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- [00:00]
A
Good morning, everybody. Welcome to Crypto Town hall. Every single day here on Exeton 15am Eastern Standard Time. And by every single day, I mean not Saturday and Sunday, every single weekday here on Twitter at 10:15am Eastern Standard Time. A lot to talk about today. Bitcoin euphoria. Until about 10 minutes ago, we're trading over $113,000. We were so back, baby. And we currently have an hourly candle, 20 minutes in that traded from 100 right back down to about 111. Good times being had by all. And of course, all of this likely having something to do with the title today of not Crypto Town Hall. We are now Macro Economics Town Hall. Employment Week. Is the printer reeling coming? Dave, you threw this one out there. What do we got here on job numbers today? What's the impact and why do we care?
- [01:01]
B
Well, the impact is nothing if the Fed doesn't do stuff. People are obsessed about it. And so there you go. I mean, as our friend Larry Lapard would say, it's not a question of if, it's a question of when they have to start firing up the money printers. But these numbers were weak and people kind of bad news is good news when you're looking at the. I don't know. I mean, it's all. It's all a bunch of. I mean, this. There's still not a whole lot of real asset allocation going on. This was classic knee jerk. And when the knee jerk happens, the best thing to do is to fade. It doesn't necessarily mean it won't be right in the end, but, you know, it's as simple as that. I mean, I wish I could say it was more, but you know, it is that. That is what happens.
- [01:49]
A
Do you have the job numbers in front of you by chance?
- [01:52]
B
I don't. I had them this morning. I'm just logging back into my computer that I saw was. Was the average hourly earnings being down a tick, which I think that actually matters to them. I mean, they look as far as. As the weaker.
- [02:09]
A
Got it.
- [02:10]
B
The weaker creation of jobs. I mean, it's still it. It seems significant because 75 to 25 is a big percentage difference. But 50,000 jobs here or there, when their average yearly revision has been a million, is rounding error. So it shouldn't matter. But there are things in here that definitely, definitely are. There's signs of weakness we've seen in terms of consumer stuff, it doesn't really matter. The real question is, are rates at the right level? Is the Fed behind the curve or ahead of the curve. And I think most people would say they're behind the curve and that's really the issue. So. But you know, look, people will debate this left whatever as a markets show all we care about is what they will do. And the tea leaves are, you know, what's Poly Market saying? I haven't checked in the last five.
- [03:01]
A
I haven't checked it today. It was 89% yesterday for a 25 rate cut.
- [03:06]
B
Let's look because it's easier.
- [03:09]
A
And while you're looking for that, I'm going to go ahead. Employee employers added only 22,000 jobs in August and the unemployment rate rose slightly to 4.3%. Revised data also showed that employment fell by 13,000 jobs in June. I know that's going to shock you guys, but we had a downward revision for a previous month. Like that's never happened before. And that was the first net loss since December 2020. That said, July was revised up upwards, I think it was by like 12 jobs. But still, you know.
- [03:39]
B
Yeah, I'm looking at Poly Market and it's right now it's 88%, 25 basis point cut, 11%, 50 basis point cut, that's up 5%. So it's somewhat material.
- [03:51]
A
Basically no chance of no cut.
- [03:54]
B
It's, that's down to essentially zero. Yeah. And you know, look, this stuff is all, you know, people are betting and who knows that the public knows a damn thing about any of this stuff. Right. But the truth is that, you know, markets do react to, to people betting because it's just another way of people to bet.
- [04:13]
A
Yeah, I think it's notable though. If you look back to November, December, I'm looking at the chart for monthly change in jobs. I mean you were in the mid, you know, 250,000 ish jobs in November. December, December was over 300,000 jobs. The last four months, all under 100,000 and some of them literally barely above zero and June negative.
- [04:37]
B
So yeah, yeah, I mean, look, clear.
- [04:40]
A
Trend, clear trends now.
- [04:42]
B
Right. The other point that I would make always on these numbers is, you know, bitcoin is undeniably, you know, the ETF flows have been the major thing people are waiting for. So if you buy it right before the open and there isn't a follow through of buying, you're going to get very disappointed and that's going to happen. It's going to flush out. But understand something. Retail doesn't react to numbers generally first thing in the morning. The retail reaction is generally in the afternoon because there's two waves of retail there's the, the, the wave before the open, which is generally decided the night before. And there's the wave that happens, you know, from 3 o' clock to 4 o'. Clock. And you know, speaking of someone who used to run a business taking the other side of retail, the, what we used to call the volume smile, because it's, it's, if you graph it out, it looks like a smile is pretty pronounced. So one would expect that if investors and, or small RIAs are, you know, look at this news as a reason to buy bitcoin that you would see it show up in the afternoon, not now. That's what you would expect, isn't it?
- [05:50]
C
Isn't it curious that as soon as the market opened today, like we had a run up in the price of bitcoin higher than obviously was expected last night when markets were closing and people were issuing trading instructions or computers were setting the rules. And then as soon as the market opens, you get a regression to like oh, 111, which is $1,000 more than what the market closed at and had been steady at the night before, completely ignoring the 113 that the market had built up to. So it, you know, there's two, there's two markets of Bitcoin there, a tale of two markets, right? One that trades 247 and one that, that only trades during bank hours and maybe isn't up to the second in terms of its decision making.
- [06:35]
A
And Tomer too, like that's exacerbated by obviously what Dave just said because not only do the two bifurcated markets, but you also have yesterday's or last night's he was talking about after a weekend, but kind of like last night's or this early morning pre trading demand on ETFs that reflects immediately at the open when those orders have to be filled in either direction.
- [06:55]
B
Yeah, and, and it's, it's just, it's hard for people because the average person who is putting money into the ETFs or RIAs, they work 9 to 5, right. And so retail who aren't trading professionally, they get their orders in before they go to their job. And then, you know, maybe they, at lunch they read some stuff and they put some orders in. At the end of the day, the people who are trading the RAAs, they've been taught, you know, it's sort of a gospel, you know, to avoid the open and not get, get it caught up in the hype cycle. So they kind of wait to see, you know, what goes on. And when you See this stuff, it makes the volatility makes people gun shy. So it's really not that surprising on the microcosm when volumes are really low and a lot of people are still out on vacation. And next week is when you expect things to get started again. But you know, who the hell knows, right? You know, it's just, it's, it is, it's something that, that has always been the case that, you know, when you see a knee jerk reaction, you fade it. But the weird part about the knee jerk reaction here is, I mean bitcoin moved well before its move was, was well before, you know, it moved, you know, it moved to the announcement. It came back down and moved back up. It stayed around there and then the US opens and it goes bloop and right back down. And so it's a bit different. But you know, you can look at other markets, right? You know, like what, what, you know, to look at what, what's happening. You know, I'm not sure that I have to refresh this page. Let's just see if I got it right because I don't want to give bad data.
- [08:28]
D
Dave, let me ask if I can jump in here really quick. We're looking at four straight months of below expectation job gains. And I think that confirms that the labor market is actually losing steam and not just normalizing. And what we're looking, we're seeing unemployment, like Scott said, at the top, top of the show here since the highest since 2021, trending upwards, not sideways. And doesn't that seem that we're seeing, I think softness. We lost a lot of federal jobs, manufacturing and so maybe the public and industrial demand says that things are weakening. I don't know.
- [08:55]
B
What do you think? Well, yes. Remember my working thesis, Matt, has been that forget the arm waving and the job boning and all the stuff that people say, yeah, this government cares about having a job picture that is looking more rosy and on the uptrend a year from, you know, maybe May or June and being, you know, in order for the midterms. You know, I know that's very cynical but very cynical human being, being. But that's what they care about. And so yeah, they know. Now of course they're screaming at the Fed. They're screaming at the Fed because they'd like to get momentum building sooner rather than later. But yeah, I mean what you're saying is true and it makes sense. I mean, you know, we haven't had two years, you know, north of two years of above of real interest rates you know, interest rates well above the rate of inflation. We've only had five years in the last 25 and three of them were the year before the Internet bubble popped and the two years before the global financial crisis. And the other two were the last two. And if you think that they're not worried about it creating another financial crisis or a market crash at these levels, you're not paying attention. So yeah, they, they're trying to get in front of it that that's the real issue.
- [10:15]
D
My last comment here, I just think that the fact that Scott even brought up that these June numbers were revised, I think that's that to a net loss. That's a red flag. That to me data quality and momentum I think are decaying.
- [10:26]
A
Yeah, I think that's clear. You know what's super cipher punk and libertarian and hardcore bitcoiner. You know, like what's really makes bitcoin special is for us to worry about Fed cuts and job numbers. It's so lame. It's so lame that this is like a conversations that we have to have on a bitcoin and crypto based show at this point. Just wanted to throw that in there. Go ahead, Dave.
- [10:50]
B
Well, I mean, yes and no. I mean look, trying to figure out what these. We all start. I shouldn't say all. I start with the premise that we shouldn't have us a fit that we said that the notion today with modern technology being what it is, that we need a cabal of secret and unaccountable officials controlling the supply of money, the most important price in the economy I think is just the wrong assumption. Okay. And the cypherpunks will all agree with that. I mean I would at least I would assume so. But we are in a situation where we do have a cabal of unaccountable, secretive, very well paid people controlling the most important price of money. And so we're faced to deal with and trade that reality. And so that's why it matters.
- [11:40]
A
Yeah, it does matter. I tweeted something to the effect I don't have it the other day they said I don't care if that, you know, like I don't care if the Fed cuts rates and then don't care if they raise rates. Rates because I don't think the Fed should exist to your. To your same exact point. I have a question, C.J. i'm going to go to you but Mauricio, are you on stage? Because I see you bouncing around and I saw your hand go up. But you show as a listener to Me.
- [12:02]
E
Hey, Scott. Hey guys, Good morning. Yeah, I'm here.
- [12:04]
A
Okay.
- [12:04]
E
I, I, yeah, Mike, I put my hand down. But my quick question was just to really touch on something that's more industry specific versus say the Fed is and I wasn't here yesterday, maybe you discussed this yesterday, but I was pretty interested in the NASDAQ guidance for digital Treasuries, Treas treasury company acquisitions. I don't know if we've discussed that already, but I think that until, until we or the market gets a better grasp on what is the true implications of that, because that was a lot of the big driving one of the big tailwinds that we had.
- [12:33]
A
So yeah, it's very vague. I dug into it a bit with NLW this morning for those who missed it. There was kind of a report that the NASDAQ is putting treasury companies that are listed on the NASDAQ under more scrutiny, asking potentially for more disclosures and information and even potentially delisting some that exist. We already saw one delisted and we sort of have had these passive vague reports over the past few months. And a lot of the companies that did the reverse mergers have been unable to actually get SEC clearance to change the business from whatever existed as to a Treasury company therefore have not actually been able to purchase Bitcoin and are sort of sitting in limbo. So Mauricio, there may be someone with more perspective here, but it sounds like things just aren't moving very fast and they're kind of halting the brakes and going to be a bit more careful on how they allow these to go forward. So I think it's a TBD to your point.
- [13:34]
E
Yeah, thanks for that, Scott. And again, I would love for anyone that has a little more insights or perhaps more details to chime in that I agree with you. It was rather vague. And that's actually what I think that's what I don't love about it. It's how vague it was because it would be super interesting to try to put some numbers around the implications, but that seems challenging with the information that's been shared.
- [13:53]
A
Yeah. And there's also I happen to be speaking with a few potentially launching treasury companies and I have seen a meaningful shift to trying to merge with New York Stock Exchange listed companies rather than NASDAQ now. So I don't know if that gives us a hint that there were some who were ahead of this. There were some deals apparently that were pretty bad and the one that was delisted. So I guess we'll see. Does anybody else on stage have more insight into this. I don't expect that you would. I'm just curious because all I've been able to see is that as I said, they're just kind of being vague and saying we're going to put these under more scrutiny. Yeah, that is a huge story, Mauricio, because if all of a sudden these can't exist, that's a problem.
- [14:40]
B
Well, that's what it means. You need to understand the backdrop here, here. So let's give some background. First of all, NASDAQ doesn't have that kind of power. There are multiple listing entities in the United States. They are a, what's called a self regulatory organization. It's a private company been imbued with regulatory power. There are many people, including several at the SEC in high positions who have wondered aloud and thought aloud many times that we shouldn't be giving private companies with a profit motive the ability to have regulatory power that can influence or that, that can protect their, their, their bottom line. This won't if it became. So there's two pieces here. One, we could end up in the courts. Two companies can list on smaller venues. The New York Stock Exchange is likely to agree with Nasdaq for the, for what it's worth. So those are listing networks. But they, they haven't said it yet. Who knows what they'll do? I mean they may, they may see it as a PR disaster that NASDAQ is doing it. It also maybe Nasdaq will walk this back and say they people need to disclose it, not that they can't do it. Right.
- [15:47]
A
Well that's the point, right, that we have a headline but we don't have any facts. So I think if NASDAQ is saying, hey, we're recognizing a trend and we're going to watch it more closely, okay, that's not barely worth reporting.
- [16:00]
B
So I have friends at the, at other, the smaller listing venues that are being built, the Long Term Stock Exchange, the Green Exchange, the new Texas exchange, etc. The likelihood that crypto companies or treasury companies won't switch their listings rather than stop what they're doing is of course ridiculous. Of course they will do that. And understand the primary listing exchange, it matters a lot because you get to ring a bell if you're on the New York Stock Exchange. You get to ring a different kind of bell, a buzzer really. If you're at NASDAQ and Times Square and you don't if the others and you're closing auctions may or may not have less liquidity. But it doesn't stop you from trading the national market system if there's consumer demand. So it's not nearly as big of a deal as people are making it. It could very well end up in the courts if it's overbroad. Most likely what they'll do is say, listen, you shouldn't be able to say one thing and do another. And they want to codify rules about that so that it makes it easier for the tort bar to go after people, which is one of the problems in the United States that we can, you know, there are lawyers on stage who can understand it, but it's. I haven't had a chance to dig into it. I know a lot of people at NASDAQ to understand and I know that quite a few of them are very forward thinking. My suspicion is they're reacting to public complaints and they're trying to do it. And so somebody got a headline out in front of something and it isn't it. We haven't seen the end of this story, but I really, really think going down the rabbit hole that says you can't have a Treasury company anymore listed in the United States is absolutely.
- [17:32]
A
That's not gonna happen. Yeah, we're not saying that. I don't think anyone's expect there's just going to be a little more stricter listing standards and that some of the early ones who did it wrong may end up getting delisted. But we know that there's going to be a culling of these down the road at some point anyways. And what was the stat Tomer, you may be the one who shared it yesterday, but 26, 27% are trading at a discount already.
- [17:55]
C
Oh, it certainly wasn't me. I, I wasn't here.
- [17:57]
A
Okay. Yeah, yeah. I just like to credit you with smart things.
- [18:00]
B
So you're welcome.
- [18:01]
A
Thank you.
- [18:01]
C
Yeah, of course it was me. I spent hours doing the research. And what was it that I said again?
- [18:07]
A
I think it was that like 25 to 30%, it was some number in that ballpark of existing treasury companies are already trading at a discount to nav, which obviously a month ago consensus not here seemed to be that if you own Bitcoin, you can never trade at a discount to nav, which we laughed at. Right.
- [18:25]
C
Very good. Yeah, so I missed it. I mean, since I never given my take on it. I think in the long term all of these companies are probably trending to 1ish or even slightly less for overheads and lack of choice, lack of freedom that you have with actual on chain bitcoin. But like strategy has justifiably because they're able to generate real bitcoin per share yield for the time being. They justifiably have a bit of a premium. These fly by nights little guys who, who don't have the capacity to raise, to raise money that's accretive to the shareholders. I just don't see the value proposition there. So they should sell their bitcoin and give up the ghost at some point.
- [19:11]
A
And C.J. i know you had your hand up and this kind of leads into. I happen to know where the puck is moving for you guys. There's a very clear way for companies to do this and it's not to try to be micro strategy and take on leverage and debt to add bitcoin to a balance sheet with no operating business. In my humble opinion, there's bitcoin balance sheets as we know, where you take a actual company and you take the cash flow and you would rather hold bitcoin than cash. That makes a hell of a lot of sense to any bitcoiner and any rational person if it's not cash you need and you're willing to ride through the volatility. I think that's a very rational approach. But then I think a more exciting approach is a company that actually earns bitcoin and can add bitcoin to the balance sheet through free cash flow. And CJ I know that's sort of the, the wheelhouse you're in. There are others that are there as well. But I think the microstrategy copycat model is going to go really badly for most.
- [20:14]
F
Yeah, I mean the, it's really hard to replicate and microstrategy because you're starting from square zero. And a lot of these companies, as you guys stated, they can't even get off the ground and they're having a hard time getting, getting, actually getting bitcoin on their balance sheet. So the ones that do have it on their balance sheet, like microstrategy far in the lead and they're able to create financially engineered products like the preferred offerings that basically create, you know, like a stable coin with an adjustable interest rate. And you know, this goes back to me referring, you know, microstrategy meta planet. These are gonna be the central banks of the future based on their products and how they balance their products and how they measure the yield against their preferred offerings which are backed by the bitcoin on their balance sheet. So a lot of these startup bitcoin treasury companies are just looking to get the bitcoin on their balance sheet so they can try to compete when these other ones are already out here doing it at a level that they can't. And honestly, MicroStrategy is the only one who's really been able to pull off the preferreds because of the amount of Bitcoin they have. And yeah, we, we are actually at People's Reserve, we're in the middle of this process right now with a NASDAQ listed company who, you know, I'm under strict NDA, so I can't share too much information. But our thesis is this, it's not just about Bitcoin accumulation, it's also about Bitcoin powered finance. And most of these Bitcoin treasury companies have come out and have created the, an accumulation engine or have theorized how their accumulation engine is going to work rather than building a bitcoin business. So what we are doing is we're bringing two companies together, one that already has strong positive cash flows and outlook and then the new People's reserve ecosystem which will facilitate a marketplace for Bitcoin powered finance. And what we can do is we.
- [22:05]
A
Can.
- [22:07]
F
We can pay our debts and we can pay the preferred yields through cash flow, through, through profit from our operations, not only in the merger company that's already listed, but also in the Bitcoin powered finance ecosystem. So we are actually able to pay our debts without having to dilute, without having to issue extra debt. And I think that's the, that's really the next step, the next step in this whole process. What I call version two of a Bitcoin treasury company is, and you, and you've heard the bigger ones talk about it, they just, they haven't taken that action yet, mainly because they don't need to. Their current strategy is working and they're continuing to stack Bitcoin at a, at a quick rate. But eventually they will move into Bitcoin powered finance which is products and services built around Bitcoin as the most pristine form of collateral in the world. And then the revenues that you can generate from those products and services take away the largest concern that is in the marketplace right now, which is how do you make money? Where is your cash flow coming from? Your, your software business is dying. You have no business whatsoever. You're just an accumulation engine. You know, how do you service your debts without issuing new debts? And the, the Tradfi guys, they, they don't like that. And I don't think they should like it. It makes much more sense. Like you say, Scott where you have a balance sheet company, you have a, you have a, an operating company that is profitable and is generating revenues. And you know what? Instead of doing a buyback, buy Bitcoin. Instead of doing a dividend, buy Bitcoin and learn how to take your company and turn your, your profitable company into a bitcoin accumulation engine. And that's, that is what we are doing with our merger partner. And then on top of that, we're integrating our bitcoin powered finance ecosystem so that we can increase those revenues, increase profitability by offering those products and services to the marketplace, some of which are innovative and revolutionary products the marketplace has never seen before, and then use those cash flows to service the debts to make the flywheel happen even faster.
- [24:12]
C
It would be good, C.J. it would be great if you, if your merger partner was Apple or Coca Cola.
- [24:19]
F
Yeah. Then we'd have life, lifetime Coca Cola in the office.
- [24:25]
C
You'd have some retain, you'd have some very significant retained earnings to retain in Bitcoin.
- [24:29]
A
You'd also have to retain. A lot of. These are big cash flow companies. Yeah. You'd also have to retain a lot of dentists and doctors for your health because of all the Coke in your office. But I guess that's a different conversation. But CJ did, maybe you can't disclose this, but this report about nasdaq, has that had any impact on your conversations or your plans? Like, is that, is that actively on the radar of people who are still in the process of doing this?
- [24:54]
F
I, I think it is, yeah. But in our specific situation, the, the existing controller has 51 of preferred share voting. So in this case, if a vote had to take place, I think the board would be aligned and we'd be able to execute the strategy. But I could definitely see that if this became a requirement. A lot of these boards, they, they're not structured in that way. And taking a vote every time you have to take action and then filing forms with the SEC for that vote, letting certain cooldown periods go, that could create a lot of big issues for companies who don't have a setup where there is 51% of the vote controlled so that vote can be guaranteed and that decision can be executed. But yeah, it's definitely something that's come up.
- [25:42]
B
I mean, look, the, the, the devil's in the details, right? If the, if the answer is the company needs to have a clear policy of when it, and when it has discretion, like, so if the policy is, and it's public and everybody knows that the company has filed that it can sell 20% of its stock whenever the fuck it feels like it as part of its ATM program to accumulate whatever the treasury company is accumulating, then I think that, I can't imagine that if that's the policy and it's public and everyone knows that they're going to legally be able to stop that company from doing that. The, the notion that a listing venue is going to require a board level vote for everything and not give the ability to do shelf registrations or other things like that seems impossible to me. But the fact is that, you know, there, there's a lot of consternation about, about the transparency around this. You know, we've seen it. Right? You know, you've seen it with MicroStrategy and all the stuff yelling back and forth, forth. I'm pretty confident that MicroStrategy's lawyers are pretty damn good and they didn't do anything that was illegal. But they made statements that people arguably interpreted one way. And I think what, what they're, they're trying to do is say listen, it needs to be clear and if that's what they're doing, then it's not a big deal. If they're doing more than that, then you're right, then it would be a disaster and frankly they'll probably lose all that business. It'll get listed elsewhere.
- [27:07]
F
Yeah, and it's a, it's a strategic disadvantage as well when you have to kind of, you're forcing a business to declassify, you know that that information was shared by MicroStrategy so that the, the marketplace had some kind of guidance because they have been tapping the ATM very, very hard and the investors, you know, are, are, are feeling the pain and feeling the burn. Bitcoin's at, at new all time highs or double or triple what, what it was. And, and MicroStrategy has new all time highs of Bitcoin on their balance sheet, yet their stock is underperforming. But it's the, the big, the bitcoin per share is going up. So when Bitcoin makes its move, it'll push that nav into the equity. And I think people are just impatient. Right. It comes back to like the, the marketplace just being speculative rather than long term based. So. Yeah, I agree Dave. I don't, I don't think it just doesn't make sense that you can tell a company how to operate. You, you can't put these types of guidelines and then enforce those guidelines when you don't have the authority to do that. And ultimately it comes down to the, to the, and I, and this is what I personally believe, this is what I think this is going to shake out. Only the bitcoin treasury companies that have a bitcoin oriented leader are actually going to succeed. When you look right now at all the companies that are falling under one at one on their multiple, they don't even really have a real spokesperson. They don't have anybody in the bitcoin community that can actually represent them and, and speak to what their theory and strategy is moving forward. And all the companies that do, the ones that have the Sailors and the Dylan LeClaire's and just that they have a bitcoin professional on the team who can relay that information to the marketplace. That is like one of the most core critical components of a Bitcoin treasury strategy because you have to interact with your community. So it's weird that it's come to that but ultimately there, there's going to need to be a bitcoin representative on the board that the community trusts in order so that the flip flopping back and forth that you can't stop actually comes down to again a trust based system.
- [29:14]
B
Yeah, I, I violently disagree with a lot of that. But, but Tomer had his hand up so why don't you go first timer?
- [29:20]
C
Yeah, it's well for, for one most of these companies have hired some, some or several bitcoin influencers. Big, big podcasters or people with big Twitter followings or very well spoken people. I think their challenge is now executing because it's not the bitcoin community that has enough capital. It's not us plebs who are going to sell a lot of our bitcoin. In order to buy shares in a bitcoin treasury company, the capital has to come from previously restricted sources of capital or previously unconvinced sources of capital. So talking nicely to the bitcoin community who believes in self custody, cold storage, you know, keep, keep the funds away, beware of paper Bitcoin aren't going to be persuaded into paper bitcoin by, by other influencers. It's actually viewed in the community as potentially a bit of a betrayal or a bit of a selling out for bitcoin influencers to try to convince bitcoiners to invest in bitcoin treasury companies in general. So I, I think like, you know, the, the interesting story with strategy was oh for, you know, they're unlocking pension funds, they're unlocking insurance dollars, they're unlocking conservative dollars, they're unlocking Fund dollars that were forbidden from buying bitcoin directly, or even the ETF directly, but can buy strategy shares. So there's been a bunch of narratives that Saylor has actually executed on, although I think he squeezed them as some of the earlier ones, as dry as he possibly could. And that's been the thing. So I'll pause there because I know Dave might want to add something.
- [30:59]
B
You saw, you saw what I was going to say. I think that's a large part of it. I mean, frankly, someone who's come from the traditional financial to the, the crypto world eight years ago, I think that the vast majority of large Twitter following crypto people are full of shit and think their shit doesn't stink and got lucky and as opposed to being smart. I mean, I know that's, that sounds ridiculous, but we're talking about all the people who pump the ICO markets, who basically pumped every market that you could possibly say. And some of them, look, I'm friends, some, and I told them to their face, you know, listen, you're not as smart as you act. And it's just that simple, you know, putting them in as a CEO. I mean, Saylor had conviction in an asset early and that conviction he still has. But now what's needed to be done and he's done it, is hire a team of people, a strategy to monetize volatility and implement the strategy. And he's doing that. And that's fine now. So what really matters isn't the spokesperson, because. Yeah, okay, if it, if it's a brilliant spokesperson, someone who actually knows how to do it, it's. I want someone as a spokesperson who can build products, who can build services around it, who can leverage what's going on right in. Otherwise they just, all the, one of these bitcoin treasury companies would all be lining up to hire. Well, I don't, I don't want to make fun of anybody, but, you know, I just don't think that that's the right way of doing it. I think it's really. Is there value in the company that goes beyond just buying bitcoin? Because you could buy bitcoin yourself. I mean, if there's no value beyond it, then what the hell's the point? There we. Gary.
- [32:30]
F
Yeah, and I want to, I want to just clarify, I didn't mean it in a way that these people need to hire influencers to talk to the bitcoin community. What I mean is you need bitcoin representatives who, who can explain the thesis to the community, but Also, who can bridge the gap between what bitcoin is to the investment bankers and that that is really what's missing. And, and the financial engineering that strategy has been able to do is what's really put them in the lead. And you haven't seen it from any, any of the other companies. So I think that just want to make it clear that I didn't mean that they don't need influencers like the pumpers of the ICOs. They need people who understand bitcoin and who understand finance and who understand that these two worlds are coming together and that the future of finance is going to be built with bitcoin integration and that the investment bankers need someone who can connect those dots and then who also can dumb it down for the wider community to understand what's going on, why it's. Why, I mean, look at STRC stretch. It's, it's a stable coin. Nobody really understands what that is on either side of the coin. Very few people.
- [33:37]
A
Gary, Gary, you're up. If you can get your mic lifted, Gary might be living in the glitch.
- [33:53]
G
Sorry, sorry, guys. I had too many, too many things opened up. Hey, on Tomer's comment.
- [34:02]
B
I see this.
- [34:03]
G
Slightly different, actually, maybe massively different. I think the whales are fueling these strategic reserves. I, I see one, it's very tax efficient. For a guy that's got 50,000, 10,000 bitcoin and move it into a strategic reserve, he doesn't have a tax event. I don't know where this is. I mean, you clearly have whale selling. They're either selling for cash or they're selling into these strategic reserves. So I was a little surprised that, I mean, this bitcoin is serving. These strategic reserves aren't just coming out of nowhere. Right? So if someone is using bitcoin to promote other activities and I don't think they're having to be like massively convinced to do this. I mean, am I wrong there? Do you guys think the strategic reserves are all being like supported by new money?
- [35:03]
B
No, I think you're, I think you're absolutely right. The ones who have seen early ones. Yes, because it makes so much sense. You're right, it's very tight.
- [35:13]
C
But they're not buying new bitcoin. Right. Like when tether moves 100,000 bitcoin into a company like 21, no new demand has been created for bitcoin. No new capital has flown into bitcoin. There was literally an on chain transaction to move bitcoin from one address to another. So they're not really accumulating bitcoin. They're not doing using. So far, besides strategy, I don't think we've seen any company generate huge, huge consistent volumes of inbound demand for bitcoin. And we've also seen recently the ones who had moved earlier that were generating something like metaplanet. We've seen that MNAV multiple come way down. So I'm not saying that you're wrong, Gary. I'm saying it's absolutely right that if you've got a bunch of bitcoin you want to put into an efficient and liquid structure that gives you all the benefits of things you could do with a Wall street asset, you can do that. But the distinction between having an operating business that's generating cash flow and buying bitcoin and a bitcoin treasury company that's doing financial engineering to generate capital to buy bitcoin is really the distinction here. Tether's got a great business and they're using a lot of their profits to buy bitcoin. Whether they put that into a bitcoin treasury company or not after the fact is like a secondary point. But the bitcoin treasury companies in general, with the exception of strategy, seem to be struggling to find continuing reliable sources of cash flow to invest in Bitcoin.
- [36:51]
A
I think it's also sort of a nuanced answer because I think the early ones were being seeded by whales and eventually that dries up and the new ones have to actually find different ways to buy bitcoin, I mean, and not just have it transferred in.
- [37:07]
B
And at some point bitcoin treasury companies will just be treasury companies, right? You know, so a company that has a nice cash flow business. Think of it this way. Imagine you have a company that has a nice cash flow business that's getting a multiple of like 3 or 4 compared to a multiple of like 15 or 20 to a company. Well, what could you do? Well, you could say, listen, what we're going to do is we're going to take our cash and we're just going to use it to buy bitcoin. But we're going to operate, we're an operating business. We're not speculating, we're not doing anything else. But understand that instead of paying out dividends, instead of doing this, we're going to, we're going to use our cash to go into bitcoins. Now, what's going to happen to the multiple of that company? It's going to trade well below its nav because, I mean, or it's going to trade irrespective of its nav, because it's going to be putting its cash in there. And very few companies have cash reserves equal to their price. Right. But that you're going to see. That's the trend that matters. That's the one that's going to push the price. Because companies saying, rather than buying back my own stock, rather than paying out dividends, I'm going to do something to distinguish myself and get a better multiple. And that's the one that hasn't happened yet. But that's going to be the next trend. And that has very little risk to it. Right. That's not. We wouldn't be having these conversations about. We would just say, oh, okay, that makes sense. Right now what you have are companies who are saying, listen, we're a company and we concede becoming a bitcoin treasury company. But, you know, effectively what we're going to do is we're just going to put this into the world. And I think that, that that trend is played out. You know, once you have three or four gargantuan firms, what's the point of the next one? So you really still have to have a business at some point. I mean, that's my. Yeah, that's my, my, my bond.
- [38:45]
A
So just to give you guys a heads up, we got a couple more minutes, but then I invited Ian and others from Ando because they had huge news this week. And I just. We used to do this thing on this show where we actually invited the people who had huge news themselves to talk about it. We tried to recontinue that. So I just want to wrap this current conversation up in the next minute or two, but. Marisa, go ahead.
- [39:08]
E
Thanks, Scott. No, I guess the point I was going to make is I think the unique. I think for me at least, what I see these treasury companies as being. And there's what they are, and then what they are not what they are is MicroStrategy had found an initial way of raising very efficient capital to buy Bitcoin in a way that an ETF couldn't, right? By issuing those convertible bonds, monetizing their volatility without paying a coupon. And that was very interesting because you're arbitraging artificially cheap cost of capital because of market dynamics of giant pools of capital trapped in money market funds making negative real rates if you compare them to the true debasement of the dollar. But that's really what these treasury companies are, so long as they can continue to get financing at better terms. Than a person can, there will be a premium and that's what's exciting about them. But if you look at MicroStrategy's most recent SDRC, the cost of capital on that is a 10% coupon. And if you add the sort of issuance costs and all these other things, you're probably closer to an 11%. And retail lenders of Bitcoin backed loans are very close to that in the sort of and borrowing. So that efficiency from which they, that delta between the efficient capital versus the true market you can get outside has, has switched. And to the point Dave and others made, I think every company that is just smart with their cash should buy Bitcoin, therefore becoming quasi or quote unquote a Bitcoin treasury company in the future. So I just, I think you got to understand for me at least what these things are and what they're not and what I think if you, if you, you know, if you believe on one vision of that, then the things that will make them successful change.
- [40:49]
A
Exactly. I think that's a great way to wrap that part of the conversation. As I said, we've got Ian here and we used to do this a lot more often when we had breaking news or a huge news story because obviously we're close to the teams from these projects and companies that are doing it bring them up so they can actually talk about it. And luckily Ian and we've got the Ando on stage as well. We're willing to do that. You guys. We talked about it actually on this show briefly as one of the main topics that Ondo Global Markets was launched. I believe this was Wednesday was the press release. 100 plus tokenized stocks and ETFs on Ethereum. Absolutely. A huge announcement and would rather unpack that with all of you. With you guys. Thank you. Just getting our opinion. So Ian, maybe you can break that down for us briefly and welcome.
- [41:36]
H
Yeah, no, 100%. Thanks for having me. So, yeah, you're right. On Wednesday we launched a platform called AMA Global Markets. It's a platform that essentially tokenized over a hundred US stocks and ETFs and makes them available to a global audience. So now anyone on main at eth and pretty soon a couple more chains can buy any one of those stocks or ETFs as they like. And the price they will pay for those assets is the same as they would in a brokerage account. The liquidity of these assets is the same as in a normal brokerage account. So it's truly the first time where A platform launched that enables global access to these US stocks and ETFs, just as if you would have a brokerage account. But this time you can buy the stocks and ETFs with simple stable coins. 24.
- [42:28]
A
5, you announced it Wednesday, but it hasn't launched yet, right?
- [42:31]
H
Oh, it has. It has.
- [42:33]
A
So it's live. Okay, it is live, yeah. So you can fully do this. Are there rules as to who can gain access to it, who cannot? How does that work?
- [42:43]
H
Yeah, so if anyone wants to directly, you know, come to our platform and buy directly from us, we would require them to kyc, just like you would in a normal brokerage account. I will say, though, that these assets, the way that they are structured, are stablecoin, like so, meaning that, you know, in the primary market, you have to onboard with us in the secondary market, these assets do flow freely. So they're kind of like comparable to USDC in a sense. If you want to mint and burn directly with us, you need a mint account. After that, these assets go wherever they like.
- [43:17]
A
Okay. So obviously there's a differentiation between what you've built and some of the other, I guess we'll call them walled gardens of tokenized securities and stocks. So you're 24. Seven and permissionless. Correct. So this is not the.
- [43:34]
B
Yeah.
- [43:34]
A
Okay. Can you explain the difference there, how that works?
- [43:38]
H
Yeah, of course. So when you think about tokenized stocks and how they're different between the various platforms, because at this point, most people have seen some Robinhood announce announcements, there's been the X stocks, Kraken announcements, a couple more. So people are starting to wonder, like, okay, how are all these things different?
- [43:56]
B
Right.
- [43:57]
H
And I think the two dimensions that people would want to look at are, are these assets truly permissionless? Yes or no. Or are they a walled garden? And second is what is the liquidity and price that I can get on these assets to trade in and out? And on both of those dimensions, the on the global market platform is kind of the first of its kind in the sense that our assets truly are permissionless. That is not the case on, for example, the Robinhood tokenized stocks. If you want to buy the Robinhood tokenized stocks. If the onboard with Robinhood you can buy them, you cannot move them out of Robinhood.
- [44:28]
B
Right.
- [44:29]
H
With our platform, you can buy these things. You can move them around 247 freely between your various different wallets, sent them to a crypto exchange, no problem. These are truly stablecoin, like, in that you can do whatever you want with them on the Second point of the price and liquidity too, there we've seen other platforms like an X stocks really rely on on chain liquidity and dex pools to trade in and out of. What that means is if the liquidity in these dex pools dries up, which is what we've seen, you're going to get massive slippage on any of these stocks that you're holding or these assets essentially just depeg. Just like when a stable coin can Depeg to a dollar and 10 cents instead of a dollar, you'll see Tesla stock depeg from its price by like 10%. No one likes to own a stock if they think it can depeg 10%. So in our model we always just put the asset on chain instantly whenever a user wants to buy it. We always source it from the various stratify networks and clearing broker networks at the price that the asset is trading, so that anyone who buys any of our stocks or ETFs on chain can always rest assured that the price you get is the same as in a normal brokerage account like Robinhood.
- [45:44]
A
Really, really interesting. So obviously in the press release there were some partnerships and integrations that were somewhat discussed. So which wallets, exchanges protocols are involved with these with this launch?
- [45:56]
H
Yeah, great question. So we, we really tried to go as big as we could on the partnership. So we've got Bitget Wallet, Bitget Exchange, the Trust Wallet, the OkX Wallet, a wide variety of other wallets. Essentially most Web3 wallets right now you can just go ahead and go into the swapper and find these assets. We also have partnerships with COWSWAP 1inch that have integrated into our system. So everyone essentially can just go wherever they would like and try to acquire these assets.
- [46:28]
A
So I'm assuming that massively increases the accessibility of these and the trading and access and obviously the experience for people. Right, because you don't have to go to one specific place to figure this out.
- [46:42]
H
Oh, 100%. And you know, we've already seen some uptake too from the, from crypto exchanges like Gate, MEXC and the like. I think people underestimate just how many people globally do not have access to a standard brokerage account, but do have a Web3 wallet or a crypto exchange account. I think the latest numbers I saw are somewhere around 400 to 500 million people who've got one of these essential crypto investment accounts. But a lot of them around the world don't have a normal brokerage account, do not have access to US stocks and ETFs even though the US stock market has been the global driver of wealth creation for the past decades. By simply putting These stocks and ETFs on chain, by making them tokens that can integrate into crypto exchanges, into crypto wallets in a stablecoin like format, meaning that you can freely transfer them, is in our opinion pretty much a game changer in terms of what it does for enabling access to a global audience.
- [47:42]
A
Yeah, and was very specific that this was launched on Ethereum in the press release as well. So how does Ethereum, I guess power this and power pricing and compliance, all those things handled. And you also alluded earlier to coming to other chains near you. So what does that look like?
- [47:59]
H
Yeah, it's a great question because there's a lot of narrative around, you know, Ethereum is for RWA and some of the other chains are trying to capture that narrative too. I think the reason we chose for Ethereum for starters is because it actually has a pretty well established intent network. What that means is that you can essentially just submit an intent on the Ethereum blockchain that says hey, I'd like to buy this stock. It doesn't mean that there needs to be already inventory or dex pools on the, on the chain itself. We can essentially pick up on that intent and mint an asset just in time. It's kind of a very novel architecture that we built and Ethereum was the right place to start for it so that we can essentially take Tradfi liquidity, where all of the liquidity of these stocks and ETF sits, and put them on chain, build essentially a bridge between the two and the intense platforms like the cow swaps and the 1 inches and etc, really enable that architecture in a pretty unique way. So as a result we can put all These stocks and ETFs on chain with the same price and liquidity as is available in Tradfi. And Ethereum does uniquely enable that in its current state.
- [49:17]
A
So I think for me the biggest question, and probably for most people, because they maybe don't understand the mechanics, is how do we ensure one to one asset backing and how can people maybe who aren't defi native trust defi, because you talked about this before, slippage and all these things, but this is still a pretty foreign concept to most people. So trust that it's backed.
- [49:41]
H
Yeah, I think it's, I mean it's going to require a lot of user education. Trust is gained over weeks, months, years. So this will take time for people to fully understand and trust the good thing is that we're very transparent in our backing and the like. So we would argue there's other models out there. You know, some companies have tokenized their stocks and ETFs without this one for one backing. We think the only way to credibly tokenize stocks and ETFs is to have one for one backing. And on top of that, have a very large collateral buffer. We have agreements with, we call them collateral agents. They have access to our, you know, brokerage accounts so they can see all of this backing and they will post daily attestations of that online. So anyone can go and see, is all of this backed, one for one, and what is the collateral buffer? So imagine as if a stablecoin company would post a daily attestation of what exactly is backing their stablecoin for everyone to see. That's the level of transparency that we're aiming for with our platform. That's the level of transparency that we have sustained on our tokenized treasury products that we launched more than two years ago. So people can go and check how the backing of those tokenized treasury products have been day by day over the past two years, give or take. And that same level of transparency, we're bringing the tokenized stocks and ETFs.
- [51:05]
A
It almost feels like you're doing for stocks what Circle's doing for dollars.
- [51:10]
H
Oh, 100%.
- [51:12]
A
Yeah.
- [51:13]
H
We look at stablecoins as the true first product market fit of tokenized cash, or that means a tokenized dollar. And I think a lot of people figured out that a stablecoin is just a better way to get access to the US dollar. And once DeFi took off, stablecoin, first and foremost was just a better form of the dollar. You can do more with it. And those same people now look at axis to the US dollar via stablecoins and say, why can I get access to US capital markets via tokenized stocks and ETFs? I think more broadly too, people's expectations and user behavior ultimately is going to change. Like right now, brokerage is completely siloed. I can't move my stocks anywhere. I'm kind of locked into the platform on the margin rate that I get. Some brokerage platforms offer 24. 5 trading. Most don't like. All of these things, when you think about it, are kind of ridiculous. You should just have a tokenized stock that can freely move 24. 7 that you can trade in and out of 24. 7 and move around in various defi platforms to get the margin rate that you like. And that you deserve. Once people have used a stablecoin, they look at their bank account and say, wow, that's a little limited. I think the same thing is going to happen to Tokenized stocks and ETFs and people are going to start looking at their brokerage account and say, whoa, that's a little limiting.
- [52:41]
A
I see CJ and Matt have their hands up. I just have a couple more questions and then actually, even though we usually end at 11:15, I'll open it back up, like kind of to wrap the conversation. But I want to know, like, maybe a way to go in that direction is how do you see the advantages of this over traditional stocks and traditional brokers in the first place?
- [52:59]
H
Yeah, no, I mean, I get this question from the tradfi brokerages quite a bit. They're like, why are you tokenizing stocks and ETFs in the first place? Isn't brokerage account great? I'm like, well, I have two brokerage accounts that can compare and contrast. Some offer me 24, five trading, but then the margin that I can get on the platform, I can't take off platform. I can only use it for more trading. The other mar brokerage account I have has great margin. I can take it off platform, but it's literally 9 to 5 trading. And on neither of these platforms I've got all of my crypto assets. So I'm stuck with now like four different investment platforms, a crypto exchange, a web three wallet, and two brokerages accounts. Like that level of fragmentation of my assets is not great. I would love to just have one single wallet where I can have all of my stocks, my ETFs, my crypto combined into one where I can start cross collateralizing any margin that I want and take it off platform and do that 24, 7. And in order to get there, crypto rails, blockchain rails are a much better infrastructure. Like traffi Rails are never going to get there, so. Or at least not in the foreseeable future. So we fundamentally think that the best way to do it is tokenize your stocks and ETFs, bring them on crypto rail so that all of a sudden you can hold everything in your Web3 wallet and then you can go on defi over time and take any margin you want with any asset that you like. 24, 7. Now this is going to take some time, but the key thing that needed to be enabled in order to get to something like that is to have these Tokenized stocks and ETFs available on crypto Rails in a permissionless format at the right price of the brokerage account with the same depth of liquidity. And that's for the first time what on the global markets enables.
- [54:46]
A
Before I jump to the other, the other guy. So what's the roadmap beyond here? Obviously you kind of announced 100 plus, but there's a whole world of assets. Right. That could be used. So I guess what's the future plans for Ondo Global Markets and how do you think that this will sort of drive the tokenized real world asset sector?
- [55:06]
H
Yeah, we'll, we'll start expanding to hundreds of stocks and ETFs by year end. So there's definitely more assets to put on chain. I think we'll probably start with all the assets in the S&P 500 more popular ETFs. We'll start, you know, the conversation about crypto DATs before this was fascinating. We'll start putting all of these crypto treasury companies on chain because that's what people want. And then over time we're going to move to, for the, on the global markets platform. Not to just be an access play where people can buy these stocks, but really also build out the margin and cross collateral capabilities of the platforms so that over time whatever people are used to in their brokerage account, like buy anything you want, buy any option you want, get any margin you want, that, that is fundamentally enabled on crypto rails, but 247 and in a better way.
- [56:04]
A
Amazing. So I encourage everybody obviously to go check this out and use it and figure it out yourself. Ian, thank you so much for taking the time. Welcome to stay. I am going to go to Matt and cj. They've got their hands up and we can continue this at least briefly before I have to run. But go ahead. Matt, I don't know if you had a question or not.
- [56:20]
D
Yeah, just a really quick question. Ian, thanks for coming through and sharing the info. It sounds like you're reading Larry Fink's playbook from blackrocker. He's reading yours. The tokenization of assets is something that we've been a long advocate for, I think since 2017. My question though really is with what you're doing there at Ondo, are you able to now then put those Q SIP codes into the stocks, the bonds, everything that you're tokenizing? Because I think that's kind of a big thing. I know it's a little geeky in the weeds on it, but I'm just curious about it.
- [56:47]
H
Yeah, no, it's a great question. The way we tokenize is we essentially issue these as a REG s offering in a wrapper format. So these are not natively issued securities with their new qip. We actually believe that that is the way to scale this. Because if you want to in your model where you need a new Q sip, where it's essentially native tokenization, every single public company would essentially have to go through that by themselves. So it's just a very hard model to scale. In our model, we can put hundreds of these stocks and ETFs on chain. Instantly it is in the wrapper. So there's no new Q sip. It's issued to non US Investors in the primary market. But it does allow scale for the number of stocks and ETFs. And as long as you tokenize them in the right way where you have the right investor protections and you have the right disclosures on the backing of those wrappers, we believe that that is the way to go. And when you look at stablecoins, they're all wrappers too, right? We think the people have gotten comfortable with the wrapper format. So that is the format that we start. We'll continue to go down a path of trying to figure out native tokenization as well. But the wrapper model is just the way to get started in a scalable fashion.
- [58:05]
A
DJ.
- [58:08]
F
Yeah, I think what you guys are building is really cool. And what's interesting to me is just like stablecoins have created an exposure opportunity for people all around the world. I wonder what the wider effects are going to be on this type of inclusion. Because US Capital markets are the best markets in the world with the most opportunity and definitely with the most government support. So I'm just what are your thoughts on how analysts should start to think about tokenization of equities and global access to those equities?
- [58:44]
H
I love that question a lot. There's a big narrative now on stablecoins essentially cementing the dominance of the dollar in the on chain economy and creating more demand for US Treasuries. I think over time the exact same thing is going to be said about tokenized stocks and ETFs where essentially it cements the dominance of US capital markets globally and in the on chain economy is going to give people globally finally the level of access they want, need and deserve into what essentially has been a creation of global wealth for anyone who had access to it.
- [59:24]
B
Right.
- [59:25]
H
And so that whole narrative of stablecoin cementing the narrative, cementing the position of the US dollar, we believe tokenized US stocks and ETFs will cement the position of US capital markets and really, over time, enhance access but also demand for these securities. The scale, you're talking about people like 4 to 500 million crypto investment accounts, right? If all of them start enabling tokenized stocks, I think globally the number of brokerage accounts is about 4 to 500 million. Now, these are clearly in the developed markets, so it's not necessarily all of a sudden going to be a doubling of your demand, but the number of accounts at least, and the number of people that finally have access, that can expand very, very quickly.
- [60:17]
F
Now, this is very exciting stuff. Keep up the great work. Look forward to checking out the platform.
- [60:24]
H
Awesome. Thanks so much.
- [60:25]
A
Awesome, guys. It's been a great conversation. I would like to keep going on for hours, but I have to run for another recording. So thank you everybody for joining, especially Ian. I appreciate you showing up and taking the time to specifically talk about this news that you guys had this week. I really appreciate it. And Ando on stage, you guys should give both of them a follow. You should give everybody on our stage a follow because they're here for a reason. Otherwise, we'll be back on Monday for the next crypto town hall. Thank you, everyone. We will see you next week. Have a great weekend.
- [60:55]
B
Bye. It.