David Mercer On How Institutions Will Make Bitcoin Price Explode #902

David Mercer is the CEO of LMAX Group. In this conversation, we discuss the Bitcoin spot market, massive amount of Institutional capital going through LMAX, regulation, The Russia/Ukraine conflict, and where David sees the industry going in the next decade. ======================= Since 2018 Copper has been at the forefront of institutional digital asset development. From award winning custody solutions, to creating the first truly off-exchange settlement function, Copper pioneers technology, products, and services, in lock-step with a rapidly changing world. No other infrastructure provider covers as many assets, across as many exchanges, with the speed and security that Copper can offer. To learn how Copper helps the world’s largest institutional investors secure their digital assets, head over to copper.co Copper - the unfair advantage. ======================= 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 http://compassmining.io to start mining bitcoin today! ======================= Bullish is a powerful new digital asset exchange built for institutions that delivers the innovations of DeFi in a regulated environment. The Bullish Hybrid Order Book pairs the high-performance of a traditional Central Limit Order Book with automated market making. Powered by deep Bullish Liquidity Pools, backed by the multi-billion dollar Bullish Treasury. So, you can trade with certainty and at scale across variable market conditions. Learn more at Bullish.com or follow @Bullish on Twitter. Because the future belongs to the bullish. *Not investment advice. Digital assets and cryptocurrencies are high risk products. Consult your professional advisor before dealing in them. Bullish’s services are available in select locations only and not to U. S persons. Visit https://bullish.com/legal for important information and risk warnings =======================

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. David Mercer is the founder and CEO of LMAX Group, which also owns LMAX Digital. In this conversation, we talk about Bitcoin spot market, all of the trading volume going through LMAX, institutional adoption, the Russia-Ukraine conflict, and what David thinks is the single most important thing to get more institutions into the crypto market. I really enjoyed this conversation with David, and I hope you enjoy it as well. Before we get into this episode, though, I want to first talk about our sponsors. Today's episode is brought to you by Copper. Since 2018, Copper has been at the forefront of institutional digital asset development. From award-winning custody solutions to creating

• 0:46Anthony Pompliano?

  the first truly off-exchange settlement function, Copper pioneers technology, products, and services in lockstep with a rapidly changing world. No other infrastructure provider covers as many assets across as many exchanges with the speed and security that Copper can offer. To learn how Copper helps the world's largest institutional investors secure their digital assets, head over to copper.co. Again, Copper, the unfair advantage. Check them out at copper.co today. Next up is Compass Mining. Compass Mining is the world's largest marketplace for mining hardware and hosting. With Compass, everyone can mine Bitcoin. Their team makes it easy to start mining wherever you want, at home or in one of their

• 1:28Anthony Pompliano?

  23 hosting facilities around the world. Through the Compass Marketplace, retail miners can access mining hardware with similar prices and purchase plans as the world's largest mining companies. Compass miners own their machines, they choose whatever mining pool they want, and they mine directly to their own wallets. Miners who don't want to host their machines can order ASICs directly to their doorstep. Simple and low-cost hosting agreements, coupled with best-in-class customer service, are the reasons why Compass is the simplest and most popular way to mine Bitcoin. Start mining your own Bitcoin today by visiting compassmining.io. Again, compassmining.io. Go check them out and let me know what you think. This episode is brought to you by Bullish.

• 2:12Anthony Pompliano?

  Bullish is a powerful new digital asset exchange built for institutions that delivers the innovations of DeFi in a regulated environment. The Bullish hybrid order book pairs the high performance of a traditional central limit order book with the automated market making powered by deep Bullish liquidity pools backed by the multi-billion dollar Bullish treasury. So you can trade with certainty and at scale across variable market conditions. You can learn more at bullish.com or follow bullish on Twitter because the future belongs to the bullish. Now, this is not investment advice. Digital assets and cryptocurrencies are high risk products. Consult your professional advisor before dealing in them. Bullish's services are available in select locations only and not to U.S. persons. Visit bullish.com/legal for important information and risk warnings.

• 2:56Anthony Pompliano?

  Go check them out at bullish.com or follow at bullish on Twitter. All right, let's get in this episode. I hope you guys enjoy this one.

• 3:02Speaker 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.

• 3:25Anthony Pompliano?

  Mr. Mercer, how are you?

• 3:27Speaker 02

  Good to see you, my friend.

• 3:28Anthony Pompliano?

  I'm good. Listen, I'm excited about this. I have stats. I want to play a game with you.

• 3:33Speaker 02

  Okay, let's go.

• 3:34Anthony Pompliano?

  For those that don't know, David Mercer is the founder, CEO of LMAX Group. LMAX Group owns LMAX Digital along with a ton of other foreign currency exchanges. I would argue, I can say this, I don't think you can. You guys are the largest or one of the largest infrastructure providers or market makers or market providers in foreign currencies. You also happen to be quite popular in the crypto world as well.

• 4:04Speaker 02

  Not popular enough.

• 4:06Anthony Pompliano?

  No retail, all institutions.

• 4:08Speaker 02

  Correct.

• 4:09Anthony Pompliano?

  All right. So I like that you guys put these together. I basically, I don't pay attention to any of the stats that LMAX Digital's Twitter account tweets all month and I wait for the monthly report and I go through and I look at it. And in the month of March, you guys did $20 billion in total notional volume.

• 4:30Anthony Pompliano?

  On you were 74 trades away, 174 trades away from 3 million trades in the month. And you traded in an equivalent of 482,000 Bitcoin. And this year alone, already year to date, you've done $66 billion. These are like bonkers numbers compared to most other exchanges.

• 4:54Speaker 02

  Been a slow year though, compared to sort of last year, you know, we need Q1 21. Right. So our best month ever, we did 60 billion. We call a billion a yard in FX, right? So sort of 60 yards is where we want to get to, you know? So 20 yards for me is kind of disappointing, but you know, you can't change the market. I guess it's been a sort of slow starts of the year.

• 5:14Anthony Pompliano?

  Why do you think that it's been a slower start? Is it just price related? Is it macro, like Fed policy, interest rates stuff?

• 5:22Speaker 02

  I think that's right. I mean, you know, as well as I do, if you're looking at it, it's kind of been directionless. Most of the year, okay, we got sold off a bit. Everyone's worried about the macro side, inflation. Of course you've got the war in Ukraine. So Bitcoin, particularly at the moment, I mean, the whole asset class is driven by Bitcoin. We like to think that it's going to be a store of value asset. We like to think it's going to be, you know, digital gold. Everyone talks about it, but actually it's a risk on off asset class. So like stocks, if you chart the S and P or the NASDAQ versus say Bitcoin, you're just seeing the same price action, just a bit of a lag. So that's meant it's been directionless.

• 6:04Speaker 02

  I think now Dogon buying a whole bunch of Bitcoin has helped. Well, look, from the start of the year to now, we're basically unch, right? So it's whatever, whatever it is now, 46,000, it's basically unchanged in the year. We're still waiting for that.

• 6:21Speaker 02

  Influx of real institutional money because that's going to make it pop.

• 6:25Anthony Pompliano?

  If Do Kwon from Terra with only $3 billion, I'd say only, but in the institutional world, it's not really that much money. If he can have the impact that he's had over the last, I don't know, five weeks or whatever it's been.

• 6:38Speaker 02

  Yeah.

• 6:39Anthony Pompliano?

  When institutions show up with real size, does Bitcoin go to a million dollars a coin?

• 6:44Speaker 02

  You're going to be happy. I'm not even sure you're going to be doing this podcast anymore. That's all I know. You're like, David, it's been nice knowing you, but I'm on a beach.

• 6:53Anthony Pompliano?

  What do you think happens though?

• 6:55Speaker 02

  It's going to explode, Anthony. I mean, look, so here's the, I've said it again, I think, before on your show, there are $200 trillion of assets in custody today. That's a fact. The three biggest custodians in the world are the three, you know, three, three biggest custodian banks are, you know, State Street, Bank of New York Mellon, JP Morgan, they control 100 trillion. There are 500 institutions in the world that matter. Total market cap of crypto today, 2 trillion, 1% of those assets in custody. I know all these names are looking to enter the market. I know all their customers and their investors want access to crypto. So

• 7:34Speaker 02

  if just 5% of those assets in custody go into crypto, it's very simple. The market cap of the asset class has to be $10 trillion. That's 5X where we are today. So what happens to the price? You know, as I say, and you get the keys and lock the door here.

• 7:53Anthony Pompliano?

  I mean, I completely agree, obviously. What I think is fascinating, I was talking to a pretty large hedge fund manager recently, and his perspective on crypto was like, I'm not anti crypto. I just know what I'm good at and where I have an advantage, and that's in equities. And so I'm going to stick to investing in equities. But it's interesting to me, help me understand. And he knew that there was 21 million Bitcoin. He understood the idea of supply demand, obviously.

• 8:25Anthony Pompliano?

  When I started to explain the on-chain metrics and the ability to see the illiquidity in the market, he kind of, you know, he perked up a little bit, right? And he started to say, so you basically have like the structural liquidity, but then you have like the actual market liquidity and you can start to basically analyze which people have what historical holding versus selling patterns, how much illiquidity, how long, when did they buy, what was the price? And I was like, it's all right down the blockchain. And you could just see him being like, I'm still an equity guy.

• 8:59Speaker 02

  Yeah.

• 8:59Anthony Pompliano?

  But like, there's more information available here that could better inform various decisions. And so when I see, when I take that as kind of an anecdotal point from a conversation, in your guys' metrics, you break out the average trade size by instrument.

• 9:17Speaker 02

  Yeah.

• 9:18Anthony Pompliano?

  And the chart that I'm looking at has Bitcoin USD versus ETH USD. Bitcoin USD, pretty much since the beginning of last year, has had a much more significant average trade size. So that strips away how many institutions, that strips away how much volume, it's just looking at when somebody trades, what's the average size? Why is Bitcoin so much larger? Is it because the market's larger and people feel like there's more liquidity or is there something else going on there?

• 9:46Speaker 02

  Hundred percent. I mean, that's, that's where the liquidity is. I mean, if you, you know, you meet a bunch of people asking you, hey, what should I buy? And you'll know a lot more coins and a lot more assets than I will, but I'm like, look, if you're dipping your toe in the water, go Bitcoin, it's the most liquid asset class. So someone comes to us and they want to buy 10 bucks worth of Bitcoin, $10 million worth, that's relatively easy to do. You try and hit that in one clip in Ether and you're going to move the market and you're going to get slipped 180, 200 basis points. You've got to slice and dice it. You've got to do it in smaller sizes. It's just that all the biggest market makers are

• 10:25Speaker 02

  Trading Bitcoin first, and again, let's look at it, it's forty to fifty percent of the value of the total asset class. So when they first come, they're making Bitcoin. I think Ethereum is doing better, Solana is also doing better, but it's very thin. And when you talk about that institutional money coming in, you just see huge price gaps, which isn't good for the asset class. And it's partly what we have to try and do at LMAX Group and LMAX Digital, is bring bigger, better institutional market makers to get deeper liquidity across the asset. I have a customer, you know, last week, literally bidding me up, David, look at this slippage now, all I did was buy twenty ether, twenty

• 11:08Speaker 02

  million ether. I'm like, dude, this is huge, you're just the biggest in the market today in that asset class. You need to cut that up, you need to trade that in shapes of about fifty thousand dollars, if you're lucky to get it done. He can't do it in one click. He trades a bunch of foreign exchange with me, the biggest day in FX with me was three billion dollars, and he trades in clips of twenty, thirty, fifty million, and they expect to be able to do the same in crypto. You just can't today.

• 11:35Anthony Pompliano?

  So let's use this hypothetical person, or real person, but don't say their name. If they trade three billion dollars in a day, and they're doing it, let's just call it fifty million at a pop, are they trading to capture one, two percent moves intra-day, and they're like, like literally day trading? Is it a human driving that? Is this all kind of high-frequency stuff? Like, walk me through what they would do in the FX world. If you trade three billion in a day and you're trading that size, what is the goal or the trading strategy?

• 12:09Speaker 02

  Well, it depends who they are, right? So I kind of have three distinct sets of clients. You've got banks who are basically facilitating trades for their customers. Their customers might be asset managers, portfolio managers, they need to buy a hundred million euros, two hundred million euros, a billion euros to facilitate rebalancing their portfolio. You've then got brokers, a lot of brokers servicing retail, and they're just back-to-backing that flow. And then you've got the proprietary trading firms, they don't like the terminology HFT, high-frequency traders, but they're just looking to gain some alpha and get in and out. They're trying to make markets everywhere, and they're trying to nick

• 12:54Speaker 02

  Half the spread. But the one thing that underlies all of that, if that's too detailed, too complex for everyone is the smartest guys are all using the algos to execute the trades now. So even, you know, who's the most famous investor in Bitcoin? I guess it's Michael Saylor. You know, he's using an algo to work that order. He's got a target price. He's using a VWAP. And by the way, you can buy these on eBay, right? You can buy these models if you want to. You just plug them in and you're just trying to, to have a target price, right? To let you access that. So that's really what they're all doing and no one's pointing and clicking.

• 13:33Speaker 02

  And so I'd say that today 90% of all our FX volume are done through API and done through algorithmic trading.

• 13:43Anthony Pompliano?

  So when that person comes to crypto.

• 13:44Speaker 02

  Yeah.

• 13:45Anthony Pompliano?

  They want to do similar size, I'm assuming. Uh, if you can't do $50 billion at a time, then you can't do 3 billion a day.

• 13:53Speaker 02

  Correct.

• 13:54Anthony Pompliano?

  And regardless of how superior your infrastructure or technology is, it's a market dynamic issue.

• 14:00Speaker 02

  Yeah. But if you need it, it's there. So remember, I've got the biggest institutional market makers on the street.

• 14:07Anthony Pompliano?

  Mm hmm.

• 14:08Speaker 02

  So my biggest ever day in crypto, May last year, we did $6.5 billion in crypto.

• 14:17Anthony Pompliano?

  How much money do you make on that? Like if you do 6.5.

• 14:19Speaker 02

  Did all right.

• 14:20Anthony Pompliano?

  Yeah, but like, like what does that look like just directly?

• 14:23Speaker 02

  Look, I'm the guy for, for us or for, for the customer. For us, we're the guy in the middle, right? So it's a couple of basis points you're making just for every trade. The retail guys are going to recoil in horror. Geez, we're paying 50 basis points or 10 basis points. No, I'm in the institutional game. You're charging one or two basis points. By the way, in foreign exchange, you're paying a 40th of a basis point to make it clear. That's the cost to trade FX. Yeah.

• 14:45Anthony Pompliano?

  Why is it so cheap just because guys come out?

• 14:47Speaker 02

  You tell me. You know, I'm glad crypto came along. Now, look, you know, it's, it's, it's a very liquid, very efficient market. Again, to scale that for yourself and your listeners, foreign exchange trades $7 trillion every single day, 7 trillion.

• 15:06Anthony Pompliano?

  Mm hmm.

• 15:07Speaker 02

  What do we think the spot market in crypto is a day? 20, 30 billion? So, you know, you're talking 200x.

• 15:14Anthony Pompliano?

  So.

• 15:16Anthony Pompliano?

  One basis point, if I'm good at math, is $6 million. If that's the biggest day.

• 15:23Speaker 02

  I wish it was 6 million.

• 15:25Anthony Pompliano?

  Is that what it is?

• 15:26Speaker 02

  No, 600.

• 15:27Anthony Pompliano?

  600K, is that?

• 15:28Speaker 02

  Yeah.

• 15:29Anthony Pompliano?

  Oh, yeah, 1% is 6 million. See, look, we don't do public math. We already did it. But like, my, my question is, how do other institutional exchanges that don't have the FX business, how do they build a business if they're only doing half a million dollars, let's call it, plus or minus, in their biggest days?

• 15:49Speaker 02

  Well, you look, I mean, just look at their, go to their, go to their webpage and say, "Fees," and it says 10, 20, 30 basis points. I mean, look, I'm saying, I'm calling this out right now, I'm saying, "It's too expensive to trade crypto today." If you're a retailer, if you're small. But I understand why it's that price. Right? Because it is hard to access it. You know, I think what we do for a living is all about providing market access, about providing frictionless market access to any market we offer. That means the price point can come down. You know that well-known name in equities is, it's free to trade. Right? So the price has gone to zero. In crypto, it's hard to access it, it's hard to get the liquidity.

• 16:33Speaker 02

  In some cases, on the retail exchanges, they pay liquidity providers. And also, if someone's trading in size of, you know, 500 bucks, like really dollars and cents, you have to have a minimum there. So that's what, that's why they can charge that. But I think over time, you're gonna see the price curve just look like this, it's just gonna, just gonna go down and it's gonna resemble more what you see in equities and more what you see in foreign exchange.

• 16:58Anthony Pompliano?

  Do you think that we'll eventually race to zero, similar to what happened in equities in crypto, for retail traders?

• 17:03Speaker 02

  Yeah, look, so, there's a secret out here, out there, which is, it's never for free. There's always a spread.

• 17:09Anthony Pompliano?

  Yeah.

• 17:10Speaker 02

  Right? So a lot of guys goes, "Hey, I trade for free." Okay, what's the buy price? What's the sell price? But for sure, as the market becomes more efficient, and that's partly what we have to do at LMAX, I've gotta bring bigger institutions to this marketplace. I've gotta bring better liquidity to this marketplace. When that happens, spreads will compress, and when that happens, the cost to buy and sell will also compress. So, yeah, you're gonna see it become much more efficient and a better market for private investors and institutional investors alike.

• 17:41Anthony Pompliano?

  What have you heard from those institutions as to why a lot of them? Aren't in the market yet.

• 17:46Speaker 02

  Yeah, look, it's it's tough for them, right? So again, it's um. It's market structure, right? Those institutions, those 500 names that really matter, they need a regulatory framework. What do I mean? They need.

• 18:04Speaker 02

  Regulatory determinism. Okay, these are the rules of the game. This is how I access the market. And this is how I. Don't contravene any legislation. At the moment, with a lack of legislation, a lack of regulation, they run the risk that there's no determinism. And suddenly, two years down the line, someone says, hold on a second, you contravened this rule. Wait, that rule wasn't there. So that's the biggest blocker. Um, look, a bit a bit self promoting here, but we launched. Uh, announced that we're going to launch futures with Six Group. Why did we do that? We can offer crypto futures on an FCA regulated MTF.

• 18:46Speaker 02

  What's an MTF? It's like a swap execution facility in the US. And that can go through a central clearinghouse with Six Group. Now, the biggest banks, the biggest traders in the street, understand that framework. So we give them a framework, we give them a ballpark that they understand. And hopefully, we give them a pragmatic regulatory framework that allows this asset class to grow. And believe you me, this is important for everyone. Crypto evangelists, crypto natives, retail investors, that framework's important for everyone. So that's. That's the biggest blocker today.

• 19:22Anthony Pompliano?

  When you think about um.

• 19:26Anthony Pompliano?

  The largest institutions that are participating. How many of them are doing it because their founder or their uh individual at the head of the organization? Likes it or owns a lot personally versus their clients? That their pension funds, their sovereign wealth funds, their foundations are the ones pushing them to do it.

• 19:47Speaker 02

  So it's the former. And it wouldn't even be, look, I know you're on on stage tomorrow with a famous founder who likes it. Um. But when I look at the market.

• 19:58Anthony Pompliano?

  Don't call him famous. Let me cut him down, then we'll blow them back.

• 20:02Speaker 02

  I saw the guy on billions. Trust me, he's famous. Um, mostly it's because they can make the call. Look, to a certain extent, if you look at LMAX Group, I'm the largest shareholder of LMAX Group. 2017, we first looked at crypto, said, hey, should we do this? I didn't have to go through a lengthy compliance committee, risk committee, board meeting to say, should we do it? We just sat around a table one day and said, let's launch LMAX Digital. So I think the preeminent market makers, the preeminent traders today are guys who had that lack of bureaucracy and were able to make slightly autocratic decisions. So I think that's why they were first. Imagine if you were in one

• 20:45Speaker 02

  of the largest banks. I've said this to you before, but one of them told me, they're going to trade it this year. I know they'll trade it, one of the biggest banks in the world, but they've been through 26 committee approvals so far. I think they've got 30 more to go.

• 21:03Anthony Pompliano?

  It feels like the other thing that's happening is the individuals are becoming institutions. We were talking before the show, there's a gentleman who started a hedge fund three years ago. He put an enormous amount of money for an individual, nine figures personally, in the fund to get it started. He's probably the biggest LP, right? He's bigger than all the institutions are in the fund. And so it feels like as the currency gets devalued, asset prices go up, rich get richer. You now are getting in this weird world where like, individuals are becoming institutions. And I think that like, they're the ones who transition first. We've already seen number of family offices, all those folks all come into it.

• 21:49Anthony Pompliano?

  I think what becomes fascinating is like, they talk to their friends who aren't big enough to be institutions, but work at the institutions. And that's how it spreads. It's less about the Bitcoin community convincing them. And it's more about, I'm watching my friends sit here and just pick up, you know, profits over and over and over again with the volatility of, you know, Bitcoin or crypto markets. Eventually, I'm saying to my colleagues at work, we got to get in this game. And it's more of a An envy thing, a competition thing, than it is like we have some big macro perspective on, you know, interest rates and that's what's going to lead us to Bitcoin. Like I think that we forget like the human psychology of this is like my friends making money. They're making more money than me. What are they trading?

• 22:34Anthony Pompliano?

  I'm good at trading. Like I should go trade that too. If they can make that money, imagine how much I can make. And that's what pulls in these institutions.

• 22:40Speaker 02

  Yeah. No, I think it's fair. A lot of points in there, Anthony. I'll try and remember them. But look, it is true. There's a lot of big names now in crypto who started as individuals. Maybe they started mining, they stuck together, an exchange or a platform really quickly. They launched a purpose swap. They're now worth a lot of money and that in itself is self fulfilling. What I would say stepping back again, you know, that capital markets is so much bigger than any given billionaire in crypto today, right? Back to that $200 trillion today. So what I'm looking at is five years hence,

• 23:18Speaker 02

  that efficient market structure that will mean Bitcoin and crypto can overtake gold. Gold's $10 to $12 trillion today. And yet guess what? Then when you have deeper liquidity, a more efficient market, it'll be harder to make money. You'll have to actually be a really good trader, right? Right now you can just sort of, you know, put it all on red, put it all on black, right? If you're a believer, it'll become harder, but it'll become much bigger. And by the way, this is the natural evolution of things, you know? I'm old enough to remember dot com. Not everyone got it right. Not everyone backed Skype. Not everyone backed Amazon or Google.

• 24:02Speaker 02

  But it's important that some of that intellectual capital move from traditional markets into the new one. And that's happening today. And I think it's a great thing for crypto. And guess what? I also think it's great for traditional finance because some of that's going to feed back into traditional finance and make that a better market as well.

• 24:20Anthony Pompliano?

  Russia, Ukraine is another topic that I know probably is having an impact on your business. What's going on there? Obviously, when you have some sort of conflict, commodity prices, currencies, the whole kind of macro engine starts to move. What have you seen both in the non crypto and the crypto part of your business?

• 24:39Speaker 02

  So I think first and foremost, The hardest bit has been humanitarian impact. I mean, this is a human catastrophe. And people say, I was dealt three conflicts before. We haven't. This is war in Europe, right? This is war with a nuclear superpower that is interwoven throughout the fabric of society, throughout the fabric of capital markets. You know, I've got Russians and Ukrainians sitting in my tech team, on my desk. Every institution does. This is tough to deal with. But, but, we're in capital markets, okay? So our job is to deliver efficient capital markets at all time.

• 25:21Speaker 02

  Credit crises, banking crises, pandemic, the atrocity of war. You need to have efficient capital markets, right? Goods still need to be paid for. So that's what we're trying to do now. So let's park the humanitarian bit for a moment. Crypto has had a great period. Why? Again, you've seen the robustness and the resilience of this asset class. We discussed the price action. This is really positive. We've seen that crypto can be used for good, right? Frictionless, borderless payments again. You know, people wanting to contribute all over the world in crypto to that.

• 26:07Speaker 02

  Guess what? We've, it spurred the regulators into action. You know, it's no fluke that suddenly President Biden issues an executive order, that Senator Warren tables a sanctions bill. The ECB, European Central Bank, the Bank of England suddenly accelerate their crypto frameworks. That was good. And probably the, the last thing is.

• 26:33Speaker 02

  It debunked the myths. Everyone told me, hey, and look at it. Look what happened in the US. Crypto is going to be a sanction buster. Incorrect. You knew this. I knew this. How can they circumvent the sanctions? Let's look at it. AML guidelines worked well. It's quite hard to buy stuff with even Bitcoin today. I've never tried to buy munitions or tanks, or jets, but I'm guessing that's pretty tough. And it's probably easier with a suitcase of dollars than it is Bitcoin. Oh, guess what, everyone? Bitcoin and crypto is pretty transparent. Have a look at the blockchain. And lastly, President Putin didn't believe

• 27:16Speaker 02

  in it. Why didn't he believe in it? He couldn't control it. So he spent no time developing crypto. So I think those myths have been completely debunked. So overall, it's been a very positive period. Again, like the start of the pandemic, right? A positive period for crypto and for this asset class.

• 27:37Anthony Pompliano?

  Yeah. Joe, John, what questions you guys got?

• 27:39Speaker 03

  I'm curious to talk about, so Bitcoin specifically, a lot of these institutions are rumored to want to get access to it. What about Ethereum and Solana? Are you seeing demand for those as well?

• 27:49Speaker 02

  Sure. But look, ultimately it comes down to liquid asset classes. You know, I'm in foreign exchange. Eurodollar is the biggest traded asset class, biggest traded instrument. So any given day, Eurodollar is going to make up 30% of all the FX trading. That's just it. So Bitcoin today is going to make up 40, 50%. So Solana, yes, it's coming. Ethereum, yes, it's coming. But the most liquidity still gravitates to the number one in the asset class. So it's up, I'd say to the founders, the engineers behind the other coins, you got to keep proving that point, right? The argument is, oh, Bitcoin for payments, Ethereum

• 28:34Speaker 02

  for utility. Okay, well, you got to start showing us the utility. And the same with Solana, right? If you want that to trade more, if you want that price to go up, if you want to have more liquidity, you've got to keep proving the utility of those coins.

• 28:48Speaker 03

  And you don't think Bitcoin has to prove that?

• 28:51Speaker 02

  I think it's proven. For me, you know, the more you look at it, the more you research it, Bitcoin's proven. Well, it's been around, what, thirteen, fourteen years now? I don't know how long Satoshi thought about it before he created it. It's proven and it's been through the peaks and troughs. You know, I said it, I've said it before. Look at the, you know, March twenty one, was it March twenty, the start of the pandemic, every asset class got sold off. Oil traded below zero. Bitcoin shot said it was going to zero. It didn't, right? It found a level and it bounced back. And it traded, what, sixty four thousand at the end of last year? Now trading forty six thousand? This is now a robust asset.

• 29:35Speaker 02

  So I don't think it's got anything, anything left to prove. And, you know, you're not seeing many level one protocol breaches, right, with this asset. I'm, I'm as comfortable holding that as I am holding FAANG stocks or holding gold in my portfolio. And I think that's why it will go from strength to strength. And the others still have a lot more to prove.

• 29:59Speaker 04

  When it comes to your business specifically, LMAX, right? How do you guys think or project that crypto as a percentage of your business will look years from now? I'm assuming it's still a smaller part, given your head start in FX and whatnot. But where do you think that this goes? Does it become a meaningful portion? Or just talk me through kind of your thought process there?

• 30:18Speaker 02

  It could become fifty percent of it. So why do I think that? So we trade over a hundred instruments in foreign currency. So we trade, you wouldn't believe it, I'm sure you never want to trade it, we trade Norwegian kroner against, against Swedish kroner. Who wants to trade that? Well, guess what the Scandinavians do, right? So, but at the moment, most things are against dollar, right? So the S and P is quoted in dollar, Nasdaq's quoted in the dollar, gold dollar, a little bit of gold euro, but actually ninety percent of it is gold dollar, dollar gold, sorry for any currency guys that are out there. So what happens with crypto at the moment, it's you're trading Bitcoin dollar, Ethereum dollar. You're gonna start trading Bitcoin S and P, Bitcoin gold.

• 31:03Speaker 02

  Bitcoin Swedish krona, Norwegian krona. We have it right now in the crypto space. Oh, it's Bitcoin dollar, David, you also have USDC. It's the same, guys, don't worry about it. It's the same order book, right? So I can actually merge the dollar order book with the USDC order book. So I think it could become a lot. Right now, first step, let's get past gold. Gold will be 5% of my book. But I really think as we start to accept certainly the currency related or the currency like cryptos, that's what I think Bitcoin is. I think you're gonna see that traded against everything. We're launching an exchange in Singapore. First time ever within LMAX Group.

• 31:46Speaker 02

  We'll have an FX exchange and a crypto exchange on the same infrastructure under the same license, right? The, uh, our customers love that. Right, one account, trade Bitcoin, trade Euro, trade gold, trade NASDAQ. How good is that gonna be for the asset class again? And hopefully, of course, good for LMAX Group.

• 32:07Anthony Pompliano?

  Of course. You get one magic wish. In the institutional world for Bitcoin. You wave a magic wand, it happens. What's the thing you wish for?

• 32:25Speaker 02

  I want a regulatory framework in the United States and the United Kingdom tomorrow. So that the biggest banks in the world can just go trade the spot and the future together. Because at the moment, banks can't really trade the spot. They want to trade the future and the derivative. Within LMAX Group, they can trade the spot on Almax Digital and the future on Almax Exchange. So that's what I want to happen. And actually, I think it is happening, but. It takes time with these legislators and these regulators.

• 33:02Anthony Pompliano?

  Mm hmm. You think it's that important? That's like the number one thing?

• 33:06Speaker 02

  The number one thing. If you want this market to grow, Anthony, we need regulatory determinism.

• 33:11Anthony Pompliano?

  Yeah.

• 33:12Speaker 02

  That's it. It's all very well, there's only so big this market can be built on retail and private investors.

• 33:18Anthony Pompliano?

  Correct.

• 33:19Speaker 02

  I'm very happy when they keep growing and they keep doing well and making more money. But you want that weight of money. I want those 500 institutions in the space.

• 33:28Anthony Pompliano?

  Correct.

• 33:29Speaker 02

  They just need to know the rules of the game. So let's get moving. Let's do it. And, you know, no apologies for this. Offshore regulation is not the way. Island regulation is not the way. We all have to do it to a certain extent while we're growing. We need the leaders.

• 33:47Anthony Pompliano?

  Yeah.

• 33:47Speaker 02

  You need the CFTC, the SEC, the Fed, the Bank of England, the FCA, the MAS in Singapore. You need these guys to create the framework, right? Because it's a pragmatic approach again. You want those pension funds and those asset managers to be able to access the market. When they access the market, this thing is just gonna go pop, pop, pop.

• 34:08Anthony Pompliano?

  I ain't gonna say nothing else after that ending.

• 34:13Anthony Pompliano?

  Where can we send people to find you on the internet or find out more about LMAX?

• 34:16Speaker 02

  It's pretty easy, right? Lmax.com or Lmaxdigital.com and I'm David dot Mercer at either of those.

• 34:22Anthony Pompliano?

  We gotta get, uh, we gotta get you tweeting more.

• 34:26Speaker 02

  Do you know? Yeah. I don't think people, just not much, not that much fun, am I? You know, I'm sort of, I'm sort of the status quo. I'm just a little bit, you know, the old gray head guy.

• 34:35Anthony Pompliano?

  Where's your cover photo from?

• 34:37Speaker 02

  That one? That's the North Pole. So I've got a world record for the most northern gamer rugby at the North Pole. So.

• 34:43Anthony Pompliano?

  Glad I asked.

• 34:45Speaker 02

  It's quite fun when you speak to any Canadian. I always say to them, I bet you I've been further north than your country than you have. And they're like, really? I'm like, yeah. How far you been? North Pole.

• 34:56Anthony Pompliano?

  I got two questions. How'd you get there and what's the weather like up there?

• 34:59Speaker 02

  Oh, I nearly swore. Um, it's, uh, bloody cold. But then again, the guys in Chicago kind of looked at me, looked at me like, yeah, it's not that cold. You know, what was it, David? Minus 35, minus 40. Yeah, it's kind of like a normal day in February for us. And a whole bunch of planes from London and then I trekked 130 miles, put in a sledge with a bunch of buddies and hoping it would all be over very soon.

• 35:25Anthony Pompliano?

  You played the rugby game outside?

• 35:27Speaker 02

  Yeah, in shorts.

• 35:30Anthony Pompliano?

  That's how rugby does it, John, in shorts. My dad had a disrespect. Was that a requirement for the world record or you're just crazy?

• 35:38Speaker 02

  I'm from Belfast and all the, all the English guys were like, you're Irish, you have to wear shorts. I'm like, yeah, hell, I'm wearing shorts. And, but we had to set up, it was quite interesting, right? We had to set up the, we had to set up the, the pitch. We had to put bags full of, of snow down so that the plane could land to bring the kit to set up the pitch. We had to put the posts up, draw the lines, the whole thing. And one of my great marketing guys at the time, he brought a, brought a drone over to take the, to take a video of the match. Battery's frozen within a minute and a half. So we didn't get much footage.

• 36:18Anthony Pompliano?

  That's amazing. That is awesome. Now, now I gotta think of something that we can go do that's not at the north. I hate the cold. Although maybe I'll go somewhere. Where's the hottest place in the world? Sahara.

• 36:29Speaker 02

  You don't want to do the South Pole? That's my, that's, that's on my bucket list is to do the South Pole. And maybe go and play some rugby there and then I'll tick them both off. The hot, you can do that. My COO, he's from, he's from Africa. He likes, he likes the heat. I struggle with that.

• 36:45Speaker 04

  You, heat is way better than cold. No, you, you like, like, you know, 90 degree weather. You say that's hot.

• 36:51Anthony Pompliano?

  Nah. I was at 130 degree weather. I was chilling. All right. We're, we're good. Don't worry. The, the cold, that's not my thing. Minus 10 degrees and stuff. I know.

• 37:03Speaker 02

  It's bad enough. I mean, I played golf with a buddy of mine. And actually he runs Elmax Exchange on the FX side in Scottsdale, Arizona. I went, hey, this is really cheap. The hotel, the golf is cheap. He was, yeah, it's great. You love it. It was 120 degrees. I nearly, I nearly smiled on the second.

• 37:21Anthony Pompliano?

  In Miami, what happens is during the summer, we always go golfing because it's cheaper. It's no competition for tee times, anything. We're not good at golf, but it's fun, whatever. The second you start getting into the fall, you see the prices jump because it's getting cooler, right? So they know, like, all right, it's actually the inverse. Most places in the summer is more expensive. Here it's the opposite because it's just hot as shit out there.

• 37:45Speaker 02

  Correct.

• 37:46Anthony Pompliano?

  Not Scottsdale, he's probably even worse than here. All right, my friend. Thank you so much for doing this. We enjoyed it. I'm hoping for you that $60 billion months come back.

• 37:58Speaker 02

  60 yards.

• 37:59Anthony Pompliano?

  That means 60 yards. There you go. That means that's good for everyone.

• 38:03Speaker 02

  I come back and we do 100 yards in any given month. That's the goal.

• 38:06Anthony Pompliano?

  100?

• 38:07Speaker 02

  Yeah.

• 38:07Anthony Pompliano?

  So 5X from here?

• 38:08Speaker 02

  Yeah.

• 38:09Anthony Pompliano?

  Yeah, by the end of the year.

• 38:11Speaker 02

  Just hoping.

• 38:12Anthony Pompliano?

  Book it. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.