#1071 Murad Mahmudov On Why Bitcoin Will Be Worth Trillions

Murad Mahmudov is the Founder of STFX, a brand new piece of technology that assists with short-term trades. In this conversation. we discuss Bitcoin's rise to a global reserve currency and if the transition will be peaceful or not, building STFX, returning to Twitter, and storylines that will define the next Crypto bull run, ======================= Don't miss Mainnet, the most anticipated crypto event of the year, September 21-23 in New York City. Join 4000+ crypto builders and thought leaders for 3-days of can't-be-missed keynotes, fireside chats, demos, networking, and more. Get $300 off of your pass today by visiting https://mainnet.events and entering promo code "POMP" at check out. See you this fall at Mainnet 2022! ======================== BCB Group is the leading payment services partner for the digital assets industry. BCB Group provides payment services in 30+ currencies, FX, cryptocurrency liquidity, digital asset custody and BLINC, which is BCB’s free, instant settlements network for the BCB client ecosystem. Find out more by visiting bcbgroup.com/pomp ======================= Exodus is leading the world out of the traditional financial system by building beautiful and user-friendly blockchain products. With its focus on design and user experience, Exodus has become one of the most popular and loved cryptocurrency apps. It’s supported on both desktop and mobile, allowing you to sync your wallet across multiple devices so you can have access to your funds anywhere. You can instantly exchange around 100 different cryptocurrencies straight from your wallet. Interactive charts let you view an asset’s price history and your portfolio’s performance over time. And maybe the best part, Exodus is integrated with the Trezor hardware wallet - making advanced security easy for everyone. Visit exodus.com/pomp for your free download or search Exodus on the App Store or Playstore. ======================= Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Compass was founded with the goal of making it easy for everyone to mine bitcoin. Visit https://compassmining.io/ to start mining bitcoin today! ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= If you’re trying to grow and preserve your crypto-wealth, optimizing your taxes is just as lucrative as trying to find the next hidden gem. Alto IRA can help you invest in crypto in tax-advantaged ways to help you preserve your hard earned money. Alto CryptoIRA lets you invest in more than 200 different coins and tokens with all the same tax advantages of an IRA. They make it easy to fund your Alternative IRA or CryptoIRA via your 401(k) or IRA rollover or by contributing directly from your bank account. There are no setup or account fees, and it’s all you need to do to invest in crypto tax free. Let me repeat that again: You can invest in crypto tax free. So, ready to take your investments to the next level? Diversify like the pros and trade without tax headaches. Open an Alto CryptoIRA to invest in crypto tax-free. Just go to https://altoira.com/pomp ========================

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

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Murad Mahavad is the founder of STFX, a brand new piece of technology that helps with short-term trades. In this conversation, we talk about Bitcoin, the rise to a global reserve currency, whether that transition will be peaceful or turbulent, and what he is building as he makes his return back to Twitter in the decentralized finance space. I really enjoyed this conversation with Murad, and I hope you guys enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. This episode is brought to you by Messari. The most anticipated crypto event of the

• 0:43Anthony Pompliano?

  year is back. Join us at MainNet 2022, which is happening September 21st through the 23rd in New York City. You can connect with over 4,000 crypto builders and thought leaders for three days of can't-miss keynotes, fireside chats, demos, networking, and more. This conference, MainNet, brings together a stellar cast of crypto pioneers to speak about the industry's current state and provide projections on the future of Web3. Don't miss a fireside chat between Messari's Ryan Selkis and Ripple's Brad Garlandhouse, and then keynotes from speakers like crypto entrepreneur Balaji Srinivasan and OpenSea's Devin Finzer. You can get $300 off of your pass today by visiting www-mainet/events and you can enter promo

• 1:26Anthony Pompliano?

  code POMP at checkout. That's www-mainet/events and promo code POMP. I'll see you this fall at MainNet 2022. This episode is brought to you by BCB Group. With a dedicated focus on institutional payment services, BCB Group provides business banking, cryptocurrency, and foreign exchange market liquidity for many of the world's largest crypto-engaged financial institutions. BCB business accounts allow businesses to load fiat currency and cryptocurrencies for payments, operations, and trading purposes. BCB's clients can trade FX and cryptocurrencies quickly and at scale with market-leading value. BCB's Blink Network is the European crypto industry's first instance settlements network and one of the first real-time payment

• 2:10Anthony Pompliano?

  Networks of its kind to allow free realtime transactions across fiat and digital currencies. BCB's vision is to empower the global financial revolution through sustainable and innovative banking. You can find out more by visiting bcbgroup.com/pomp today. Again, that's bcbgroup.com/pomp today. Today's episode is brought to you by Exodus, the world's leading desktop, mobile and hardware crypto wallet. They offer beautiful, user-friendly blockchain products that sync across all of your devices, making it easier to send, receive and exchange over 150 or more crypto assets in one place. And with world-class customer service available to you 24/7, Exodus always has your back. But the fun doesn't stop with staking and trading.

• 2:51Anthony Pompliano?

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• 3:18Speaker 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.

• 3:42Anthony Pompliano?

  All right, guys, bang, bang, got Murad here with me. Murad is one of the only people I've ever talked to on the podcast, which after I had a conversation with him, I ran and I bought more Bitcoin, going all the way back to, I think, 2018 is when we had our first conversation. So Murad, I'm happy to get you back. Maybe what we could do is just kind of do an update in terms of your views of the macro environment in Bitcoin. Obviously, there's a whole bunch of stuff that have transpired on kind of legacy financial system. How do you evaluate the current environment and the situation that we find ourselves in now, about two and a half years after the pandemic started?

• 4:15Speaker 02

  So I would say that my bullishness didn't really change whatsoever. Uh, I'm still as bullish as I was in uh November two thousand eighteen. I believe or October two thousand eighteen, I believe it was when we kind of recorded our last podcast. Um, the long-term thesis didn't change at all. If anything, the kind of boom and bust, yet another boom and bust that we've experienced since has only strengthened my resolve. Um, I still think it's a matter of time before Bitcoin takes over. Uh, I still think it's a matter of time before um sort of we end up with

• 4:54Speaker 02

  a slow hyperinflationary scenario. Um, I think we've seen sort of inflations historically, locally. But we are at a point in world's history where things are more interconnected and interdependent than ever. And so because of that, we've never seen a global hyperinflation, right? And what I'm worried about is sort of a situation could be three years from now, could be thirty years from now, but I definitely think it's going to happen in our lifetime. Um, and um, it's hard to say whether the transition is going to be peaceful or sort of more violent. But we have to sort of be prepared for both, both situations.

• 5:33Speaker 02

  Now, of course, we're in the middle of the first quantitative tightening in Bitcoin's sort of twelve, thirteen-year uh history. Now, there, there was a brief period, some, a brief similar of slight quantitative tightening in two thousand eighteen, but nothing that uh we're seeing right now. And generally, I would say, um, yes, of course, Bitcoin isn't so much a direct inflation hedge as it is a proxy for monetary expansion and sort of monetary basis like N two and three. But uh regardless of all of that, I'm still super bullish. I think we are

• 6:14Speaker 02

  In a beginning of a slow bottoming process right now, and it doesn't matter whether we're going to revisit seventeens again or not, I still think we've sort of begun this wide rectangular multi-month period of bottoming across the entire space. And I think today, next month, two months from now, these are generally great times to sort of DCA back into the market.

• 6:40Anthony Pompliano?

  Tell me more about the global hyperinflationary type event. What would that look like? Or what would you be looking for to say, yes, it's happening now?

• 6:50Speaker 02

  Well, first of all, I think we're kind of in the early innings of it. Of course, it's not going to be an overnight thing. It's more likely to kind of also come sort of in these waves of increasing and reducing inflation. But we're already seeing inflation at like 42-year highs. And personally, kind of the official government statistics that we're seeing in the world, I think those are further sort of artificially lower. I think just by looking at the food prices and the real estate prices that I myself am experiencing, I would say things are kind of slowly getting out of control. Now, people

• 7:32Speaker 02

  think that it's because of supply-side reasons. I still think that the majority driver of that is sort of the insanely aggressive monetary expansion that we've seen sort of spring 2020 onward. But essentially, there's a kind of a one of the less spoken about debates in the Bitcoin world is whether the transition from fiat to crypto, whether it's going to be a peaceful one, and there's definitely a path for that as well, or it's going to be more turbulent. Now, in the last three or four months, we're already seeing sort of some civil unrest around the world, Albania, Sri Lanka, Tunisia, Kosovo, Serbia, et

• 8:16Speaker 02

  cetera. And in my opinion, sort of

• 8:21Speaker 02

  If you look at history, rising sort of bread and energy prices have always been the biggest and the most frequent sort of causer of any kind of upheaval or unrest. Right. So definitely just something to consider, definitely something to think about as we sort of move forward in this age of rapid change, I would say.

• 8:44Anthony Pompliano?

  Talk to me about the central banks around the world and their role through market intervention in creating some of these scenarios versus is it external shocks and external event developments that they're simply trying to respond to and you can't really lay fault or blame with the central banks for either the 40 year high of inflation that many countries are seeing or things like a potential recession, which I would argue is a recession in the United States.

• 9:13Speaker 02

  So I believe that a fractional reserve based banking system cannot survive without intermittent interventions of central banks into the economy. As I'm sure many other guests on your podcasts have alluded to in the past, this creates all kinds of distortions when it comes to sort of the correct pricing of goods. More importantly, and something that's less talked about, is I believe that the government intervention in the currency markets, it makes inflation a lot higher than it has to be,

• 9:54Speaker 02

  which in turn, I believe is kind of the primary cause of mental health issues, stress, anxiety, because essentially it forces you at the margin to prioritize short term projects over long term projects. And because of that, people essentially, not just financially, but also psychologically are essentially like living week to week, if not day to day. And that creates a lot of discomfort in people's minds. Right. And I think that this is like one of the, one of the 12, 13 things that is, is less discussed and something that

• 10:35Speaker 02

  hopefully will change for the better once we kind of move to a sounder system in the coming years.

• 10:41Anthony Pompliano?

  You've mentioned a couple of times that that transition could be peaceful, or it could be a little bit more turbulent. What is your kind of description of both of those scenarios? What does the peaceful transition look like? Is it just people start buying something like Bitcoin? And over time, the percentage increases and then everyone starts using that? And then also, what does the turbulent time look like in your opinion, given the facts and information that we have today?

• 11:03Speaker 02

  So I guess I kind of described a similar metaphor a few years back, but effectively, both fiat and Bitcoin are just two balloons, right? And with every boom and bust cycle that we have in Bitcoin, effectively, the peak of each of the bull cycles is essentially an attention wave, right? And with each of those attention waves, usually the majority of the participant, the majority of new participants of each generation in Bitcoin cycles predominantly comes at the top. And it's designed to be that way, right? Because with the top comes the greatest amount of hype, news, marketing, attention, right? And each of these sort of heartbeats, so to speak,

• 11:48Speaker 02

  brings more people from the fiat balloon into the Bitcoin balloon. And the peaceful scenario is one where that transition happens sort of gently, slowly, gradually. And instead of a large number of people in the world being caught off guard by sort of the entirety of the current monetary paradigm sort of blowing apart, you have a relatively sizable chunk of them already in the Bitcoin system or in the cryptocurrency system. And the infrastructure to move from one to another is already sort of very well established.

• 12:31Speaker 02

  And sort of that movement of air, so to speak, from one balloon to another, it happens gradually, steadily, peacefully. And fiat, instead of exploding, so to speak, it slowly sort of fades into irrelevance instead, right?

• 12:50Speaker 02

  I don't know how realistic that is. Of course, that is the preferable way. But I think a darker pill, so to speak, is that the very existence of Bitcoin is probably going to end up accelerating, a more rapid and sort of explosive collapse of the current monetary system, in my opinion, right? Now, we don't know when that's going to happen, but like I said, I think it's going to happen in the next several decades. But personally, I lean towards sort of a more turbulent scenario.

• 13:24Anthony Pompliano?

  And as that plays out, what is the role of Bitcoin in relationship to nation-states or central banks? Is it something where the more turbulent it becomes, the more likely they are to kind of capitulate and purchase it? Is it something that they will avoid because there's a confidence game and kind of fractional reserve banking and fiat currencies? How do you see those relationships playing out?

• 13:45Speaker 02

  So we need to understand that governments, at the end of the day, are composed of individuals, right? Let's say, for simplicity's sake, a government is by 1,000 people. We need to remember that what's best for the government is not necessarily what's best for each of those individual people. So the ideal scenario is one where a lot of the people around the world, including some of the government officials and government institutions, start sort of capitulating from fiat into accumulating Bitcoin themselves. And then it sort of collapses from the inside, where the interests of the participants

• 14:29Speaker 02

  start to starkly diverge from the interests of the group as a whole, right? But like I said, both fiat and Bitcoin are effectively competing money products. And let's, if we just ignore governments for a second, as an individual, you're seeing one sort of hyperinflated way, while the other is steadily, across sort of medium-long timeframes, is appreciating in value. And effectively, it's just a matter of time before people put both on the shelf and kind of realize that B is better than A, right? And I think it will only accelerate the process of sort of governments capitulating into it as well. Finally enough,

• 15:13Speaker 02

  Since 2017, people said that first it will be like savvy technological retail, then it will be sort of savvy VCs, then it will be sort of more established institutions, and then finally it will be sovereign wealth funds. But it's possible. Now, I don't have, I don't know of any confirmed rumors. Of course, there is sort of some things that we are hearing here and there, but we can't know for sure until official announcements. I wouldn't be surprised if there are a number of sovereign wealth funds that are sort of slowly accumulating already, and it makes all the sort of mathematical sense in the world to allocate 1% or even less than 1% to kind of this asset class already. But yeah, I think, I, I, I think the governments will facilitate into it in, in due time.

• 15:58Anthony Pompliano?

  Talk to me about mining. Obviously, there's a number of nation-states that are rumored to be participating in various forms. Some, you know, kind of prototyping and testing, others openly doing it, like a country like El Salvador. How do you see mining and nation-state participation, kind of the level of importance there?

• 16:16Speaker 02

  I think China made a very big mistake by effectively letting a really big chunk of the market move to the United States, Europe, and other places. We've really seen a sort of a, we're seeing sort of a slight renaissance in American miners. And I think it's probably better for Bitcoin, for the mining infrastructure, to be predominantly existing in a nation with more established sort of property rights and freedoms. Now, of course, there's still mining going on in China, right?

• 16:58Speaker 02

  But the sort of the, the official, the waves of official bans that we've seen from the, from the Chinese central government, and even the Chinese entrepreneurs themselves, frequently posting pictures from like Iceland, Finland, Sweden, and the United States itself these days on social media. I think 10 years from now, China will realize that they've made a strategic You can stake in this regard.

• 17:24Anthony Pompliano?

  When we talked back in 2018, Bitcoin's price was somewhere between, I don't know, $3,000, $5,000. It ran all the way up to $69,000 in the couple of years since then. We're now sitting somewhere in the $20,000 range. The price action for a trader obviously would be super interesting. But one of the pieces of our conversation back in 2018 was the demonetization of other stores of value. And you laid out an argument and a framework to see Bitcoin continue to rise in value. And measured by market cap, could reach, you know, hundreds of trillions of dollars or over $100 trillion in value as it demonetized these other store of value. That would lead to a Bitcoin price measured in millions of dollars per individual Bitcoin.

• 18:08Anthony Pompliano?

  And I think a lot of people kind of said, wow, that's a pretty interesting thesis. It's a pretty bullish thesis and they were drawn to it. What is your kind of analysis of the progress along that thesis from 2018 to today? So about four years, you know, three and a half years after you kind of originally laid that out. Do you feel like we're still moving along kind of that same thesis and generally believe the same thing?

• 18:32Speaker 02

  So I would say like, if the odds of it happening in my head were like 30% back then, they are like 50% now. So I would say it's even higher now. Every time Bitcoin grows in market cap, market cap is effectively symbolizing the amount of attention, the amount of eyeballs that are looking at this thing. And so the fact that we've went from 5,000 to 69,000, back to 20,000 right now in the last three years, has only strengthened the bullet points that I was bringing up three years ago. And the fact that there are so many more participants now, the infrastructure is even more mature,

• 19:15Speaker 02

  the amount of institutions is even bigger, the amount of sort of famous celebrities and financiers and other sort of individuals that are participating and supporting the ecosystem is even greater now. Essentially, the chances of everything I was talking about in 2018 have only increased since then. Simple as that. In my opinion, all the bullet points still stand. And the eventual market cap measured in today's dollars being over 100 trillion is completely realistic.

• 19:48Anthony Pompliano?

  And when you see that 100 trillion number, it's a big number. What is the expectation timeline wise? You said the probability of it happening has increased. Do you still keep kind of a multi decade view from a timing standpoint? Or has that been pulled forward at all, given what we've seen transpire over the last three years?

• 20:06Speaker 02

  I think to manage the expectations, I think somewhere between 10 to 20 years is a realistic possibility. Could take a little bit longer, could even happen faster. But something to the tune of 15 to 20 years, I think is definitely possible. We need to realize that this is like a long term game. And 400 year old currency paradigms don't collapse overnight. So of course it's going to take time. But the fact that there's internet right now. And the fact that these very technologies are decentralized is going to make it faster than it would have otherwise happened.

• 20:43Anthony Pompliano?

  And when you look over the last three years, are there any negative surprises? In your opinion, kind of the development of Bitcoin or the adoption of Bitcoin? Is there anything that's happened that you're like, you know, I didn't expect that to happen? Or maybe it is a negative view of the progress to date?

• 20:58Speaker 02

  So Bitcoin likes when central bank prints money and it doesn't like when they contract the money supply. Now, the following is going to sound a little bit simplistic. But it does seem that Bitcoin is even more sensitive to contractions than how sensitive it is to expansions. Now, of course, there's other variables that play like the stock markets sort of collapsing as well. And the tech, like the tech industry also kind of experiencing some downturns. But that's kind of one thing to think about. The other thing to think about is, the second thing I mentioned as well is Bitcoin has become highly correlated with other sort of risk assets in people's portfolios.

• 21:44Speaker 02

  But ultimately, I think it was a bit of an inevitability as Bitcoin kind of matured into a trillion dollar asset, right? Now, I think we are still in this middle ground where we are going to mimic sort of.

• 22:02Speaker 02

  A leveraged technology stock still for the next several years. But ultimately, I still think that Bitcoin is first and foremost correlated with kind of the global central bank monetary aggregates and to, to be most specific. So if that continues to expand, which over the medium to long term, I believe it will, Bitcoin price will continue going higher, in my opinion, nevertheless.

• 22:30Anthony Pompliano?

  The last thing I want to talk about Bitcoin before we talk about what we're working on now is leverage. And obviously, when there's leverage in a system, you usually can't see the leverage if you're a market observer, or it's very difficult to identify. In the Bitcoin and kind of broader crypto ecosystem, many times it is actually much easier to see that leverage. And then when you couple that with wild price swings, both to the upside and downside, one, it acts as an incentive for people to take on more and more leverage, but also, two, there's kind of punishment on the other side. Back in 2020, obviously, you shut down a fund. And then you've kind of watched over the last three years as you've continued to invest in the ecosystem and in the industry. What's your thought process around leverage today?

• 23:14Anthony Pompliano?

  How have past experiences kind of changed your opinion about leverage? And then what do you really look at in terms of leverage over the last couple of weeks or months in the Bitcoin ecosystem as we've seen a number of existing businesses kind of get forced liquidated due to levers that they had?

• 23:29Speaker 02

  Yeah. So if you have leverage, your sort of, your outcome's path dependent. And if you're only holding spot, your outcome is not path dependent, really. Especially in the medium to long term. So I've experienced the dangers of excessive leverage firsthand, as many of you may know. But I think despite any kind of failures or challenges that you may face in life, you simply have to kind of stand up and try again and again and again until you succeed. I would say that actually leverage has become a little bit more opaque.

• 24:15Speaker 02

  In uh two thousand twenty to two thousand twenty one. And the reason I say that is because at least in the two thousand eighteen, two thousand nineteen era, the majority of leverage existed on centralized exchanges, which still shared a lot of the sort of open interest and average leverage and sort of the long-short ratios and different kinds of analytics with the end consumers. So, yes, of course, every transaction is not transparent on a centralized exchange, but they did share the aggregate values with the market. And kind of a lot of quantitative analysts could extrapolate that data with um

• 24:57Speaker 02

  the amount of leverage in the system, uh so some useful ratios where the key equitation points are, etc. Unfortunately, I think with some of the sort of the Celsius uh Voyager, Three Arrows Kappa, other stuff we've seen in sort of two thousand twenty uh twenty one, twenty two, um a lot of that stuff was a lot more opaque. Because even though a lot of these entities describe themselves as C5, um the public or the average market participant wasn't privy to their books, uh their loans, sort of the aggressiveness uh of of of the of the debts involved, of their average sort of leverage ratios there.

• 25:40Speaker 02

  And so it's probably for the better that that got got sort of washed out of the system. Every sort of bottom, every every approximate bottom of a of a global bear market always has entities capitulating. And I I've experienced something like that firsthand. But ultimately, it just leads hmm. It's kind of the pain going away and opens up the door to new market market participants kind of scooping up the coins at cheap prices. So um it's just like like I said, the the inevitable symptoms of of of the bottoming cycle.

• 26:17Anthony Pompliano?

  I recently was listening to an interview and Jerry Seinfeld, of all people, was talking to Tim Ferriss and in it, he said that pain is information or education rushing in. And he used the example of when you stub your toe, it is the world telling you, hey, there's a bedpost there that you didn't think was there. And it's kind of a feedback loop. When I hear you talk about pain, when it comes to trading and leverage, same thing, right? Kind of information and education rushing in. And obviously, nobody wants to experience that. But I think it's kind of a fair way to look at some of that pain and what some of the optimistic takeaways of it could be. Is that fair?

• 26:54Speaker 02

  Yes. These things are very, very expensive lessons.

• 26:58Anthony Pompliano?

  Yeah. When you think about kind of the market today, you now are building something that uses some of the same technologies, but is quite different as well. Talk to me a little bit about kind of your journey from what most people would know in terms of the most hardcore, most optimistic Bitcoin bull, maybe they've ever heard speak into a microphone, to now somebody who is incredibly bullish about Bitcoin, but also has become excited about other parts of the industry as well. What has that journey been like? And maybe talk a little bit in terms of how you get to the idea you're working on now?

• 27:31Speaker 02

  Yeah. So obviously, we've had a very big DeFi summer in the summer of 2020. I myself have gotten sort of more interested in that subspace of the industry towards the end of 2020, more so early 2021. One of the things I disagree with sort of your more vanilla Bitcoin maximus is that absolutely everything else in the space is a scam other than Bitcoin. Because I think that even if Bitcoin becomes the dominant store of value and the dominant currency, there's still going to be other on-chain businesses. Now, whether you like it or not, or whether that diverts attention from people only buying and only studying Bitcoin, doesn't matter. The on-chain businesses will still exist. The idea that there won't be revenue-producing and revenue-sharing and cash flow-positive

• 28:15Speaker 02

  blockchain businesses, whether those exist on Bitcoin or in any other chain, is completely preposterous. And I think that actually, the next cycle will be defined by sort of decentralized applications. That make consistent money and share that money with sort of their community. And I'm actually very excited, like if if we ignore sort of the store of value discussions and and currencies per se. I'm very excited by any kind of DeFi application that can enable, that can maintain, that can create and maintain a moat. And that have sort of consistent, consistent fee generation. I think those are very powerful and very exciting. The fact that you can sort of build a business that's completely untethered to physical objects, essentially.

• 28:58Speaker 02

  And even compared to the fintechs of the two thousand and tens, you don't really even need a bank account to run any of this stuff. Uh, you really just need a bunch of computers and a bunch of discords and then that's it. And so I think that's unbelievably exciting. I'm building something similar in this space as well. Uh, our project is called STFX. Essentially, it's a it's a completely new way to do short term asset management. So since two thousand and sixteen, there have been many um asset management products in the Ethereum and other ecosystems. However, um, the collective TVL of all active asset, asset management products in the space right now is fifty million, which is essentially nothing. And the reason for that, I believe, and I don't want to go through the entire list.

• 29:43Speaker 02

  I I wrote a Medium article kind of describing the twelve reasons why this is the case, but essentially, um. People don't want to wait for years uh in in in any kind of a D five vault or in any kind of a vehicle. Uh, they want something faster and something with a faster feedback loop. So what is a traditional fund? It's something that usually lasts for two, three years or more. Something that thus far, at least in crypto, meant you hold a portfolio of Bitcoin and maybe ten, fifteen other altcoins and you kind of rotate between them. Um, and something that's continuous, right? Something that's portfolio style. Essentially, you can think of every fund as a series of seventy or two hundred trades, right?

• 30:28Speaker 02

  Instead of doing a fund on chain, we're doing something we call single trade funds. So think about it as if you would sit down with the lawyers in the real. World, structure fund, go through fundraising process, load up the funds through your exchange, execute just one trade, and as soon as that one trade is done, the investors receive their proportional P and L. You sit down back with the lawyers to kind of wind down the fund. Uh, and essentially, we do that, but it all happens in minutes, right? And the decentralized exchanges, particularly those that focus on derivatives, have finally matured to a point in the middle of two thousand twenty-one, where what I'm describing has finally become possible.

• 31:10Speaker 02

  Um, I think on-chain funds in the classical sense of the world are boring. So we are doing kind of on-chain managed trades instead. And instead of people waiting for two years, uh, they only have to wait a couple of days to a couple of weeks to kind of see the result of their investment. We think that's a lot more exciting. So if traditional funds are molecules, we're trying to build atoms, right? And if traditional funds are kind of twenty-minute YouTube videos, we're trying to kind of build the TikTok of asset management. Uh, on top of that, the other way to think about it is kind of deep by since two thousand twenty-one has kind of been undergoing a voltification of everything moment.

• 31:48Speaker 02

  This means that many different kinds of on-chain strategies have been packaged into vaults and kind of, uh, made investable. We've seen that with leveraged yield farming, with managed, uh, with liquidity management. We've seen that with, most famously with options. But we're trying to do something similar, but with directional trading, and we're making it completely permissionless. So I'm super, super excited. Uh, if you want to learn more, join our Discord, uh, discord dot G G S T F X.

• 32:15Anthony Pompliano?

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• 33:00Anthony Pompliano?

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• 33:45Anthony Pompliano?

  Go to altoira.com slash pomp. That's A L T O I R A dot com slash pomp. Start investing today. So when you think about these short term trades, I've got a whole bunch of questions. And as many people know, I invested mainly because you said you were doing something and I didn't, I don't even think I asked you necessarily what you were doing as much as just if you're doing something I'm in. But when you start to look at the short term trade, is there anything you can look at in the legacy world that would be kind of a proxy or a comparison? Or is this something that's brand new that wouldn't be possible without this technology?

• 34:27Speaker 02

  Yeah, that's a great question. I've said many times on Twitter that the use like the crypto use cases that I'm most excited about are those that are completely fresh, new and unique, and are specifically arising for the first time because of sort of the convergence of these technologies. I personally don't think there's anything in trad where that can compare. Some of the closest kind of parallels or metaphors that I can make is you know how Angel List is a place to develop vehicles to invest in startups?

• 35:00Speaker 02

  Now Angel List even had vehicles developed for people to come together and to invest in just one startup, right? So there have been funds that just focused on investing in one startup. You can think of our platform as Angel List for trades. So instead of investing in startups, you're investing in a trade idea and you're sort of essentially giving someone access to funds in a non-custodial manner. So obviously they can withdraw or run away with it, but they can manage it, right? You're essentially giving somebody access to a portion of your funds for between two days and two weeks. And essentially during that relatively short-term time period,

• 35:42Speaker 02

  they're going to be executing on their proposed trading idea. The other way to think about it is you can think of it as a Kickstarter for trades, right? Instead of Kickstarter for charities, this is a Kickstarter for trades. And the other kind of the last but not least parallel that I can draw is if you've ever used TradingView, you've ever been on the TradingView Ideas page, we're trying to build something like TradingView Ideas, but that's very easily fundraiseable and investable in one click.

• 36:11Anthony Pompliano?

  When you start to see people doing this, what prevents me as an individual, if somebody pitches me on a single trade, kind of going around them and just doing the trade myself? Is it the complexity? Is it a cost thing? Is it an access thing? Like what kind of keeps me, as we see in private markets all the time, people say, hey, I want to invest in this company. Oh, that's a great idea. And they try to go around the kind of fund manager. What, how do you think about that?

• 36:40Speaker 02

  Yeah, so every single STF, what we call them, single trade funds, they're going to have a relatively brief fundraising period where anybody in the world essentially can invest into those vehicles. Some of the charts, the price seeds, the fees, the direction, the asset that the manager uses to incentivize people to invest in their STFs, there are, some of them are going to be binding, And the direction, but some of them are not going to be binding, right? Ultimately, the STF is going to be managed and executed discretionarily by the manager in real time via market orders and not set in advance via limit orders.

• 37:24Speaker 02

  So even if they said they're going to enter it, let's say forty, ultimately, the manager is going to decide when to enter and you never know when that's going to be the case. Additionally, on top of that, we are going to be letting managers hide one of the parameters of the trade. And as they build a greater reputation and greater capacities, they'll be able to hide two or even more of the parameters of the trade. Additionally, we're building on layer twos. So kind of the actual execution is going to happen a lot faster than if it was to happen on layer ones.

• 37:58Anthony Pompliano?

  And as people do this, are there simple trades like just like, hey, I think right now is a good time to buy Bitcoin and I'm going to hold it for, you know, three days and kind of just go long only and it's more like a timing thing? Or is there other complexities that you think certain types of asset managers or kind of those with trade ideas will be attracted to this structure?

• 38:20Speaker 02

  So just like you said, I think timing is probably the single biggest service that the managers will technically be giving to their clients. So it's timing of the entry, timing of the exit and kind of shepherding the trade in between. So things like trailing the stop losses and kind of exiting earlier than originally anticipated or even not deploying to the trade idea at all, or deploying earlier than they planned or at a different price than they planned, et cetera. So yes, it's not just about ideation. Execution and specifically timing are the biggest services that are provided here.

• 38:58Speaker 02

  We are starting off with Perps, Perpetual Futures, simply because it's already the most well-known, most well-understood, highest volume, highest liquidity product in crypto. But we think that if that finds product market fit, the single trade funds can of course expand to spot options.

• 39:19Speaker 02

  NFTs even as well as more complex trades like longing and shorting something at the same time and different kinds of simultaneous spreads, things like that.

• 39:30Anthony Pompliano?

  How do fees work? What do you think the fees that folks will charge? Like, why will the fund managers do this? How do they make money? And then also, what does that technically? Is that just an on-chain streaming payment type mechanism? Or is there some other way that the fees are transferred between different market participants?

• 39:47Speaker 02

  So currently, we're thinking that managers will receive around 16% to 17% of the profits that they generate. And the platform that we're building is going to be taking 3% to 4% of the performance fees. And that's simply the default values. As the manager grows in their reputation, aka capacity, we are going to be charging them progressively less fees, right? So the bigger and more successful you become, the less of the performance fees that you have to share. Similarly, on the investor side, we're going to be charging

• 40:27Speaker 02

  a modest management fee as well. And similarly to the manager's side, the more and the better that you invest as an investor, your fees start to quickly reduce as well. So we charge a small fee on both sides, but as you sort of level up on either of the classes, the fees that you have to pay start to reduce.

• 40:52Anthony Pompliano?

  Got it. What is the biggest risk that you see right now with STFX? And how do you guys try to mitigate that risk?

• 41:00Speaker 02

  I think at this stage, ensuring that we have successful product-market fit is the most important thing. Like I said, we have been following, we've been trying to be opinionated and trying to develop this product in a lean manner. We're starting off with perps because I think by utilizing other D-dexes, we can enable people to use mild leverage on top of their STX as well. I think just given the current demographic of the space that makes it more exciting and makes it more likely to find product market fit than purely spot focused on chain asset management

• 41:40Speaker 02

  products that we've seen since 2016, 2017. And essentially, it's making sure that the UX or the user experience is as smoothless, is as smooth and kind of flawless as possible. So these are like the top two things that I'm currently most focused on.

• 42:00Anthony Pompliano?

  Yeah. And talk to me about the team. What are some of the backgrounds of folks who are working on this? How much of it is a technical kind of innovation or body of work versus maybe more finance related or market related?

• 42:11Speaker 02

  So we currently have almost 20 people. I believe it's 18 or 19 right now. Half of the team is anon and half of the team is DOCS. So I'm clearly one of the DOCS people. But other than myself, there I've essentially been building this side by side with six people since February and we've kind of been growing the team steadily since then. Currently, we have five engineers and over 10 people on the sort of the business marketing design UX community side of things. We have a couple of folks that used to work at Snapchat, an

• 42:52Speaker 02

  ex-Yelp individual and sort of a number of people that have worked in DeFi on things like PancakeSwap and sort of other, other popular DeFi protocols.

• 43:04Anthony Pompliano?

  Got it. And as you begin to look at the market, you mentioned earlier that decentralized applications will lead or kind of be a big piece of the next bull market here. How do you see STFX fitting into kind of the next bull market? Is it an expectation that this will become one of the dominant kind of applications? It's something where you're really just targeting a specific use case?

• 43:27Speaker 02

  Yeah. So our ultimate goal is to turn single trade funds into this new financial vehicle, financial primitive, or a money Lego, like they call it in DeFi. And I think that it's very interesting what we're trying to do because essentially

• 43:47Speaker 02

  We are on a mission to unbundle the fund, right? We're trying to take the idea of a fund and use blockchain tech to turn it into a much smaller, shorter, faster, and more compartmentalized, focused, discreet vehicle, right? Now, I think they often say about technology that some of the kind of new breakthroughs, they come and they start looking like silly toys or silly games. And I think that this has been the case with a lot of like DeFi thus far. But I think if we start getting consistent volumes and prove ourselves, this has all the chance in the world of becoming sort of this new mini asset class,

• 44:30Speaker 02

  or rather, this new financial vehicle, right? You can think of it as an unusual fund structure.

• 44:37Anthony Pompliano?

  My last question for you is around regulation. Obviously, one of the, you know, big things that seems to be coming out of a lot of the contagion that we've watched play out in the last couple of months in the crypto ecosystem is more likely increases in disclosures and more regulatory scrutiny. How do you view what you're building now, kind of in that regulatory backdrop? What is the types of participants? Do they have to be accredited, non-accredited, US, non-US? What's kind of the breakdown there?

• 45:06Speaker 02

  Yeah, so first of all, before anybody can connect their wallet to the platform, they need to acknowledge sort of all of our terms and conditions. Among many other contingencies, our terms and conditions, our disclosures, disclaimers, risks, privacy policies, as well as the website itself, will make you kind of agree that you are not from one of the sanctioned countries, you're not from the United States, you're not from sort of Cuba, Iran, I believe Venezuela, a couple of other countries, et cetera. So obviously, we cannot, because this is a completely decentralized world, we cannot account for every single user.

• 45:50Speaker 02

  But we have been learning from other successful DeFi protocols and DeFi DAOs thus far, and kind of taking the lessons learned from them, trying to imitate them to the point that is kind of reasonable and appropriate.

• 46:04Anthony Pompliano?

  As you begin to look at kind of the current state of the ecosystem, you mentioned some bottoming that you think is either playing out or started to play out at least. Give us kind of your view over the end of the year. So we're recording this, you know, beginning of August of 2022. The next six months, what do you think is kind of the view there?

• 46:26Speaker 02

  So I personally publicly started to get some exposure in the 17,000s. Did I go all in? Not yet. Do I still have some fiat on the sidelines? Yes. Am I going to sort of slowly continue getting into the market? Yes. I think, do I know for a fact whether 17.5 was the ultimate bottom or not? No. I think most bottoms are these wide rectangles. That's just the way it is. And I think that we have kind of like gotten into that tube, so to speak. So my view is that for the next half a year, we're going to be pretty much ranging rightwards.

• 47:11Speaker 02

  I'm not 100% sure whether the stock market has already bottomed. I lean towards more of a no than a yes. But regardless, I think, super loosely speaking, I believe that that 20,000 peak that we had in 2017, which was resistance, is going to be flipped into support. Right? Even if we quickly go to 17 or 15, doesn't matter. I think this kind of general 20K area is going to flip into support. And kind of this has begun happening right now. So I think that kind of buying slightly above 20 or slightly below 20, I think that's a great time to get in because in the next four to six years, I think we're still going to be higher than today.

• 47:50Anthony Pompliano?

  Yeah, I think that that is a fairly safe view of the world. But we will see, as you and I both know over the years. Best way to be surprised is to think one thing in this industry and think that there's no other possibility. Where can we send folks to find you on the internet or find out more about STFX as you continue to build it?

• 48:11Speaker 02

  Yeah, so I'm on Twitter at MustStopMurad. That's M U R A D. And you can find all the relevant links there. DMs are open, so happy to talk to anybody who's interested about any topic.

• 48:23Anthony Pompliano?

  My friend, that is a very appropriate Twitter handle because no one can stop you. So keep going and it's great to have you back and publicly kind of talking about a lot of this stuff. And I know a lot of folks, I've learned a lot from you. So we're all excited to kind of see what you continue to build with STFX and then also continue to see your thoughts around Bitcoin as it appears to continue to do what it was designed to do.

• 48:48Speaker 02

  For sure. Thank you so much for having me. Once again, after all these years and sort of excited to continue the conversation flowing whenever you're interested.

• 48:58Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player. And if you're looking to transition into a brand new job in the Bitcoin or crypto industry, we've got you covered. Head over to thecryptoacademy.io. My team and I have been working with the top HR teams in the industry to develop an intensive three-week training program with over 50 live events. We teach you exactly what you need to know to break into the industry, including live interview prep and resume review. Our students have been hired at over 75 of the world's best Bitcoin and crypto companies. Go to thecryptoacademy.io to learn more. Again, that's thecryptoacademy.io. If you enjoyed today's episode, make sure you share it with your friends and I'll see you all for the next episode.