Unchained Podcast, Ep. 973 — Bits + Bips: Why TradFi Knows It Needs Crypto More Than Ever to Stay Relevant

Date: December 9, 2025
Host: Laura Shin
Guests/Co-Hosts: Austin Campbell (Host), Chris Perkins (Coin Fund), Rahm Alawalia (Lumina)

Episode Overview

This episode of Bits + Bips—live on the Unchained podcast feed—dives into the complex convergence of traditional finance (TradFi) and crypto, exploring themes like institutional adoption, regulatory battles, new products such as staked ETH ETFs, and the shifting role of retail and institutional investors. With sharp exchanges, memetic jabs, and an expert’s-eye-view, the panel dissects why Wall Street’s biggest players are increasingly making crypto moves to maintain their relevance—and what this all means for the macro and microstructure of markets in 2025.

Key Discussion Points & Insights

1. The Macro Backdrop: Rates, Inflation, and Retail Fatigue

[02:07–07:53]

• Shifting Rate Environment:
  The consensus is that the era of ever-falling interest rates has ended, with the Fed expected to cut rates soon, but inflation remains sticky and internal Fed views are split.
  — "We've seen situations like that in the US before." (Austin, 02:45)

• Disinflation and Market Perceptions:
  Rahm points out how market expectations for future rate cuts are frequently wrong and driven as much by sentiment as data.
  — "People perceive [the data] as negative. ... But people will find a reason to cut." (Rahm, 04:10)

• Energy as the AI Bottleneck:
  The demand for energy, especially natural gas, is highlighted as the main constraint for AI’s infrastructure expansion.
  — "It's the number one binding constraint on AI. Access to energy." (Rahm, 06:24)

• Japan’s ‘Nothing Burger’:
  Despite noise about rising rates and policy moves, the hosts view Japan’s situation as ultimately inert for global markets.
  — "As my favorite word, become the nothing burger." (Rahm, 07:32)

2. Crypto Liquidity & Institutionally-Driven Markets

[07:53–11:52]

• Crypto Liquidity Remains Low:
  Institutional adoption is growing as retail activity ebbs, with institutions primarily drawn in by basis trading.
  — "Retail’s ebbing a little bit. Institutions are coming in... it’s just the assets are too volatile so they have to trade the basis." (Austin, 08:45)

• Retail Investors: Exhaustion or Rotation? Discussion notes retail’s fatigue in crypto (especially altcoins and meme coins), while retail is still actively buying dips in equities. — "[In equities,] sellers are exhausted and that it's just gogging." (Austin, 10:00; meme reference)

• Convergence of Platforms: The panel muses that super-apps with both TradFi and crypto access are likely to dominate, potentially favoring TradFi incumbents over crypto-native upstarts in the arms race. — "Do you need all these fancy new wallets when you can access the asset through your traditional brokerage account?" (Chris, 11:52)

3. TradFi Strikes Back: Tokenization, Partnerships, and ‘Dance Partner Season’

[11:16–17:21]

• TradFi's Scale & Distribution Advantage: Major banks still dwarf the crypto user base, raising the question whether crypto-natives can win the engagement war. — "Are there brokers or banks in the United States that on a standalone basis have more customers than all of crypto?" (Austin, 13:24)

• Dance Partner Season:
  Big TradFi players must build, buy, or partner with crypto startups to stay competitive in the coming era of tokenization and hybrid products. — "It’s dance partner season, right? What capability do I need? Who’s my dance partner? ... That’s net positive for the crypto startups." (Austin, 14:24)

• Arms Race & Hyper-competition:
  Payments companies and super-apps are racing for relevance, and the regulatory door is opening for both incumbents and newcomers. — "The super app thesis is still a very interesting thesis to bet on." (Rahm, 16:26)

4. Every Account a Wallet, Every Wallet an Account

[17:21–18:00]

• Vision of Convergence:
  The boundaries between accounts and wallets are dissolving in both TradFi and crypto, further tipping the scales towards giants who already own distribution and user experience. — "Every account is going to become a wallet. Every wallet is going to become an account. Distribution will remain king." (Austin, 17:21)

5. Bitcoin and the Normalization of Crypto Assets

[18:00–24:48]

• Bitcoin’s Institutionalization & Price Action:
  Bitcoin trades in a tight range, with option markets reflecting expectation for little near-term movement. Institutional flows provide a floor (e.g. sovereign funds "nibbling" at $80k). — "You are seeing higher lows start to form on bitcoin. It's behaving well." (Rahm, 18:39)
  — "Bitcoin has this very unique identity. It’s digital gold on one hand… a frontier risk asset, very sensitive to near-term rates [on the other]." (Austin, 19:32)

• Rangebound Markets & 1970s Parallels:
  Speculation arises: will cyclical rate/inflation whiplash persist, like the 1970s? Rahm thinks not, citing productivity, labor, and consumer strength.

• Sentiment & Retail Psychology:
  Retail panic and exhaustion are both indicators for institutional entry points—one guest jokes about mixing therapy with financial advice. — "Most of this is like emotional agitation ... what is going on in your life?" (Austin, 23:08)

6. Staked Ethereum ETFs: The Next Frontier

[24:48–35:12]

• Structure of the BlackRock Staked ETH ETF:
  BlackRock’s proposed ETF would allow investors to capture staking yields, solving the so-far intractable ETF liquidity-yield conundrum. — "The current ETH ETF product is an awful product because ... why would you buy into a stock if you don’t get the dividend?" (Austin, 25:24)

• Technical & Structural Challenges:
  Discussion on why current ETF structures can't capture staking yield effectively (because of the unbonding queue and daily redemption requirement) and possible solutions with interval funds and liquid staking tokens (LSTs).

• Institutionalization of On-Chain Rates Market:
  The real institutional “action” in crypto will come not from equities, but on-chain interest rate products, basis swaps, and similar financial plumbing. — "How long is it going to be before we start trading Ethereum rates against SOFR or ... short term interest rates? ... That's called the basis trade." (Austin, 32:15) — "One of the unfortunate truths for a lot of crypto natives is... trading gains are going to come from bringing rates markets on chain, not equities markets." (Austin, 33:06)

• Ethereum’s Institutional Edge:
  Ethereum’s decade-long uptime is a credibility boon for risk-averse TradFi institutions—even as competitors tout speed, or new models.

7. Ripple’s Strategic Fundraise: Structure and Implications

[38:59–47:52]

• Debt-Like Equity Deals: Ripple’s $500 million raise at a $40 billion valuation features guaranteed 10% returns and liquidation preferences, amounting to a structured, investor-friendly deal. — "That's called structure. ... So as an investor, count me in on that deal, by the way." (Rahm, 39:52) — "If you're Fortress, it's heads I win, tails you lose." (Rahm, 40:28) — "Are the losers the retail investors of the token? ... somehow this money has got to come from somewhere." (Austin, 43:54)

• Strategic Dance Partners:
  The raise is viewed as more about finding the right partners (Citadel, Galaxy, Fortress) to accelerate institutional adoption and less about needing the cash. — "Economics aside, hey guys, I got dance partners. We're going institutional." (Austin, 42:06)

• Who is Missing from the Table?
  Notably, other investment banks (Goldman, JP Morgan) are absent; panelists speculate that this is due to lack of internal talent and understanding. — "They don't know how ... the questions you're still getting in 2025 are like, where does bitcoin have its bank accounts?" (Austin, 46:28)

8. TradFi Policy Pushback: Citadel vs. DeFi

[47:52–59:23]

• Citadel's Stance on DeFi Regulation:
  Citadel writes the SEC urging that DeFi dealing in tokenized securities be regulated as broker-dealers or exchanges under current securities law. Commodities (like BTC) are excluded. — "They really don't care about what the silly little crypto industry does with its fun little tokens ... but they draw the line in equities." (Austin, 48:55)

• Debating the Regulatory Framework:
  Panelists argue applying ATS (alternative trading systems) rules to DeFi is unfit for genuine innovation. — "Treating [DeFi] as a centralized system to be regulated as an ATS ... would allow them to participate. I'm not sure that's the right regulatory framework for all of this." (Rahm, 52:00)
  — "RegATS does not make any sense for something with the word decentralized finance. This is a different framework." (Rahm, 52:19)

• Fundamental Infrastructure Changes: Open ledgers and decentralized clearing could obviate the need for many traditional financial intermediaries, completely reshaping the industry’s landscape. — "You have a transaction where right now we go through nine intermediaries, the rules are set to make those nine intermediaries better. ... What happens if five just vanish because we don't need them?" (Austin, 56:15)

• Tech vs. People: The need for clear taxonomy and a focus on regulating activity and actors rather than the technology itself is stressed. — "Computers and cell phones, people do really, really bad things with them. ... We don't try to destroy them. We go after the people." (Austin, 54:41)

• Transparency as a Disruptor:
  Real-time, on-chain transparency makes some regulatory standards (e.g. NBBO) obsolete, necessitating a fundamental regulatory rethink. — "In a decentralized system ... you have a different level of transparency there. ... Do we still need [the rule]?" (Austin, 58:14)
  — "Applying regats to defi is contradictory to the point of the innovation." (Rahm, 57:12)

Notable Quotes & Memorable Moments

• Market Sentiment:
  "Retail and crypto is worn out. ... In equity markets, it reminds me of the David Goggins meme." (Rahm, 09:50)
• TradFi-crypto convergence:
  "Every account is going to become a wallet. Every wallet is going to become an account." (Austin, 17:21)
• On basis trading & decentralization:
  "How long is it going to be before we start trading Ethereum rates against SOFR or against short term interest rates? You know, why not? That’s called the basis trade." (Austin, 32:15)
• On regulatory lag:
  "Literally they don’t know how ... you’re still getting in 2025 ... where does bitcoin have its bank accounts? Isn’t all of this money laundering?" (Austin, 46:28)
• On DeFi and innovation:
  "Applying regats to defi is contradictory to the point of the innovation." (Rahm, 57:12)

Timestamps for Key Segments

• [02:07] — Macro update: Interest rates, Fed moves, and sticky inflation
• [06:24] — AI’s energy needs and grid as the new bottleneck
• [07:53] — Crypto liquidity, institutional basis trading, and retail fatigue
• [13:24] — TradFi user bases vs. crypto: can crypto win engagement?
• [14:24] — "Dance partner season": strategic TradFi/crypto partnerships
• [17:21] — "Every account a wallet": vision for unified financial UX
• [18:00] — Bitcoin price: institutional floors, option markets, and cyclical range
• [24:48] — BlackRock Staked ETH ETF: industry impact, challenges, and opportunity
• [38:59] — Ripple's $500m round: structured deal terms and strategic value
• [47:52] — Citadel pushes SEC on DeFi regulation; existential questions about market structure

Conclusion and Takeaways

The lines between crypto and TradFi are blurring fast. The TradFi “empire” is striking back—via tokenization, partnerships, and by co-opting crypto’s best ideas—and incumbents’ scale and regulatory savvy remain formidable. As institutions march in, retail’s role morphs, and winning distribution remains the north star. On the product side, the industry is primed for a wave of interest-rate related innovations on chain, with Ethereum (and staking) at the center. But the regulatory frontier is the wild card: defining “decentralization,” adjusting outdated standards, and navigating the tricky choreography of a multi-trillion-dollar sector in transition.

All in all:
Crypto is normalizing, TradFi is adapting, and everybody is picking dance partners. The game is being played “one basis point at a time”—and the smart money is watching.