← CRYPTO 101
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- [00:00]
Podcast Host 1
Welcome to the Crypto 101 podcast presented by Gemini, your bridge to the future of money.
- [00:15]
Brendan
All right, everybody, welcome back to another episode of the Crypto 101 podcast. I hope you're having a fantastic morning, noon or night, wherever you are in the world, you are certainly in the right place. Brendan and I are joined by an incredible guest, a heavy hitter CEO of a publicly lit listed company on the Toronto Stock Exchange. We're joined by Patrick Woods, CEO of Delft X. Patrick, thank you for joining me. And Brendan, and how the heck are you doing?
- [00:42]
Patrick Woods
Doing great, guys. Doing great. Thanks for having me. Absolutely. Yeah. Funny, we're actually a publicly traded company in Canada, but we're based out of New York, but that's a whole other story and I don't want to go in there. It'll bore everybody, so. But yeah, there's some history there.
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Brendan
I love it.
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Patrick Woods
Yeah.
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Brendan
And, and Brendan, how are you doing? Not in New York, not in Canada, but in quite the opposite climate in Florida.
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I know coming in from sunny, blazing hot hurricane season Florida over here. But no, you know, I'm doing good, I'm doing great.
- [01:14]
Enjoying the volatility, my friend.
- [01:16]
Yeah, that's for sure, dude. It's very tradable market. The audience knows me. I love trading, I love making the play. The volatility is my best friend sometimes, but.
- [01:27]
Oh, man. Well, Patrick, we're really excited to have you on a. Kind of an expert in structured credit and all things Wall Street. But we want to just dive in a little bit into your background first before coming into crypto, before getting fully crypto pilled, tell us what you were doing beforehand and what pulled you into the market.
- [01:45]
Patrick Woods
Yeah, so that's so 30 years ago I came into capital markets. I pretty much worn every hat you can, guys. Investment banker. I was a stockbroker at one point, sales, you name it. So, and I, and I've been at very large firms. But then, then I left to put up my own shingle, I guess about maybe 13, 14 years ago. And, and around that time is when crypto kind of started to, to really kind of, it was, it was becoming something. And so I was based in Toronto. The guys at Ledger Labs who developed Ethereum were based up there. So I, I connected with a lot of folks in the space through that kind of, you know, once again, that small kind of close connection. And, and I gu. 2012, I went to the first consensus conference out in New York and met, you know, once again, a lot of folks who today are running some of the largest companies in crypto. And for me, to be quite frank, guys, you know, the, the allure of crypto was really more on the blockchain side. I really liked Ethereum. I thought smart contracts was a brilliant thing. Delaware, you know, the governor of Delaware was actually at that conference which was, you know, once again, it was only about 200 people at the conference back then. It was really small, but, you know, I loved what he was doing, you know, using smart contracts through their, you know, their city infrastructure and ecosystem. But then by virtue of running my merchant bank advisory, we took a few companies in crypto and in blockchain public. Now, one of them actually, funny enough, happened to be this company, Delfex. And Delphix is a company that was originally, you know, kind of rolled out in 2018. The original management blew the company up, and then I reluctantly stepped into where the CEO had a few years ago. And what led us to crypto, actually, Bryce, am I kind of skipping ahead a little bit too much?
- [03:31]
Brendan
No, no, no, this is great. We love.
- [03:32]
Patrick Woods
We love the story. Yeah. You know, but what led me to crypto again was the fact that we were approached early in the summer this year because we have kind of a. I mean, we. Our stock price is literally nothing. We've done no marketing, and we've really been focused on our mission. And our mission at hand has been developing a new structured product for, for the credit markets. So we noticed that there was a, you know, kind of a gap in the credit default swap market because my, my background is pretty heavy in fixed income, as is most of our, you know, guys in the company. And anyway, we developed a really cool product. We, we noticed there are weaknesses in credit default swaps, and we developed a really, you know, great structured product that addresses pain points around downgrade risks. So if you're an insurance company, you're on triple B bonds. If they're downgraded to double B, there's no real product out there that covers you. So we created these securities which essentially provide that kind of capital buffer or that, that mitigation of risk. And funny enough, as I was saying, at the beginning of the summer, we were approached by a few guys in New York and they said, look, why don't we use your little shell company essentially to do it, Basically do a bitcoin Treasury. And Sharp Link was doing their thing at the time. I mean, obviously MicroStrategy has been around forever, but everyone was doing, you know, crypto strat. Well, dats. Right. And so they still are.
- [04:54]
Brendan
I saw a New, a new one recently for Solana, 1.6 billion or something.
- [04:58]
Patrick Woods
I mean, it's, it's a really cool business and I think the model is interesting, but we wanted to do something a little bit differently because, you know, how do you differentiate yourself? And the one thing that we found out was all of these guys going public, the Salana guys, the Ethereum guys, they're all searching for alpha and no one, like no one out there is actively hedging their portfolio in a securitized way. And when I mean securitized, like I'm talking about a fully collateralized, transparent way, one that, you know, when the bottom falls out, you're not worrying about a counterparty. Like, you know, you don't need to worry if FTX is your counterparty in our structure. And so what we designed is we took our original infrastructure and we built out our product line, expanded it, so to speak, to crypto. And we think what we've got now is a product which provides a hedging cushion in bad markets. So, you know, we think 15% below market is a good place to start on the hedge and cover you all the way down. But what makes this unique? And you know, Brendan, you were talking about trading crypto. I bet you're using a lot of derivatives, OTC options and things like that. Those are, those are, you know, those are fine. But when you're talking about a large crypto treasury, you need to have the assurances that, you know, if there's gut wrenching volatility like in 2022 or 2018, you need to know that. And, and I think it's important, I think it's an amazing selling feature too, because there's a lot of people looking to get into the space who aren't, because they don't want to have the 2018, 2022 moves of, you know, down 74, down 64, they can stomach 15%, but, you know, they don't want to do that. So what this in effect does is it unlike OTC options and other strategies out there, you're not worrying about your counterparty. So when you're basically a crypto treasury or dad, or even a fund, but anyone who manages, let's say 100 million of Bitcoin, let's say you would pay a premium to put on this protection. It's going to, obviously it's going to cannibalize a little bit of your CAGR on an annual basis because this is an ongoing strategy that you continuously want to do every year. But you're Going to pay a premium, almost like buying a put option. But on the other side, Brendan, the, the option seller, they're putting up collateral which actually sits in a Treasury bill or like three month treasury bills. And US bank is our custodian. They run everything as far as all the cash flows, etc. It's really a traditional finance product that we've married to a decentralized finance product, crypto. And we think we're the first guys out there who have done it because, you know, let's face it, Wall Street's asleep. They haven't invented, I mean, last time Wall street invented something new was, I don't know, about 20, 30 years ago. So that, that's us, you know, the small, little tiny company, you know, window and, and you know, the ability to actually go out there and innovate new products and disrupt a bit. So that's kind of where we're at as far as, you know, that's what we're doing. I don't think we're really a product. I think we're more of a service. And the service we provide obviously is being the issuer of these new securities and, and obviously we act as the placement agent through our broker dealer, all that other kind of good stuff. So it's pretty cool. We're pretty excited about it.
- [08:10]
Podcast Host 1
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- [11:03]
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- [11:33]
Patrick Woods
Now.
- [11:33]
Brendan
It's super fascinating and I just want to make sure I get got this right. And so for, for folks who are listening, you know, this is almost like, you know, a large, if you're Microstrategy or if you're one of these large companies that hold a lot of Bitcoin or crypto, you could kind of come to a company like Delph X or pretty much only Delph X and you could get this insurance, this disaster insurance, if you will, on your, your crypto and you could handle all the structured credit in stuff for them so that they don't have to roll their own, you know, out of the money put buying, you know, monthly strategy. Is that right?
- [12:07]
Patrick Woods
Yeah, so we don't actually make any decisions on that front. As far as, you know, how much protection they want, you know, what levels they, they want to set it at, that's up to them. But that's a negotiating factor that they, they will negotiate with the other side. The other side are, you know, two very large hedge funds who want to basically offer the protection in return for that premium going forward. We simply act as a broker dealer, placement agent in the middle and we can help facilitate the transaction, of course. And these are issued as private placement securities. So pretty standard stuff like you know, you're talking sub docs, an offering memorandum, all those other kind of, you know, Once again, it's under 4A2 in the United States. It's a really easy program and pretty much everyone knows about it. Which also makes it a very kind of distinct product too because we're not a derivative because we're fully collateralized because the collateral is held in a Treasury bond. You know, we, we are, we're technically, like I said, A4A2 security and we' fall, we fall under that program banner. So that is also somewhat interesting because if you're an insurance company or pension fund, you know, you're limited in some cases to derivative exposure, etc here, you know, once again, you're, you're building in a hedge that's not a derivative. It's actually a real security and that's how it's viewed.
- [13:21]
Brendan
So, and, and with the cost of Bitcoin so high and, or sorry, the vault like the implied volatility typically being pretty high because it's so volatile like you Know, I think a 15% move in Bitcoin is, is pretty regular, I would say in crypto, I would think at least once or twice a year, whether it's a bull market or a bear market, we're going to have a 15% drawdown. So does that mean that like buying 15% out of the money protection is, is more expensive and you know how, you know, you said it drags on compound annual growth rate over the long term. Are there any sort of like, sort of ranges that you could kind of give us on, like how much that drags on return?
- [14:02]
Patrick Woods
Yeah. So Bryce, that's a great question. So in the last 10 years, the CAGR on Bitcoin has been 84%. Had you put this protection on over that 10 year period, your CAGR would have come down to 69. So.
- [14:15]
Brendan
But you would have been able to sleep a lot better too.
- [14:17]
Patrick Woods
Well, you know what, once again, you're avoiding those gut wrenching volatility, you know, moments like 2018 and 2022. Now you're mitigating, like you're not avoiding them. You're still going to get spanked 15%, but, you know, you're not down 84 or, you know, 64. Sorry, I think it was like 74 and 64. But anyway, it was a lot. It was a lot. And if you're, you know, if you're a conservative investor and you look at this, like Michael Saylor is an example, he thinks that bitcoin is, you know, it's. The reason for it is preservation of capital. Well, that, that's a good thing to say. But wait a minute, you're not preserving capital if you're not hedging. And you know, once again, if you're leveraging and doing all those other things, it's not really the truth, is it? And so, so our view is that Bitcoin is basically dictated by supply, demand, fundamentals and obviously a friendly administration right now as well, and, you know, basically a more robust adoption. But you know, at the same time, if you're thinking preservation of capital and you're thinking about the 95% of people who want to be in crypto who probably aren't because they're worried about preservation of capital. I think, you know, we have a tool that, you know, if it's marketed and used properly, then people will really benefit from it. So.
- [15:30]
Brendan
Yeah, and something that you said really stood out to me is the fact that this is meant for those bigger treasury companies and we're seeing more and more of them. And I Think for the average investor or person, you can hedge against your own normal size portfolio pretty, pretty easily, right? If you're extremely long, you know, maybe you buy a put to offset some of the risks. But if we're talking about a company or, or any of these treasury, treasury companies doing that, it's a lot harder. Not to mention maybe liquidity issues that happen, that when you have a portfolio of like tens of billions of dollars of Bitcoin and you want to go hedge against that, it's not as easy anymore. You're right, it's not as simple. And so I think for all these treasury companies that are looking to get billions or tens of billions or eventually hundreds of billions of dollars in crypto and build these over decades of time, and I think it makes sense that we have something that is a bit more structured, something that's a bit more complex and something that works for them. Because rare, like very rarely do we see these large billion trillion dollar asset managers and institutions do the same kind of trading strategies that retail traders do. So why should they have to hedge risk in the same way that retail does?
- [16:42]
Right?
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Patrick Woods
Yeah, exactly. And to that, to that end, Brandon, I mean, this is a very institutional type product, like I said, it's traditional finance type stuff, structured products. But you know, bringing it to this arena, I think the timing is awesome because you know, to your point, guys, I mean, so many people are getting into this, you know, DAT model. So if you, and I think the key to most of these guys is how do you differentiate and how do you cannibalize the other treasuries? Because at some point there's going to be, you know, there's going to be a big kind of buyout mergers, all that kind of stuff of these guys. So there will definitely be a consolidation play coming down the pipe. But to differentiate yourself from all of them who are, like I said, seeking alpha and to be the safest of all of them or certainly regarded as the safest, I think, like I said, I think it opens the door to people like my dad as an example, you know, old guy, you know, think, think guys who, you know, they want to be part of this, but they don't have the time, Brandon, to go out and buy OTC options. They don't want to do that. They want somebody to do that for them. And, and that's where I think the corporate crypto treasury strategy works, is it's a great way for people to get involved in the asset. And, and also it's a, it's a Great way for people to hedge and if we can offer that as one product or not us, but if we could be, you know, if we could service those, those guys who want to do this, then I think it, you know, it really makes sense.
- [18:10]
Brendan
So yeah, I think you're totally spot on. And I, I liked what you kind of said about, you know, finding the differentiators between all of these different digital asset treasury companies. And we spoke with the head of trading at Galaxy recently, a gentleman named Jason Urban and he, he pointed this out. He, he's like, people are underestimating how much volume is going to come from just arbitragers going back and forth between Bit Mine Immersion and you know, SBET or you know, Micro Strategy and Meta Planet.
- [18:37]
Right?
- [18:37]
Because at the end of the day people are trading, you know, the, the Bitcoin per share and they're trading the Bitcoin premium Denav and there's a couple little things that they're trading. So like there's a whole new class of metrics and really a whole new asset class that people are now coming into and volatility arbitrages are coming in. So there's going to be, I mean, I see, you know, bit Mine and MicroStrategy are some of the most actively traded stocks in the, on the stock exchange. And so they're going to need to differentiate themselves as more and more come online and that puts you guys in just such a sweetheart position in the market, you know, to develop more structured credit, to develop more and more products for Ethereum or Solana or Bitcoin. And so I guess I wanted to get a little bit of your temperature on, you know, what, what are you building towards? You know, are you going to be a services company to these DATs? Are there other structured credit products that you're starting to get really excited about or how are you thinking about this?
- [19:32]
Patrick Woods
So I can't tell you too much because we're a public company, but I can definitely say that, look, we're very, we're very excited about, you know, where this is headed. We are agnostic in the sense that it doesn't have to just be Bitcoin. We can do Ethereum, we could do a Solana, anything, anything out there through this structure. Bitcoin just, you know, it's an easy one to start with. But you know, we are contemplating at some point, you know, when we're live and the products being used, which we think is going to be very shortly. You know, we, we have a few other ideas that will Come, you know, come down the transom or across the transom story. And, and I think, you know, to be quite frank, you know, somebody like Goldman or JP Morgan is going to rip us off at some point. So you know that, that always happens. But you know, we have at least a one year head start and we just know from the legalese, all that other kind of stuff that you know, we are first mover advantage guys and you know, so we have a year to do it. But you're right, Bryce, we can't just stop here. We have to keep going. So we know that our credit product right now is being evaluated by insurers. So that credit product will eventually start moving as well. And we have, like I said, a few other ideas that as soon as this gets going they're going to follow on suit. So you know, once again it just gets to the point like, you know, once again Wall street hasn't been developing anything new for years. And so it gives a little small, you know, kind of companies like ours the ability to innovate and you know, disrupt and offer better alternatives.
- [21:04]
Brendan
So you know, when it comes to Treasuries, I think they're really interesting because it shows that not only does retail like truly believe in this for the long term, it's showing that the institutional side is starting to really turn over a new page and say, hey, we believe in this in the long term as well, which is exactly what these treasury companies are. But I've seen some people speculate that with the influx that we've seen of treasury companies, some people are speculating that maybe that will be the catalyst of the next crash or that that cause like the next FTX like moment. And I think that from their perspective they're looking at all these new Treasuries coming up and saying, well eventually they're going to try to become more and more risk on right, because they're going to try to outperform their competitors. And while I don't think a company like strategy or bit mine or, or some of those, I'm not really as nervous about those. I think most people are nervous about the new ones that come up and they're going to say, well we can get better returns and this and that and maybe they start integrating forms of leverage and then that eventually leads to an unsustainable path. Kind of like what we saw in the defi boom of 2021 where you saw people saying, hey, I'm going to give 5% on my stablecoin. And then someone else said, I'm going to get 10% on my stablecoin. Then we saw 15%, then 20%, then 25%. And then eventually we're like, what in the world's going on? 25% on a stablecoin. And then it all blew up because they're all trying to outperform each other.
- [22:32]
So good times.
- [22:33]
I know it's a big statement, but do you think that the treasury, you know, boom, let's call it the treasury explosion that we're seeing with all these companies come up, do you think it's even possible for them to lead to a blow up moment like that? And does a product like yours help avoid that by mitigating risk?
- [22:54]
Patrick Woods
Yeah, so, so there's a few questions in there. So, yeah, I think, I think Brandon, I think there's a lot of leverage in the system from what we've seen just by talking with people who are, you know, in the space and the leverage is definitely building. So, so to that end, is that a good thing? Is that a good thing? It depends who you ask because.
- [23:16]
Brendan
Depends whose hands it's in.
- [23:17]
Patrick Woods
Yeah, because. Okay, so, so, so look, okay, you have all these guys coming on stream, they're all launching these tragedies at some point, you know, it's going to be a crowded, it's going to be a crowded room. Some might argue it's already there. I don't know. I think all these guys coming out buying crypto, I think it's underlying very supportive because it's really basically they're hogging the supply. So, you know, and less supply out there, the tighter that you know that demand is going to get and you're going to end up with much, much higher prices in any kind of scenario like that. Now you will have blow ups, you will have bad actors like FTX is out there who unfortunately they paint, you know, they paint the whole thing with a bad brush. And it's a very nascent, it's still a very nascent industry. It's only like what, like I guess maybe 15, 16 years old. I mean, you know, it's, it's not that old. So in any nascent kind of industry like this, you're going to have hiccups, but the underlying fundamentals are strong. But to that end, funny, I was talking to a hedge fund the other day. Get this guys, you're going to love this. So the hedge fund, I was telling him about our product and, and I can't say who but, but I said, look, you know, this is, this is a way for you guys to hedge because you guys are buying, you know, some of these crypto treasury companies. You know, you're putting money to, you know, putting money to work here. And he sat back and he's just like, well said, I don't need to worry about the crypto treasury because I've already hedged myself. So this is the guy putting up the capital for the Treasury. He doesn't care about the company treasury as far as them hedging. So he doesn't really care about the retail investors or anybody else in the play. He's sitting there smug as a bug, thinking like, I'm so smart because I hedged myself. But what's, what's unfortunate about that, other than him being a real sleaze, is the fact that this guy is using OTC options to hedge his risk and to offset his risk. He has no idea who his counterparty is and whether their books are clean. And, and I can definitely say this, that there's a lot of talk, and once again, I, I'm not a full expert in this, but there's a lot of talk right now in the hedge fund community about the excess amount of leverage that's been building up behind this. So let's face it, if you have something bad happen, you need to know that you're, you're, you know, basically you're going to get paid. You know, the protection you bought is going to come through to you, and that's where our product makes a difference because all of that money. So if you hedge this thing at, let's say, you know, at 85, let's say, let's assume BTC is at 100,000, you're going to, you know, your hedge kicks in at 85,000. Well, if BTC goes down to, let's say, 50,000, you need to know that that 35,000 is going to be there for you when, when that, when that time comes and you call that option with us. Like I said, the, the seller of that protection has taken that 35 million already and is sitting in a Treasury bill at U S Bank. It doesn't move. So your collateral is always there. You're guaranteed to get paid when a bad moment happens. OTC options, other types of strategies like that, I don't really, I don't think they offer the same thing. And like I said, that was the weakness we identified in credit default swaps as well back in the day is you, you were dealing with a lot of counterparty risk. You know, and especially, I mean, you go back to 2007. I mean, my goodness, I mean, you couldn't ask for a bigger disaster happening. But, you know, everyone facilitated it. And then he had Volker and Dodd Frank come in, which, you know, kind of cleaned the deck, so to speak. But you had a market that never really came back because once again, everyone remembered how badly burned they got because AIG was writing protection and they had no collateral behind it. So we, we think the same thing about crypto. And for some of these, you know, crypto treasuries is the fact that, you know, if they have a fully collateralized transparent instrument and hedge which gives their investors and them the assurance of getting paid in a bad market, then, then, then I think, I think we're winning.
- [27:15]
Brendan
You know, so, yeah, I think you're totally right. And it's interesting because, you know, my, you know, kind of Brennan to your point about like, can this really collapse the ecosystem? And you know, everybody's got their micro strategy and Michael Saylor with a target on his back, he's become the main character. Everybody's saying, and you know, any leverage that starts, you know, at some point, you know, gets unwound. And you know, he's always on CNBC kind of defending his position and saying they've got this bulletproof balance sheet where they've got, you know, I don't know, call it $80 billion worth of Bitcoin and they've got, you know, $10 billion worth of debt extended against that. And most of that is in these perpetual strike preferred things that eventually, or essentially he's basically like, I can't get margin called. Like, I've structured my credit in such a way that I just can't get margin called. And so micro strategy in a sense might be a little bit of a, a unicorn in the sense that they were first to market. They, they created the, the whole financial engineering of bitcoin. They've become like the first bitcoin bank essentially where they've got bitcoin and assets, they've got bitcoin denominated loans and all this kind of stuff. And then, you know, they kind of do some software development on the side. But, you know, it is, the jury's still out to see if, you know, everybody else could kind of have that same immaculate conception story and if they do it as well. But it seems like, and I want to get your thoughts on this just in terms of volatility over time for bitcoin, is it going to go down or go up? Because it seems like we just have a lot of Sellers of volatility like microstrategy and everybody, you know, selling the microstrategy options and all this kind of stuff. And one of bitcoin's, like, key things that people were really attracted to is like trading its volatility. But now that it's probably going to be on a trajectory of lowering over time, do people need to get their yayas out with their volatility out in the altcoin world? And could it be a rise of all this volatility in altcoins?
- [29:07]
Patrick Woods
Now you're asking me?
- [29:10]
Brendan
Yeah, I'm asking you. I'm asking you think bitcoin's volatility will, will go down or, or rise over time?
- [29:16]
Patrick Woods
And oh, man, I mean, my, our view on it that we take as a company is that, yeah, you've got 3 to 7 million bitcoin you lost. Okay? Like, I'm, I'm, I lost a bunch of bitcoin ones. You know, I had these little hard wallets and I'm just like, yeah, beside myself how I could have lost those things. But, you know, time, it was like $400 a coin kind of thing. It was no big deal. But it's a lot different now. But, you know, when you, when you, when you look at the drivers, so, so you have 3 to 7 million wallets gone or, or bitcoin gone, you have maybe about a million to still be mined. So you now have, you know, ETFs, you have corporate crypto treasuries or DATs. You know, everyone's buying this, this, you know, this, this cryptocurrency up, so you're actually ending up with a lot less supply. And is the demand going to go down or is it going to increase? I, I would, I would wager that it's going to probably increase. So you're going to have more and more participants play, especially when products like ours kind of come out and it brings out, you know, a whole new investor, somebody who's more, once again, more, more conservative, more focused on, you know, preserving that capital and giving away a little bit of their upside, you know, in return for that. But I think you're going to have more demand, less supply, and I think you're going to end up with an asset that, I mean, I, I think when you talk about volatility, it might not be as volatile on the downside as it has been in some cases in the past. But I think on the upside, I think it could be incredibly volatile. You know, I mean, people throw around huge numbers like 300,000? A million. I mean, gosh, it wouldn't surprise me, put it that way. Yeah, that, that, that, that comes. But as far as the lack of volatility, that's not necessarily a bad thing. You know, that's actually probably a really good thing because longer term, if you're going to treat it as a, like a Michael Saylor preservation of capital type asset or investment, I don't really know how he views it. But you know, you want less volatility over time, it strengthens the whole, whole ecosystem for sure.
- [31:25]
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- [32:52]
Brendan
I think the rise of all these different dots has also been something that stuck out to me, right, because, you know, originally it was just Michael Saylor. Then we started seeing some for Eth and I think that makes sense, right? You look at Bitcoin as the king. Eth builds a lot of the infrastructure that Bitcoin really can't do. And then we started seeing Solana, which again, I think makes a little bit more sense. It's a big infrastructure play a lot can be built on top of it. It can do things that it can do things differently and sometimes better than Ethereum. And so there's caveats. There's pros and cons of both. And then in recent months we've started seeing treasuries of all these different altcoins. Some meme coins, some projects that have no revenue, you know, maybe not even a product yet. Some that do. And they're all coins that do have a product and a service and maybe some revenue and stuff. But it seems like now we're getting into the point where there's just a race to be the first one to do a Treasury for something. And I'm not sure how I feel about that. You know, I think not. I don't correct me if I'm wrong here, but I feel like not every company needs a Treasury, if that makes.
- [33:54]
Sense or not every crypto needs a Treasury company.
- [33:57]
Oh, yeah, yeah, sorry. Not every crypto needs a Treasury company. Yeah, but I'm sure for you, Patrick, I'm sure that's a great thing. You're probably seeing all of them and saying, hey, come our way, we can help out.
- [34:07]
Patrick Woods
I mean, I guess that's even a better point. I mean, would you even offer your.
- [34:11]
Brendan
Kind of products to treasury companies that do all these different altcoins?
- [34:16]
Patrick Woods
Yeah, so I, I think. Okay, so, so you have a lot of new companies coming out. You have, you know, once again, a real rush into the room, so to speak. I think part of the reason for that is you've got a lot of lousy companies. Like if you looked at, what was that one that. The Ethereum one. I already mentioned them.
- [34:36]
Brendan
S Bet. Yeah, yeah, sharply sharp link.
- [34:40]
Patrick Woods
I mean, look, I mean, from all, for all intents and purposes, I mean, the thing was a flop, right? I mean, it was enough.
- [34:44]
Brendan
It was a dead company.
- [34:45]
Patrick Woods
It was dead. So, you know, so there's a lot of interest for, you know, boards of small little blown up companies to do something like the treasury and, and there's still quite a bit of funding for that. I mean, you know, there's so much money being thrown at this right now because it's the hottest thing and, and everybody loves that. But I, yeah, I think, I think you do end up with a crowded field at some point. And that's like when I say consolidation, I think starts to kick in and, and do people start, do people start doing that when the. Actually comes down to, to one or, you know, basically, you know, to, to a flat line with the underlying asset? I think that's when, that's when you're going to see that consolidation play kind of kick in. And we seem to be getting close to that. I mean, you look at, you know, you look at prices of, of these Treasuries over the last little while, I mean, they're just getting kibosh, like completely KO'd. So, you know, that's, that's a really, that's a good time for a consolidation play to come in. And I think that's what's probably going to happen. And I think, you know, all the glamour, all the fun stuff around the altcoins, etc, you know, I don't know enough about it to on that, but it seems like it's, it's a lot of crazy going on. But that's not a bad thing. I mean, you know, hey man, the system needs to be shaken up a bit and you need to have new entrants come into play. And so I think, you know, that's might not be a bad thing.
- [36:07]
Brendan
Yeah, we're getting an ever expanding universe of new buyers and new pools of capital. You know, we, we think, you know, me and Brandon, we've been locked away here in our crypto world for years and years, but we, we realize that 99% of money out there, you know, they need equities or structured products and, and you know, bonds, they, they can't actually go and buy and hold, you know, crypto as a, you know, a commodity and all these.
- [36:31]
Patrick Woods
That's a great point. Yeah, that's a really good point. Yeah, yeah, no one wants to go into, you know, set up a wallet and all that kind of stuff. Most, most people don't have the time and patience to worry about keys and all this other stuff. So, so yeah, there is like a big, big market of people who want to be involved. They think that the crypto, you know, treasury strategy is the one to go with over, over exchange traded funds and all that other kind of stuff.
- [36:57]
Brendan
And, and I want to kind of just round out the conversation with a little bit of your experience kind of going back to 2007, 2008, because you were kind of right in the thick of, like you said, just, you know, great financial crisis and really understanding from the sales side what was going on. And I just want to get like, you know, what are your signs that you're looking for if there's going to be a crash? I mean, maybe not to the same scale, but are there, you know, everybody's talking about those sentiment reads. You watch the big short and you know, like Steve Carell goes, he realizes all these different conversations, he has that aha moment. Are there any sort of aha moments that you could kind of bring to to our, our listeners, I, I would.
- [37:36]
Patrick Woods
Say in this, in this kind of, in this world right now, narrative plays everything on this. So I'm reading a book right now called Narrative Economics. And it's how the narrative actually can dictate what really kind of happens, you know, under the covers, so to speak. And, and with the economy, with, with companies with segments like crypto. So I would always pay attention to the narrative and if the narrative gets too, too buoyant, then you know, you know, there's going to be, you know, somebody's going to get kicked in the pants. Whereas, whereas if it gets too depressing and you know, everyone's just throwing out their crypto, like, yeah, this was a failed experiment then, then you know that you're at the bottom. So. Yeah, yeah, I mean that's from my experience, that's, that's all I can really share about that. But you know, my biggest thing and the only reason why I harp on 2007 because I think it's relevant to the product that we've created and that is that, hey man, you know, AIG Lehman, a bunch of other guys were writing protection and they had no collateral to support it. So that's why everyone got so, basically just slammed. And so I think if you have full collateralization and transparency and, and once again the assurance that you're going to be protected, that that money's there for you, then, then like I said, I, I think, you know, we're, we're on the right path. So.
- [38:54]
Brendan
Yeah, and kind of last question is just in terms of like, where can this market go? You know, are you, are you feeling like it's part of the, the, the top of the four year cycle? I know a lot of people think the four year having cycle is going to dictate prices or do you think that this bull market can extend through next year?
- [39:14]
Patrick Woods
I think it could do, do either or.
- [39:16]
Brendan
Man, there you go.
- [39:18]
Patrick Woods
Come on, man.
- [39:18]
Brendan
It's got to be hedged.
- [39:19]
Patrick Woods
I mean if I had a crystal ball, man, I, I would, I wouldn't be, wouldn't be here. That's actually, I would be still chatting with you guys. You guys are great guys. Anyone who makes time for me, I mean, again, God, you know, God bless you guys. But no, I would say. Really? Yeah, I mean from, from our view, we think it's going to do very, very well. We think there's going to be obviously, like I said, M Navs are coming down, they're being compressed. That's a really, really good thing because when they come to basically, you know, an equalization level. Even if they get to a discount level, you're going to have a cleaning of the deck, so to speak. But the underlying asset, like Bitcoin, Ethereum, Solana, they're probably going to do great. In fact, I think they're going to do beyond great. I think they're ready for probably one of the greatest bull markets they've ever had. So that, that's my opinion.
- [40:09]
Brendan
But clip it.
- [40:10]
Patrick Woods
Yeah, but you know, at the same time, I mean, if, if, if I was wrong, but if I also, if I was going to build my own bitcoin treasury right now, I, I sure as heck would give up a little bit of upside in return for the peace of mind that, you know, hey, if I'm wrong, I'm not going to get too hurt. And I look like a superstar, by the way. If that, if that, if. And when that event happens, everyone's going to want to pile into my thing because they're going to say this guy was the smartest guy out there. He had a hedge, nobody else did. And, and so then you end up cannibalizing everybody.
- [40:41]
Brendan
I love it.
- [40:42]
Patrick Woods
Yeah.
- [40:42]
Brendan
Patrick, thank you so much for coming on to the show. CEO of Delf X. We hope to have you on again soon as there's more developments and more exciting shakeups in the DAT world. And any new products and services that you launch, we'd love to hear about them first. But until then, thank you for joining and everybody at home listening. We hope you enjoyed as well.
- [41:00]
Patrick Woods
Thanks guys. Really appreciate it. Pleasure talking with you. Thanks for having me.
- [41:14]
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