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The Wolf Of All Streets
Max Pain Achieved For Bitcoin Options! What’s Next? | Crypto Town Hall
00:52:47
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- [00:00]
Scott Melker
Good morning everybody and welcome to Crypto Town Hall. 10:15am Eastern Standard Time. Every single weekday here on X. And it's been every single weekday. Because even these days when I miss we have the amazing Dave Weisberger who is on stage that's been covering my ass and hosting for us and doing an incredible job. Dave, we got a title here Max Payne Achieved for Bitcoin options. We hear this term all the time. Maybe you can explain it because this is one of those rare times that the market actually achieved it.
- [00:37]
Dave Weisberger
Yeah, it's actually. It's interesting. So there's a large expiration, I think it's 12 UTC which is soon on deribit. And Max Payne is refers to the amount that the where the price where most of the options will expire are worthless and market makers make the most money. Now if one asks oneself the question, well, why do we care about this? It's because for reasons that aren't all are aren't. Well, I mean it's pretty obvious actually. The price of the asset when there's huge options expirations tends to gravitate toward that Max Payne price. Today it looks like they overshot it on the downside. We'll see. But when it happens, what that does is market makers make money and options premium buyers lose money. It is not well understood but in general and options are incredibly popular, particularly United States because there's no other really good way to get leverage. There's no perpetual swap markets. But most option premium does actually expire worthless. That's fairly normal. And so these expirations are a situation where you have what we call liquidity arbitrage. Now that's a very fancy term that sounds for something that is kind of not particularly people don't really like. What it means is the spot market or the market or the underlying market for the asset has a certain amount of liquidity and it can be worthwhile from a profit and loss point of view. Sometimes to sell when you may be long and buy when you may be short in order to get the price to a level where your market making book makes more money. And so the incentive structure on options expiration, on futures expiration, sometimes options is more obvious, sometimes tilts in this direction. And you've seen this many times in the past. It's not a big deal. We're still in the same trading range we've been in. And around this trading range we've seen relative illiquidity. Meaning that, you know, we. Everyone jokes about. Well, whenever the market goes up, going into the New York open. It tends to drop after and vice versa. But what's really happening is there's not a lot. The books are not really that thick. And so that's what we're seeing. So I'm not remotely surprised to see, you know, right now it looks like we're bouncing off the bottom back towards 85. Look, I'm not going to strongly talk about technical trading, but it's important for people who are just sitting watching their bags and despairing over the crypto market to understand that this is not a strange event. This is not an event that is unexpected. And that's really the point that I want to make here.
- [03:26]
Scott Melker
There's a idea or thought process where people assume that when we expire near max pay and we're supposed to go up. Correct. Or that that will happen more likely than not. I think the exploration may have happened based on the timing.
- [03:43]
Dave Weisberger
Right.
- [03:43]
Scott Melker
8:30 this morning, Eastern standard time or something.
- [03:45]
Dave Weisberger
So, yeah, so it could very well have happened. I mean, look, I don't think it means a damn thing in terms of future direction. It depends on what's going on in the market. It means. What it means is it explains the mark, you know, the pricing action into expiration. The only reason it would go up is if you believe there are people who are waiting for expiration to end to buy more than waiting for the expiration to be over to sell. Right. You know, that's the only reason you believe that.
- [04:12]
Scott Melker
So it's more of a bull market sentiment. Like if you're in a very clearly bullish trend, maybe you get a pause and a dip on the options expiration before people buy and head up.
- [04:21]
Dave Weisberger
Correct. But. But the opposite is also true, which is why I do think that this is somewhat tradable, which is to say that we've not exactly been in a bull trend. Right. You know, so we'll see. I'd say that in general, there's no reason to believe it means a damn thing. But when you've had a trend, it could very well represent the end of that trend and give you the chance for a reversal. But we've been in a range, so I don't know that it means a damn thing to me. I just think people always want to hold on to lifelines. I mean, the lifeline hold on to a bitcoin is fundamentals which are crazy positive, you know, and we can go into that later, but I'll let other people talk about that. And this, on the other hand, is just dominating the short term. Trading and you need to understand liquidity and short term trading always to. Otherwise you end up making the wrong conclusions. That's the only reason I run on talk about it.
- [05:18]
Scott Melker
Anybody else, specific thoughts on the options expiration today? I think also, Dave, that there's just some sort of optimism yesterday, as usual, when price pushes even the slightest bit. Earlier this week we had a little bit of a push from altcoins and I think people are just dying for any excuse to get long or to feel bullish once again. And it seems like at every turn there's a disappointment when price does push slightly. And I think that's probably just market fatigue at this point.
- [05:49]
Dave Weisberger
Well, I mean, look, the NASDAQ's down a percent and a half again, right? You know, it's. That's the global proxy for risk assets. I was actually at a talk and got to chat with the governor of the bank of Israel last night. And it is amazing because you wouldn't think they would care. He talks about the proxy for risk assets being the Nasdaq and so it's pretty entrenched. So when the NASDAQ is now going down a percent and a half, 2%, that's a much bigger move given the relative volatility. I mean, I always make fun of Mike McGlone for talking about betas if it's kind of delivered down on stone tablets from the mountain, because obviously betas move and correlations move a lot. But on days when risk assets are getting pummeled, don't expect a big rally in assets that are risk assets. And while we could argue that Bitcoin shouldn't be a risk asset and at some point it might not be, you can't make that argument with regard to the vast majority of the crypto sphere, which are undeniably risk assets. They're tech assets that are assuming a future potential addressable market that's huge and that these are all potential assets that are in that. So they're going to trade like risk assets. So you need to keep that as context every time.
- [07:04]
Scott Melker
Yeah. In the meantime, outside of the price actions and the options expiration, obviously we've had some more, I would say, incredible tailwinds that are just largely going quietly, unnoticed. The SEC here officially, we knew it was going to happen, but officially dropping any charges against Kraken, Cumberland and Consensus, we saw that they're dropping any investigation or the Wells notice into crypto.com as well. We now have legislation on the House side that's being pushed forward on stablecoins. We know that the Genius act was pushed forward last week with Haggerty in the Senate. So seemingly competing stablecoin legislation heating up. And we have the predecessors, the precursors for market structure coming from Emmer in the House as well. I mean everything we could possibly be asking for on the regulatory and legislative front is happening right now. I mean anyone who heard Hester Purse's recent speech, as NLW said on my show this morning, I mean it was just thousands and thousands of words of literal bullet points of things that the SEC was going to fix that had been wrongs done to this industry. And you also have the OCC and FDIC dropping reputational risk and another further step in ending operation choke point 2.0.
- [08:26]
Dave Weisberger
I want to point out two things or one thing and ask a question for the panel because I think the question is very important. The one thing I will point out is Hester's speech was amazing. She and Paul Atkins both said something in his testimony that are very important, at least to me, which is that not only is digital getting digital asset regulation right important for the sake of digital assets, but that the aspirational goal to leverage what we've learned in digital assets back into traditional finance is also important. And frankly I think that's actually very, very true. And it was kind of buried toward the bottom of her speech. Paul got to it a little bit more specifically. But on the House bill, I'm curious what the panel thinks because I'm sort of enraged by it that the Senate bill seems like a perfectly reason the House bill effectively says you can't, you can have a stablecoin cannot pay yield which to me is, is, is either lobbied by one of two places and either one of them it should be ashamed. One is the American Bankers association who obviously doesn't want stablecoins to take away from people using demand deposits and fractional reserve banks, which of course it will if they can pay yields that are dramatically higher than checking accounts. The other was asserted by somebody else that circle had lobbied so that they could be as profitable as tether, which I would find kind of crazy to believe that that's what they would do. But who knows? I'm curious what people think.
- [10:01]
Scott Melker
Panel, feel free to jump in. Go ahead, Simon and Sasha.
- [10:06]
Simon
Yeah, sure. I think there's nothing more to read into that than anti competitive behavior and corporate trying to push something in a direction where it's no longer good for the consumer. Because the, you know, the model that there is definitely going to be competed away the excess profits that stablecoin issuers make at the moment by being able to keep all the yield and then the ability to share the yield is without a doubt the key to adoption of stablecoins. So it's a really, really important one to recognize that it is great for the consumer and it is great for changing and leapfrogging that you are actually if a stablecoin is earning yield then it is in fact able to pass the yield on to the consumer. There is actually no other way of really looking at it I don't think other than the argument that if you back it by a money market fund, therefore the stablecoin is a security and then it moves into the jurisdiction of SEC rather than occ. But again these are all the different debates to be had but I think everyone should really keep an eye on that. You definitely want the yield to be able to be passed on to the consumer. The innovation that will come from that will be truly radical change in in the financial system.
- [11:37]
Scott Melker
Basha.
- [11:38]
Basha
Yeah, yeah. And to add on that, I think one thing that is important to remind, you know and maybe it's just you know a nice message that they're trying to convey but like the coinbases of the world, I mean the circles and what like within issue those stable coins they've been wanting to give some of the yield like most of the yield back to to consumers and they can't. And to Dave's point, I, I believe Caitlin Long also fought a lot in Wyoming when they were trying to issue stable coins and do narrow banking with not without fractional reserves. And I believe that's the issue.
- [12:14]
Simon
Right.
- [12:15]
Basha
It's competition to savings accounts and checking accounts that don't give, that don't give basically any yield.
- [12:22]
Avery Chang
Right.
- [12:23]
Basha
And having competition to that with something that's not fractional.
- [12:29]
Scott Melker
I can't see the hands but I believe David towel and then zillion. I think you both had your hands up.
- [12:34]
David
Yeah. I don't know if this was discussed on this space in February but if in that in February the SEC approved an interest bearing stablecoin issued by figure ylds is the stablecoin if this legislation goes into effect. Figure 1 this race like they're, they're in an entrenched position that they will be the only forever more yield bearing stablecoin which is you know, I mean maybe it flew under the radar that they got approved in terms of you know, the industry's knowledge. But you know Figure Cagney who is the head of SOFI fame, I mean he knows how to run the table on this, right. He's going to go ahead and make sure that this yield bearing stablecoin is in with every, you know, payment processor, digital and trad fi that he knows of. And if everybody else is foreclosed from issuing a yield bearing stablecoin and this one yields 3.85% right now, you know, I guess he's won the race. I don't know. Does anybody know about that? Stablecoin?
- [13:49]
Zilian
Yeah. Sorry to jump in here, but that's one of the major issues with this industry is that gatekeeping is a big, big issue here. Not all good products get listed, not all good solutions get listed. So there is a big, I think that for a lot of practitioners out here, they will feel me on this one. There is a big, big, big difference between having the right product or having any type of right solution and getting exposure. Exposure here. Especially when you have such a consolidation with big players, if you, if they have a different agenda than you. If, if you have something that could whatever, interfere with whatever they're doing, if you're not from their circle, it's very hard to get exposure. Yes, I know of that, of this but unfortunately exposure is a big, big deal. So having the right product, I don't.
- [14:44]
David
Know if I'm understanding the point. Does that, does that oppose what I just said about ylds or in favor of.
- [14:52]
Zilian
It's in favor. But the major obstacle to such coins basically being offered and distributed is the gatekeeping at the level of the listing, at the level of all the distribution. Distribution here is becoming so consolidated that a lot of very good products, a lot of things that could actually move the needle might not get distributed. And this is.
- [15:14]
David
Yeah, well, look, what I'm saying is unless somebody else has a different opinion here, if the SEC has already approved this yield bearing stablecoin and now we're going to go ahead and get legislation that forecloses any other yield bearing stable coin to be issued. That means that while this is, is the effective winner, winner, period.
- [15:36]
Simon
Yeah, David. So I mean we've, we've had a couple of models. I've been playing with all of them actually. Like one, as you quite rightly pointed out is Figo created the, the actual one that was structured and approved as a stablecoin. The other one that I've been using is Biddle, which is the securitized offering, but that's actually structured as a security. But the interesting thing is in effect they're, they're virtually the same thing except for one requires a transfer agent and one is fully transferable. My question to you, David, as a lawyer or any other lawyers on the stage. Once something is approved and then legislation comes out that would prohibit that, does that mean that they then go and unapprove or do they allow a monopoly to exist? Have you, have you seen that case before? Or is it unprecedented?
- [16:28]
David
So, so, so my, my read on this and Carlo is going to go ahead and give a real answer. My, my opinion on this is that the SEC operates at, at the pleasure of, or the appointment of or you know, the, the grace of the legislature. And so if the SEC already went ahead and approved this, unless there is legislation that comes out that specifically delists ylds, I think it's, it's there until it's specifically removed. Carlo, please correct me if I'm wrong.
- [17:08]
Carlo
No, I think you're on the right track. It opens the door as to whether we'll see an outside challenge because now you've got one stablecoin that has a serious competitive advantage in the marketplace that's got a workaround from the legislation. However, the entire workaround is based on an administrative decision, a rule or an administrative ruling by the sec. And I'd have to agree with you that at the end of the day legislation would trump that. Another interesting component of what's being proposed is also a pause on algorithmic stablecoins, which I think is a very responsible thing. I am concerned, as Scott shared, that the fact that you cannot let the consumer earn yield is just going to enable banks to continue to be banks. And we're not really making any progress or headway here if this passes as it's drafted.
- [18:02]
Simon
So Carlos, does it give us basically a useful tool to say that if you approve this legislation and now one of the stablecoins exists, that they would be engaging in anti competitive behavior. So therefore it could be used like to push back, Just use this as an advantage for the industry to push back.
- [18:23]
Carlo
Yeah, I think it's definitely a talking point that hopefully someone in the legislative aid office that's, that's presenting this will consider because you've, you've essentially created an unfair playing field for the stablecorn market. It goes to the advantage of one, but to the detriment of others. And I think first of all, it's an excellent opening to reverse this provision in the proposed bill because this provision is, is actually anti consumer in many respects and it's only continuing to discourage people from using stable coins because there's no real incentive. I'm, I'm struggling to think like I know there would be ease of transfer and that's nice, but what the hell is the difference between holding your money in a checking account or in a stablecoin account? If you are learning, if you, if you can't earn any yield, you actually can get a terrible yield on your checking account. It's abysmal. But if you're getting zero yield, what's the incentive?
- [19:27]
Dave Weisberger
I mean, look, Carlo, I think the reason I teed this up is because, and Caitlin Long and I agree on a lot of things, we disagree on others. But the one thing that we agree on is that the fractional reserve model of banking has outlived its usefulness. And were it to be, were competition to be allowed, it would in fact go the way of the buffalo. Now just so people understand it, when I talk about fractional reserve banking, I'm not talking about zero reserve requirements. I'm saying basically the entire model that you need banks to hold deposits and then lever that up to be able to make loans to businesses. I mean there are lots of avenues for capital raising for businesses now that don't require banks and bank loans and revolving credit could be done in a variety of ways. But the fractional reserve banking system, where people get paid nothing on checking accounts, where it takes days for things to move around, the system is antiquated. Imagine a world where all you have to do is take two innovations, a yield bearing stablecoin that is 100% backed and having that LinkedIn to MasterCard, Visa, et cetera, the bank chips so that you can tap to spend. And now all of a sudden, what human being today is going to use a checking account? Maybe the ones who have to write checks. I mean, I guess once in a bloo moon, you know, I'll write a check. I always, it always feels to me, you know, writing a check feels to me like borrowing money from my mother. Right. But you know, it's outside of that. Once you have stable coins, we know the technology rails work, we know it's way faster and it, it, it basically spells the end of fractional reserve banking from a checking account perspective. And banks are going to have to compete in, you know, with that and frankly most of them will adopt stablecoin Rails under the covers. That is what's even adding to that.
- [21:21]
Carlo
Even adding to that. Dave, why would I as a business owner ever at that point want to accept a credit card? Because now I've got to pay the credit card transaction fee. I've got to wait several days for it to clear and reconcile well, slow your roll.
- [21:34]
Dave Weisberger
The reason the businesses will do that is because people need credit. Now there are two things credit card companies provide that are services are not going away. Can't fix them in crypto. Right. Service one, credit. Okay, I'm going to have money later. You know, I want to finance this. And you know, you could say that's a bad idea, but it's still in demand. The second is certainty of purchase. You know, people, you give someone, how many times have probably every person on this stage has had to dispute a charge. I mean you pay for that service and it costs a service and as a merchant you don't like that. But it's, it's important. Right, because merchants, particularly anyone who's ever signed up for anything that's on a schedule, you know, whatever that, a subscribe kind of deal, you know, you cancel it and they keep sending it to you. I mean it happens all the time, so they'll never go away. But it'll be, you'll be paying for that service explicitly, which is what you should be doing.
- [22:29]
Simon
Yeah, one, one of the arguments if anyone's going to be fighting this battle is that if you don't allow for the yield, then the consumer is going to end up engaging in defi and locking it up and doing more risky things with it in order to generate the yield. And so, you know, it's just such an obvious, there's, there's zero downside and 100 upside for the consumer. So the only reason it wouldn't happen is because there's, there's, there's gatekeepers and lobbying and it, and it is just anti consumer behavior. So everyone just needs to fight that battle if they're engaged in it. And there is an element of not fully disrupting the credit card system, but if you are able to borrow a stable coin against your wealth collateral, I. E. Bitcoin locked up in a smart contract on lightning network, then you are able to gain access to credit based upon wealth rather than credit based upon trying to meet your everyday consumption, which is essentially the change that Bitcoin is meant to bring to the world, which is to change time preferences to encourage savings and then enable programmatic money whereby you can access fiat currency and stable coins without having to actually sell your wealth. And the credit markets are available based upon you saving for longer and generating more wealth, which is essentially a radical is like Austrian economics on a blockchain while the Keynesian economic system is dying.
- [24:17]
Dave Weisberger
It's funny.
- [24:17]
Carlo
And you'd get a better rate. Correct me if I'M wrong, you'd get a better rate than a credit card company. Because even the worst of these bitcoin collateralized loans that I'm seeing are far better.
- [24:28]
Scott Melker
I mean, credit cards and it's like 20, right? These, these loans. I've actually been down the process with Abra, Bill Barheid, who's on here often, and I think they've been floating for the last 18 months between 7 and a half to 13% or something like that. So you're way below a credit card.
- [24:46]
Dave Weisberger
Yeah, I mean, look, the, the, the reality is crypto will be disruptive. The disruption comes in stages. I mean, Simon, when you're talking, I'm smiling and I'm thinking to myself, just don't talk about that too loudly or the banks will get even more enraged. But you know, the stablecoins breaking the paper trail of checks, disruption is one that's undeniably good. Although in Europe it's even worse. Not only about the yield, but in Europe they're making stablecoins be held as bank deposits, which are inherently much more risky than being backed 100% by, you know, being backed 100%.
- [25:21]
Scott Melker
Oh, the irony.
- [25:23]
Simon
And they're doing CBDCs. It's like anyone would think that the European Union and the European central banks hate Europeans because they do well, but.
- [25:33]
Dave Weisberger
What'S going to happen here? And as I said, I was having a conversation with a Wharton train, with a Chicago trained Wharton economist who happens to be running the bank of Israel. We were talking about stablecoins and his commentary is, look, they and the whole world are waiting for what the US is going to do here because it's either going to be picking the European model or the US model. And if you're a sane economist and he's a monetarist, so he can understand where he's coming down. You're going to pick the US Model, right? This idea that you have to trust your assets in a fractional reserve bank as opposed to a fully collateralized bank. It's very important. And that's why from a lobbying point of view, the Senate version has to be the one that wins going forward. And this issue has to get screamed from the rooftops because it's very anti the customer as far as what you were talking about, Simon, in terms of bitcoin. Look, bitcoin being good collateral and it becoming widely known as such, is literally the catalyst that will propel it to its next level for so many reasons, Dave. And that to me is the catalyst. I mean, yes, it doesn't sound like a catalyst, but it is a catalyst.
- [26:42]
Scott Melker
Such a big catalyst. Imagine a world where A, every large institution is allowed to borrow against their Bitcoin and find ways to earn yield. But B, imagine the decrease in selling pressure when any wealthy person holding bitcoin feels comfortable borrowing against it instead of selling it. Very many people are going to sell their bitcoin if it's an asset, just like their stocks or their real estate.
- [27:08]
Dave Weisberger
And that's the important thing, because rich people don't make money. You know, they, they have assets and they borrow against them. I mean, when's the last time Bezos had to do anything other than borrow against Amazon stock?
- [27:21]
Scott Melker
You know, buy, borrow, die or whatever, you know, it's a very clear roadmap for the ultra wealthy. I'll never forget the first podcast I did with Sailor, which, you know, probably September 2020, right after he first bought Bitcoin. And aside from the incredible bitcoin conversation, he broke down that roadmap for wealthy people and how bitcoin could play into that in the first days. He understood that, but basically said, listen, I've got five yachts. I can collateralize a yacht that's sitting in an ocean across the world. Good luck going and collecting that collateral if I default. Bitcoin is the perfect, most pristine capital and institutions are going to understand that. Go ahead, Simon.
- [28:03]
Simon
Yeah, and the apex predator, as it were, is when you can do all that in self custody with no middleman as well. And so that's, you know what, what we got to understand and appreciate around Bitcoin is Ethereum was the beta test. Ethereum showed you that if you believe in eth, you can lock up your collateral and then you can engage in a defi contract. Now once we can do that on taproot lightning, and I know we've got quite a way to go until we get there. But now you've also added the final element, which is privacy within a channel. Stablecoins with privacy locked up, collateralized against your Bitcoin where all you do is stack sats every single month and then you pull out your fiat currency to meet your expenses and you receive the yield in there and then the yield actually can be converted into Bitcoin so that if you save it, you end up with more Bitcoin. So it is 100% exactly how you do a complete bottom up attack of making the system completely clean again, as it were, for consumers, with the benefit of consumers. And it will be the currency that artificial intelligence will choose once you get that Right.
- [29:27]
Zilian
I'm not sure you can do that now, Simon, with Rob, Bitcoin as well. I mean, on aave you can do that.
- [29:33]
Dave Weisberger
Yeah.
- [29:33]
Simon
But you have to add proof of stake risk, which means those that control the state can control the network. And then you had to have smart contract risk. Being able to do that without the Ethereum ecosystem and be able to do that on Bitcoin is as disruptive as it gets. When we start to hit the. When we start to hit the full potential of what this can be. And by the way, Americans, this is why the European model is disgusting and the American model has to prevail to allow this to exist. So we're relying on you fighting the good battle and the Trump administration is the time to do it, because if you can get this locked in now, then it's going to set the standard. So we're all reliant upon you guys getting this one, right?
- [30:22]
Scott Melker
Not sure. I just wanted to point out that there is a kind of version of that on the liquid side chain from Blockstream. There's a service called hodl. Hodl that allows you to lock up your liquid Bitcoin and then get L tether in return for that.
- [30:40]
Simon
Yeah, the difference with that one is that's a federated network of banks. This is Bitcoin on chain through channels. I get it. We're gradually moving across. But the ultimate is to get stable coins and lightning channels with privacy built in and the ability to use taproot securities. And then if people, if people want to create centralized services because that's too much, then you, as a financial services provider, you can do the complicated bit on chain and just put a layer on top to simplify it for your customer. But this becomes the base layer of the, of the financial system, even if it's too complicated for others to engage into.
- [31:23]
Scott Melker
There was news that kind of quietly went by that Custodia bank, which is of course Caitlin Long, in partnership with another bank, released the first effectively regulated bank backed stablecoin in the United States in the form of tokenized bank deposits, which is something I know she's told me many, many times, they have a trademark on. And so although they're small and not fractionally reserved, as you mentioned, this is an official regulated bank in the United States directly releasing a stablecoin which I think could be a roadmap, obviously for the bigger banks that we know will eventually do this. Also, Avery, I see Avery Chang, the CEO of Aptos in the audience request, because I would love for you to jump into this conversation about stablecoins since Aptos obviously seeing so much adoption of stablecoins on their chain. But before hopefully he can jump up, we can continue this conversation. I think we all know that the future of stablecoins is private stable coins everywhere, right? I mean we saw it with Libra and Diem, of course they were too early with Facebook, but we're going to have JP Morgan coin and Goldman coin and blackrock coin and BNY Mellon Coin. I mean, isn't that the inevitable path that this is going on?
- [32:46]
Dave Weisberger
It's a question of interoperability, Scott. I mean honestly, there's not really. It's going to be a. It's no different than. Think of it this way. Every bank individually has a bank deposit and you can move money around. As long as the stable coins are interoperable, then it doesn't matter who the stablecoin provider is. But the reality is interoperability isn't so obvious and you will see probably pools of liquidity and things that get used. The battle is going to be will independent stablecoins like circle, tether, et cetera continue to dominate or will it go the way that you just said? Because banks adopt a standard upon which they will each accept each other's as quickly. And that's. Not everyone in the world of crypto understands that there's basically a bridge involved in that. And we all understand it's essentially complicated.
- [33:36]
Scott Melker
But we do have a roadmap for it with centralized exchanges to some degree. Right. Because most centralized exchanges accept for example, tether on a number of chains and you send it to the centralized exchange, then you can send it out on another chain because they've done the work. But that's more centralized, obviously.
- [33:53]
Simon
Yeah.
- [33:53]
Zilian
Again, there is also above interoperability, which is an obvious problem. There's also a problem of distribution. I mean all these obviously when big banks, big banks can distribute, what can they distribute and can they create the. The markets? Right. Can they. I don't know the distribution for me, like when I saw Tether and I think Simon was. Was a little bit more close to the auction when Tether started getting listed. You know, obviously they had the advantage of binance adopting and, and other exchanges adopting and a massive adoption. Right. So which is access to distribution. I think here as we see the market getting more and more fragmented, you will have an issue of distribution. And this goes also for sovereign, stable, privately issued stablecoins. I mean sovereign currencies are going to start the future of the distribution of sovereign Currencies. Yuan against US dollars or euro, etc. Is distribution right? How many people in the world find your currency useful and, and, and, and, and hold it? And I think that's, that's basically far in the future where nation states are going to start understanding that they need to distribute and to make their currencies as useful as possible beyond their borders. The US today understands that because it's the number one currency. But maybe you will have other contingents, you know, other, other, other, other sovereigns that wants to, to create that.
- [35:26]
Scott Melker
Avery, this is the perfect time for you to randomly show up and discuss because there's been a ton of stablecoin news for you and you're building this and doing this. You're on the ground talking to all these institutions. Do we have this right, you know, in general, or how do you sort of view the future of the stablecoin market since you're literally on the front line?
- [35:49]
Avery Chang
Yeah, thanks for raising that, Scott. I, I think so. Actually. I just got back from D.C. yesterday where I was fortunate to be on stage with Chairman Style as he announced the, the new iteration of the Stable Act. And I think from talking to a bunch of folks in Congress on the Hill, it is very clear that the, the administration is very, very much forward thinking here. They want to see the American innovation happening right at home. And we see that, you know, there's almost everyone is, is planning to launch a stable coin. Wyoming also announced their own stable very recently as well as Fidelity and others. It kind of takes me back to our time at, at Libra and Diem though, where we really brainstormed this effort well and I think what we're going to see is in the short term a lot of new stables being launched. But in reality the interoperability that aspects that people have brought up here are going to be are getting pretty, pretty troublesome. And I do suspect that consortiums will form over time in this space to allow folks not to have to maintain their own, to allow better distribution and really kind of imitate what Tether and Circle and others have done really, really well in the space. And it's not as easy to disrupt as people think. There's a lot of TSPs and OTCs and other things that are happening on the ground that are very important for the actual adoption of a stable, not just, not just, not just legislation. So my expectation is, is very much that, you know, there will be, there will be a lot of staples launching, but over time some of those from consortiums and also some of the strongest distribution players that have Worked on the ground game very hard and will be probably be very successful in the future.
- [37:30]
Scott Melker
Well, so you were obviously there for Libra. You were building it, you guys, as I said, is, is it correct to say that you were just early like it was the wrong legislative and regulatory environment for Meta to effectively propose their own currency or stablecoin?
- [37:47]
Avery Chang
Is that a. I definitely think that yeah, today's today it would be very different if that was the same team that was proposing it now. I, I think we'd have a much better opportunity and making, and making progress and especially with the support that's bipartisan and also across the House and Senate and CFTC as well as SEC side like I, I do think that we would have, would, would see that and I think that's what you will see now.
- [38:13]
Scott Melker
Lost you there for a second.
- [38:14]
Avery Chang
I think probably not probably ideal.
- [38:18]
Scott Melker
Okay. So that you know, obviously you have, you're building and you have an incentive to see ASS win. When you talk about this interoperability or the consortiums, do you think that they're going to be basically a one chain wins scenario or is it going to be interoperability between different chains and they just find a way for that to work? I mean, how does from your perspective when you're trying to win this battle, how do you do that as a founder and CEO of a specific chain?
- [38:50]
Avery Chang
Right. So if you think about chains, they're mainly just infrastructure for transporting value across the network and all chains are doing this. So it really comes down to I think the way that the product is operating here. And so there are differences in terms of the fees and in terms of the speed in terms of the scale. And this is where aptos really differentiates itself from everybody else because in terms of support scale that can see Visa, MasterCard and every other payment processor operate on a network, only aptos has demonstrated that only Optos can show a hundredth of a cent or less fees on the network at that scale. And only Optos can show the kind of fastest finality times that are available there. So you can enable use cases that just aren't possible in other networks. So in terms of product distribution, you can see a much wider use case for stablecoins and for value transfer happening on aptos and their network because of the technology that's underlying it.
- [39:51]
Scott Melker
So in the end the actual best chain should win. I mean even all things aside, if it's going to be way faster, way cheaper and way more secure, that should be the determining factor.
- [40:02]
Avery Chang
I think that's the big part of it. The other part of course is the distribution alongside it and so having the access to usdt, usdc, usde, usdy, you know, all the major stables neededly issued and then our partnership with Air Zero, you have oft bring on many more assets into the blockchain. We have a partnership obviously with, with with Wormhole that brings on their native assets. I think the world is becoming a much easier place for, for settlement to happen on any chain. And I think users are, are definitely picking the chains that are, that are supporting their use case with the, with the lowest fees, with the fast finale times with the most security and so that you'll, you'll see pro both products as well as the users kind of picking the best product for their use case.
- [40:48]
Scott Melker
Since I have you, I want to touch on something else and you and I have somewhat discussed this before, but I happen to be with a bunch of my friends from college, a bunch of almost 50 something Wharton graduate, Wall street guys and I've been sort of trying to gauge their sentiment as I always do about crypto. And there seems to be this idea, and I think we see this anecdotally, that Bitcoin has really become a legitimate whatever that means, financial asset. It's part of the common vernacular. It's not going anywhere but that in their eye they, the rest of what they see is the Bybit hack and scams and meme coins popping off. And we seem to have lost the narratives, at least outside of our echo chamber about the real utility. Right. And I think that that's, maybe it's, we're doing a poor job of spreading what's being built, but you can give us a better idea, maybe even me for some ammo like of all the things that you're building and how important they are from a utility perspective, like all of the things that are being built on blockchains are going to absolutely change the world. I mean maybe you can tell us, you know, what you're excited about that you're building. That sort of gives some fuel to that.
- [42:03]
Avery Chang
I can understand your friends. I do see if you focus kind of more on the speculative elements and on the more casino like elements, I could understand some of the concerns for sure. I think it's also important to remember there are builders that are very serious about solving robot problems in this space. I will give you one example. There is a PAT consortium who have been issuing loans into emerging markets. Over a billion dollars of loans have been issued into emerging markets with over 20 million plus customers. And these loans are very small in scale, 10k to 50k. And they help real people to kind of get access to financial capital at rates that are going to save two thirds of the kind of interest costs you would expect from the local markets. And these loans happen completely on chain. There's an NFT on chain for the loan, there's a payback on chain for the loan. And they kind of support these open access of financial capital across the world to enable people to do things with their lives and to get the scooter that allows them to be a better driver for goods and services across the country and help them earn for their families. And these products can only be really built on strong blockchain based rails. And we're really happy to see these kind of use cases happening on aptos where it takes advantage of very, very low fees and very, very fast finale and security. You know, just as another example, if you want to take out a loan in an emerging market for like a dollar, you could pay it back in 2 cent increments, you know, over 50 payments and all those payments and all that loan transaction fees would still be well under a cent. Like that's something that is only enabled with, with really, really new technology and innovation. That app is bringing the table. And so I, I'll tell your friends that there are use cases like this that are able to change people's lives in a very positive way, to provide them with financial capital they wouldn't have access to and to do it all on permissionless infrastructure that anyone in the world can build on top of and compose alongside with.
- [44:02]
Scott Melker
What else are you excited about that's being built that maybe some of us haven't heard about? I mean, I know you guys have a new launchpad and quite a few things launching on aptos, but you know, more fuel for that fire. What else can we talk about that you who's on the front line are seeing and that we should have on our radar?
- [44:23]
Avery Chang
I think the other thing that I would say is that the rural adoption use cases are starting to really take effect now with the change in administration in the US and then seeing those effects percolate throughout the rest of the world. It's becoming clear that lots of the larger institutions and enterprises are also taking a look at this space and are really, you know, coming up with their own web three strategies. And this is also happening at the smaller scales, the startup scales for a long time. There are companies like kgen, there are companies like Stan and others in emerging markets or in India that are driving massive, massive Adoption cross border, cross country, through things like Proof of Gamer, through things like being able to support creators across different kinds of countries and having an ecosystem that ties across all that to really put millions of people on chain is quite exciting. And so that's something that we are starting to see perlaflight much more networks that are built for that kind of scale, specifically on aptos. And we're also seeing a lot of new developments with respect to trading platforms. I'm sure all of us have been following Hyper Liquid in the recent HLP saga with the vaults, but there are much more decentralized and very powerful perps dexs coming to places like aptos that are going to be showing off. You can do things that are very much in the spirit of centralized product flow, but the decentralized aspect is not going to hold you back. It's going to actually be something that provides you a lot more capabilities and functionality for composing these kind of high performance DEXs with other DeFi ecosystem elements. We see the launch of AAVE to be coming soon as a very trusted partner in DEFI to bring in tremendous amounts of liquidity as well as high quality products into the aptos ecosystem as well. So I would say that there's a lot of lot of great, very reputable and very good yield bearing assets that will be coming aptos soon. There'll be lots of interesting use cases across multiple genres that are also already out and are starting to develop and pick up Steam with the new changes in administration. And then there's also the efforts you kind of brought up on stablecoin movement and real world assets that are going to be driving tremendous amounts of traffic and making this a very much a virtuous cycle of trading stablecoins RDBAs and then a lot of this can be infrastructure as well for new emerging platforms. So Deepin is something we're all very familiar with right now. It's not really taken off in its final form right now. A lot of these Deepin infrastructures are very centralized. They don't really rely on decentralized Rails. And what you're going to start to see is when you have a network like aptos that can support very, very high throughput, very very low fees and do it at scale and be a reliable infrastructure that people can depend upon, it starts to look a lot like cloud. And cloud isn't great to building out amazing services on top of it for enterprises and also small businesses across the world. That's what you're going to see with aptos in particular and Aptos is going to be leading the way in how deep infrastructure can be built fully on chain.
- [47:41]
Scott Melker
Just quickly before. I know I keep asking you questions because I have you here, but I remember you did a post at the end of the year that talked about the importance of shipping, a ton of innovation and a ton of new things. Throughout 2025, it kind of feels like we have this Goldilocks period. Whether regulation or legislation, who knows what's going to come? Like, is there a feeling of urgency right now to just keep shipping incredible product? And if that's the case, then what are the things that you're definitely the most focused on, I guess throughout this year? And then I'll go back to the panel. I've kept you long enough.
- [48:20]
Avery Chang
No worries. I would say that there's a lot of opportunity here for shipping at the infrastructure level at massive scale. There's the ecosystem side where we have a new program from the Aptos foundation called lfm, which is really taking a lot of the projects and putting them through the kind of accelerator efforts from how do they get started with building and fundraising and then token launches and all those fun things. That's been really great. That's really just kicking off now. And then from the aptos Lab side, we're really focused on building infrastructure for tomorrow's needs in kind of building the global trading engine. And that means faster block times. Already aptos has the fastest block times in the market, just recently dropped from 200 milliseconds down to about 125 milliseconds. And you're going to see those block times get even faster in 2025. You're going to see new primitives coming out that are making it easier for kind of interoperability between financial assets moving around within the network and across networks. And I think we're also going to see many new innovations with what we call block STM V2, which allow for much more parallel transactions. We're going to see move to get more powerful in terms of supporting many new features like aptos Intents and higher level primitives and just making your code simpler and easier to understand, as well as support for Raptor, which is our newest consensus protocol to make the system even quicker. We have Zaptos and Shardeens, which we've already laid out as new innovations. What Shardeens allows you to scale to 1 million transactions per second and well beyond that when with Zaptos you can see the finality times are going to drop much, much more significantly. So aptos infrastructure, already the best Today, it's going to get only better in the future.
- [50:09]
Scott Melker
Thank you so much, Avery. I really appreciate you jumping up and giving the perspective because we have a lot of opinions here, but not often do we get to actually talk to the people that are building it. So really appreciate everything you're doing and can't wait to see what's coming in the future. Anything else I missed before I'm going to let Zilian jump and had his hand up, but anything else I might have missed?
- [50:33]
Avery Chang
No, it's been great to be here. Thank you so much for that.
- [50:35]
Scott Melker
Awesome, Avery. Thank you so much. Zillion. Did you have a comment?
- [50:40]
Zilian
Yeah, just great. Great technology and very good with what I was hearing here. Fantastic. And this, this actually is a very good example for, for how, as you see, the. The example that was given here was, was an emerging market example. So I feel that the space really pitches for the future of America, but actually executes in emerging markets because that's where there is a real need for this infrastructure that we're building. This is something that capital allocators and I think understand it pretty well, but mostly builders. Builders, when they pitch to capital allocators, they pitch obviously in the US because that's where they get capital. But when it's time to execute on their technology and to build for the future, to have immediate adoption, it's in emerging markets where it's happening. And it's going to be the same thing for the, for the big breakthroughs that we're going to see in stablecoins. I mean, what aptos is building right now. Can you imagine if these people have access to stable coins denominated in their local currencies that have had exchange exchanges, direct exchanges to, to US, USD, et cetera? So this is, this is one of the dislocations of this environment. I don't know if I'm. If my message is going through, but for every single emerging market entrepreneur that is trying to, to pitch his emerging market, you know, tech company, just pitch for America like it was the future of America and execute him in your homeland.
- [52:05]
Scott Melker
That's the idea that makes sense. Anybody else, any further comments here? Because we're going to move to wrap up momentarily. I think we, we did a good job. It's a great way to end the week. I want to thank our entire panel. It's great conversation today, especially Avery, for showing up and giving us all that perspective on what's being built there, but generally on. I just can't believe you were actually there in Washington yesterday when the stablecoin bill was announced, sitting there as we were discussing it earlier here. It's funny, it was amazing to have you up, guys. That's all we got. We'll be back Monday, obviously, at 10:15am Eastern Standard Time at the next Crypto town hall. Everybody, have an amazing, amazing weekend. See you soon. Bye.