Pod Insights The Pomp Podcast Wall Street Gives Brutal Credit Rating To Strategy Over Bitcoin About this episode Jeff Park is the Partner and Chief Investment Officer at ProCap BTC. In this conversation, we unpack why Strategy securing a credit rating marks a major milestone for Bitcoin adoption. Jeff breaks down what it means for corporate balance sheets, the upcoming Solana staking ETF, and how prediction markets are shaping global narratives — including the wild debate over whether Donald Trump might actually be Satoshi.======================Check out my NEW show for daily bite-sized breakdowns of the biggest stories in finance, technology, and politics: http://pompdesk.com/======================BitcoinIRA: Buy, sell, and swap 75+ cryptocurrencies in your retirement account. Take 3 minutes to open your account & get connected to a team of IRA specialists that will guide you through every step of the process. Go to https://bitcoinira.com/pomp/ to earn up to $500 in rewards.======================Core is the leading Bitcoin scaling solution, enabling you to lock in yield by locking up your Bitcoin. Simply lock it on the Bitcoin blockchain to secure the Core network, and get rewards. No bridging. No lending. Just holding. Still your keys. Still your coins. Now your yield. Start at https://stake.coredao.org/pomp======================Timestamps: 0:00 - Intro1:58 - Importance of Strategy getting a credit rating 7:25 – What matters more: the logic or the rating itself?14:14 - How investors can make money on this19:41 - Solana staking ETFs enter the market25:12 – How traditional firms will handle staking31:47 – Prediction markets and Donald Trump being Satoshi?37:11 - New York City mayoral election odds45:52 – Coinbase’s UpOnly Podcast NFT and grabbing attention
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1:02 Speaker 03 What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode.
1:30 Speaker 04 Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.
1:54 Speaker 05 This is what they're telling you. We think this is a bad business idea because your equity is negative based on our RACC framework that Bitcoin is on your balance sheet. But two, it seems like lots of people really like your stuff and your liquidity is super high, which we love. So now we're going to give you a boost back up and give you points for that. But third, like, let's not do that.
2:17 Speaker 03 You tweeted a fantastic market, which I think has currently 65% chance that Donald Trump is Satoshi Nakamoto. Do you believe that?
2:28 Speaker 03 What's going on, guys? Today, we've got a great episode with Jeff Park. Jeff is the Chief Investment Officer of Procap BTC. And in this conversation, we talk about strategy, getting a credit rating. This is a huge deal for the industry, and Jeff's going to break it down for us. We also talk about the Solana staking ETF that's launching, and then we get into prediction markets and whether Donald Trump is Satoshi, and why the world is moving so quickly. You can see this across financial markets, politics, and social media. This conversation is a lot of fun, and we unpack some things that you're probably thinking about at home. Here's my latest conversation with Jeff Park. All right, Jeff, a great place to start the conversation. Strategy finally got the credit rating that they were looking for. Came in as a B-, which I think was a little surprising to people, but talk about maybe the importance of getting the credit rating.
3:10 Speaker 03 And then you had some great takes on why B- may not be the rating that you would have given them.
3:15 Speaker 05 Absolutely. Well, first of all, I think it's so funny when you read the report and you realize there are so many things about it that hint towards the lack of compatibility with the Bitcoin business model that strategy is pursuing, and the insurance framework that B- itself just feels a little random. Like, why B-? Sounds like from all the reasons, it might have been a C. And I thought maybe it's B- because it's Bitcoin to be continued. That was a clever way to make a nod at it. But all kidding aside, look, I'm very happy for strategy. I know it's been something the Saylor and team have been working on for a long time, and we owe them a ton of gratitude for pushing the industry forward, because insurance is the holy grail of capital costs, to which I think Bitcoin serves a really useful role as a very long-duration asset,
3:59 Speaker 05 which is exactly what insurance should be pursuing.
4:03 Speaker 05 But at the same time, rating agencies are growing and changing and fallible. And you know, there's a wonderful quote from Warren Buffett, actually, back in 2008, when in his annual shareholder rotor, he said, "Ratings agencies are a prime example of people who don't know what they don't know, and everyone trusts them anyway." And there's a certain truth to that, and I think the strategy research report shows you exactly what those gaps are. So I'll point out a couple of things, and then we can double-click on which ones you think are more interesting. The most glaring aspect of it that I think most asset owners would recognize makes strategy very challenging to grade in the credit model that insurance companies are
4:46 Speaker 05 used to is the concept of RAC, Risk Adjusted Capital. So Risk Adjusted Capital is important because it is trying to assign a quality grade to assets to which there's bifurcation between good assets and bad assets. And it's a little bit of a combination of the Basel framework, it's a little bit of the OCC, NFDIC with the Fed, it's a little bit of NAIC, and it's all of these bodies combined trying to think of what are assets ultimately worth and how can we penalize or reward good assets versus bad assets. The two parameters that tend to dictate this, which wouldn't surprise anyone who's been following crypto,
5:25 Speaker 05 is liquidity and volatility. So if it's very illiquid, you get pinged, and if it's very volatile, you also get pinged. So Bitcoin sits in this really strange medium where we know it's volatile, but we also know it's very liquid. And again, as we've talked about before, those two things don't generally come hand in hand. It's usually very volatile because it's really illiquid, or something that's really liquid tends to be very not volatile. So Bitcoin's a corner case. And so what happens is that to calculate the RAC ratio, you take the Risk Adjusted Capital, you divide it by the Risk Weighted Assets. And the problem that strategy has faced is that the S and P has determined that their
6:05 Speaker 05 Risk Adjusted Capital is negative. It's actually not just even a small number, it's negative. And the reason it's negative is because you took the equity value and subtracted all of the Bitcoin assets and therefore flipped it into a negative territory. They subtracted Bitcoin because they classify Bitcoin as intangible assets. And a certain category of intangible assets can also be called non-capital assets. And generally, those classifications are used for things like goodwill, right? So if you have goodwill on your balance sheet through mergers and acquisitions, very hard to put value on it. Of course, it's really illiquid, you can't trade intangible assets of that kind. So you have to take it back out of the equity, which I think is fair.
6:49 Speaker 05 But it's not fair to call Bitcoin goodwill. That's essentially what they're doing. Because Bitcoin, as we know, has value. It has liquidity. And it has all the features of what should be more treated as way collateral is otherwise haircut or promoted in different regulatory frameworks. So that part, I think, is a fundamental chasm. It's a true gap. And once you go into negative territory because of that, nothing will make sense. The other part that I thought was really kind of interesting, and this is more for kind of the meta of what rating agency ultimately stand for, is the heavily penalized strategy for the operational risk vector for which they are custodians of their own assets. And therefore, they have cybersecurity risks. And their cybersecurity risk is pretty profound, because if they were to lose controls of
7:34 Speaker 05 their private keys, their whole business would be at stake. I'm a little sympathetic to this kind of operational issue that rating agencies have not dealt with. But at the same time, the territory now that we're going into is rating agencies specifically telling you that self custodial solutions are bad. Right? It's this idea that things need to be intermediated more, and you actually do want more middlemen, and all these things, which is exactly what Bitcoin is trying to be an attack vector for. So that being also a penalty, when in some sense, could also be perceived as an asset if you're truly risk remote from having intermediation, which makes it a more kind of robust security to hold on your own balance sheet.
8:17 Speaker 05 One could imagine that could also be a plus, but again, it requires like a total reset of your mindset and a regime of underwriting.
8:25 Speaker 03 When you think through the report, what's more important to you? The logic that went into it or the rating itself? Right? If, I'm assuming like the, the rating itself is kind of like the headline. People, you pay attention to that. You are one of few people who will actually read the report. But in your mind, what is more important, the learning how they're thinking about this? Or the fact that it's a B minus? And now we've kind of like let the genie out of the bottle, if you will?
8:49 Speaker 05 Absolutely. Definitely learning how they're thinking about it is important. Because how they're thinking about it helps us anticipate what the next incremental progress has to be made. For the industry to advance. So we already know that accounting rules have gotten easier with ASC 820 clarifying on how to treat assets that basically have to be measured at fair value. We know that the C A M T guidance that has been coming out of treasury and IRS is also permitting the possibility of Bitcoin adoption on corporate balance sheet. But the third vector is insurance and credit risk. This is actually one of the hurdles to having more corporates buy Bitcoin in their balance sheet. Take for example, Apple, right? Apple has billions of dollars of cash on its balance sheet.
9:31 Speaker 05 What this report just showed you is, hey, Apple, if you go buy Bitcoin on your balance sheet, not only are we going to just reduce that to zero, we're going to turn that into a negative number and double hit you with it. So when you see stuff like that, and you're just a normal corporate who wants to get credit rating, you're going to be like, I'm not going to buy Bitcoin on the balance sheet because now I just realized this is going to hit my credit score in a way that is so detrimental. And so it's really important and it's a good thing that we now know how they're thinking about it. On the other hand, it's a huge hindrance. I think now this is very clear that most companies who are blue chip are not going to buy Bitcoin on their balance sheet because what we just saw in the treatment was so incredibly unfair.
10:11 Speaker 05 At the same time, for strategy in particular, getting an actual rating assignment is important. And for that, again, I think it's a worthwhile thing that Sailor did. I'm very grateful for what he's done for the Bitcoin treasury space and crypto at large, mainly because now we can still contextualize what the risk spectrum of Bitcoin adoption means to other players in this space. So what does that mean? B minus is fairly severe in its categorization of high yield. It is speculative. It is maybe five or six rungs below investment grade, so it's not great. But there's numbers associated with this, right? B minus is about 10 to 12% of a credit spread.
10:53 Speaker 05 It's actually kind of what the preps have historically been pricing regardless with the converts, which again, I think is how S and P ultimately backs off to B minus. I don't think they actually did it bottoms up. They just did top down and looked at where the rest of the capital structure was trading and saw, oh, if it's in this box, it must be B minus. Which in itself, if you think about it, is kind of hilarious. But that's important because it helps people think about what that 10 to 12% risk premium can mean. So.
11:25 Speaker 05 10 to 12%, that's probably about, you know, four times a regular and high yield, maybe eight times investment grade in credit spread. And it implies about a 10% chance of default over a year and over a five-year period. It implies maybe a 30% chance of default over a 10-year, 45, 50% chance of default. And so it's good. People should think about these kinds of things. What I think, though, then people will realize is, wait, what Jeff just said makes zero sense. You're telling me strategy's chance of default goes up with more time? When in more time, we actually expect Bitcoin to be even better of an asset? So then I think people will have this aha moment, which is Bitcoins has always had
12:09 Speaker 05 a backwardation to its risk spectrum for some who understand the relationship between Bitcoin and fiat. It's more likely, in our opinion, that credit risk for strategy goes down in five years and in 10 years because of Bitcoin's performance relative to fiat. So the credit spread itself implying what B minus means across the contango of generally what a default curve looks like is, I think, showing folks that it's not a compatible framework.
12:40 Speaker 03 Let me ask two other questions, maybe as offshoots. So one is, what if they're right? What if the rating agencies are smarter than we give them credit for and B minus is the correct thing? Should we take a signal from that or is there any lesson that we can take out of this other than just, you know, I think it's very easy for me, you and all Bitcoiners say, they're wrong, right? Like, look how they made this mistake. What if they're right? Or are there certain areas where maybe they've brought up points that we should say, actually, you know what? This is a really good point that we haven't been thinking about. We should start addressing it.
13:11 Speaker 05 Yeah, yeah. I actually think they are right about the score to the extent that, again, we know the market clearing price for micro strategy credit spread is around to 10 to 12%. So this is a nice way to at least formalize that there is an ability to kind of put strategy in the same box as everybody else. So that I think they got right. I think B minus is the right level. What I think they got completely wrong is the process and analysis for them to have led to that conclusion, which is the part that I find hindrance for further adoption. Because the methodology itself was so punitive that what it's making it possible now is for
13:54 Speaker 05 those that are rated A and double A would actually not be able to buy Bitcoin under balance sheet, knowing how it affected their credit. At the same time, imagine a world where Apple does buy Bitcoin on the balance sheet and the credit spread doesn't move at all. In fact, people still think it's better than US sovereign and therefore like this is actually as good as money comes and credit spread doesn't move. What is the ratings agency going to do? Notch Apple down to C because they bought so much Bitcoin on their balance sheet when they have incredible cash flow, incredible kind of capital market liquidity and the market is always right. I'm a big believer, the market sets the price for which risk is tolerated for.
14:34 Speaker 05 One more thing that I'll just add that I think was the cherry on the cake here is one benefit that the SMP did provide and give credit for was that strategy has deep access for liquidity and it appears that there's a lot of demand for their products, which is like, oh, that's good. Like, we should give a plus for that because they have found some proprietary pool of capital for which that they're a liquidity provisioner for. If you draw the full circle now together, this is what they're telling you. We think this is a bad business idea because your equity is negative based on our RACC framework that Bitcoin is on your balance sheet.
15:17 Speaker 05 But two, it seems like lots of people really like your stuff and your liquidity is super high, which we love. So now we're going to give you a boost back up and give you points for that. But third, like, let's not do that. There's like, you're basically long Bitcoin and short fiat and we don't know how to understand that world. That's what the analysis of that report tells you basically in three bullets, which I think is the part that just requires a lot more leveling up to do.
15:44 Speaker 03 Second question is, how do people make money on this? Right? Like if, what do they change in their portfolio? How do they think about strategy in their portfolio differently? Or maybe other things, you know, they have a lot of preferreds out there. Like, just talk through the implications of a report like this.
15:59 Speaker 05 Yeah. Yeah. Great question. Again, this goes back to normalizing strategy by having a rating assignment that allows a peer set to come in. So now we know it's B minus. What does that mean? Who else is B minus in the S and P universe? JetBlue. JetBlue is B minus. So if you had JetBlue paper and you're thinking, maybe actually the kind of diversification I want might look different by having strategy in there. As a fund manager, you actually now have the ability to have these conversations without the investment committee saying it's unrated. So it is much like the same game that Bitcoin has always played, which is just let us play. Give us something and then the market will figure it out. But like, let us in the game, let us in the room. And what effectively is now possible is some high-yield bond manager is going to be able to look across the universe
16:42 Speaker 05 and have a cohort for B minus or Bs. And they're going to be able to play some substitution and strategy, I think, will find a place. Within the intra-capital structure of micro-strategy, I think this is also a really powerful engine for preferred adoption, because next after preferreds will probably have to get rated too. And once the preferreds are rated, this is the game changer, right? Because we know the preferred market itself is actually the most kind of interesting market where there's a lot of arbitrage and a lot of capital chasing yields where there aren't plenty of options. So, once that, I think, happens, it'll be much easier for these preps to trade at a level commensurate to where they should be. So, that's kind of the next level, I think, to come.
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18:09 Speaker 03 or starting fresh with a new contribution, the Bitcoin IRA team is here to help you get access to real crypto in your retirement account. And here is the best part. As a POMP podcast listener, you can earn up to $1,000 in rewards. When you add funds to your account, search for Bitcoin IRA in the app store or visit bitcoinira.com/pom to join 200,000 Americans on their journey to upgrade their retirement. That's bitcoinira.com/pom to upgrade your retirement today. So when I think of strategy getting this, it is the most Bitcoin or story of all time. You mentioned like, kind of like, let us play, let us get in the room.
18:49 Speaker 03 I always think that our progress is made, like, you know, we get in the room and it's all the cool people are like, ah, they're losers in the corner. Who cares about those people? Like, and I got this thing over here, right? And then all of a sudden, like, the Bitcoiners somehow find a way to become the cool kids in the room, right? And, you know, it's kind of our graduation now to Wall Street and, and BlackRock becoming a Bitcoin company or whatever, right?
19:13 Speaker 03 This does feel like a little bit of a Trojan horse, like, everyone like, oh, these B minus, you know, losers in the corner. And then all of a sudden, you turn around and, I don't know, A, A+, you know, the world kind of changes and, and kind of realizes the value of Bitcoin on the balance sheet. But it does feel like a very Bitcoin native type, you know, progress, which almost feels like we're like, making progress but walking backwards.
19:36 Speaker 05 Yes, yes, yes.
19:38 Speaker 03 But we should still celebrate the fact that, like, we are moving in the right direction.
19:40 Speaker 05 100%. And this is exactly what Sailor is really good at, right? He figured out micro strategy for the first wrapper of Bitcoin holding when Bitcoin ETFs were not possible. And it was like, just give us a shot, let us play. And then it proves its case. I think ratings agencies now coming in to at least let us be in the arena is the most powerful thing that could have happened. So regardless of what the report says, regardless of its fallible arguments, regardless of whatever perverse incentives might now arise out of other corporates being able to buy Bitcoin on the balance sheet, putting that all aside, I think the market will determine what the risk clearing price is for the kinds of considerations that they want to be paid for. And
20:20 Speaker 05 My feeling is that the B minus ratings category strategy will stand out versus its other peers that I do believe are truly speculative in the nature of their credit because of their CapEx or because of the cyclicality of their business. Strategy is a very robust capital structure and smart money managers will come around and see it and then we'll push it forward.
20:41 Speaker 03 Speaking of another product that's getting an entry into the room, we now are seeing Solana staking ETFs. Your former firm, Bitwise is one of the firms that's leading the way here. I think we're both very big fans of what they're doing. I think I'm a little surprised at how quickly we're getting these in the market, but it does feel like staking in general kind of yield generation is, as we see, Wall Street loves that, right? Like this is something that they are dying for. Talk a little bit as to like what's exactly is going to be happening here and what do you think the importance is?
21:16 Speaker 05 Yeah, the symbolic significance of having the solely ETF go live is this is the first ETF that has now passed the rung in the framework that we've all been hoping for, which is the general listing standards. Rather than having every one of these be argued through our 19B4 and whether it's a security or a commodity or going through that administrative motion, now we have a path. And because that path has been established, it's not just this line yet. There's a few others coming in online as well today for which I think it's just the beginning. So that's the thing that is most symbolically interesting. Two, as you pointed out, it's also staking, right? Staking in the ETF wrapper that historically is something that the industry's been wanting so long and now it's being permitted. And that I think are both exciting things that
22:00 Speaker 05 are happening. You know, Bitwise in particular, I'm just really proud of this particular moment because I think as a firm, we've always had this long-term vision that asset management is just going to look really different in the future. That isn't just going to be about the distribution business of FAs and RIAs to education. Of course, that's important, but we know the underlying asset in this wrapper are code.
22:26 Speaker 05 And that the income and economic value capture framework of that will just look different than administering funds, like the way that like the iShares funds might exist. And so staking is now a representation of that expertise an asset manager or issuer can bring to the table that is going to speak so differently versus others in the space. I would love to have Bitwise sit next to BlackRock and talk about staking in a way where we can show our proprietary value proposition. For example, Bitwise actually runs its own on-chain solutions through the acquisition of a testnet from the prior year, and I will call it the first vertically integrated asset management company in the crypto arena, which means in the end, the efficiency gains are passed to the customers.
23:10 Speaker 05 So we have this ability to have an asset that we can then internally operate at the highest level of standards to maximize the yield from being our own validator to then be the best performing ETF on a net return basis. That kind of synergy is solely affordable only to those who are native to the crypto arena. And for that moment, I'm just very proud of where Bitwise is. I think this is just the beginning of the value proposition that we can compete on that is going to be just different than being the largest asset manager in the space. So for other non-Bitcoin related assets, I think that vertical integration of staking and other features is going to be a huge component.
23:51 Speaker 03 When, I don't know for this one or in general, how are people thinking about the staking rewards? Is that just going to go into the fund and NAV goes up? Will they buy back shares? Will they actually distribute? Do we know yet how these asset managers are thinking about those staking rewards?
24:03 Speaker 05 I think for now, it's going to be a total return construct. And the toggle that everyone seems to be focusing on is whether you essentially stake 100% of your assets, or do you stake less than that and engage in different ways to provide liquidity for those? Do you also choose a liquid staking derivative as the underlying asset instead of the actual native asset? Those are kind of the different points for optimization that issuers are navigating. Don't think that the intention for now is to have dividends that come out of that.
24:39 Speaker 03 Well, I guess you would need to have some liquidity, right, for the creation redemption process. And so, yeah, it would be interesting, you know, some people want to maybe take 50%, some say, well, we're going to go to 75, or, you know, maybe the size of the fund really matters in terms of percentages or whatever. You can easily see people starting to try to arb or, you know, figure out who's going to have the best total return. And it does kind of put the onus back on the investor, a little bit of active management, even though you're buying a, you know, a kind of definitionally a passive fund.
25:10 Speaker 05 That's right, that's right, yeah. Unlike the Bitcoin ETF, which I do think is more vanilla, more commoditized, because it's a Bitcoin holding vehicle, and there's not a lot of ways to compete on that outside of price and liquidity. Yes, and fees. This is different. This is categorically different, because the income is going to look different, and the know-how and the finesse and how you execute that capital efficiency and liquidity management is key, too. And it's not just in the crypto ecosystem, the ETF wrapper matters, too, right? Because the ETF wrapper can actually have different kinds of credit facilities as a bridge to permit different kinds of features that are possible. And a lot of traditional illiquid asset ETFs do this, right? Like the bank loan ETF, for example.
25:51 Speaker 05 Of course, bank loans can't have daily create redeems, given how illiquid the underlins are, but they have clever ways they figure it out in a more capital markets facing way, where that edge is also useful. And that edge then also comes from the service providers you work with. And in that context, having the ability to navigate in crypto and TradFi smoothly is a key advantage.
26:12 Speaker 03 When you think of these traditional firms, the BlackRocks, the Fidelities, you know, those folks, how are they going to navigate this, right? Because it really does become, I just keep coming back to this idea that BlackRock's most profitable fund is the Bitcoin fund. Now, I think they charge 20 or 25 basis points for it, size times a higher price than your S and P fund, right? You get there. Once you get into staking, it's like this is a whole new arena for them. And it's one thing if your most profitable fund comes from this industry. It's a whole other thing if your like quote unquote crypto asset management business drives more revenue and profits than your non crypto. Like, like the collective revenue coming from crypto actually outpaces everything else.
26:57 Speaker 03 Because I think that when you have one product that's highly profitable, but it's a single product, it does still feel kind of like, ah, it's that a one hit wonder. Right? And we've got this great business, it's very diversified, it's very resilient. We've got all this infrastructure. But there has got to be a tipping point. At some point, all of a sudden, you're like, wait a minute. Why are we continuing to invest in these legacy things where we just don't see the growth that we see in crypto? And the truth is probably, I'm guessing it's not black and white. But what is that tipping point in your mind? Is it a revenue thing? Like, how do you think these guys are going to think about when they're just like, screw it? We're a crypto business now?
27:33 Speaker 05 Yeah, yeah. It's funny, I think this is actually, you're just reminding me of a huge story that's been unfolding in the capital markets that crypto probably isn't paying attention to, which is the QQQs. So Invesco QQQs are, I believe, holding a meeting relatively soon where they're going to, I think, recut the pie of that P and L ref share, right? So, and I believe there's a lot of drama associated with the timing of this naturally, because it's a big motion. And the big motion here is to actually change the role of Invesco to be, I think, beyond just like a traditional distribution agent, where it's a little bit more asset management like.
28:17 Speaker 05 And, and the tension really comes from like the different parties that hold the keys, which is like the custodian, right? Like Bellin has a key part of how much they take. Are they earning too much? Are they earning too little? Is Invesco doing more than just distribution? Is there actually fund management services? And that kind of tension that can exist. When the product is like a commodity, I think it's more easily acceptable that it's a distribution business and there really isn't like a core expertise required for the asset management services associated with that. At the same time, you could imagine the pendulum can swing when things start to look a little more active, even in the passive arena. And that's what these non-Bitcoin ETFs are.
28:59 Speaker 05 These non-Bitcoin ETFs, I think, require a lot of active management, even though people will think of it as passive, because staking by definition is not a passive endeavor. Lots of times, people think staking and dividends are peripetous terminologies to be intertwined, but it's simply not true, because dividends are essentially declarations of returns of capital for which every shareholder is due the same amount. You and I will get the same dividend by just holding the stock. It is absolutely not true that you and I will get the same staking yield where we choose to stake it differently, or we choose to partner in different format. There is no universally cleared staking rate that considers the composite total return to be egalitarian for every participant.
29:44 Speaker 05 There will be dispersion of performances. And in that world, active management does matter. And for BlackRock to be able to speak eloquently to this must mean they understand staking at the deepest level and have those conversations with their customers. At Bitwise, because we run our own validators and because we actually have our own on-chain solutions, which, again, we've developed a stack to have these robust infrastructure capture, not only is it a little bit more authentic, in my opinion, and a little bit more credible, but really, we are the firm that's going to get the phone call when people have questions, right? A lot of times, the reason I believe Bitwise has been able to have staying power through
30:27 Speaker 05 all these years is because we have an incredible distribution team that picks up the phone every time somebody calls and asks questions. And the questions can sometimes be really basic, like wanting to figure out how it works with their brokerage and administrative issues around that, but it could also be more sophisticated. And it's also an access point, because what I've noticed, at least, is a lot of Bitwise's best investors are not just in it for the financial motivation. So to your point, it's not just about fees, even though Bitwise does compete on having the lowest fees possible. I believe the sole ETP is actually free for a while, for those who are listening. I want to take advantage of that. But it's, it'll advance to the point of where as they want to learn more about it,
31:09 Speaker 05 Bitwise will actually provide forums for it. So we'll bring the human capital. We'll actually bring interesting thought leaders to speak to things that are happening behind the scenes with our financial advisors in a point-to-point, person-to-person format, where there can be intelligent and robust dialogues of intermixing ideas. And so that's actually, I believe, what it means to be a crypto-native financial advisor in the middle of that information flow. And that's very valuable. It's almost pricelessly valuable. And I think Solana will open that door for a lot of people.
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32:25 Speaker 03 in exploring the largest Bitcoin DeFi ecosystem. There are over 100 live apps in the network and the deepest liquidity in all of Bitcoin DeFi. Get off zero and start earning yield on even just 1% of your Bitcoin by going to stake.coredao.org/pomp. Again, that's stake.coredao.org/pomp, or go click the link in the description. Another place where there's priceless information is on these prediction markets. It seems like these prediction markets are very accurate. Now, I'm starting to think that they're claiming a little bit of victory after the fact, right? Because there will be these wild swings in the predictions. And so they're earlier than, you know, the
33:06 Speaker 03 news or polls or whatever. But I think that now somehow people have extrapolated whatever the prediction market says is actually going to happen. And they don't think probabilistically about it. I bring all that up because you tweeted a fantastic market, which I think has currently 65% chance that Donald Trump is Satoshi Nakamoto.
33:30 Speaker 03 I have no clue how the market got to 65%, but this prediction market is saying that there is a more than 50% chance that Donald Trump is Satoshi. Do you believe that? And maybe just talk a little bit about this idea of the prediction markets and extrapolating quote-unquote "truth" from them.
33:47 Speaker 05 Yeah, this tweet was actually a bit of a double dipper because it was meant to be a bit of an inside joke to an inside joke, which is, as you know, and we all know, Polly Market being the source of truth can sometimes also be blinded by the fact that there is just lots of misinformation that is out there. So for instance, that particular Kali market that I screen shared, it's actually not a real market. Somebody designed it and there's a website that lets you create these fake markets and fake graphs and, you know, go viral and whatnot.
34:18 Speaker 05 But the double inside joke here being even those who aren't paying all that attention think it's real and therefore realize like you are now susceptible to misinformation because you thought Kali was the thing that would be having an authentic market on true information discovery, but it turns out like all of these things can just be faked. So the double player is like, that's not a real market. And the response below, which I thought was so funny because he's just now going down this deep rabbit hole about Trump's grandfather being like a Tesla investor or friend and this book, I don't know if you've heard this Baron Trump book from the 1800s that apparently predicts the rise of Donald Trump 200 years later.
35:01 Speaker 05 This and it's just incredible.
35:04 Speaker 03 Is it on Amazon? Can I buy it?
35:06 Speaker 05 So here's the thing, I've been actually going down this rabbit hole myself.
35:10 Speaker 03 Oh, here we go.
35:11 Speaker 05 I am a sucker for a great conspiracy theory.
35:14 Speaker 03 We need some tin foil hats and just put on when we start going down the rabbit hole.
35:19 Speaker 05 There are lots of verifiably neutral sources of truth like Wikipedia that talks about this and so allegedly. But we all know Wikipedia too is also like not totally infallible.
35:33 Speaker 03 That's why Elon's building Grokapedia now.
35:36 Speaker 05 That's right. I mean.
35:38 Speaker 05 Maybe we need a world where all of these come to building consensus together. But but there is a lot of information out there and I have yet to see a actual physical copy of this book. I have yet to see it. I think, call me old school. Somebody showed me the first edition of this book.
35:56 Speaker 03 What is the book supposed to be?
35:58 Speaker 05 It's apparently a trilogy of this boy named Baron Trump going on an adventure.
36:02 Speaker 03 No.
36:03 Speaker 05 And he's mentored by someone named Don. And actually has some lore to it that people have just kind of fallen in love with.
36:12 Speaker 03 Great internet fodder.
36:13 Speaker 05 Great internet fodder. But bring the whole point back to like, you know, the challenges of these poly markets is that like, yes, it's real, but also like, we gotta do our homework and make sure like it's real. So anyone who says like, yeah, that's free, easy money. Of course Donald Trump is not Satoshi. Like, that's like, free money. It's like, well, it's not, because you can't bet on it.
36:33 Speaker 03 Yeah.
36:33 Speaker 05 So like, anyone who says that they've bet on it also hasn't actually been practitioners of the market. Because they would have seen, oh, this is.
36:39 Speaker 03 So you know what's funny to me is I always joke, I love the line like, technical analysis is astrology for men. Right? Just like, you know, like they'll draw the lines, they'll do whatever. I've always thought that was just a great line.
36:52 Speaker 05 Yeah.
36:52 Speaker 03 The book kind of feels like same thing, right? Of like, people are bored, Bitcoin's going sideways. We need something to talk about, somebody, you know, whether the book's real or not. They throw it out on the internet. Now you got a whole bunch of, you know, internet sleuths all arguing about it. And it helps us pass the time while we're just waiting for Bitcoin to go back up again.
37:09 Speaker 05 No, it's true. And the other point you made about how these markets sometimes feels like it's not being awarded for the probabilistic nature of outcomes. That sometimes it feels too deterministic. The other particular market that I think has been really interesting to watch as New Yorkers was the New York City mayoral election. Right? Because Mumdani's been basically sitting at 90 plus percent to win for days now, for days. And it's probable he will win. But but as you know, and anyone who's lived long enough, one, first of all, anyone gives you a 10 to one payout, you should take the other side, especially on something as fallible as elections where things can change very quickly. And there's just tons of kind of bad voting and bad data out there.
37:54 Speaker 05 But. But that that idea in itself, like being totally like insurmountable is where the edges. And so I think those who can think a little bit more probabilistically can find like economic opportunities in those, as long as, of course, the real markets, which this one is.
38:11 Speaker 03 Matt, do we know what the odds are, the latest odds on the the election? The reason that I find it interesting is it seemed like more of 90, so 90, 89% for Mumdani right now is the
38:26 Speaker 05 That's come in then, that's come in.
38:27 Speaker 03 So it was up to 95 at that point, right? It's come down. But what I found fascinating was actually, you know, he had this performance at the last mayoral debate. And I think generally people who were objective, like there's going to be extremes on both sides, hey, he did amazing, he did bad, whatever. But like the objective people seemed to be like, that was not his best performance. Right? He said some good things, he said some bad things, but like that wasn't his best. But the odds had gone up after that. And I found that very fascinating. Right? And one of the things I'm trying to wrap my head around with these prediction markets is there is something about like just the amount of money that's wagered, like it is a market, right? And so you can like move the market if there's low liquidity. Now, the mayoral race is actually not like one of these like kind of light liquidity.
39:11 Speaker 03 But if you and I create a market tomorrow and it's like, you know, is Jeff going to, you know, I don't know, go to Chipotle? We can, you know, frankly, just manipulate it by, there's only two people betting on it, right? And so like, that feels like something that, again, where a takeaway from an event is one thing, but the market moves in the other direction. I think I'm still trying to wrap my head around, do you trust the market? You know, or do you have to get some sort of calibration? Because then we saw three or four days later, the market actually did come in. And so is it something where like it takes time for the market to digest the news? Is it something about, you know, the liquidity of the market? Like, I think that there's just a lot of things that as you get into the more nuances, right?
39:55 Speaker 03 And you're trying to figure out what's the difference between 89 and 95%? That we just don't know yet.
39:59 Speaker 05 Yeah.
40:00 Speaker 03 It's easy to, okay, look, whether it's eighty nine or ninety five percent, that's really good odds. Right? Like, you know, those takeaways, I think, are like the simple analysis. But we start to look at the market dynamics and stuff like there is still a lot that I think we're learning as this goes.
40:12 Speaker 05 Yeah, yeah. I think what you're alluding to is this really interesting question, which is, do prediction markets reflect the outcome without the bias in which the prediction market itself has affected the outcome? Right? And there's two dimensions to this.
40:27 Speaker 03 Chicken or egg?
40:27 Speaker 05 One is the one you just described, which is if there is a market out there on me eating a burrito tomorrow and I found the market and I saw the odds, maybe I will eat a burrito tomorrow, depending on who's on those sides of it, and I'll influence that outcome. But the other part of it is actually the election too, which is if you think the odds are so unlikely that Mumdani will lose, does that disincentivize voting? Right? Does that mean that that person who would have come out to vote for Mumdani doesn't come out anymore because he sees that and goes, oh, it's a shoo-in. I don't need to vote anymore. Vice versa, if you're a Cuomo voter, would you look at that and go, actually, like, I need to go vote and therefore I have now raised the dial? And so the prediction market itself somehow fed into affecting the outcome.
41:12 Speaker 05 I think that is really like quite fascinating and one in which there's probably going to be more guardrails around what people call influencing based on what the information of these markets can dictate.
41:23 Speaker 03 I don't care so much. Well, I do care about the politics in the sense of, you know, obviously, I don't think that socialism is a good idea. But what I'm fascinated by this specific election is lots of attention. The prediction markets now are like a thing, so people are paying attention to it. You have what I'll consider like some of the like political analysis in terms of which candidates they enter drop in the votes and all that kind of stuff. What we have seen is there has been a surge. So for anyone who's not paying attention to the New York City mayor election, in the first three or four days of early voting, there has been such a turnout that they believe we are on pace for the highest voter turnout since nineteen ninety-three.
42:01 Speaker 05 Right.
42:02 Speaker 03 Bonkers. And frankly, part of it is like, you know, a lot of people, regardless of which side they're on, think like socialism versus capitalism is on, you know, on the ballot. And they're going to go and they're going to kind of vote whichever way they want. A huge portion of the people who have come out are boomers. And I saw a Mamdani statement that basically was like, he didn't say like, we have it in the bag, but he basically, we're not worried. You know, we've believed that the market is showing the polls, all the stuff like, you know, we feel good about our odds. But then I saw somebody online on X show a campaign email that went out that basically was like, a lot of people are voting and they all tend to be, you know, in age buckets that we either are losing or tied with Cuomo.
42:46 Speaker 05 Right.
42:46 Speaker 03 And so you start to see this very interesting, like, kind of like the internet election. You know, I think the people a couple of years ago were like, very interested in this idea of like, the first internet generation and election. Now we're seeing this blending of like, all the things like you and I care about, right? It's like prediction markets, kind of the way you communicate, data analysis. Also, there's this like, showmanship that plays into it. Then you got like, the social media videos.
43:11 Speaker 03 I just feel like we're in uncharted territory, right? And so, the same way, I think that we're like, in a volatility generation in asset prices and like, markets, I kind of feel like that way in politics of like, we may be the night before and people have no clue who's gonna win.
43:23 Speaker 05 Yeah, yeah.
43:24 Speaker 03 And it makes it kind of fun, but also kind of makes it a little scary.
43:27 Speaker 05 Oh, no, totally. It's fun, scary and weird, right? The internet town hall is just flat out strange. So take for example this.
43:37 Speaker 05 There is a huge, I believe, Republican donation to Kamala Harris for her chance to potentially run again.
43:45 Speaker 03 Okay.
43:46 Speaker 05 Meaning like, the Republican Party in itself would like-
43:50 Speaker 03 Oh, if she wanted to run, they would donate to-
43:52 Speaker 05 Yes, yes, yes. And you would, you would almost find that like, crazy, but now it's like, oh, of course you would do that. Yeah, yeah, yeah, like, that makes sense.
44:00 Speaker 03 It's like, you know, the defender on the other team's your best player.
44:04 Speaker 05 Yeah, that's right. And you see this playing out in the internet town all the time. You know, one aspect of it, and this is not, we're going to a little bit more politics than, than perhaps we've historically done, but like- You know, people are obviously feeling very emotionally heated about this particular election and it's, there's many lines to draw it. Some of it is of course socialism versus not, but it's also the young versus the old, right? That's, that's the big demographic split that's happening here. And the reason young people are obviously choosing Mamdani is because they're out of the system. They're just, they don't actually, they, they just want to belong to something. And this is a clear way to belong. And if you're that outside of the system, like, this is the only chance, right? You know, so the way
44:47 Speaker 05 you make capitalists out of these people isn't to tell them, hey, you gotta be a capitalist, like, and, and lecture them. You just actually turn them into capitalists by giving them capital, right? That's actually the best way to do it. But what, what we're seeing is that's not kind of the operation, right? And so when you see like, a bunch of billionaires tweeting in New York City, talking about how Mamdani is going to be the worst thing that's ever happened, I've at times felt that in itself is actually antithetical to what you're hoping to achieve, that you're actually making the situation worse. Because that voice is not the voice that's going to convince those who are otherwise on the margin. And it reminded me exactly of the Trump and Clinton situation, which was when
45:29 Speaker 05 any time there was the voice that felt a little bit, you know, holier than thou.
45:34 Speaker 03 Patronizing.
45:35 Speaker 05 Patronizing, exactly. And saying, you know, you're voting for Trump for all the wrong reasons in like a patronizing way. It mattered who that person was because that person, if you didn't believe was representing you, meant you were just going to go against that person. And the problem that I'm seeing in New York is the exact same thing. We have the billionaire class going actively against Mamdani, but that's the wrong voice. They're actually antagonizing their base even more to go then support Mamdani. What you actually need is a young person who's against Mamdani and able to relatably tell the story of why this is the wrong path. They don't want to hear from the billionaires telling them this is not the right choice. It's, it's, it's a stronger fuel to go vote for Mamdani.
46:17 Speaker 03 You know what's interesting is, um, I do think that there is this, uh,
46:22 Speaker 03 heuristic where Andrew Cuomo is a professional politician. Like, if you look at some of the campaign videos he's done recently, he has, you know, Jews for Cuomo, Muslims for Cuomo. He even has, I think I saw a video where he has like Muslims against Zoron, right? And like, to your point, he's going to the actual groups themselves and saying, hey, let me talk to you, record you saying this stuff, and then I'll like, give it a platform. Right. Right, which, which I think you're addressing. But also, there's this element of, people are getting much smarter about how to drive eyeballs on the internet. And so I'm going to make a little bit of a connection here, which brings it back to the crypto industry.
47:03 Speaker 03 In the same way that we see the politicians looking for, you know, there's always like, their competitor makes a mistake, they're out in the press conference the next day. Somebody one time told me, I don't want to say who it is, but they told me that Chuck Schumer is Chuck Schumer, because he has a press conference every day, and he'll figure out even 20 minutes before what he's going to talk about, but his press conference, like, it's all about, you know, get the eyeballs, get the whatever.
47:29 Speaker 03 Coinbase, very, very, very well grabbed attention by buying the $25 million up-only podcast NFT. Yeah. And if you look at the announcement, I think they technically bought Eco for $400 million. It just happens to be the night before the announcement of the $375 million acquisition, they bought the NFT for 25 million, and there's like a 12-hour period where people were like, is this company insane? Like, what are they doing? And they just got tons of, you know, quote-unquote, free eyeballs or free marketing. Yeah. And then they turned around, and then it all made sense the next morning. But that feels like those society we're in, whether it's, you know, companies, whether
48:12 Speaker 03 it's politicians, like, everything now is about how can we creatively grab attention and put that attention, you know, where we want it.
48:23 Speaker 03 Which just means I think you gotta like think more critically, you know, as we kind of navigates.
48:27 Speaker 05 Yeah, yeah. I mean, I think this is again, speaking to people is just unrelentless demand for authenticity. Right? You just want something real and something that doesn't obviously feel paid for. And this is one example where Coinbase is continuing to reap the benefits of that transactional dynamic. I don't know if you've been following, but Chillhouse is now involved in this drama. That is where Jesse and Kobe are partaking, ratioing each other. And it's hilarious. It's so fun. Like, there are times I literally go home and I'm like, all right, should I watch some K-drama with my wife or go on crypto Twitter?
49:07 Speaker 05 You know, Chillhouse is a fun one. And that is eyeballs right there. That's competing with Netflix. And Coinbase just now found its way to compete with Netflix for attention. So I think that that is absolutely the right path. And the reason it's compelling people like me and others is because this is more authentically interesting than any kind of paid sponsorship ads that you will ever see across these campaigns.
49:26 Speaker 03 Yeah, could not agree more. All right. Thank you so much for doing this. Do it again in the future.
49:29 Speaker 05 That was great.
Previous This Bitcoin Bull Run Trigger JUST Happened | Anthony & John Pompliano Next Coinbase Exec: Institutions Are Loading Up on Bitcoin | Brett Tejpaul Page updated October 26, 2026 · transcript and summary are machine-generated
