build an L2. It's going to be super high performance. We're going to totally rebuild it from the ground up compared to HyperVM. And they, apparently, they're going to expose some more interesting opcodes that allow you to get more of a read into the order book on HyperVM, or sorry, on Hypercore. I believe HyperVM, it only allow you to see the kind of, the top of book, but it didn't allow you to see the actual order depth. And that maybe is useful for, you know, they talk about Prop AMMs and other types of pricing functions that you can use by reading order book data in real time, querying

• 41:17Speaker 01

  the underlying, you know, order book and matching engine. That's cool. That's interesting. Is that enough to bring entrepreneurs, to bring DeFi, to bring activity into this ecosystem? I don't know. I'm pretty skeptical. I think the reality is that part of the reason why HyperVM didn't work is not just because of the performance, but because that's not what people are there to do. People are on Hyperliquid to trade perps. That's why they're there. And it's a great product for trading perps. But, you know, to go build an entire blockchain ecosystem and to get a bunch of founders to want to go and build there, I think a lot of them have already been bit. You know, I got a lot of pitches from people who were trying to build on HyperVM, and most of them didn't get anywhere. So obviously,

• 42:00Speaker 01

  Kinetik is one of the exceptions. They've done very well. They're, you know, a staking derivative, and they're the largest staking derivative. That's great. They've done well. But I think they kind of realized that, look, there's nobody building on us. There's no ecosystem around us. And so, they're trying to muscle an ecosystem into existence. I respect that. I think it's the right thing for them to do, given where they're sitting. I just think, you know, the odds are difficult. Most L2s do not make it.

• 42:26Speaker 00

  Speaking of things not making it, let's talk about tokens. And a lot of people bit by tokens and purchasing them in previous cycles. You had this tweet from August 21st. So I guess that was last week. "They told you tokens were dead and not coming back. Still here, still early." I want to link that tweet to some of the news that we see on the week coming from the Athena Foundation. So Athena goes full token company. They are really improving the, let's say, investor alignment with some of the updates to their tokens. So they just bought out early investors who sold ENA, that is the Athena token, the

• 43:06Speaker 00

  last nine months. IP and protocol value assigned exclusively to the foundation. So the idea is the foundation is under token holder control. So there's no residual cash flow due to equity investors. They have a fee switch now in governance. That proposal is live, and you got to imagine all of the Athena token holders will hit yes on voting for fees back to the Athena token itself. And the monthly VC unlocks were also eliminated. We've seen a number of tokens really go through this investor alignment, value accrual improvement cycle, whatever you want to call it. You know, VVV burns with Venice. That seems to

• 43:48Speaker 00

  be a better version of tokens than we've seen in previous cycles where they used to be like work tokens or utility tokens. Also see the Uniswap fee switch coming online. Now Athena improving the story around their token. Is this a positive development? Is this essentially what we need to happen to all of our tokens in order to bring tokens back from the dead?

• 44:13Speaker 01

  So, first I should caveat that we are seed investors in Athena. We led their seed round in their series. So we're big investors, and we've been chatting with Guy, obviously, about this whole move for quite a while. We were not one of the investors who were bought out. We did not sell over the last nine months. But it was a really incredibly well-executed move by the Athena team. And I think they're kind of charting a path for a lot of tokens to potentially emulate. The Athena situation was one that was obviously a very great, it was a great product. It was very well-positioned, you know, excellent team, great execution, sitting very centrally in the ecosystem. But, you know, when I would talk to liquid funds about Athena, about ENA, the governance protocol,

• 44:56Speaker 01

  the governance token of the protocol, they were just like, look, I'm just not going to buy this thing. As much as I like Athena, I'm just not going to buy this thing because every fucking month, there are unlocks, and I see people dumping. And I'm just like, I'm not going to stand in the way of, I'm like, I'm not going to be on the other side of that. And so, I think, after hearing this enough times, I was like, hey, why don't we just, why don't we just do a big reset? You know, why don't we just say, look, this structure that we have, and a lot of this, like, okay, why do we have this system of, okay, VCs unlock over four years, and, you know, the unlocks, and, you know, obviously, some, you know, not all VCs do this, but there are enough VCs. And most of them are, honestly, to tell you the truth, are not the VCs, but they're often the strategic investors. So, the people who are not VCs who usually do this, that they just, every

• 45:40Speaker 01

  moment, the moment they get their tokens, they go dump it. The moment they get their tokens, they go dump it. And they just do that until the four years are done and everyone loved their last tokens are transferred. And these types of investors, they ultimately are just like this ball and chain around a project. It's like, you know, these, when people talk about, oh, the fate of this token is that it's going to be down only chart, that's why those things are happening. So, I was like, you know, when we were chatting with the Athena team about this, like, surely there's a better way to do this now. Look, the SEC clearly has changed their mind and changed their tune about how open-minded they are about whether or not to view these things as securities, or to bring, to understand,

• 46:21Speaker 01

  look, this is a different regime. We don't have to kind of, you know, do this rain dance as though, okay, well, we have to, you know, have these, you know, pretend like it's an IPO and do all this other bullshit. And so, can we just wipe the slate clean, unlock everybody, and anybody who's been selling, just get rid of them. Just, great, we're going to, we're going to buy you out right now. Here's all your money, liquidity for you. Go right off in the sunset. And I think this is a model for what a lot of other tokens are going to consider doing now, seeing how the market is reacting to this. So market seems to be loving it.

• 46:56Speaker 00

  20% up today.

• 46:58Speaker 01

  Yes, all uniform positivity in the responses to the announcement. And so I think for a lot of tokens that have baggage, and a lot of tokens have baggage, and it's not their fault. A lot of this was a response to a very warped regulatory regime. A lot of people tiptoeing around things and having to contort themselves into weird shapes just to avoid being the subject of the fury of the government. I think they can now say, look, what, if we could start over, how would we prefer to have done it? And for a lot of tokens, something like this might be the answer. So, now, the problem is, it's hard to tell what caused what? You know, why is the market so happy? How much of it was, you know, the token unlock, like unlocking all the tokens and saying, okay, no more unlocks, no more overhangs? How much of it was buying out the sellers? How much of

• 47:41Speaker 01

  it was the fee switch? How much of it was unifying the equity? We don't know. So, I hope other projects can maybe space these out a little bit, so we can like, get the data of how does the market value each of these types of, of kind of improvements to a token's profile? If I had to guess, I would say, I think probably taking out the sellers and unlocking everyone was a big part of it, probably the biggest part. And unifying token and equity, the third, and the fee switch, probably the last, in terms of importance. But, I don't know. It's hard to tell.

• 48:18Speaker 00

  So Athena was down like something above 90% from all-time highs. It may have been as high as 95% in the bear market. And so, a lot of people have seen token charts that look like this, and it's just like down only from inception. Do you think moves like this, not talking about Athena specifically, although you couldn't include Athena, do you think it has the potential to resurrect tokens? Basically, it's like, Athena is a fantastic protocol, fantastic stablecoin. I don't know, number three in terms of adoption? Something like that? Three or four? It's in the top five, anyway. The question I've always had as an investor in my mind is like, same for the Uniswap token, like, where's the value accrual mechanism? Is there some disalignment between whatever equity the

• 49:01Speaker 00

  foundation of the company has and the token itself? We've seen very few stories so far of tokens kind of coming back from the dead after a 95% sell-off. But is this how they do it? They just kind of direct, like, do the steps essentially Athena's taking? Do you see hope for tokens there? Because at some level, we've got to figure out how to bring some success back to this asset class beyond Bitcoin and Ether and Solana and some of our top ones, back to kind of the, the app layer of tokens here. Is this how we do it?

• 49:35Speaker 01

  I think this is a big part of it. Now, look, if you don't have the underlying strength as a protocol or as a project, that's not necessarily going to save you. You know, that like, there's a lot of teams for which doing something like this would be shuffling around the deck chairs in the Titanic.

• 49:50Speaker 00

  Right.

• 49:50Speaker 01

  It's, you know, like, at the end of the day, the reason why there is appetite for Athena at all, given a better structure, is because it's a good project. It's creating something valuable. Markets are willing to value that. But look, if what you're building doesn't have product market fit, you know, the structure is not your problem. That's not going to save you, right? They say, okay, we're going to unlock everyone and we're going to do this and we're gonna, we're gonna turn on a fee switch. Okay, well, do you have fees? So, like, yeah, the reality is that there's, there's probably a lot of projects that will look at this and say, aha, great, I should go put lipstick on my pig and that will make people get really excited about it. And it's like, no, that's not, that's not quite the lesson to internalize.

• 50:32Speaker 00

  Haseeb, we got a few more things to discuss. Before we do, well, I want to thank the sponsors that made this possible.

• 50:37Speaker 02

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• 51:42Speaker 00

  Some exciting news. We are launching a new podcast to help people figure out the crypto cycle, how to navigate it. The best crypto cycle investor I know, his name is Michael NATO. He runs the DeFi Report. This is the guy that sent me a sell alert before the 1010 price drop happened. His cycle analysis has been absolutely on point. I've been following him for years. And this year, we started recording weekly podcast episodes. Each one, we get into his portfolio, what he's holding, the market structure, entry targets, fair market value of Bitcoin and Ether, and where we are in the cycle. There's new episodes that are released every Wednesday. They're 30 minutes, they're short, they're punchy. I think this crypto cycle is harder to navigate than most, so let's do it together. Go subscribe to this podcast, search the DeFi Report, wherever you get your podcasts, YouTube, Apple,

• 52:26Speaker 00

  Spotify, or find a link in the show notes. There's a new episode waiting for you now. A few more things to round out this episode. So Coinbase, they launched Bitcoin-backed mortgages. You think there's a market for this?

• 52:38Speaker 01

  Is there a market for this? I kind of feel like this is more symbolic than anything that said, as symbolism, I think it's great. I think it's awesome.

• 52:46Speaker 00

  Why do you think it's great?

• 52:47Speaker 01

  I think it shows. Well, because it shows that Bitcoin is being taken seriously as a financial asset by lenders. Like, this is real collateral. And you don't have to sell, you know, yeah, a lot of people doing this. I doubt it.

• 52:58Speaker 00

  Can you do, I'm not familiar with, I'm sure there's a way you could do it if you're kind of high net worth and you have some leverage accounts open. But can you do like an S and P 500 backed mortgage? I don't think you can, really. I mean, that's not really mainstream, is it?

• 53:12Speaker 01

  I don't know, but you can certainly borrow against your brokerage account and put that as a down payment.

• 53:17Speaker 00

  Chen.

• 53:19Speaker 01

  So, I mean, those two, like, the reality is, look, actually borrowing, like, putting your Bitcoin down is one separate move from just borrowing against your Bitcoin.

• 53:28Speaker 00

  Right.

• 53:29Speaker 01

  And you could just borrow against your Bitcoin and put down a, you know, like, is this really a huge unlock? Not really, you know, like this?

• 53:35Speaker 00

  We get to say we can do it, though. You could have a Bitcoin-backed mortgage.

• 53:38Speaker 01

  It's cool. It's super cool. It's extremely cool. But yeah, is it extremely, was this the big unlock to a bunch of people buying houses? I don't think so.

• 53:48Speaker 00

  Not going to solve the housing crisis anytime soon.

• 53:50Speaker 01

  But incredibly cool. And I'm here for cool things.

• 53:52Speaker 00

  Is this cool? Is this a cool thing? Zcash has its first ETF that's gone live, which, from one perspective, okay, cool, mainstreaming another crypto asset. From another perspective, this is a pretty cypherpunk protocol. I mean, you're going to do your shielded transactions with a Zcash ETF? What's going on here? Is this cool or not?

• 54:12Speaker 01

  Come on, are we still doing that? Are we still ETF shaming? Like, I thought we were behind that. I thought this was behind us, man. Come on.

• 54:18Speaker 00

  Oh, you think I'm shaming there?

• 54:19Speaker 01

  Listen to ETF for anything.

• 54:20Speaker 00

  Funny, like, what, like, so you think it's, you think it's totally fine to have ETFs in the cypherpunks? They can all be on the same chain, they can all own the same assets?

• 54:29Speaker 01

  You look, grayscale, putting some Zcash in an ETF does not stop you from shielding your stuff and going doing crazy shit on Zcash.

• 54:38Speaker 00

  In fact, it benefits you because it's worth more.

• 54:40Speaker 01

  Exactly. Look, it's a truly, fully libertarian technology would allow both suits and cypherpunks to use it at the same time, right? That is the dream. That's actually what it's all about. It's not about, okay, only cypherpunks can use it and suits cannot. That would be a really weird protocol. I don't even know how that would work. So, like, this is great. This is part of the story. Like, we got to get over this thing of like, oh, an ETF is somehow genuflecting to the man. That's just not true.

• 55:06Speaker 00

  I look forward to your next book, The Suits and Cypherpunks. It's an excellent title, Haseeb. I love that.

• 55:10Speaker 01

  Exactly.

• 55:11Speaker 00

  Let's end it with this. I want to talk to you about the AI trade, because I'm genuinely curious about what is going on here. And if you've seen some of the AI, I guess, bulls, they've been all over the place, All In Podcast, you can, you can pick up on them. Dwar Kesh Podcast is great for this. I was listening to an episode with Dylan Patel, who's been all over this in general. And there seems to be a sense that AI is maybe running out of capital, or it's going to consume all of the world's capital. And then what happens? So the story is something like this. First of all, the hyperscalers burned through all of their balance sheet, their retained earnings, right? And they had a ton of retained earnings,

• 55:55Speaker 00

  reinvesting that in AI capex, right? More compute, because token demands are off the charts. Now we're going to Wall Street. You had the Nvidia $500 billion deal. Wall Street is all in on this, so it's Wall Street credit. Next is what? Are we starting to see like sovereign credit enter? Is this why Bessent is doing some of the yield curve control type measures? And that's what you were indicating earlier, basically. It's like cost of capital is increasing. There's a question of where are we going to get all of this capital? You know, Dylan said, by 2030, we may need as much as 11 trillion in AI capex. So he said, 1 trillion this year, 2 trillion in 2028, and then trillions

• 56:37Speaker 00

  by the end of the decade. So there's a number of questions here. It just seems like there's such a delta between what the rest of the world thinks and what the AI bulls think. First of all, if they're right, we get 11 trillion in capital, where's all this going to come from? And 11 trillion in capital funded by what? Like, AI token demand? They seem to see, the bulls, anyway, they seem to see inexhaustible demand, like, demand off the charts, demand going to like, go up the exponential and continue in the future. Like, that just seems crazy to me. At some point in time, the exponential eats the rest of the world economy, all the capital we have, and the entire world GDP is just like,

• 57:20Speaker 00

  basically, the AI trade. So I don't know if you have any thoughts on this, but I've been scratching my head, trying to figure out, like, how much longer the AI trade can continue, and whether we're just starting to hit up against the diminishing returns of cost of capital, if that could really slow things down. What do you think?

• 57:43Speaker 01

  So, first thing is that I don't consider myself anywhere near an expert on this, but I'll tell you my view, is that I'm, I'm more on the bull side, is that I think this stuff is going to get bigger and it's going to get crazier. And every previous year that you would have thought that, you would have been right. It's very analogous to early crypto, is that, like, the first instinct you have when you look at this is like, well, Bitcoin can't be worth more than $1 billion. I mean, that would just be crazy. And Bitcoin would be worth $10 billion and $100 billion, a trillion dollars for Bitcoin, that's just crazy. That would mean it's like gold. And yeah, yeah, it does. Like, if you take the AI question seriously, that this stuff is getting potentially rival risk to human intelligence, which I

• 58:26Speaker 01

  think, just use, look, use the frontier models today. It's really obvious that these things are very quickly becoming generally intelligent and capable of doing knowledge work. Now, knowledge work is only one part of the work that we do as, as the human species. It's obviously not the lion's share of the work that is done in the human population. But if you rewind the clock, if you just imagine, what was world GDP being spent on in, you know, 1900? The answer, it was mostly spent on growing human populations, right? Because, you know, humans are what do the work. And so it was, you know, food and clothing and shelter and all the stuff that people do to order to stay alive and supply chains and blah, blah, blah. Like, that, that's what GDP was spent on. That's the reason why

• 59:08Speaker 01

  we made all this wealth is to reinvest it into growing the human population. And we saw this massive population boom over the last 300 years.

• 59:17Speaker 01

  So, once you have labor now being done by AIs, you should expect the same thing to happen. Is that the same amount, like the Ponzi scheme that we saw in human population growth? Where, yeah, you just take all the money, you take all the wealth, and you just reinvest it into making more people? That's crazy. Like, you're just gonna grow exponentially? Yes, yes, you will. That is how labor works. Is that when you actually create a labor machine, you can keep reinvesting into it and growing it and growing it and growing it, and you can create the Ponzi scheme. But do it another time with AI capital, sorry, with AI labor instead of human labor. So, it's very clear. Look, we're not growing the human population anymore.

• 59:57Speaker 01

  You know, by many indications, we've already peaked in the human total fertility rate. So, the human population is probably gonna peak in like 2050 and it's only gonna go down. So, human labor is tapped. This is all the human labor we're ever gonna get. AI labor is gonna be where human civilization grows. And that growth rate is almost, in a way, a handoff. We are handing off the work of growing the future from human labor to AI labor. And is that gonna take a lot of capital and a lot of reinvestment? Almost certainly. And it's gonna happen in large part, I would guess, not just through, okay, we're gonna pull money from other places, but probably we're gonna create new money. Probably it's going to be an expansion of the money supply,

• 1:00:39Speaker 01

  because everybody is going to want to continue investing in this. You know, ultimately, again, to come back to the very beginning of what this is all coming from, which is that money, especially fiat money, is a social fiction. It is an agreement that we all make with each other that, you know what? We're not just gonna denominate our goods in physical stuff. We're gonna take bets together. We're all gonna agree that, you know what? I don't know that it's gonna work out, but I'm gonna believe in you, you're gonna believe in me. And we're gonna all engage in the social fiction that, at the end of the day, we're all gonna get paid. Right? That, that social fiction only works when the money supply being larger than the real stock of goods in society is if everybody agrees the future's gonna have more things than in the past. That's fundamentally what the fiction of money was created for. Right?

• 1:01:22Speaker 01

  Expanding a money supply means that we all agree the future's gonna have more things that we can trade things for in the past will. And if you believe that AI is gonna result in real growth in the economy and material plenty, then it makes sense to do that. So, my answer is that I think that is what is going to happen over the next, you know, 10, 15 years. That's where the money's gonna come from.

• 1:01:44Speaker 00

  I think I broadly agree with you. And that puts us in the position, maybe many listeners in the position, to be long the debasement trade, long crypto, long scarcity, and also long AI. However, Haseeb, that doesn't mean it's a straight line up. And taking an example that we've seen in crypto, where, you know, Bitcoin in 2012 seemed crazy to go to, you know, something approximating gold's market cap, even to $1 trillion, was absolutely bonkers. It was not a straight line up, was it? It was four-year cycles. And so, you could be right, and I think you're right, in the 10- to 15-year, 20-year vision for AI.

• 1:02:26Speaker 00

  That doesn't mean it's going to be a straight line up, though. There could be some resets and some leverage, booms and busts along the way. And I'm kind of wondering if that's what we have in store first. Of course, predicting that is pretty difficult. I'm starting to see some signs, like, I mean, once you go after kind of sovereign debt and capital, once you're in the bond market, how do you get bigger than that? I mean, we're getting to the end of capital for this current era, I think. At least, that's what I'm trying to figure out right now.

• 1:03:00Speaker 01

  Yeah, well, this is something that Dworkesh, in his interview with Dylan, talked about, is that one of the biggest roadblocks for this whole story is not running out of capital, it's running out of rope with governments. Is, you know, we're already starting to see the data center backlash. And, you know, to be honest, right now, this is mild. People complaining about data centers and saying, oh, you can't build in New York, you can't build in this state, you can't build in that state. Okay, well, there's a lot of states. And not only is there a lot of states, there's a lot of countries. If you can't build a data center in the US, you'll build it in Canada, you'll build it in Mexico. You can build it in Malaysia. You can build it anywhere. Like, the reality is that, okay, it just means your chatbots are gonna have a little more latency, round-tripping to Malaysia. But at the end of the day, like, look, if you push out of the US, we'll gladly do it outside the US. You know, like, that's, it's your call.

• 1:03:43Speaker 00

  We'll do it in space.

• 1:03:44Speaker 01

  Build these data centers. Right, exactly. Or in the ocean, you know? There's a lot of places that are gonna be open to these data centers. So, the world's a big place. I'm not actually so worried about that. I think the bigger thing that you're gonna see, look, so, one, Anthropic's going public later this year, almost certainly. And, you know, if you think that there's been volatility in the AI market, you ain't seen nothing yet. Once there's a lab, a real lab, you know, Anthropic is gonna be out there, I think you're gonna see an insane level of volatility in that stock. Because it's just gonna be, you know, the collective fears and imaginations of society in this big Ouija board, you know, controlling the stock. Like, you know, Anthropic writes a blog post and they take out 20% of an entire industry. Right?

• 1:04:27Speaker 01

  Like, this is the most feared company I have ever seen in my life. And that thing is now gonna be public. And so, I think what part of the craziness and the market movements are gonna come from just having these assets in public markets. But the second thing, of course, is gonna be that there's going to be civic and governmental backlash to AI. And a lot of that is gonna result, not just in, okay, these kind of fake roadblocks with data centers, there's gonna be real roadblocks. Right? I mean, we've already had, you know, Besse and coming out and the Commerce Department preventing models from getting released. You know, well, what, you know, why is Commerce Department getting involved in that? But right now, that's what's been happening. We've had export controls. We've had, you know, this is kind of the opening salvoes. Right?

• 1:05:12Speaker 01

  This stuff is still not yet, you know, really that scary. We're gonna get scary models very, very soon. I mean, looking at the OpenAI Hugging Face attack, supposedly, one of the models that was involved in that is gonna get released very soon by OpenAI. So, we are gonna see a step change in the level of capabilities of these models. And that also means a step change in governmental response. And it could well be that you see big, big, big, show-stopping moves from governments that are gonna prevent this thing from really going into hyperdrive as fast as it might.

• 1:05:41Speaker 00

  Haseeb, these are some of the most interesting times I have ever seen in my life. I'm glad you're on at Bankless, subbing for David to talk about this. Actually, you're gonna be on next week, because David has two weeks at Burning Man. So, maybe we can continue the conversation then. Guys, gotta let you know, of course, none of this has been financial advice. You know, crypto is risky. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.