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- [00:00]
Joe
Bitcoin17.17 years is a $2 trillion asset and I could care less what bitcoin trades for. It's just a matter. The money, the money, the money. Buffet is bottoming strength in my view, because his entire mindset is based on fiat money.
- [00:18]
Michael Tanguma
Here's a different way to see the world. You owned all of the bitcoin in the world. You also had to make some $25. I wouldn't take it. They just follow what I do.
- [00:28]
Joe
Welcome back to over the Horizon, a bitcoin podcast. Today I'm joined by Michael Tanguma, founder and CEO at OnRamp. Michael, thank you so much for joining me, man.
- [00:35]
Michael Tanguma
Yeah, thanks for having me. It's late in the afternoon on Friday, so I'm sure we're both excited for the weekend and it's a good end of the day. I think Bitcoin hit 78 today at some point. Now it's sitting around 77,000.
- [00:46]
Joe
That's right. Hopefully by the time we upload this on Tuesday, the price is relatively similar. But right now behind me, it is 77,006. The S&P 500 just closed break. Brand new, all time high. I guess we could sort of start there and then we could dive into some of the stuff that we had prepared previously. Like, what on earth do you think is behind this rally in bitcoin? Obviously, in the broader market, Is it entirely related to the war? Is it something else? How do you view what's happening right now?
- [01:10]
Michael Tanguma
It's a good question. I was texting some of the guys early, like last week, and I had this tweet that was meant to be tongue in cheek around Bitblock Boom. And what was going on. And the Spidey senses were tingling and it was relating it to Gary Leland having that. And the reason why was because part of that tweet was looking back at 2020 and it was really August that that conference went down. And then everything in 2020, if you think about Q3 and Q4, there were sailors stepping in publicly. There was Ross Stevens, there was Nydig. And you just saw this lift because we had been in this band below 10k, maybe teetered above it, but for years in 17. And then the price took off and it did its thing. And it feels very similar, Similar, kind of like, I don't call it geopolitical conflict, but, but, but conflict and potential inflation and all the things associated what's happening in Iran. But I personally think what's where the Spidey senses were tingling on like, we're ready to kind of like start to move up again was I've felt that the price action has been inorganic. I don't think it gets talked about enough that the bull run wasn't a proper bull run in all metrics from adoption to when you look at the heuristics. If you talk to anybody that was selling hardware devices like usually get these uptrends and it's been down into the right since 21 or 22 the blow off top that we had there. Another great example is like how many bitcoin companies have been like spawned off for new entrepreneurs. That's generally a catalyst. You have net new entrance, you have more adoption, you have more interesting products to come about. So point being is we never got the proper bull run, we never got the proper reflexivity for the market to do its thing. So we're not going to get a proper bear market either. What we're going to get is, I think it's not popular to say because it sounds like Coke. But ultimately in the same way gold has its version of manipulation, there is a version of pegging that price for a certain point because there's a lot of things that needed to get in place. And what are those things? Morgan Stanley launching ETF is one of them. Charles Schwab launching Trading Clarity act getting in place For a lot of institutions there's no shortage of stuff with NASDAQ and Securitize and Tokenize assets every region across the world. Pakistan just came on, you got, got Hong Kong working on stablecoin stuff, you got Switzerland working on stablecoins. You have all this market structure in place. I think hyperliquid's doing its thing in you know, defi or like outside the system which is fascinating itself because obviously don't hold any of this stuff. But I do think it's interesting how they're projecting and I haven't read that colossal piece Colossus piece on the founder of Hyper Liquid. But it's this idea that Tradfi really is like enamored by it because of the 247 market. So you have all of these markets, markets like commodities and potentially like secondary markets for like SpaceX and others trading on this thing that nobody you know, manages and it gives them insights into markets that are historically 9 to 5. So point being is you have all these things coming into place and I think once they were and those pipes were ready to go. Now you start to have to see the inflows and, and I think it's going to coincide more than likely with A lot of, you know, know, printing of money and then also interest rates having to lower at the same time.
- [04:17]
Joe
It definitely feels that way, like the institutional groundwork that's being laid. And on my main YouTube channel, I made several videos about this and they did really well. It was, you know, the first. It was Morgan Stanley, right? $9 trillion in total global client assets, launching their own Bitcoin ETF, clearly trying to start a fee war. 14 basis points, undercutting the incumbent with iBit. Clearly they want to get in on this. Clearly it's for a reason. And then you have, you know, on top of that, Charles Schwab launching their crypto trading today. Crypto, we care about bitcoin only. And then you've got Morgan Stanley also sort of dipping their toe in the. Or not Morgan Stanley rather, but Goldman Sachs sort of dipping their toe in the water with this premium income etf. I'm of the belief that this is sort of like a trial balloon, if you will. A trial balloon isn't the right word, but testing the waters to see if there's appetite for an eventual spot Bitcoin ETF of their own. So really it seems like the institutions are flooding in. You couple that with probably a little bit of insider trading or, you know, Washington, D.C. type trading. Sherry Biggs, representative from South Carolina, I believe today bought 200th of Bitcoin, or she disclosed a purchase of $250,000 worth of Bitcoin. So in my mind, chances are that tells me that this institute or this clarity out of Washington that we've been looking for as far as regulatory clarity is on the horizon here. So to me, it does feel like a pretty big move is coming up. You pair that with the Iran war. I was just talking to Lawrence Leopardi yesterday and we uploaded that show this morning, and he tends to think that what's happening right now with Iran is deliberate in an attempt to erode the value of the dollar, which to me, 50, 50, not exactly sure. But in his mind, what he knows, and, you know, I'm sort of the same belief here that Trump and his base, he sort of, you know, by going to war with Iran, he, he went against the best wishes of his bas. Really, all he has left heading into the midterms is markets. And so he's going to try to juice markets to the best of his ability. You also had Hank Paulson come out, say that the Fed needs to have a backup plan in the event that demand for U.S. treasuries dries up. I'm not sure, if you've seen that clip. But that's pretty insane. He went on Bloomberg Wall Street Week and talked about that he was the guy who engineered the response to the great financial crisis. So it seems like everything's really coming to a head now. I guess the one question for me, and I guess I'll pose it to you too, do you think that between now and when we see new bitcoin all time highs there will be sort of a zero to one event where we do see some sort of massive crash, a big print as it were? Or do you think that like a melt up rally now that the Iran war seems to be coming to an end is the path of least resistance?
- [06:46]
Michael Tanguma
It's a great question because I think this maybe ties into the first part about without going into the geopolitical, geopolitical situation in politics, there is a real reality of what Larry's saying, who's a good friend of we get trapped. And I think it's the same thing with the sailors and stretch. Stuff we'll talk about later is there's 1D solution, there's 2D solutions or 2D takes and there's three dimensional. And generally the real world operates in the third dimension. But most people that we talk to that listen or on Twitter are the second dimension. It's just enough to think you're clever, but not enough to actually know what's going on.
- [07:20]
Joe
And then the Dunning Kruger, I guess
- [07:23]
Michael Tanguma
I don't necessarily know what that is. But the first dimension is like cnn, right? And the second dimension is you go on Twitter and then the third dimension is like the actual truth. And so the angle there is like Elon Musk never understanding Bitcoin. It's like so the guy that is the smartest wealthiest person never understood proof of work and all that. It's like I don't believe in it. In the same way that so Trump doing what he did wasn't going to start this whole situation around movement of commodities like oil and what that would have. And from the lubrication of the whole global financial system, it's like doesn't make any sense. So I do think that there's a process in play there. Now the 2D, 3D layer on do we get a crash before the run up? We saw that in 2020. So that was kind of the base case a couple weeks ago where everything starts to seize up and you're like this feels like it's going to hit a tipping point and we're going to get that real. Like March 2020 kind of deleveraging moment before things really rally. I feel like that might be the 2D and I was in that camp. That might be the 2D logic versus the 3 dimensional is like everyone's waiting for that and we don't see it. I don't. I truthfully don't know. What I do know is that if you look at the silent hand, the machine, right is the commercial way. There is things that guide the global. You see ETF's launch and then everyone across the world starts to adopt digital assets and frameworks and green light it. In the same way that I've always felt with a high degree of certainty where I'd make a bet that clarity was going to get passed ultimately because of everything you described, that the machine needs proliferation of dollars. They need demand for Treasuries from a socioeconomic perspective in the U.S. they need an asset or assets that behave like sponges for liquidity, that don't have the reflexivity of real estate and equities, I. EE. Gold and BTC. Hence ETFs getting launched. Because if you go back to the history of ETFs, there was back because I don't know how much you know about my history, but I've been in this space building since 2019, 2020. And so you get very close to private clients that work at large instit institutions, large institutions. And people really forget from 2020 to 2022 when FTX, Celsius and all those firms fell apart. When you talk to people at Citadel, blackrock and Fidelity and all these firms, they looked at coinbase like a Web3 company. That's the way that they would discuss it. They would never trust them. This is pre Coinbase, IPOing, pre ETF. And this is part of why EDX Markets was stood up. It was a consortium between Charles Schwab, Fidelity and Citadel. And that was the narrative and the atmosphere. And then 23, it all flipped. And a lot of people likened it to. Or they referenced the GBTC and what was going on in the legal aspect. But it never fully sat right because when that flipped, the ETS for greenlit and Coinbase was the base for all of effectively all of them, the two that aren't using them. I don't think they have any flows. But the point being is that there was a lot more embedded in my view with the ETFs being launched, which was the understanding of a lot of the things that are going to play out. And you can even marry this back to. There was all these offshore derivatives exchanges that were really demonized. And then once we had this new administration and the new framework, everyone came into the fold. Right. You look at Deribit was acquired, you look at like a lot of the market structure, everyone's cool with the way things are because the apparatus can wrap their arms around it from a legal, from a tax perspective. So. So what I'm sharing with you is you look at just all that pattern recognition and framework and you can see how this is a tactical strategic lever for the financial system. Still a small asset class compared to everything else. Like Bitcoin's 1.7 trillion. Gold sits at 34 trillion. And there's a bunch of other things happening in the administration and very smart people's minds that need to be in place. So it's similar when Trump got into office, like we wanted all these things, but the reality was that there was an order of operations. And so I think that's what's just been playing out. And that's why we didn't get the exciting 25 that we all wanted. But I do think nobody knows timing, but I think within the next 12 to 24 months we do get that kind of real exciting, kind of like reflexive loop where you get the real bull run.
- [11:32]
Joe
Yeah, it's certainly a wager. If I were a betting man, I'd say that that was the case because it just seems that all this groundwork is being laid. It has to have been laid for a reason. One of the things I want to ask you about, particularly about, obviously you run on ramp and so self custody is a major aspect of your day to day and what you're think, how do you think about these new ETF launches?
- [11:53]
Michael Tanguma
Right.
- [11:54]
Joe
Morgan Stanley coming into the fold, launching their own ETF. What do you think the role is that Bitcoin ETFs play? I have long said for a couple of years now, and now we're sort of starting to see it because Charles Schwab just launched spot Bitcoin trading, that the ETFs are sort of the inroad for large pools of institutional capital, but also people who just are just normal retail investors to get into Bitcoin. But over time there's going to be a demand from those same people for spot Bitcoin exposure. Once they learn what the asset is, I've said that they'll come for the number go up, they'll stay for the self sovereignty. Is that how you view ETFs or do you view them a little bit
- [12:28]
Michael Tanguma
more adversarially no, I think it's a really smart take. I think we're going to enjoy this combo because we haven't really discussed, I don't know how much you've heard, but we're I think align in and I'll give you, I'll add some more ammo or more wood behind that arrow in the sense of it's less on the sovereignty, it's ultimately the economic practicality of why you don't want a pulled vehicle on a single party exchange. So if you, if you humor, humor me for a second, I'll give you some context into how and why we do what we do. So my background, I was actually maybe where some of these takes are interesting or different is I had a background in traditional tech. So I was like at like big companies like Google, YC, back companies. I was with Adam Newman at WeWork Lighting Money on fire in New York City while I was learning about money. That's kind of the joke is in 17 I was finding out about bitcoin. I was reading the standard nights and weekends while I was just working in 18 hour days with Adam Newman. So I was learning about money while oil, it was lighting on fire. And the point being is I adopted a material position meaning like majority of my wealth. And I had to realize or come to the conclusion, well, if I do this and I did this, I couldn't leave it on a third party exchange. the time I was using Gemini, I was in New York. And you come to that conclusion because it's rational that you can't get knocked out of the game because you wake up the next day and it's gone. And it can be gone because they don't like you. It can be gone because your phone was intercepted. It can be gone because they lost it. All right. So that led me down the journey of custody. I ended up becoming good friends with Parker Lewis joined Unchained and I built basically multi state collaborative custody for a few years. And there was a lot of learnings there. The main one was when FTX Celsius block file collapsed. It was this real like visceral moment of oh God. Not only did I see the like ceiling of self custody where people. I think that it's obviously what makes the system work. But I think that at the meta level custody is a reason why people think bitcoin is speculative at best and a Ponzi at worst. And what that means is because if you tell anybody about it that isn't that just thinks you're crazy, it's because they're subconsciously understanding you're giving them a problem, not a solution. Because you're first telling them there's a new form of money and a new thing to protect you. And now you're putting the agency on them to go figure it out and then manage it, when all they've ever heard is it ends up in landfills, it ends up in North Korean wallets, it ends up rehypothecated. Ftx, like all these things. My grandma, God bless her soul, she texted me after, knows very little what I do, but she texted me after ftx like, are you okay? It's like, I'm perfectly fine. But nobody understands that, right? So the core idea is this is where the custody layer is the main focus. Because if you can figure that out, and you can figure it out at scale, you have generational business to be built. But you also can really help people. Because the way I look at it is like, Bitcoin is the best savings technology. And then on ramp provides the best savings account because you have to harness that technology. It's almost like nuclear. And if you just like get it and you don't know what to do, deal with it, you can really blow yourself up. So where this ties into what you asked was built unchained in 22. The market collapses. And I started to look at the market structure. And the market structure is effectively the thing that's existed for thousands of years. You either have a third party custodian that holds the asset, which has existed for thousands of years. Somebody holds the horse, and you got to go give them the gold if you want the horse. And that's similar if Coinbase holds the BTC metaphor gold. You got to send them the money. So there's nothing different there. It's just digital. And then Bitcoin is a bearer instrument, and we've had bearer instruments forever. But nobody tells anybody to take all of their gold or their dollars home. Yes, you can hold more of it in your hands, but you still end up with the same problems. And why you needed a bank. Whether it's because you get cancer and pass away, whether it's inheritance planning, dynasty trust, access to financial services, you don't want to get your family killed because somebody learns about your bitcoin. All the things that are going to happen as the price runs to hundreds of thousands of dollars. This is what Leads People to ETFs or other products that are easier. The point being is that if you look at that trajectory, you start to be concerned about an existential crisis for bitcoin. Because where did gold failed? Anybody that really has a material allocation of Bitcoin I would imagine had to underwrite gold and where gold sat on a global scale and how it underpinned money. And so you start to learn. Well it centralized and that was ultimately the problem. So you look at the trajectory the trillions of dollars that were going to come in. Our business was founded in 22 pre ETFs so but it wasn't possible to forecast. You already saw what grayscale had done in their trust pre ETFs that what happened in what or what was going to happen happened in that you're going to have trillions. I think the number in the past 24 months we went from 2% to 12% of all Bitcoin is now held by DATs or ETFs. And it was going to continue to happen because there's no other solution because those institutions aren't going into cold card ledgers and Trezors. So that's how we thought about, that's how we funded. That's why we created on ramp. Now to your point, the most bullish thing for anybody that wants to build and what I think we're building is Arthur Hayes was on a recent podcast. He's a little bit of a kind of out there but he has some really good takes. He's been around for a long time is he referenced how he doesn't care about clarity or genius or all this crap and he basically said because we don't need them. And he's saying that this is a retail driven phenomenon. It's been a retail driven phenomenon. And if you think about it, this is the part that gets missed by tradfi is because individuals are a consensus of one. They don't need a board to figure out how to buy bitcoin and get into it. Retail holds the VA empirically. The vast majority of bitcoin in self custody they're the most sophisticated because they knew they couldn't trust a third party custodian. But that was over time education. And if they did trust a third party more often than not they lost all their Bitcoin, Blockfi, Celsius, ftx, Genesis. You know you can go down to La, Mount Gox, Quadriga or you can go forever. So you see where I'm going with this. That like the entry point for retail, whether it's Strike Cash app or if the reason these institutions like Morgan Stanley and Fidelity and Goldman Sachs is because there's demand at the retail level. Now retail is different for everything. It's not like crypto retail. This is like family offices and high net worth individuals that sold businesses. But the point being is retail drives this market. Institutions are building products for other institutions which are omnibus pooled wallets, no assurances, no insurance that covers it, all these things. But they're buying small slivers in the same way somebody buys a small sliver on cash app or strike right off the bat. When somebody gets serious about bitcoin, they have to do what I talked about in 2018 that I did. I had to figure out the custody aspect because it's rational. If you're going to buy large amounts of bitcoin, you got to understand how those keys are protected and you have to make sure you don't get knocked out of the game. You can't have a single point of failure. So all that's to say a long way is the ETFs are very bullish. They get people in. But the economically rational thing is the ETFs will leverage something like multi institution custody. The individuals will move over those assets, whether it's in kind, which will be allowed, or they'll just sell their shares, have to take the tax hit and then they will go into something that provides better assurances. I have no question that's the trajectory of the industry. Because once your economic value is tied to that, the rational thing to do is to participate in something that you can't get knocked out of the game the next day because somebody effed it up.
- [19:36]
Joe
Fantastic. I think that's a really, really good pitch for multi institution custody. Just for those who are hearing about that term for the first time, I highly doubt people listening to a bitcoin podcast haven't heard of you guys or multi institution custody. But how does your setup differ from traditional collaborative custody setups that people may be more familiar with? And then, you know, what do you think is going to drive wealthy clients based on the conversations that you've had with them? What is the dominant reason that they're choosing you guys overalllocating their capital to an etf?
- [20:06]
Michael Tanguma
Yeah. So most individuals are not at this stage. If like we work with ultra sophisticated individuals, meaning, and these are people that work at like the largest tradfi firms that lead their research teams to people that hold thousands of bitcoin. And so when I consider somebody ultra sophisticated is the person that basically played hot potato. Because I don't think there's anybody that's been in bitcoin this long that still Holds the underlying in some form of custody that hasn't had to move it around because everything's failed them. Whether it's a third party, whether it's a data leak, whether it's the bitcoin price rose or their family grew and they can't get knocked out of the game for their wife has to be able to find it if they get hit by a bus and everything under the sun. Dynasty, trust, all of that. So the point being is we're like that end state. And it kind of makes sense because I was there, I had to live through it. I use this because I need my wife to be able to manage it. And so the notion of multi institution is really straightforward. It's multisig, which is interoperable. It's whatever. It's the hardened infrastructure that powers almost every large custodial exchange. Think about Fidelity, Coinbase, Bitgo. And it's the same technology that collaborative custody providers would do, like a CASA or Unchained. Right? It's the only asset that has it built into the protocol. So it's not a smart contract. There's nothing that's proprietary about it. And that's very important because for anybody that does anything in Bitcoin, when you move over to custodian, you ultimately want to know not only the reputation of them, but you want to know the architecture, and you don't want it to be proprietary. And if it's new, you need years of like battle testing and hardness before you go and adopt it, because you don't necessarily know if there's anything wrong with it. So all we did with the difference between collaborative custody, the easiest way I describe it, and where we're at in Bitcoin's phase, and this is probably not popular, but I think we're like in a very much hobbyist phase right now. We're 17 years into this big thing. And what I like in the meetups, which I've been a big part of with Parker and Austin and all things, and I love all the bitcoiners, but I think of the meetups very similar to a parallel in 1970s and late 70s where you had a bunch of quasi nerds and they were all get together and they would fight over what does a hard drive look like and what does a motherboard look like and what does a RAM look like, and they were developing a PC and we still have that, and that's more power to anybody. But the reality is to cross the chasm, something happened where you had commercial individuals and the easy people to and there's compact and others. But the fun ones are like gates and jobs. They said, well, what if we just ship the computer to the individual because there's an infinite amount of value that they get. They open it up, they do their thing, they close it and go back. And so that's what I think about on ramp and multi institution custody is it gives you like 10 to 100x the security and assurances without any of the complexity. And we just ship MacBooks, they just work, there's no viruses. And the core idea is that those keys are held by multiple institutions that cannot unilaterally ever move the assets. And then you have the lean. So you have a technical construct which means that no institution can move or lose. But then you have a legal construct which means that the title of the bitcoin's always yours. And then you have a legal relationship with each of the custodians. So we have this nice unified experience. It takes a couple minutes to onboard. Used to take me two to eight weeks to onboard people. Everyone listening here knows you got your seeds. You got your hardware, devices, you got your wallet, config files, you got to separate them all. You end up with a problem because if you put them all in different places now who has access to them? What if you travel, there's an attack service and you put them all in your room, you have that. I'm not saying it's not for everyone or there's not a nice barbell approach, it's just our approach has been that for a vast majority of people, as the price rises, they're going to run into the fact that inheritance, Dynasty, Trust, lending against it, access to financial services. And then also there's a real market structure problem that everyone doesn't like to talk about, which is nobody kidnaps Jeff Bezos, Mark Zuckerberg for their equity portfolio. But everyone knows you can go after crypto or bitcoin holders because they're very close to the asset, whether they have it in multisig or they have it on coinbase. And multi institution doesn't solve that right off the bat because you can put time locks on a seven day or 365, it's more of a legal time lock. There's nothing like technical. It's just you're saying that some of our clients say, I don't want to move this for 365 a year and then I have to go meet you if I want to move it before then. But the point being is that you can. It's not until the market has this as a standardization layer, which I believe this is how the market will kind of standardize. And then you. This is how you cross the chasm. Because then you never have the question of, well, what if it's lost because I got hit by a bus or the custodian went down. The analogy I like to posit is, or the example I like to show is Bitcoin has such great product market fit from storing value that it got to $2 trillion without anybody credibly knowing tomorrow if it'll be there with 100% certainty.
- [24:48]
Joe
Phenomenal. I really, really like that analogy because ultimately those are the things that really changed the world. Right? Personal computing didn't take off because we were able to develop a hard drive that could do its job 100 times better. We put it into a package that was end user ready and we shipped it. And ultimately that's sort of what you guys were doing. I really like alentrae. Speaking of which, what you guys are doing in on ramp, you guys have a major announcement today. Well, actually, you know, I'm learning about this in advance. I'm a lucky guy. But when people are hearing about this, the announcement will be live Onramp Finance. So you're announcing that for the first time here. I'll go ahead and share my screen as well. I've got something to that you sent over, but for the viewers at home. What is it? I pass the mic off to you.
- [25:29]
Michael Tanguma
Yeah, I appreciate you sharing that in the sentiment around the crossing the chasm because I truly am like the ideological crazy bitcoiner in the sense of if you look behind me, I'm sitting on this property worried about all the things everyone's worried about. But the thing I kept running into is 99.9% of the world isn't there and they think we're all crazy and so we can wait for the market to come to us. And I believe as the market price appreciates and good things and bad things happen, it will come. A great example is in 22. I think we were sharing before we started recording or maybe it was a previous call. I've had a lot today, but it's this notion of out of all the aum the billions of dollars we brought into unchained walls, 75% of it happened when FTX, Celsius and Blockfi. So it's the thing that people miss is liquidity is such a great thing in the sense of Bitcoin's price. But all this risk gets inserted whether it's rehypothecation, physical attacks, digital attacks, insolvencies, all of that. And so we could wait for that to happen and then the market to understand it, or we can go play offense and help to bring people into the fold, into our platform. And so the launch of Onramp Finance is really to bring and bridge the gap to the rest of the world. It's bringing in dollar accounts earning up to 5% earn cards where you can earn up to 1 and a half percent to spend lowest cost, Bitcoin brokerage, IRAs, lending, basically a unified financial platform for our existing clients. Anybody that's been thinking about multi institution, but then for everyone else that's not ready for multi institution, they can still get access to all of this at no cost. And so we're incredibly excited about it because I think that all the platforms in bitcoin do something really well, but it hasn't really been tied in and unified together. But the real kicker, where our real ambitions are is how do we cross the chasm for the other 99% that aren't even in bitcoin that need access to dollars Bitcoin. And then we're also inserting Argo, a partner of ours or a Sprock family firm to get spot gold exposure where you can take delivery if you want serial numbers. Because I think this is the big part that we miss on the bitcoin side is as gold or liquidity comes in and inflation, Bitcoin's price does its thing. But gold is moving and it's going to continue to move. And everyone has their own risk profile and trajectory. This is the narrative of stretch and MSTR and all the things that they can't handle, the volatility, the way I see the future working, and this is the stuff we talk about with banks and I think our platform works, is you have your dollars, you get your interest on it, you get your rewards, you have low yield savings, which is your gold, you have it secured. In this instance it's Royal Canadian Mint, we'll have other mints and that's your low yield. For people that are old that the guys love to talk about, people that are 80 years old, well, I think gold's a lot better than holding, but we'll talk about the unsecured claims later. And then you have your high yield, which is your bitcoin. And you go through that. And I think truly when this asset and this narrative understands of savings versus investing, this will just be in the background like that MacBook, it'll just be behind the scenes you'll know it'll work because three is better than one, I. E. Multi institution versus single custodian. And this is how you can just kind of help people preserve their wealth. Because I think that's the thing that gets lost in all of this is there's a fundamental difference between savings and investing. And that's the big lie and the big like dark matter that lives here. Everyone needs to go out and they believe they have to invest. But you've already gone out and invested and risked your capital, meaning your personal time, to make the money. It was just supposed to compound for you and preserve your wealth. And so that's what really what we think of as the money platform of the futures. How do we unify all of that? The three forms of money, Dollars, gold and bitcoin.
- [29:01]
Joe
Dollars, gold and bitcoin.
- [29:02]
Michael Tanguma
I like it.
- [29:03]
Joe
And ultimately I really like that you guys integrated gold in there because a lot of older folks, or even just general sound money advocates who may be younger on the bitcoin side. One thing that I found we were a lot better at than the gold bugs is the gold bugs. Love to denigrate the bitcoiners, but a lot of bitcoiners, you included, Larry Lepard, myself as well. Like it's very clear if you're just an honest, clear headed person, that gold performs a very similar monetary function to bitcoin. When global liquidity expands, gold is a tremendous absorbent of that. Bitcoin just does that better. So the fact that you guys put that onto the platform really is a testament that what you guys are doing is trying to integrate sound money directly into people's day to day experience without excluding gold. What made you want to pursue this? What made this the next step for you guys instead of just going deeper into bitcoin custody?
- [29:55]
Michael Tanguma
It's a great question. One thing on this platform and on the website, shout out to your buddy Matt Ball. He joined on the design side. He worked incredibly hard on this. I call him Matty Ball Game because sometimes he starts off a little slow, but he always shows up at the end and he crushed it on this design. So appreciate all the work he did on the going in this direction. So this will be a nice trip down memory lane. I've wanted to do this for like five years. And the reality is one part, and I think this ties back to just being in traditional tech and like really seeing growth and scale, is that it made rational sense from an individual and also just market adoption that you need to put dollars In a world where we have dollar denominated liabilities next to bitcoin, like that's amazing. And the reality though was the administration and a lot of the stigma around digital assets, specifically bitcoin banks weren't willing to touch this. So I had this really interesting experience where, because there's stuff we can go into if you want, where like you can build a lot of products within a multi institution vault around lending. The product that I had this idea for was you could effectively have a multi institution like a loan, but you have a card issued against it. So we got accepted because I was connected with Kai Sheffield who lead Visas team and we are going to build that product where you can have bitcoin in a multi institution vault. You can have a card and then so you have that collateral sitting there, you can run up that balance and then you could either pay it at the end of the month or roll the juice over because it's kind of playing that our. Well, inflation's running here, the interest is here. Maybe I don't spend my dollars to stack more bitcoin. Collateralize it. The point in sharing that is that took years, millions of dollars in compliance, all this stuff and it all blew up because FTX blew up. And then all the banks got scared and all the banks that were willing to do this because there's a whole slew of issues about PRIM and the bank merchant service and how you develop the card. So I had been thinking about that for a long time. Well with the new administration, specifically with the Genius act, knowing that there's a green light around stablecoins new financial settlement infrastructure, Stripe getting into this, we developed a partnership with Stripe to basically power all of this infrastructure with clicks of APIs. And I mean it's obviously a little more complex, but it was something that we could put together in months time that would have historically taken years and millions of dollars. And so once I found out we could do it, it was like, oh my God, we have to. Because we were already planning to launch trading and the accumulation because a lot of bitcoin holders want to start just on accumulation before they get ready for multi institution. But I was like, we gotta pause this because the reality is we can embed so much more value for somebody when they can get dollars next to their trading and IRA and multi institution blending against it and then also being able to spend. And so it was just a rational thought. The only thing I'll share, and this is kudos to river because river just announced something on being able to Offer cash yield or earn. And then also I think bill pay is that I have no doubt that the companies of the future, there's a convergence that's going to happen with TRADFI naturally adopting these services because they want to retain client deposits and revenue. And then on the other side of it, if you're native to the space, you're going to have to meet them with similar products and built better and natively. Because the rational thing for those other 99% of people is if you have a mortgage and you have all these other things with the bank and they offer bitcoin, even if it's marginally better or less better and not as good as a river, the rational thing for most people is to stay with that firm. So you really have to increase the experience, whether it's money movement or something like multi institution. And so we're coming in at both angles. What's funny now is now all the large institutions we talk with because when you're just a bitcoin custody provider, they look at you a little funny like, oh, that's niche and cute. The second you bring in dollar deposits, their ears perk up because that's what they're all trying to retain. The client relationship and those dollar deposits, Fantastic.
- [33:46]
Joe
I love it. Why do you think that so many players are converging on this right now? Tether launched something very similar river in the app. Now, I haven't done the bill pay thing yet. I don't think my wife would let me because she doesn't want us to sell any of her bitcoin. But all of the major players in the space, all of the smart people are suddenly converging on this architecture where you've got dollars, you've got gold, you've got bitcoin. At the very least, you're integrating traditional banking functions into your bitcoin experience. Why do you think that's happening? What do you think it says about the future of finance? And also I guess on the flip side too, it just made me think of this at the same time that you guys are sort of becoming an everything app. Coinbase has also become an everything app and a couple of other shops have done it, but in a different way. You guys are becoming more of an for sound money and you know, low time preference, whereas Coinbase has now added like prediction markets and sports betting. And same thing with Gemini. I get notifications because I have the Gemini credit card which I might drop soon for this. About like, you know, oh, the New York Knicks are up and I'm like I don't care, right? This is an app that's supposed to be used for, for investing in bitcoin but it's showing these things to me. I guess speak a little bit to the disparity there between like the direction that the bitcoin and sound money firms are headed and then the direction that sort of these, these crypto firms are headed Added.
- [35:07]
Michael Tanguma
Yeah, I think this ties into like the notion of what's obvious is obviously wrong and also why there's very few like principled or bitcoin only companies or companies with like bitcoin centric financial services. It's because like there's been this real bar rail because we're so early to bitcoin where you had the ideological principled individuals but generally you had to have a couple screws loose to get into bitcoin that early. And so maybe those screws loose also probably didn't have you working at big companies and thinking about commercialization. You're thinking of about like got my citadel, my guns and I'm good to go. My coal card, I'm ready to rock and roll. And so you got the, the story and even the bookends, right? But it's like how do I get from here to there and make money and meet the market? And then the other side, what you're referring to is like the Wall street crypto Bros, the dat Bros, all the stuff on that side, it's like they read the Ford to the bitcoin standard but they never opened the book right. And so or they never read gradually and suddenly there was like a tweet about bitcoin's the great definancialization everyone and do real well in 2026 to go read Parker's Graduand suddenly or just like that specific article because when you break down from first principles like if people just preserve their wealth, there's not a need to go speculate and that fundamentally is going to re architect a lot of how the system works. Not to say credit and financial services shouldn't exist. It's just the reality is going to look fundamentally different and in that monetization phase you don't want to get caught off size. Not holding the underlying so that obvious is obviously wrong leads to all this craziness because the only way to get funding, if you think about it, if you live in this world, world that's incentivizing velocity of movement, diversification, private credit and all of the things associated with the SpaceX stuff and the secondaries and SPVs that is all just a proxy for the amount of liquidity in the system that people have to go further and further out on the risk curve to justify the management fees or justify existing or justify how do I get a return above what inflation is? Because you're a sucker if you hold the money. And so that's what you have. When you have Coinbase and you have Polymarket, you have all these things, they're being told that and they don't get funding, they don't get the traction, they don't get the narrative. So but the problem where they miss it. And this is really what I hold dearly. And a lot of this was learned from building before. This is financial services at the end of the day. And everything happening here is not technology based, it's not even necessarily money based. It's. It's relationship based. And if you don't have the relationships and you don't have brand and you don't have credibility. And this is why we're so adamant about the preservation and taking a conservative view to this. Because for 17 years, if you didn't, you lost all your bitcoin. So we're willing to be wrong once in a while if that's the case. We probably don't think we are, but it's still okay because you're preserving the capital and Bitcoin's going to do its thing either way. And so really that's the view. And I think Leishman hold him in a high regard because he's always held that and he comes from that Silicon Valley background. So I think that's a testament to what is embedded in a lot of what River's done. And then the only other thing is tethered TBD on their intent long term, but from a sophistication level, they're easily one of the most sophisticated market participants. Like when you look at their balance sheet alone being ahead of the gold, real estate, AI compute and then btc. And so it's rational that if they're that sophisticated, they develop this wallet you're referencing. It's a little bit different than what we're doing in the sense that this is more from emerging markets because it's the mobile phone itself. Custody is tokenized gold. It's BTC in a hot wallet and then tether. But it still serves an insane amount of value for a lot of people that don't have banking relationship with the ability. And where I think a lot of this goes and they know is that we end up going more to a free Banking style world where the credibility of the institution underpins a lot of the relationship. But then also think about stablecoins. If we end up in this world where stable coins are out there and there's going to be this credibility that's tied to them based on what's backing them and Treasuries are backing them today. But if the dollar's cooked and Treasuries are moving around and volatile Tether understands you're going to have to back them with other sound assets, I. E. The kicker goes all the way back full circle to how do you custody the btc? Because if the credibility and the free floating of that stablecoin is tied to the underlying well, if it's lost now the credibility. This is the whole issue that goes and maybe this is a good deal for your. The dat. DAT area is like the very base layer of the DAT is like it all goes. It's all faulty because the custody's faulty. And so the second one DAT lost the custody. Everything's because the market, retail market doesn't necessarily understand that the custody is a problem and it's been a problem for 17 years. I think there's a lot of people that weren't around in 22 or you just assume because we appeal to authority that like now Coinbase and Fidelity are in. They just are infallible and you can't lose it and it's just fundamentally like a false premise. And so anyway that just. I think that's the angle around where the market goes and then the beauty of what's obvious is obviously wrong is that if you're right it's the whole notion of you know, hard choices, easy life. Easy choices, hard life. If you take the harder path on the other side of it is where the rewards are because that credibility in the relationship is what drives the market to you. If you've been doing things the right way the whole time. Beautiful.
- [40:06]
Joe
When you guys were developing this, my last question on this and then we'll. We'll move into some of the other stuff we've got slated here. When someone hears like this is all in one platform, how do you. How did you develop this in such a way where like you weren't adding a whole bunch of counterparty risk by integrating dollar deposits, by integrating your. Your multi institutional custody and the gold functionality as well. How did you sort of retain the no single point of failure ethos while you were developing this additional functionality for on Ramp Finance?
- [40:34]
Michael Tanguma
It's a great question because it comes up a lot in like money Movement. Naturally, when you look at a lot of the proliferation of these new settlement layers for finance and dollars, you have this notion of money's going to start floating. Like I think all banks will have to offer similar what we're doing and passing back the interest and then better money movement. The example I use is like Mercury. Mercury is a multi billion dollar business. They didn't do anything different. They provided a better user experience for banking. So now you have these new Rails that are just one to one backed. I would take the case that they're at least at par, if not more secure than a bank deposit. Simply because a bank deposit's not yours, it's rehypothecated multiple times. These just sit in Treasuries, right? So if we're ever going to offer dollars, we either had to become a bet a bank or become a primary issuer like a circle to offer this. So we were always going to have a counterparty where, where we have to have the dollar sitting in Treasuries. The way we think about it is multi institution is the base level of cold storage for the money of the future. And so we started with the hardest part first, which is effectively how do I take those keys, segregate them with different institutions, take them offline. If anybody goes away, those assets are still secure. And then the idea is as capital comes into our system, it's to migrate it over from dollars to BTC or gld. In the gold instance, the best you can get with gold is sovereign mints. You can't multi sig gold. A funny trail is this is the difference between Bitcoin and gold. It's not in my view, 22, 20 million 21. That's arbitrary fixed supply. Not advocating for more inflation. But you can make the case you could have inflation and still have a global reserve asset. The thing that will make Bitcoin successful is that you can insert governance at the asset layer there. You can distribute those keys. And so gold can't do that. So the best we can do is have sovereign mints. I'm in the great state of Texas, we have our own bullion depository here. I would like over time to be able to park gold in the bull and depository. There have cameras on isolated vehicles of that so we can think through from a bitcoin lens all of these properties. And I think that's what will make us different because everyone knows like it's the same thing with AI where there's this dark forest component, where there's all these bad actors online Doing all these prompt injections and crazy things. Bitcoiners have had to be living in that world from OPSEC perspective. So we take that bitcoin centric view of security with the bitcoin and then we layer it into any counterparty or anything else we do.
- [42:56]
Joe
I like it. I like that the ethos remains consistent throughout. I want to. I want to talk briefly about. Oh, yeah, go ahead.
- [43:02]
Michael Tanguma
I just want to share one thing because this ties into you. You mentioned, I think, offline and then for anybody. So this is coming out right at the time. So there will be slots available. I don't know if you saw this, but we have Genesis, which is the 210 flag. First signups to get access to the highest reward tiers. But also anybody that loves Parker Lewis, there's signed graduates, Sunny Lee book, a whole, like, swag packet, a bunch of other stuff that's on the landing page I won't go through. But just something worth calling out because we wanted to make sure it's exciting for the market when we launch those.
- [43:33]
Joe
Perfect. Yeah. So the link to that will be in the description. Michael, if you just want to send me that after this, the link to that will be in the description below. So be sure to sign up. This is if this is of interest to you, so you can get those exclusive perks and read more about that on the landing page there. I appreciate that, Michael. That's good, good marketing. So the one thing I do also want to touch on pivoting away from Onramp Finance is last week he got into a bit of a heated exchange with Matt Cole on X, specifically talking about digital credit, or what it's been dubbed. Right. It began last year with strategy. They had a huge balance sheet worth of Bitcoin. They began issuing preferred stocks, and the fourth preferred stock that they wound up issuing, Stretch, has proven to be wildly successful. They've had several days last week where they were above a billion dollars in volume before the date. Clearly, it's proven to have a great deal of demand. You have a lot of folks who are doing the same thing. STRIVE has launched SATA here in the United States, paying, I think, 13%. Now at the time of this recording, Metaplan is looking to do something similar. How do you view digital credit? Or just these preferred stocks generally in relation to bitcoin? Are they a net positive for the space, a net negative? Are people just misconstruing what they are?
- [44:44]
Michael Tanguma
Sorry, I can't. I can't hear you. No, just kidding. I reminded me of I was talking about it yesterday with Braum, remember during the, the COVID crisis where the guy was on the. That was hilarious.
- [44:53]
Joe
And they asked what does the company do? And he said, I can't hear you.
- [44:56]
Michael Tanguma
Yeah, no, yeah. So maybe going back to how this started is there's two components to it. One of the main one is that because this is a retail driven phenomenon like full stop, it's easy to get exposure individuals that a lot of the individuals that were influencers for these DATs, they're all underwater. They targeted retail no matter what they say from capital pools. It's inconsistent because they'll reference volatility, but then their stocks are insanely volatile. And then you mentioned it before, I didn't know it was 82%. The stretch is 82% driven by retail. And retail, if they're concerned about volatility, well, there's other instruments that there's risk associated and I don't think you're getting compensated for the risk. That's the thing. I think it's fundamentally interesting seen but where I take where I don't like the products and where I spoke out was ultimately wasn't even about any of the products. It was that I think that there's a better risk adjusted way which is ultimately put out a tweet that you can park, you could pick your profile in whatever pool is volatile or concerning and you can put that percentage in money market funds or now something like what we have here where you can earn up to 5% and then you can switch, meet the, earn the rewards or you could take some of that percentage and put it in spot Bitcoin. And when you, and we have a calculator now on the website, you can blend those rates and you end up with not only more USD or BTC because it's in cold storage, you don't have to use on ramp for this. You can use anything. You can go sign up for, you know, on their finance and take it into cold storage. But the point being is that you end up with a better risk adjusted return than putting it at risk in any of these, these theoretical products. And so when you mentioned digital credit, I think all of these things are theoretical at best. I think they're worse. But I won't talk, I won't say it here. It's that in 17 years you can effectively close your eyes and put all the things you described and then all the things that have existed that offer any kind of credit on top of bitcoin and you could throw a dart and you would hit one that went belly up and everyone lost the money. So it's not to say that it will happen, but it's to say that it's not risk free and they're marketed at retail. And if you go back to the beginning of the pod, it's insanely hard for people to understand bitcoin. It's really impossible. So when you take individuals that understand that, that were thought to be influencers and then they propagate and promote this thing. And the thing is that most people forget bitcoin is this platypus, this alien tech that doesn't fit within a 60 40. It's not a bond, it's not an equity. So the market forces are always going to go in the favor of whatever the wrapper I can buy that looks more of what is like that. So you take this version of oh, it's like bitcoin, it's amplified bitcoin. All these things are insane, they're not true, they're gonna end up in a lot of misery, they're gonna end up with a lot of people not holding any bitcoin or less bitcoin. And the beauty is if I'm wrong, adopt the thing and then bitcoin's still gonna do its thing. It's just like, do you wanna be on that side? And specifically a capital at risk. So that's how the basically started was just effectively saying, look, you're not getting compensated for the risk. Take whatever you want. If you're concerned with volatility, park it in high yielding treasuries, take the rest in bitcoin and cold storage. You reduce your counterparty risk, you still have a counterparty, it's the US government, but ideally they don't default and you just end up in a better position. And then that's effectively how it started. And we have a pretty sophisticated team, we have people, we onboarded the first UK pensions. Glenn Cameron is a rock star. He sits in the United Kingdom if anybody ever wants to like talk about it and like put together their thing and you can go on Twitter and see all this, it's pretty straightforward. And then, then he was going, I don't even understand it. But effectively last night explaining the arbitrage between the X div and then when it goes up and like how it's not sustainable long term. I think we're going to put out a bunch of reports on this. It's just not propagated. And I guess the last thing is it's a retail driven thing. It's inconsistent to say like the pools aren't there. And then you go on Twitter and you have AI slop ads that say, you know, ad and it's like, like whatever sailor's promoting or to whatever the next thing. That's why they spend all their time on Twitter. The funny part about that engagement is I don't really spend much time on Twitter. I was supposed to be on vacation, so I had my phone in front of me so I was able to actually like be on, be on Twitter and go back and forth. But it was just funny because I was like, I know Matt's all day long. That's what they do is they're out there like promoting the deal. And I was like, this is what they do all day. It's, it's a sign when you had to get all the influencers to come promote your dad because it's a retail driven deal. If it was for an institutional market, you would go hire institutional people to sell the product.
- [49:29]
Joe
Gotcha. Gotcha. You know, it's a sensible take. I think it's balanced in my view and curious to hear what, what other folks think. And also if this gets clipped, because this podcast typically does get clipped. So if and when it does get clipped, we might get, get reposted and have some people challenge you for a debate or something like that, which could be interesting.
- [49:47]
Michael Tanguma
So.
- [49:48]
Joe
So to you, I mean looking at strategy's website, one of the things that sticks out to me is that they have something like 42 years worth of dividend coverage across all of their preferreds with the current outstanding if Bitcoin did nothing. To me, the premise of being able to package Bitcoin's typical cagr which over the last couple of years has been pretty disappointing. But it's pretty rational to say 20, 25% potentially over a longer timeframe into a fixed income product. To me that seems like a reasonable take. What you're saying is it's just a function of counterparty risk and not marketing this in good FAI faith, I suppose.
- [50:28]
Michael Tanguma
Well, it's not even a good product when you think about like there's a lot of Fed speak, we talk where we have a lot of traffic guys. World class people from bny, Stifel, Brown Brothers, across the board, Goldman. And so we have a podcast and we talk about this stuff and I always have to like caveat or when we talk about 2%, 3% inflation because everyone understands inflation's anywhere between 10 to 25% if not greater. Specifically Covid, like post Covid Event horizon from the amount of capital injected in every. Everyone that knows anything understands it. Structurally it has to increase and the velocity is only going up. So at best stretch or any of these products are keeping you right at par with inflation or maybe going backwards or maybe 1% above. So you're not getting compensated, you're staying static. So the notion is that a, you have, you're not keeping pace with where the market's going. When you look at everything layered into this, it goes to the same point of the ETFs where rationally, when you have real money, you don't park it into the system. It's a contradictory move because you effectively take this asset that's in its monetization phase, you get all the aspects of private credit, gold and whatever, but you get the upside of all that. So the only thing to do is like make sure you preserve that capital at risk and you want the optionality. The Iran thing was one of the biggest movements because you look at the utilization of it to settle sovereign oil, which every sovereign needs. That's showing you that in the future you will need this, whether it's agent, commerce or any other reason. So to give an offspring set, you can't eat your Strat, your Strat or whatever it's called, your Stretch or your MSTR in this, but you can transact in dollars, you can transact in gold, you can transact in BTC if locally you need those units. So you're giving up the downside protection of any kind of air pockets in a system. Like a lot of the conversation last night was talking about global financial collapse or hyperinflation of the dollars. It's like good luck with your dollar denominated liabilities in that situation. So you give all that away away, you give away the ability to increase your purchasing power. Like Bitcoin already just moved up 10% in like 24 hours. So you give that upside, you're, you're barely keeping pace. And if inflation's going to continue to have to ramp, you're going to be working backwards on whatever percentage when you could have put your liquidity profile in Treasuries, got some of those dollars and then you could have parked the rest in cold storage Bitcoin. And then if you're afraid of, of Bitcoin, well then that's a way you have to market and educate. But it's not to say like the market is going in this asset because they just look at people love fiat. This is why the speculation works. And so if you tell somebody you get 11% like, I love it. And so that's like the, the whole like I think trade off or the way it's not really articulated is there's just better products to effectively preserve your wealth.
- [53:13]
Joe
Got it. Thank you for giving your perspective. I really appreciate it. It. We, we have limited time here. We didn't even get a chance to touch on AI, but I suppose I'll, I'll ask you about, about a couple of things before you have to go.
- [53:26]
Michael Tanguma
Can I, can I share one more thing? Just on that is the thing that, the thing that's not all. And this is honestly the, the biggest issue is you can make the case that MicroStrategy holding their assets at three different custodians is riskier than holding it at one. Because the reality is that all of this becomes mute if any custodial situation happens. And this isn't crazy to say because for 17 years this whole podcast has been around custody and the problem with it. So if you have three custodians now, you have an attack surface three different ways it could go south. And if any of them are lost and any assets are lost, not only does confidence in the whole, that whole system, any dat, but specifically that whole trade goes out. That's just the first level that never gets addressed and never gets talked about about. If it was sound, all you would take is your 60 billion and your darling and you would park some capital in the same way they parked it for the stretch dividend and go develop a solution, put it on chain and verify it. That should be the red flag to start with everything because that false premise is built into it. Everyone else builds the dats and the narratives built on like what I effectively think of microstrategy is fundamentally different than everything else happened in that space. It's like the immaculate conception for bitcoin. That's what MSTR is. And so you create a maze from bitcoin's this pristine thing. And then Michael Saylor did this first thing and then everyone else is making that grift off the top and they make some money while everyone else is underwater. The problem is when you're underwater, it's like if you've ever played poker, when you get into a hand, there's that sunk cost fallacy. You keep throwing good money after bad, hoping that that amplified bitcoin is not going to just keep amplifying to the downside. So the fact that custody doesn't get talked about tells you everything because somebody would address it, build a better product if they really believed in like what they were selling.
- [55:06]
Joe
Got it Mike. So I want to ask you specifically about something that you mentioned. You wanted to talk about this credit air pocket and you just mentioned it a mom moment ago in your last answer. AI is obviously extremely deflationary for the real economy. You and I both know we live in this credit based monetary system where they need to continue extending credit in order for growth assumptions to hold true. Given that AI is deflationary for the real economy, what is the market missing? It's kind of ironic that the market is celebrating a potential end of the war in Iran. It's at all time highs. But you have this force behind the scenes. Claude just launched a brand new product today. It seems like every single week it's launching a product that's destroying an entire sector of the US stock market. And it seems like nobody cares. On top of that you have the credit component that I'll let you speak to. But how are you thinking about AI as it plays into US economic growth and the current credit based economy that we reside in?
- [55:58]
Michael Tanguma
Yeah, I think it happens to do with the pattern recognition more of instincts in that if you've ever imagined, I know you have is like what would bitcoin look like at a million dollars and where are we at? And it's always felt instinctually right, that the world would be a little crazy. It'll be a little chaotic because just regardless if it's 12 months or 12 years, that if that was happening a lot of things are breaking or the market sentiment around this digital bear asset that came out of nowhere got to a million dollars, that the zeitgeist in the atmosphere would be different. And so when I look at that or believe that and you see the acceleration of AI, it feels like that fills into its narrative of just the amount that you can do with less the ability. Where I think of like we talk about wanting to hold bitcoin, Bitcoin, I really think there's going to be a convergence of the store of value narrative and then the technology component and the store of value. The corollary or the tie in to that is like settlement of sovereign commodities and oil and need for that and then just bigger things. Regardless of what it is. You just need a neutral form of money that's you know, easier to transport than gold. And then on the other side of it, I think in the next 12 to 24 months it's going to accelerate where bitcoin sits with these agentic layers because it's just better tooling and it's interoperable and it's not permission like a stablecoin is. Even though I think stablecoins will, will take little unit to start. And so you tie that into AI. I think it's just to your point with anthropic the acceleration is just insane. I know you and most people listening are probably playing with it and we're all just barely like touching the surface. And so you tie that into what already was forecasted. When you hike up interest rates and you already have this overlevered market that there's air pockets everywhere. You see the private credit seizing, you see what's happening at SVB like it's all over the world bail ins that we're not in a normal world where counterparty risk doesn't exist. And this is that whole notion around. Go ahead.
- [57:50]
Joe
Speaking of which, I'll bring this quote up on screen. I'll actually share the screen. But it says and this is from Apollo Global Management chief economist and he says that hedge funds now own roughly 8% of the entire 31 trillion U.S. treasury market, up from 3% just five years ago. And it's been fueled by heavy borrowing with combined financing via repurchase agreements and prime brokerages now exceeding $6 trillion. So this levered U.S. treasury trade is another sort of pocket here where it's getting a little bit dicey. And you also have Hank Paulson saying that the Fed needs to create a bailout plan for demand once it dries up in the US treasury market. It seems like markets are sort of balancing on the head of a pin right now and they're more fragile than ever despite them being at all time highs.
- [58:33]
Michael Tanguma
Yeah, it's exactly right. I mean this is a little bit out of my domain of expertise but if you go look at what's happening from a geopolitical perspective with oil that if sovereigns need to find the capital for higher oil prices they have, what do they sell? They have to dump Treasuries. That causes the treasury yields to spike which breaks everything. And I think that again going back to pattern recognition, you look at Covid because I think most people listening in western world we sit in the US you could never have fathomed that they would lock everyone in a box and everything would just go completely haywire like everything is on the table. And so you have this world getting increasingly more chaotic and we just have lived in, in this random situation over the past X number of years where things have been stable, they've been relatively consistent. Larry Leard has probably been the loudest cheerleader. So I think we love him and he loves us because sure he talks about all the time. It's like he was fighting this fight all alone. And the gold bugs have one part, but they're almost like the, the libertarian, like they love to lose where he wanted to win. And so that whole adage he understands why gold is money. I had this article today. Gold and money and bitcoin are money. Everything else is credit. That's been understood forever. But the reality is in this fiat world you layer in all these things and everyone misprices the counterparty risk. I've long held this, I've told me and Marty would go back and forth. It was around SVB specifically. But knowing what you know about everything in the financial system and the value of bitcoin, what would be the number where you would take less bitcoin in dollar terms, but bitcoin versus dollar sitting in a bank, not to say. And you have to sit there for 36 months or whatever it is. So like I like to just say is it a million dollars in cash sitting at SVV or is it 500k? Way to hold your bitcoin right. Because that's the thing that gets mispriced. It's asymmetric in the truest sense that it's not only the upside you're getting, it's the downside you're protecting yourself against. And that's again goes back to all the stuff we talked about before is it's just not rationally discussed that we live in this fragile time. And if you're going to take the inside money approach in a world where there's all these air pockets, it's the thing that makes your thesis right about inflation and why bitcoin's valuable and where this digital credit narrative goes. It's the thing that also kills why you want the money in the system. Because all of that deleveraging, you don't want to be inside of that when it happens. Hence going back to bitcoin's a great definancialization. We're going to get a lot worse and you're going to want to hold outside money before it gets better. And so I have no problem and idea that there'll be capital markets and credit that forms in bitcoin. But do you want to be the first person doing that? Because you don't want to be the first person in BlockFi, Genesis, Celsius, FTX and whatever.
- [61:01]
Joe
Talk about AI. One thing that I've noticed is that I wasn't early to Bitcoin. For your reference. I came into Bitcoin, I think 2021, so very, very late in the game. I had heard about it in 2020 when we had cratered. My friend who now works at BTC Inc. Had told me all about this thing.
- [61:19]
Michael Tanguma
I had ignored it.
- [61:20]
Joe
Price went from 3,000 back up to 10,000. After the crash. I had my eye on it and then it went from 10 to 60. It made its first run at 16. So that's when I came in. I came in quite late. But right now it feels almost like in AI. It feels very similar to what I imagined it felt being in Bitcoin in 2011, 2012, where you have such a small portion of the population actually utilizing these tools effectively, or even paying for these tools. Whereas it seems like.001% of the population is geeking out on the weekend, buying several instances of cloud credits throughout the day because they're running out. And at the same time, in tandem, you have bitcoin adoption. Right. So how do you square those two tracks happening at the exact same time? Where do you think we are as far as AI adoption is concerned? And how do you think AI is going to inform the next wave of bitcoin infrastructure over the next five, 10, 20 years?
- [62:20]
Michael Tanguma
Yeah, there's a lot there. I think the one thing I'll share with you is you came at the perfect time. I truly believe the best time for somebody to get into the space and for the long term, longevity, longevity of it, is to go in on the upswing. Because when you're going in as the price is running up, specifically closer to the top, if you write it on the way down and you're getting educated, you're prepared for everything else that comes out of it. It's generally where somebody buys at the top, they sell on the way down, and then they're just burnt across the board. So. And I definitely don't think it's early. I know you hear people say it, but we're still insanely early on the bitcoin and AI front. You know, I've been doing this for a while and have a lot of thoughts and one of the articles I just need to start doing more like writing or talking and orating out with these tools is there's this notion of like Moore's Law and Metcalfe's Law, where Metcalfe's law is like X squared or whatever, R squared, and it's just the notion of like Ethernets and the amount of connectivity the network and Moore's law is like the inverse of that where you're like reducing semiconductor capacity. And so it reduces the cost, cost. And that's really what caused the proliferation of what the society and technology we live in today, right, because you connected people with computers and then you also added the ability for everyone to hold it. And now you can have an iPhone and all the stuff associated. So but the kicker is that took like 30 to 40 years. We are living through that, like whatever that law is squared with. Bitcoin is the Metcalfe law in that world because the connectivity and the borderless perspective of like anybody can transact and move. And then that's Metcalfe's law. And then the Moore's law is the AI because you can do more with less. So you can bottle up more and more of that like nuclear energy of intelligence. And so think about when you tie those two things on top of like technology that's already existed and you go together, this is what's going to cause it to move so much faster. And so I don't know if you know this, but we have a venture arm that's bitcoin denominated. It was based on this whole premise, it's called early Writers. It's the only bitcoin denominated firm. But it was based on this premise because a, I had saw liquidity in dollars just kill all businesses because you raise too much money and then it kills all the soundness and strategy in the business. So we built our business like bootstrapped with my own balance sheet, my own bitcoin. But we started this was right at the AI wave of starting to take off in 22. So we started to do a lot more with less leveraging all these tools because the whole game of this business has been to be a bitcoin positive flow business, to print bitcoin, bitcoin to build that scale. So we took the leanest approach and everything we did the most like conservative and how we grew and that gets you to the most like rational and efficient way to build a business. And I think that this is really the biggest opportunity that exists like on the planet Earth is when the bitcoin camp and the people that work at these firms with all the bureaucracy and all the fat that exists when they lead those firms because they've been disenfranchised, marginalized because that's what bureaucracy everyone listening to, I know this, I've hired the people, I was there that you know where the world's going, you try to change it. I call it the carrot or stick, you first start with the carrot because you're trying to help the firm try to get them to put bitcoin on the balance sheet, whatever it might be. And then the stick is, okay, now I can rip these shackles off these golden handcuffs because I have a better form of money. I have a parachute to actually go and try something. And you know where all of the dead bodies are buried. So you can run back the playbook and you know the competition and you can build 10 to a hundred X better and faster with 1 10th to 1 100th of the cost. But the kicker is now you have a better store of value on your balance sheet while everyone else is inflating away and they're having to increase their costs, reduce their margins. And you're playing with the nuclear reactor of AI plus the nuclear reactor of money and Bitcoin. And that's the most interesting, honestly, business opportunity that exists because that's going to touch every industry across the world and that's effectively what we invest. I don't know. Did you know we did that or
- [66:08]
Joe
no, no, yeah, I know. Yeah, I'm aware of it.
- [66:10]
Michael Tanguma
Okay, well, I didn't know. You set up the question really nicely, so I didn't know, but yeah. Oh, you're good. You're good.
- [66:16]
Joe
That's why, that's. It really is fascinating to see one of the, one of the topics specifically regarding AI being a disruptive force is all of the jobs that it's going to destroy and all of the different companies is going to destroy being, I suppose, like what is. What sort of businesses or sectors in your mind are most at risk of being disrupted to the point of being completely. How do I phrase this correctly? I suppose you can think of it in one of two ways, right? One being like, it's going to be this massive boom to productivity. It's going to invent entirely new sectors of the economy, which is true. But there's another school of thought that like in tandem with that, it's going to destroy areas of the economy, certain businesses, certain sectors in your mind. Like how. How do you think about those two things? What sort of productivity gains is this going to bring about? And then also, if you've put any thought into it, what industries is this just, just going to completely dematerialize and remove the need for entirely.
- [67:12]
Michael Tanguma
Yeah, I don't. I maybe can get specific here. I think that the notion that I can add value or insights is like we, I think, believe in a maybe utopian version of there's some angle where everything's perfect for everyone. Right. And I don't think we're in that. I think the way society evolves and technology evolves, it's like a fractal where it centralized. You go back to wherever in the beginning and then it just naturally expands and expands. And like the printing press is a good example and you open up the aperture for intelligence and education and then grows out and you get more and then you get like, you know, the Internet and you get money. And it's this notion of like I think one of the parts is like, well, bitcoin solves the this version of K shape economy. Like it's a travesty. But it's also was always going to be a reality. There's people that have a lot of money, there's people that don't. I think that you get a democratization of the ability for more people get more like asymmetric power. The gun was a great example of it. Encryption is another great example. So you're going to get. The point is like with AI dematerial dematerializing jobs, you're going to get more people with agency the ability to do more things. The problem is that I think it's Pareto distributed like all things in life where you give more people that didn't have the opportunity a chance to do something, but a lot of people are just not going to take it. I think it's a sad state of where you end up with UBI and all this. And a great example that I like to think about that doesn't get talked about about is the western aspect of it, right? Because we've like offshored and sent out a lot of like key infrastructure and things to other countries. And then we've had these jobs and we've had, you know, the project manager from COVID that you know, was at the pool. Like that person's probably in a rough spot because she maybe didn't have the agency, didn't learn and have that grit. So we look at it from a western lens. But think about it from the other side where now those jobs are open to anybody. You add Starlink, so you have an Internet connection. You add a global form of money that anybody can have. You have a form of intelligence that anybody can have that compute on their phone in the future. And what does that mean from a societal perspective? We're just going to like kind of change the shifting of power in who has that. And there'll be winners, there'll be losers. I think on the net net, you end up with more winners and that's just how society forms. But we don't end up in this world where everyone's like living with universal high income or whatever.
- [69:31]
Joe
Whatever, right? Yeah, it's sort of, you see this bifurcation accelerate where you have high agency, high IQ individuals, you know, building digital cathedrals as it were and then low agency, low IQ individuals or just people who just, you know, don't have that get up and go per se, who just don't use the tools in front of them. And then as a result we have massive productivity gains over here. But then for some people, they're just as destitute as they are today. It's unfortunate, right? You can lead a horse to water, you can't make them drink. You can create literally the best product market fit tool of all time, time clawed, install it on somebody's machine and if they don't have the willingness and desire to learn about it and learn how to improve their life, learn how to build a business, then nothing will come of it.
- [70:12]
Michael Tanguma
I think that's exactly right. And I think that's like the sad part of stablecoins and centralized issuance of things that it reminds me of like encryption in the Internet. It's like you have this technology that's super asymmetric but a lot of people won't necessarily think about how many things we do knowing the things we do that we shouldn't when it comes to Google and all that because it's convenient. And so it's similar going to be with the money but on the net net it gives more power but at the same time it can be used as the thing against you just to give you an answer to your question. I think financial services is an easy angle to look at and how this gets disrupted because you have two con, a confluence of things happening. One is you can do a bunch more with less. When you think about research, analysis, everything that goes into what is a traditional FI compliance, regulatory. Like there's a lot of things that you can automate and then have humans in the middle of the loop on. But then the other aspect, if there's a true essence of, well it's all just math, right? Like you have these two fixed supplies where Bitcoin has its thing and then gold has its relative fixed supply. And so from a mathematical perspective those things will outpace inflation because they're sponges for everything else in the universe. Right? And so the point and you can look at copper oil and maybe they do its thing but you can't eat them, you can't transact them as barter. So that's why you have uni money instruments. So if that world goes there, that's the bet we're making. Well then what's the need for a financial advisor taking 1% when they're underperforming those things? It's another idea that I'd love, if anybody's listening to, is like I want asset management firms, I want products that are gold in bitcoin. Whether it's you hold gold, bitcoin, I make the case that gold BTC would outperform in whatever ratio you want. 80, 20, 20, 80, almost any active passive manager, any like fund because you're taking these two instruments that are on the right side of history around inflation. Inflation. And so point being is when that transpires and that becomes understood in the zeitgeist, well tradfi is kind of like cooked when you think about it. And you're kind of seeing this around like how many bankers and people does JP Morgan have and are they needed? So I think that's going to be an easy industry. And you've kind of seen this with a lot of the fintechs that are launching and offering kind of like better rails and better money movement with a fraction of the team.
- [72:19]
Joe
Michael, thank you so much for coming on. I suppose as we wrap up here, any parting thoughts on anything we discuss? Like anything that you hadn't spoken about that you want to leave viewers with as we go off into this week?
- [72:33]
Michael Tanguma
No, you, I mean this was, this was probably one of my favorite pods. You asked a lot of great questions. You can tell you're well researched and yeah, if anybody's interested, reach out, love to talk about any of the stuff we talked about. We have a podcast book, a consultation if you want to learn more. I think maybe the biggest thing is we truthfully just look at ourselves as the safeguardings of our clients capital. And so we look at it, we take it upon ourselves to at least identify risk and then share them. Because historically for 17 years in Bitcoin there's always something out there that it's the notion of shout out to Michael Goldstein Bitstein is everyone's a scammer and there's only 21 million of them. And so we just take a very ultra conservative approach because we've seen everyone blow up and we don't want to be on that side and we're playing the long game. So hopefully you take that from this podcast and a little bit of commentary that was fun. And we'll, we'll do some, do some clicks on, you know, I'm sure Matt Cole will appreciate it.
- [73:26]
Joe
Most definitely. Michael Tanguma, thank you so much for coming on the show. Where can people find you if they want to find more of your work? And check out Onramp Finance on or
- [73:34]
Michael Tanguma
onramp bitcoin.com I need to probably buy that URL and then Mtanguma on Twitter. Shoot me a note DM if you want to come check out what we're doing, have ideas and then earlywriters.com if you're looking for capital and you're building in this space, we'd love to talk with you if any of this resonated because it probably is not going to resonate with a lot of people. But if you're res resonate with you, it's your archonic.
- [73:53]
Joe
Fantastic. Michael, thank you so much for coming on then.
- [73:55]
Michael Tanguma
Yeah, thanks, Joe. Which does nothing. Bitcoin has to be like that.
- [74:01]
Joe
Bitcoin 17 years. 17 years is a $2 trillion asset and I could care less what bitcoin trades for. It's just a matter of the money. The money, the money.