← The Bitcoin Treasuries Podcast with Tim Kotzman
The Bitcoin Treasuries Podcast with Tim Kotzman
Bitcoin Treasuries Live from Pubkey with ProCap Financial CIO Jeff Park
00:24:31
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- [00:00]
A
Jeff, thanks for joining us today.
- [00:02]
B
Thanks for having me.
- [00:04]
A
I would love to make this a Q and A session. So I've encouraged a few individual people, but now as a group, please raise your hand. We have David in the back with an audience mic if you guys have any questions. There's at least two things on my mind. One, we have people on social media this morning saying the bottom's in. Any. Any thoughts on that? Is the bottom. And we have Jose over there saying, according to astrology, the bottom's not in. So, like, I just don't know what to think.
- [00:41]
B
Is the bottom in? I don't know. I don't know if it's in. But I'm not saying it's not the bottom either. There's just not a lot for me. Clarifying evidence of a breakout. So the things I'm looking for is a reversal in volume, where we're actually seeing volume trends pick up back to normalized levels. And that's been relatively muted still. So any pricing of the trades that are happening to me are not really significant enough to generate a statistical signal. The other thing I'm watching is options imbalance between calls and puts. And I would say this past week we finally did see a reversal where calls are trading more than puts, which. Which hasn't been the case for the past month and a half. So that does give you a little bit, again, potential for a trend breakout. But I think we just need to see more evidence of it being sustained over a longer period at a more broader level. I think one of the overhangs, and I put this on a tweet back, I think, like two months ago, was whether the passage of the Clarity act is actually going to be the catalyst for Bitcoin, either to the up or to the downside. And I do think it is an overhang one way or another that we just need to get past this part of, like the legislative blockade, so people can get clarity on what the intention of crypto and bitcoin could mean here in this country. So I think that is another kind of event catalyst I'm watching for just to get past it and that maybe if we get past it, we can finally see some consolidation of how people are approaching this space.
- [02:21]
A
Over the past few days, Basel III has been on the minds of Jeff Walton, Fong Li, Matt Cole. Can you explain to everyone what is Basel iii? Ed asked me earlier, like, tim, do you understand this? I'm like, I asked Chad about it a little bit, but it's kind of the banking framework, not just in the U.S. but globally, what am I missing and what's potentially going on there along with, you know, if the Fed and the treasury and everything lines up perfectly, what could that mean? Is this making any sense?
- [02:51]
B
Yeah, no, it does. And I would say largely there are different regulatory bodies in the US that engage with assets and securities and provisioning, cost of capital and capital efficiencies. You know, on one hand you got the occ, on the other hand you got different kind of oversight to how derivatives are managed and the kinds of capital charges you can put on them. But really the way Basel III in is on the rails of banking, but more I would say precisely on insurance. A lot of insurance companies use Basel III frameworks because it is the most conservative of all the outstanding frameworks as to put risk weighted capital constructs into asset liability matching. And so far, Basel III has been extremely onerous for Bitcoin. And what I mean by extremely onerous for Bitcoin is that it doesn't even count it as a neutral event. When it's on the balance sheet of an insurance company or even a corporate, it's actually in many ways a negative asset. So some of those who have been following MicroStrategy's journey to get a credit rating from the S and P will have noticed how they follow Basel III guidelines as to understanding what it means to have Bitcoin on their balance sheet. And the show you the calculation actually leads them to have negative asset value, which is shocking because it's one thing to write it off to zero, it's another to actually penalize you for owning it. And so that's why the spread is so wide. And ultimately, of course, Strategy's credit rating was only a B minus. And the other reason why I think corporates are not buying Bitcoin on their balance sheet is precisely because of this problem. So imagine Facebook, right? Imagine Meta. They're going on a huge credit spree today because they need to build out their data centers. Some of these companies have gone out with Centurion bonds. You may have seen hundred year bonds. And they need to access credit markets. They need a good credit rating. The moment you buy Bitcoin on your balance sheet, your credit rating gets impaired pretty punitively. So that kind of blockade is literally the thing that I think Saylor and most of the folks on the corporate side are trying to get fair treatment for.
- [05:04]
A
What's your reaction to what you've heard so far? We've only had one of three companies present, but how do you think about the landscape of the U.S. treasury companies versus globally. I think a lot of at least I'll speak for myself. People in the echo chamber of like, well you just do what strategy is doing. It's all going to be great. You just follow the playbook. But in different markets it's not necessarily the case.
- [05:34]
B
No, I think that's absolutely right. And we have to remember strategy is a security which is distinct from bitcoin now being treated as a commodity. And of course every country has their own regulation as it touches securities. So I completely agree with you. At the same time I think Jose said it best, which is there are lots of tam of an investors who need security centric guidelines to actually tap into the asset class. And so however it works in that compartmentalized framework for each jurisdiction, the unlock is pretty much the same. There's a lot of capital that idle capital can access Bitcoin in a specific format. And every country I think is going to figure out what that path might look like. And at the highest like meta level of story, I've always believed that Bitcoin is really a non American story at the core. And I know here we're all Americans, I'm American and we root for bitcoin. But I also have the great privilege of having been born in South Korea and seeing what it's like to see asset adoption away from the dollar centric living. And really it's very clear to me the most important unlocks that are happening for Bitcoin is not really in the United States. And that's shown through a lot of surveys. I think there was a study in 2025 that chain analysis put out and they looked across all the countries to see where bitcoin adoption is happening the quickest. And the top five countries where you see it growing explosively should not be surprising. They're mostly in Southeast Asia and Latin America. And the other thing that the study showed is that the demand is price inelastic. So unlike the US those in Asia and Africa and Latin America are buying Bitcoin out of necessity. It is actually necessity. They are trying to actually preserve wealth, debasement, capital, remittances, whatever it is, it is not speculative behavior. In the US we have the great privilege of thinking about speculation as part of asset allocation and alternatives. But really once you go offshore, you realize the story of Bitcoin as a resistance money is pretty profound. So with that kind of mental model, I think there's a lot we need to root for. Emerging market adoption broadly as kind of the counterweight to bring the mission forward alongside, of course, US Adoption. But in my humble opinion, if Bitcoin doesn't get adopted anywhere else for the US that experiment will have failed. It will have failed as resistance money in the way that we want Bitcoin to be truly democratized and decentralized in its ownership model so that we can think about it as a sovereign store of value.
- [08:18]
A
If you think about 2024, the beginning of 2024 through the end of 2025, as the beginning and the crux of the ETF adoption, do you think it'll be a 2026 through end of 2027 story with the big banks? Or could it happen faster than that? I mean, we have the Clarity act and all of this clarifying, no pun intended, sort of push. So is that what the banks are waiting for? Several have already announced, but you can't just walk into the bank down the street here in New York and open up your Bitcoin savings account yet. And is that, and is that really the push, as Saylor says, from 100,000 to a million dollar Bitcoin?
- [08:59]
B
Yeah, it's a great question. I think from my perspective, it's easy to think about bitcoin adoption coming from this retail versus institutional paradigm. And it's the most, I think, intuitive way people communicate about bitcoin adoption. But the reality is it's much murkier than that. And I think the factors that make it murky is there is a trend as an undercurrent that is happening here in the US but I would also say globally, where the actual construct of money is being challenged pretty meaningfully. And so I go back to why is Bitcoin so popular across the world, both at the retail and the institutional level? And there's a lot of uncertainty as right now how people are feeling about Bitcoin. I know the mood is low, there's a lot of concerns, quantum bitcoin fees, you name, whatever, and you can come up with any reason not to own it. But in these moments of uncertainty, I've always found it helpful to take a step back and think about what are actually the certain things, the inevitable, irreversible things, you know, that is going to happen in the next 10 years, 20 years, 30 years, and I have three. The first is demographics are against the old. There are less people that are going to be around from now on for a long time because there's less people, there's less children. And older people will eventually, of course, meet their end. That's a fact. Like 100% fact and nothing's going to change it. So there's going to be this incredible wealth transfer that is happening in which I will still assign that the number one culprit of Bitcoin is real estate. That real estate has become a store of value in ways for a generation that they have to eventually relinquish it. And there's just not enough bodies that are going to live in it. There's just not enough bodies who can afford it. And so one day real estate will crack. It has to crack. There's no other way demographically, you can support those prices. Unless we thought there was such incredible productivity growth at the labor level of the young that could actually meet the demand at that clearing price point. Otherwise that whole thing is a mirage. When that wealth transfer happens, I think there's going to be a lot of people realize real estate's number one issue is mobility. You can't move that around and you're stuck. And then that will raise the question about Mamdani recently having come online back to say that he's going to raise property taxes. And the reason why property tax is such a weird thing is because as we live in the U.S. we know we have to tax more. And generally we have a tolerance for a certain kind of tax that I classify as tax on money in motion. Right. So if there's some productivity gain or transactional activities around money, I think Americans have a tolerance for it. So sales tax, income tax, dividend tax, whatever. What they don't want is tax on money at rest. They don't want a wealth tax. They don't want tax on capital gains that are not realized. And the reason they believe this is because fundamentally that's money at rest. And if you take money at rest, that's essentially theft. But real estate is just one thing that occupies both zone. It is money at rest because it's an investment property for many. But it's also a consumption good because the home affords utilities and social services and education and all the public services that we're happy to actually pay for. But the problem is there's not enough money there to be left. And so real estate, it's going to go through some fundamental reset of a model. And I think that is going to be one way Bitcoin is going to win. The second thing is the demographics of income inequality is global. You know, we talk about issues of being here, but I'm telling you that this has been an issue in Japan and Korea far earlier, far longer, given the demographic trends. And it's getting worse everywhere. So from that income inequality issue, we're now talking about taxing unrealized capitals like Amsterdam came up with two weeks ago. And now it's going to pass, right? It's very likely. Netherlands is going to be the first country they're going to start making you pay taxes on unrealized capital. I mean that's a pretty crazy thing. But on one hand, if you squint hard enough, understand why they're doing it. Because that money that is at rest in the older generation is not productive money. And you have to find a way to access that if you want to bring it down to some productive use. So that tension of unrealized to realize is a demographic problem. So all of these things are pretty much tied to the same idea, which is it's a generational gap of income transfer. And the third thing I would mention is really on AI, on the rise of AI. What I think is going to be obvious and irreversible and this I think again is the third thing that is certain beyond demographics and income inequality continue to increase is capital is going to be far more powerful than labor. That is on the wall for me as well. So if you believe capital is going to be more powerful than labor, it means assets. And ownership of assets is actually the priority for most young people too. And I think when you connect all the dots in these three things being inevitable, I simply don't see any other asset than Bitcoin being the global solution for a global problem. And that's why I don't think it's an institutional question. I don't think it's a question about ETFs coming in and buying. I don't think it's about structured products, accessing private wealth channels and driving yields. Those things are incrementally helpful. But the thing that's really going to move Bitcoin is Mamdani putting that tax on property tax higher. It's going to be California when they want to start taxing wealth. Because these things are going to happen. It sounds crazy, but the gap is just too wide and something has to break. So that sounds really negative. I think I got like a little off script there, but that's why I'm very bullish on bitcoin.
- [15:27]
A
We have David in the back with a microphone. Any questions for Jeff?
- [15:36]
B
So it's kind of like a two part question. The number one is with this price action, how much do you think is related to naked shorting slash paper Bitcoin and how can we going forward Prevent the institutions from capturing Bitcoin and suppressing the price in the long term. Great question. You know, Bitcoin ultimately will move based on things you already know, based on demand and supply. And the thing that has changed with the ETF is that it has become more interwoven to the traditional financial systems. And so I think the number one thing that's obvious right now, even today actually if you stick the tick by tick, Bitcoin's correlation to risk assets is really high. Like when you see IGF gapping down, you see Bitcoin gapping down like it's tick for tick and it gaps back up together. That correlation is basically a multi asset tradfi RV type trading that is happening around Bitcoin's role as an alternative asset. You see Bitcoin's correlation also very tightly hedged with alternative asset managers. So if you actually look at Bitcoin's correlation to Apollo and, and Blue Owl and all these publicly traded alt managers, it's very tight. So it's clear to me that a lot of allocators have underwritten Bitcoin to be in like an alt bucket and it'll trade like an alternative asset as a result. I think for Bitcoin to advance, it needs to break that correlation. Because actually, I hate to say it, but if you're a pension manager or you're, or you're endowment manager, the number one job you have is create as many degrees of freedom for portfolio diversification to push out the efficient frontier in an all weather format over a long period of time. So if Bitcoin looks exactly like igv, you don't need Bitcoin, you can just trade igv. So that's why I think the most important thing, whether it's up or down, that correlation just has to break because people will buy Bitcoin even if it loses money, if it goes up, when something else goes down. And that diversification value is really, really important for institutions. And that's why I think I don't feel very confident we've gotten to a point where we're going to see a breakout. Because if you expect the incremental buyers in the future are going to be institutional investors, which I think I would agree with, is the next group of investors trying to onboard that correlation profile has to offer some benefit. So I think that's the most important thing. And then in terms of derivatives, I know some people have issues with derivatives being synthetic money that isn't really trafficking and underlying collateral and therefore suppressing price. I Think it's a very complex topic and a complex analysis. But really what I would argue is that they're not really suppressing price action. They are, I would say, accelerating the timeline of price discovery more than anything else. Because let's imagine we had no derivatives, right? So we only had physical commodities and hard assets. And someone wants to trade in size, and they want to trade in size, but they don't want to move the market. What that means is that investor will take a year to build a position rather than a day, right? Because for every buy and there's a seller, synthetics, those are. It's a boxed condition. You couldn't have it any other way. So actually derivatives are very useful because they help price discovery at scale. I think that's the key. So if we believe that there are no derivatives and we think therefore anyone who wants Bitcoin has to come in size and then they're going to come in with billions of dollars. They're not going to hit the smash button to get a billion dollars. It just takes more time to digest that capital. But derivatives compress it. And by having things like options, you can actually start building in some convexity to those payoffs in ways that give you a lot of capital efficiency that is beyond one for $1. So the biggest benefit of derivatives, actually, from a speculator's perspective, is you introduce volatility. And I've always said this, and I'm sure many of you have heard it, but volatility, in my opinion, is the number one reason why investors are interested in Bitcoin at some level, especially Americans, because again, it's not out of necessity that they're buying bitcoin. They're really looking at it as a source of wealth creation that derivatives are actually additive to that effort. It just so happens that the last two weeks it was driven by puts, but not cost. But one day it'll come for the calls and then you'll see that actually it was incredible that the prices that will reach at the velocity in which we do will be assisted by derivatives.
- [20:42]
C
Hi, Farza Misani from Valor, thank you very much for your thoughts. I wanted to hear your thoughts about the dollar. So in addition to your three elements that you talked about, I see the US Dollar over the last couple of years being used much more as a weapon from the perspective of the international community. That's, I think, a big change in the past where people are starting to question about the dollar is the, the reserve currency of the world. So I think I would add to your third Kind of the inevitable decline of the US dollar based on economic history as well as political actions recently in the last few years. So I wanted to see what your thoughts were about the future of the dollar and how you see that playing into Bitcoin emerging more dominantly across the world.
- [21:28]
B
Yeah, you know, it's so interesting. When I first began my crypto journey, a lot of people asked, how would you put Bitcoin across asset classifiers? And you know, I used to come from a multi asset hedge fund trading equities, credit rates, fx, the whole gamut. And now I think most of the country agrees it's not a security. But you can imagine for a long time that was a big overhang. The next battle, if you will, is the question of is it a commodity or is it a currency? And there I think you'll find a lot more blurring between people's opinion. I have the view that it's a commodity, that Bitcoin is not a currency. And the ultimate reason is because to have a currency you need to have a sovereign issuer. That is the scope of monetary policy. And Bitcoin does not have that. Hence it's a commodity. If you believe that and if you accept that, you have to provision for a world where currency and Bitcoin coexists because they're not inhabiting the same space. And I think this is why, even though the dollar has been weaponized, the endless appetite for tether has been surreal because it's the cleanest dirty laundry. The dollar is still the preference of most emerging markets citizens that they would rather hold, even if it is not idealized in the ways that we would like it to be, because the alternative is so much worse. So I think the dollar supremacy is more meaningful and longer lasting than we expect. And that's why I think even when you hear sometimes Ray Dalio talk about how this Chinese yuan is going to become a reserve currency and we should be careful about that. I kind of laugh that all off because ultimately it's a network effect. And I don't think there's a lot of people who actually believe that they want to own the Chinese renminbi. I think that's why the stablecoin question is so important. And that's why I think what's happening right now in D.C. with the genius act and clarity act. Genius act only because the yield questions being revisited is paramount to this. Because if we can get to a level where stablecoins and Bitcoin can actually have some economic relationship, including the dollar, then I think you can see the Bitcoin being additive and complementary to further kind of expressing us might and improve its credit ratings that may not have to deal with just the actual kind of inflationary aspect of the productivity problem.
- [24:25]
A
All right, thank you, Jeffrey. Thank you.
- [24:28]
B
Thanks for having me.