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- [00:00]
A
Welcome to Bits and Bips where we explore how crypto and macro collide one basis point at a time. We're here to discuss the latest stories in the worlds of crypto and macro. With that, we're going to take our first break.
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A
I'm your host Chris Perkins, the golden hand of 250 digital asset management. And today the good Professor Austin is off teaching and doing what he does. So I'm going to sub in as the host and I'm here with my co host Ram Alawalia, maester of wealth, leader of Lumina. How are you?
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C
Doing well, how are you?
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A
I'm doing well. Lots going on. Lots going on. You were telling me before on the pre call you're super bullish but what's on your mind?
- [01:16]
C
I think there's a lot to be bullish about, a lot to be optimistic about. We have some news around the Strait of Hormuz where the IRGC is proposing a path of de escalation. We've got earnings estimates that are going up. We got a, a lot of names that look like they have bottomed so we can take it where you, where you want but that's what's on my mind.
- [01:39]
A
All right. And yeah, let's, let's start off with Iran. We'll just go through that quickly because I think that that's really been in the driver's seat, right. We, we haven't reached, I don't know it, it feels like we're reaching that stasis finally where the markets are just like, yeah, it's in the background. It's like Ukraine. It's not like impacting our day to day. Certainly something could come out of the woodwork and change things but it feels like we're kind of in the, we're leaning forward. I don't want to say to the end because I've been in that position before where you wake up and you're in Iraq decade later, but it does feel like, we're starting to reach stasis anyway. Lots going on there. We're seeing that the blockade is having its intended effect. It's putting a lot of pressure on, on the regime. But what are you observing?
- [02:24]
C
Well, here's some news that came out of the Wall street journal about 20 minutes ago. It's titled Iran wants deal to lift Hormuz blockade that postpones nuclear talks. So they've presented an offer, and that offer includes stopping attacks on ships in the strait in exchange for a full end to the war, which is what Trump was looking for. And it includes a lifting of US Blockade on Iranian ports and a postponement of nuclear negotiations. We'll say, hey, we'll kick the can on that. It doesn't look, the proposal includes a lifting of sanctions other than allowing Iran to move through the strait. So their economy needs cash flow. The blockade's been successful. We talked about this a few weeks ago where CENTCOM made a move and they ran the I am the captain meme against Kaiser Soseg. I am the captain meme1. But overall looks good. You know, the bear case is that there is still a significant buildup that is taking place as, you know, a lot of airless moving heavy equipment into the area. Overall, though, I would still be constructive. You know, we've got a, a meeting between Trump and Xi Jinping taking place soon. I think he wants to have some clarity going into that and have someity around the current situation. And you've got the American Bicentennial coming up on July 4th also. So Trump needs wins on the board. He needs to bring chaos down. And it looks awfully similar to a replay that we saw last year almost to the week.
- [04:03]
A
Yeah. So we've got, we've got the midterms coming as well, which is going to be very, you know, Trump needs something. But as we're looking at the timing, right, he is facing incremental pressure, but at the same time on the domestic front, but at the same time, we are also the range is under pressure because if they're, they're actually sending old oil rigs in to fill up because if they overflow with their oil wells, it's going to hurt them for a very long time. So it feels like this is coming to a head.
- [04:35]
C
You nailed it. You nailed it. Right? So Iran needs to use these, these old oil tankers otherwise are forced to shut in the wells. And when you shut in a well, you're taking a well once productive, and you've got to put it on the back burner and just the nature of Iran's oil and how they use water at natural pressure to bring up the oil. They are not in a good position to do that. It will cause significant damage if they're forced to shut down wells and it'll be hard for them to recover from that. So overall I would say the response of CENTCOM and Best in two here for the last few weeks has been brilliant. We talk also about how, look, if you're in the irgc, they've got families too. They've enjoyed a few weeks of respite from bombs and attacks. They want that to continue and they want to focus on the local political struggle and they've got to vie for that kind of position. That seems to be what they're focused on here. So overall this is good. Yeah, I agree. This is receding into the rearview mirror like Ukraine did as well. And the economy can handle higher oil prices, you know, so you know that world is, is less energy dependent at least. Certainly the United States is as a
- [05:52]
A
how in the past, I don't know. Did you see the news about Tether? So Tether Neost government best has talked about the pivot to Operation Economic FURY and the US government actually worked with Tether to seize over $300 million of stablecoins. And like we've been talking about this all along, like hey, if you want to get paid in stablecoins good luck to you because these are centralized assets and that's exactly what's going to happen. You're going to get seized. So I think the added incremental economic pressure, it's feels like we're actually stabilizing. It feels like as this lifts, provided there's not too much damage done to oil and it impacts inflation, et cetera. It feels like it's a good setup for markets. Do you agree?
- [06:37]
C
Yes. No, I mean I think the setup for markets is, is very attractive. You know you're getting me excited, Chris. Now we start our markets. Look, here are the headlines. Number one, the S& P bottoms up analyst estimates for year over Earnings growth is 19%. This is bananas. These numbers are absurd. Last year, year over year earnings growth was clocking around 12%. That was strong too. We're seeing an acceleration in earnings growth. So every element of the GDP equation is moving in the right direction. The government is spending like a drunken sailor unfortunately. So bringing to the present spending, that's bullish. Obviously Defense tech is a big part of that. Industrials data center second capex spending is going up on AI The AI stories flip from AI apocalypse to we need more compute yesterday clause doing the rate limiting. Everyone needs Data center and CapEx spend from the hyperscalers there. And you're about to see more capex spend from the Pentagon. So they're the new customer on the block. They're just getting started and then the consumer is healthy. We saw that from bank reported earnings from the large banks, the credit card issuers to the regional banks. Banks are lending. When banks lend, the borrowers use those funds to make investments. Jobless claims are low, inflation remains higher for longer. But war is a new incoming guy. He's not going to want to raise rates. So owning real assets and owning market assets seems like a very compelling opportunity. And plus a lot of people have cash. They got scared out of the market. They're trying to get back in the market. They're buying dips. I expect they will be buying dips. And this week we have tech earnings season.
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A
Yep. 45 report. Yeah. Yeah. What do you expect to see out of that? What are you looking for? What are you not looking for?
- [08:39]
C
Yeah, they. So it's. Yeah. What I would look for is ROI on capex spend and it's going to be there. It was there last quarter. It was the quarter before that. Like the overhang was really around sustainability of capex. But Microsoft, Google Net on Amazon report this Wednesday after the close. Apple Thursday after the close. I think the, the technology sector is still reasonably valued and they've got strong earnings growth. So the reaction matters more than anything else. I think it's going to be constructive. I think it's going to be positive. You know, each company has their own unique story. Microsoft has a lot of capex spending on cloud. They're going through a divorce process with OpenAI. It looks like they contracted that out. We can come back to that later. We want to see these other companies report too. But overall though, the world shifted from AI apocalypse to the world needs more AI compute yesterday. That's generally bullish for these cloud providers.
- [09:47]
A
Yeah, let's talk about this. Yeah, no, I think it feels like a constructive setup across the board. I want to unpack a little bit. What's going on with OpenAI. This news just recently broke. So Microsoft is going to remain OpenAI's primary cloud partner and OpenAI products will ship first on Azure. Microsoft is going to continue to have a license to OpenAI IP for models and products through 2032. But Microsoft's license is no longer going to be non exclusive. Microsoft will no longer pay a revenue share to OpenAI and the revenue share payments from OpenAI to Microsoft will continue to 2030 independent of OpenAI's technical progress. So this seems like what's your take on all this? Is this friendly? Like hey we're both growing, we agree to disagree. We're know how you think about whatever you call it.
- [10:45]
C
Yeah, yeah this, let's do winners and losers on this. Like overall Microsoft's a winner here. You know as you, as you know like when a startup cuts a deal with a big corporate, the corporates bring their M and A and Corp dev team and they ink a paper tight contract that protects them many ways to Sunday. And Microsoft was the the purse funding OpenAI for such a long time and they wins because the Microsoft cloud would benefit from all of OpenAI's development. Now here, here's a couple things. So one is Microsoft doesn't have to spend money and do a rush back to OpenAI so their expenses linked to OpenAI are going to drop. Number two, they're going to enjoy revenue from OpenAI through 2030. So they the upside on that. And third, they have rights to the OpenAI IP through then as well. The R and D for these LLMs is significant. You're going to spend tens and tens of billions of dollars to do model training runs. Microsoft gets a free call option on all of that. So you know the context was we talked about, I think maybe a month ago OpenAI cut a deal with Amazon and Amazon invested in OpenAI. OpenAI needed the capital to keep up with Claude. OpenAI is saying hey we are growth constrained because we don't have compute. Amazon as a result got OpenAI to do a deal. There was a report in the Wall street journal that OpenAI violated their agreement with Microsoft and we all wanted to see how this would play out. It looks like Sam cut a deal that was illegal under contract law. And was it going to play figured out later? Well the later just happened and they reworked terms with Microsoft. But if you're in breach in a contract, if you're the breaching party, you don't have the negotiating leverage because the party that claims breach can allege damages. So Microsoft, it seems to me ironed out a great deal and get more revenue, less expense and a call option on the ip. So I think it's a big win for Microsoft. It's one of my top three positions right now too I think.
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Interesting.
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C
Mispriced.
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A
Got it. And then you see OpenAI. Do you see the rumors about the phone?
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C
They're launching a phone they're right, they, they're putting together a, they're teaming up with two semiconductor companies. We'll see. You know, they brought in Johnny Ivey from, from Apple to go design this. Now remember, like when Meta launched the Ray Ban glasses, they sold a lot, but it wasn't really material. Like Meta's got distribution on its apps, but it's hard to sell a physical product without.
- [13:22]
A
Yeah, that's who we're looking at. So we've heard this rumor for a long time and then today, I think earlier this morning it was tweeted out that yes, they're working on a phone. You saw Qualcomm respond quite favorably, but I was looking at world price and it really didn't respond. And to your point, we've seen other projects in the crypto space like Solana Anatoly, he's a Qualcomm guy, he's been trying to push out his phone very, very hard to find product market fit. You know, if they do though, it could be a pretty nice unlock across the crypto space as well. Particularly as you're trying to figure out proof of humanity. If it's, if it's a, if it's an agentic friendly phone, like, I don't know what the next iteration of interface with the Internet's going to be. Right? Like, is it really natural for humans to be like this all day long? I kind of don't, I don't think that's our natural state. And so I do think eventually we're going to evolve beyond that. I don't know if this phone is a phone or if it's a new type of UI that we haven't thought of, you know, rather than just, you know, but at some point someone's going to go head to head with Apple and say there's this new human to computer interface and I don't think it's going to take the shape, I think it's going to look like something else. And Jony Ives, he understands ui, so I would be interested to see. And then of course, if it's an AI first phone, an agentic friendly phone, this whole idea of proof of humanity comes in. I was in there, I was at their liftoff conference this week or so ago. Really interesting stuff going on. And as we said, you know, we've been big supporters of that project over the years, so I think it's worth noting. But I'll also say like product market fit disrupting the incumbents. You know, let's talk about Apple a little bit you know, they've faced incredible criticism for not being AI first, but this is a company that tends not to be first. Right. But when they come to market with the iPhone, they crush everybody else. As you're watching Apple earnings as well, like what are they going to be doing in this space? Because it looks like Sam is coming after them on the phone side or some iteration of it.
- [15:39]
C
Yeah. I wouldn't be worried if you're Apple or Google about disruption from OpenAI. The lock in and the ecosystem around these platforms is significant. The switching cost to get out of the Apple ecosystem is so high. OpenAI doesn't really even have like an app store now. They're trying, but it's not a real credible offering. Those platforms can be agentic AI friendly. They will be. Right. They can do anything they want to go do. If there's a customer need, they'll fill and fit the need. So I'd be skeptical on it. It's just a lack of focus. OpenAI is not focused. The best form factor, the most intuitive one, is how we're communicating this audio. When I'm driving, I talk to AI regularly. When I'm going for a walk, I'll talk to AI. And that just requires a mobile phone with a gps, some local compute and headphones. So that might be the form factor up until we get the R2D2 projection of Ben Kenobi. Maybe the holograms come five years from now. I don't know if we have that technology yet, but I think the form factor, really simple audio, mobile together. So we'll see. Like you said, it's hard like Solana trying to develop a phone. It's extremely hard to get customers to switch.
- [16:56]
A
Yeah, maybe it doesn't have to be a phone. It has to be something different or definitely something innovative. We've seen Sam do that before. I think one of these episodes you're going to say something positive about Sam Altman. Like we should put, we should start a prediction market on that happens.
- [17:10]
C
You should call like the 911 and they should check that I'm not being held against my will here. It's really, I find that hard to believe.
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A
It'll be, it'll be a deep fake. Right. But you know what, we have to get you world. You know, I was at this world Lipoff event. They have like this new technology, right. Where you can use your proof of humanity id, they can do some social graphing and you can prove that you're a real person and not a deep fake. So it'll probably be the deep fake ROM that shows up.
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C
It will absolutely be the deep fake ROM or it'll be April 1st. You know, I mean, it's kind of an incredible individual.
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Right.
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C
He's been sued by his first shareholder, Elon Musk.
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Elon Musk. Crazy today. Did you see that?
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C
No, but it looks like that the legal battle that he's pursuing here is going to be more uphill. But go ahead. What happened there?
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No, he was just going off on how, you know, he was saying a lot of disparaging things about your buddy Sam Altman on Twitter.
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C
Yeah.
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On his own, on his own platform.
- [18:12]
C
I got to dig in more. But it looks like that the, the legal suit that the complaint that Elon filed is going to be more, I mean, you know, Anthropic, which now in the secondary market has a bid around a trillion dollars amongst retail investors, right? Yeah. So it's ahead of OpenAI now. It's got more growth. OpenAI is saying we are growth constrained. They're saying, oh, we need more money to grow. Can you give us the money, can raise some money? Claude Anthropic had less resources, less compute. They started later and they're ahead of the pack. And the CEO of Anthropic, Dario, came out from OpenAI. And OpenAI has spawned so many competitors now, many of them aren't seeing traction yet. The CTO went somewhere, started thinking of machines and there have been other spin outs like Ilya, but Sam has dropped the ball 10 ways to Sunday. He's birthed his own competition.
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A
Got it. So as you're looking at tech earnings going into this week, you said you're super long Microsoft. How do you think about the others? Anyone that you're.
- [19:22]
C
I think the others will in general know, do probably fine. I mean, oh, it's like, yeah, meta. We just got to see are they spending capex like a drunken sailor or not. Their core business does really well though. They can fund it because they keep growing earnings. You know, we like that too. I think Google will do really well in their cloud business. They showed up 30% cloud growth. They're benefiting more from their, their chipset as an alternative to Nvidia, but they don't have enough capacity on that because Nvidia lockdown, all the capacity from TSM and the semiconductor ecosystem. Right. But Google has all sorts of ways to win here too. Amazon rallied ahead of earnings on news, including around Claude and OpenAI. So that's more on the expensive side. So is Apple. So I'd be interested in some of the other names like Meta, Microsoft. But overall though, hey, this is a, you know, the Max 7 names were sold off. Many of them haven't fully recovered. So I think, you know, there's, there's still opportunity in that bucket, especially if they have a cloud business.
- [20:33]
A
Yeah. All right, so let's, let's pivot to the crypto space. I think we both, I'm generally constructive. Sometimes you're constructive, sometimes you're not. So constructive. This week you sound like you're constructive. What are you looking at?
- [20:46]
C
I'm constructive. Yeah. I mean last week we were constructive. We talked about hype. It was so constructive, actually, when I said let's talk about what to buy, we said hype. I think it's a, I think there's a rally. I think it's a good opportunity set. Like I, I, I might want to wait a day or two. Things a little kind of softer tactically right here. But you know, if you, if you look at 20 to 30 to 50 charts in digital assets, you see these long bases, you see these quiet rallies in certain areas and you're seeing bitcoin do well. We still want to see the STRC issuance, of course, but it's doing well. Other assets, Ethereum doing well. Hype, I mean, so, and sentiment has been so bombed out, washed out, reset, that it might not take much to get this going. So is it a trade or is it a new trend we'll have to see. Right. We haven't finished the whole four year cycle. Right. It could be a rally now through say July, along with Q. Q. Q. And software, of course. Crypto's been highly correlated to software. Software in general is holding up too. Right. We had a kind of one and done drop with servicenow, but overall software has been recovering. So if that happens, maybe you get an April to July rally, some softness and then a recovery towards the end of the year. So a broad outline, you know, subject to revision.
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A
But yeah, I think from my perspective,
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C
I think there are opportunities out there. Yeah, go ahead.
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A
When you look at the crypto space, you got to start with bitcoin, it's the most dominant asset. It's maybe not the most exciting, sexy asset. It is what it is and it's not what it's not. But the one chart to look at right now I think is bitcoin gold. And if you look at it in the past month, beautiful chart. And as those fundamentals continue to improve, we talked about the macroeconomic stress of Iran, we talked about its utility. I See bitcoin and eth differentiating themselves through this trustless, permissionless capability, right? That's their edge, that's their differentiation. Everyone else is trying to catch up to it. So bitcoin gold looks very constructive. We're seeing bitcoin DOM continuing to drive out and you can expect that to lead, but we've been waiting for years for that pivot into alts and maybe you're not going to see that in the future as institutions take hold. It's going to be a pivot into fundamentals, not a pivotal pivot into alts. I think that's, that's an important paradigm for investors to have as you step down into Ethereum. Some really, really interesting things going on. And that brings us to the kelp dao story that we talked about last week. What you're seeing is you're seeing market driven solutions to big problems. And I will argue that kelp DAO layer 0 hack is a really, really big problem. It demonstrated the interconnectedness of defi and frankly something we've been talking about for a very long time. The security issues across crypto and defi, like these things have to get addressed every time there's a hack that we get a little bit harder and do we learn from it? Yes, but it's this cat and mouse game. Some people think that hacks are going to be a thing of the past because once we get our hands on Mythos and other AI technologies, we going to really, really harden them. I don't know. I think it's always going to be cat and mouse, cat and mouse. You can see big hacks and it's scary. Like, how can you bring the $127 trillion equities market on chain if you have these massive security issues? And like I said, a transfer agent isn't going to protect you because once you get out of Dodge, you flip it into bitcoin, you're gone and someone's going to be left with a bag. And we're dealing with a bag right now. There's a big bag of in aave and what's been in a way beautiful to see is Defi United coming together. And so we're seeing competitors, saw Avalanche, Solana and others participating in the recovery efforts. Why? Because they're being smart, they're being thoughtful, they're being strategic and they're realizing that now's not the time to blow, you know, burn everything to the ground. Now's the time for the market to find market driven solutions, which is very, very core. To why many of us are in crypto in the first place and what you're seeing, we're seeing like, you know, these, we don't know all the details yet. And I'm very excited and I'm going to tease that. I think we're going to do something really special with the details here in the future. Don't know them personally, but I know that they're coming together. But you're going to see a market driven solution here and it's going to repair for the time being what's been, the damage that's been done. I think there will be some pain in certain places, but if you're long term, you think that we're going to navigate through that. And that leads us to the bigger question. Why are we letting state actors ravage this ecosystem, this young ecosystem? I've been very annoyed with some of the people who are like, hey, this is an environment that you have to be prepared for and you know, it's, it's non permissive, it's brutal and like, you know, you have, you know, shame on you if, if you get hacked. I don't know, man, I, I think that these, these sophist, the sophistication of these hacks gets more intense every single time. It's almost, it's very, very difficult right now as a human, we're all flawed in many cases to not be socially engineered, you know. But my point is, is that we need a policy response and I'll continue to say it till I'm blue in the face. What would that look like?
- [26:43]
C
What would the outline of the policy response be?
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A
Well, what I've said for years, I guess more than a year now, is we need to increase our security surface area, our surface area of security. We need to empower the private sector to go out on the offense against those that are hacking us. We need to hack them back and we need to make it very painful.
- [27:03]
C
Yeah, let's do it. Yeah.
- [27:04]
A
Yeah. So we need to go on offense. I talked to Democrats about it. They're like, I like offense. Richie Torres is like, hell yeah. I've talked to senators about it. They, they like it. We just got to bring enough attention to folks to understand it's security that's, that's hurting our next evolution, that's hurting the institutional adoption institutions want to come in. Right now, they're begging to come in, but they want control. I don't know if they're going to avail themselves. We talked about this in the past. Decentralization is fine. In certain levels, that's okay. You can have a centralized front end, a decentralized back end. But they do want control. But if they're entering a system where they're happy to take market risk, many investors take market risk all day long. But I'm going into an environment where my assets may get stolen and I'm not so sure. We got to figure it out. It's like the wild west back in the day. Like, you know, we need law enforcement, we, you know, Jesse James has to get thrown into, into jail. We can't have this, this anymore. That's, that's what's required next. So anyway, Bitcoin Constructive.
- [28:10]
C
Yeah.
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A
The thing I love about Ethereum is that, you know, time and time again the communities come together, whether it's moved from proof of work to proof of stake or in this case or even in the dao that came together, like they're coming together once again to work through this as an industry, which I think is very, very positive. Long term, near term, it's a little bit painful. And then as you go down the stack again, it's about fundamentals, you know, fundamentals, fundamentals. No one has time anymore for the fluff. I think you're seeing as every day goes on, less fuss, more fundamentals. And that's what happens when professional investors continue to enter the space.
- [28:50]
C
Yeah, I guess a few quick reactions like one is in this past cycle, digital assets failed to hit all time highs. Unlike many other asset classes. A lot of expectations were missed. There's still basic issues around security and these hacks with these established protocols. So my view is that one should trade and not hodl and look for trends so these assets still compete with other attention assets that are out there too, including AI names which can do well and semis can do well over the next year or so, notwithstanding the next few weeks after an incredible run. So it's important to just keep all of that in perspective and the quantum risks on bitcoin are legitimate too. So there's yeah, I'm constructive, you know, but it, I'm not, hey, go Max Long, Max Maxi this, Maxi that. Like you know, it's, it's an asset, it's got a role, it's got an opportunity around it. Go ahead.
- [29:55]
A
Yeah, you're talking like a meme coin trader.
- [30:00]
C
I don't know about that. I mean I would look for value, I'd look for real opportunities, look for differentiation, look for a story. You know, I don't, I don't think the meme coin thing is a move at all.
- [30:09]
A
Actually, I think I know if you say, you know, you're trading based on, on the meme, right? And I think that's a big part of it, the attention, right? And so like, like that's my point. And like there's part of the attention that you need and you can like empirically evaluate that attention. We have plenty of tools to do that. And, and you know what, that has informed a lot of price action in crypto to date. Why? Because it's a retail driven market now. Retail has been distracted, as you say, they're going after the next shiny toy. The difference with crypto and I think there's been this gap right, where retail's gone after new shiny toys, gold, whatever. But these institutions are slowly coming in. The pace of their entry I think is also a function of some of these things they're trying to get their head around, like security and other things. I think there's a good angle here for. And again, you said you're not a Hodler, but I don't know my take in this space. Fundamentals and long term focus. Because it's going to be volatile, right? It's going to be volatile in this emerging asset class. So find good fundamentals, go long term and then make sure you're secure as hell. And I think that's why you're seeing in this phase, you're seeing some of the big institutions coming in and saying, hey listen, Bitcoin, awesome long term asset, don't worry, you're going to outsource the security to me, put in an etf, I'm going to make it operationally easy for you. That's why you're seeing these big institutions come in right now whether it's name your traditional institution of choice.
- [31:40]
C
So Trump over the weekend said we have to do more for crypto to do things for crypto. He just said that yesterday. I want to see what they have in store and the right tail surprise outcome, which is where things are more. That's where I would try to focus. What's the right tale story that we haven't seen yet would be does Trump negotiate a deal with IRGC where there's some settlement involved? I don't think that's outside the realm of possibility. I think it's more probable than people think. I don't think it's a 50% plus probability, but is it a 40% chance? Is it a 40 to 50, is it a 40 to 45% odds? I would say it probably is.
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A
So you have two Choices, Right. What are the two things they've been looking to. I guess you have three choices. You have bitcoin, you got stablecoins, or you get yuan. Right. Those are the three ways that you can transact going forward. Bitcoin, trustless, permissionless. Obviously you don't want to see the Iranians buying this asset as an illicit, you know, whatever, but that's, but it has that utility. Trustless, permissionless. It's kind of like gold, right? If you mine gold in your backyard, who's to stop you? You got stable coins, which again, best instrument for national security. You couldn't invent something better on a whiteboard. We just saw the lacs, the tether assets, and then the yuan, which brings in additional challenges. If you're, you know, any country around, do you really trust it? And how does that, you know, how stable of a store value is it? So I don't know, what do you think? How does this play out?
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C
Well, if you're Trump, like there's, there's a cynical way to take it and there's another way to take it. If you say that, if you, if they're self dealing, then it touches Wolfie Token in some way. Right?
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A
Not if you're Justin son. Now if you're Justin's son, he's done with it.
- [33:39]
C
So that's another angle. Right. So there. Let's go through it. So. Or it touches Tron network because USDT would be likely the mechanism, not circle because you're not kycing the Iranian regime. So I don't think that it's circle or it's bitcoin. I think those are the expressions. Right. I'm not placing a bet on this. I just think an interesting thing to consider though. It's an interesting thing to consider.
- [34:10]
A
So but when you ask what, what he could be doing more for crypto, I think there's a couple of trips still up the sleeve. We got to get clarity. Pass. Well, and I'm, I'm actually increasingly worried about that right now. I don't know if you saw, but Senator Tillis said. Wait a second, Ethics. He had, you know, he had issues around yield on stablecoin. Got through that. Haven't had a chance.
- [34:30]
C
Congress had a concern around ethics. What? That's right. That's the headline. That's breaking news right there. What?
- [34:36]
A
Exactly. So it's been so frustrating to me. I talked to policymakers, I marched down to D.C. and they're like, particularly when you talk to Democrats, they're like, chris, you know what my constituents they will not fly for this because unless ethics are addressed, that's it. And I'm like, come on, man. Like, we have ethical problems with trading throughout Congress on both sides. You know this. They're like, we know, but politics, you know, Trump, crypto. Crypto, Trump.
- [35:01]
C
Oh, the giants really want this too. I mean, they are going to executives at Coinbase and saying, hey, you guys supported this. And look at Trump, Coin. Look at what happened, look at the money loss. So I, I think they are serious about that requirement. What that looks like, I'm not sure.
- [35:21]
A
Yeah, it's going to come to a pass and they're going to go after his personal holdings and he's going to say, I got real estate too. You want to get that? And like, it's. And. But we've talked about this in the past in the State of the Union address, he actually talked about the Stop Insider Trading act twice. And that's the right way to do it would be to punt this into a greater cross asset class ethics policy. That's the way to do it. And again, I would never be up here arguing that ethics aren't important. They're probably the most important. Why? Because our capital markets are based on clear, transparent rules of engagement that are not full of graft or insider trading or anything like that.
- [36:03]
C
Trust and integrity, right?
- [36:05]
A
Yeah, exactly. Trust, integrity, transparency, et cetera. So if you undermine that, you've got a problem. But we continue to have issues. Speaking of which, did you see that prediction market? So they arrested a special operations individual for betting on the success of the Maduro raid. Did you see that?
- [36:23]
C
Yeah. He made what, $400,000?
- [36:26]
A
Yeah. Yeah. What do you think about that?
- [36:29]
C
Well, he's one of many.
- [36:31]
A
Yeah, happens all the time.
- [36:33]
C
Yeah.
- [36:33]
A
Yeah, Right. Yeah. What do you think about that?
- [36:38]
C
Well, I'm glad they did it. I'm glad they, you know, like, found the guy, because we had seen reporting a month ago about how there were resignations from the SEC Enforcement Division due to failure to follow through and prosecute people that allegedly were engaged in insider trades. And we've seen a number of unusually timed large futures trades within 30 minutes of Trump giving a press conference. So there's more of it. If you're the politically connected person in the White House, they don't come after you. If you're the guy doing the special operations raid, you don't have the political clout, then it looks like they come after you. So it doesn't seem like even handed justice to me. It's complicated. Look, people follow the Examples of their leaders. That's it. You gotta lead by example. If you're not leading by example, then people don't know how to interpret the rules of the road or they make up reasons why they can engage in that behavior. So hopefully this creates a bit more clarity for people on what's permissible and not permissible. There's a lot of these hedge funds that are starting that are just betting in prediction markets, which I think is nuts, by the way, because I think the bid, ask, spread and all this stuff. Did you hear about the guy with the hairdryer who took the hairdryer outside?
- [38:02]
A
Here's my take. I've been in futures markets markets for a really long time post Dodd Frank. They became regulated and fraud, manipulation and abuse is illegal, full stop. And sometimes when new technology comes out, people or new innovations come out, they think that the rules don't apply. Derivatives do. They're fully regulated. That's illegal. I disagree with you that the guy, the special operator who bet on a military operation should be treated the same as others because as a military guy, like people could die because they tipped off the enemy and they were on hyper vigilance and they shot down whatever. Like, so, like the consequences of that are incredibly profound. If you're betting on military operations, if you're, if, if you're listing markets on, on when land invasion is going to occur, yeah, free market's wonderful, but when it leads to, to people's deaths, it's a problem. And like I've had plenty of friends that have died in combat, don't need it, don't like it. So I, I do think the consequences are different. So to the extent that one of these markets.
- [39:11]
C
More severe, you're saying. More severe for sure.
- [39:14]
A
Yeah, yeah. If you put people's lives, the law has to be enforced everywhere. Right. But the consequences are much more profound. You know, like you can kill people if you tip off operations. So I think like that that will be regulated away for the unregulated businesses. You know, how do you have accountability? I don't. That's an interesting model because there's still a lot of centralization out there and I think you probably could find ways to hold those folks accountable. And again, I love decentralization, but not when my friends get killed. So I don't know. That's something to think about. Cool. Why don't we take an ad break here and we'll come back and there's plenty, plenty more to chew on. Mr. Ram.
- [39:58]
B
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- [42:49]
A
All right, Rob, we're back. We started talking about prediction markets and I think we've agreed. I wish we could find someone who disagrees with us so we can have a nice debate. But look, these are for the regulated ones. You can't manipulate them for the unregulated ones. There probably needs to be some kind of accountability. But I'm also seeing new ETFs that are coming out that include prediction markets. How are you using prediction markets to inform your investment thesis? I think in time, personally, you're going to be able to use them for all different types of things, particularly as you evaluate a company, you evaluate aspects of a company. Are you starting to include that into your discipline as you're looking at underwriting?
- [43:36]
C
Yes. So we've had prediction markets like the Fed Fund futures contract for interest rates. That's worth taking a look at. But now you have prediction markets on events such as the outcome of congressional elections. So that's something that we're looking at. If you know whether the House and Senate go one way or another, then that can tell you whether say healthcare stocks linked to Medicare Advantage or solar stocks are worth owning. Those would benefit if Congress were to flip. Right. So we're incorporating that in our AI in our app. I think you've got to focus on the right markets though. There's a lot of noise out there, like find the things that actually matter. So policy decisions, rate decisions. I think there's some opportunities now and then that come up. Know I saw that the prediction markets were predicting that Kamala Harris has a high likelihood of being the DNC nominee. Really? I will take the other side of that all day long. That seems totally offsides to me. Someone that didn't go through a competitive process and lost an election. I don't think, I don't think they're going to back that horse again.
- [44:52]
A
Yeah, I think we're, I think we're barely touching the surface of what these prediction markets are going to give us. Most of them, you know, are quasi permissioned at this point. I think with HIP three, sorry, HIP four, you're going to see all different types of new markets coming out. Ultimately you're going to be able to dissect, you know, organizations that you've never been able to dissect before. Like, are you betting on a certain part of growth within a company in a certain region in a certain Part of the company. How does that inform the valuation ultimately? How do you hedge if you're a commodities investor on weather and like you said, all this data is going to feed into, into the AA models to really help you project and risk manage. So I think it's still early. Do you have a view? Polymarket vs Kalshi I mean clearly these guys love each other.
- [45:46]
C
I'm not close enough to it but I'm expressing through public markets. For example, I think on the one hand I don't think sports betting and prediction markets are good for most investors because they will lose money. The bid ask spreads are thick, they're trading against Citadel who's got better edge, better information. I think just the rise of betting in general is just not a good thing. People should be focused on investing and like you said, taking signals from what those friction markets tell us, which can be incredibly informative. But like I'm expressing like through GENIE in public markets, you know, for example. But I don't know who's, it's truly to say who's going to be the winner between these companies. And they're, they're expensive, they're pricey, you know, versus other names out there in the public markets.
- [46:34]
A
So they are their values.
- [46:37]
C
Be the winner or I know them
- [46:39]
A
both, I consider both friends. I, I, I don't know if that's possible but, but you know, I've got, I've got great contacts at both organizations. I love what they're building. I think it's going to be a Pepsi versus Coke kind of regime. I think the natural state of markets is, is probably a duopoly now it's going to be interesting to see how other folks with massive distribution try to leg into this and they are. But I do think right now you've got liquidity concentrating in those two exchanges and as a guy who's been in derivatives for a while, nobody knows how to move and shift liquidity. Once you have it, it can be sticky. But if I had a magic wand to say how to get liquidity, I wouldn't be here. But these guys have liquidity. I do think you're going to see a lot of pressure on the sports markets. To your point, there is some, there's a lot of, of political headwinds, I think. Well, the CFTC has been very bullish and Chairman Selig, God bless him, has been saying federal preemption. That makes total sense where you have one set of rules, not 50 set of rules. But there are plenty of politicians in various states that are saying on both sides of the aisle saying wait a second, you know, this is very good for my state. I don't want to make it federal and available. You know, it's killing, you know, my industry or my casino or whatever. So I do think sports is going to probably face some turbulence in the future. Obviously Kalshi's got better liquidity there, so they've got more of a fight in front of them perhaps. But honestly I think we're so early and you're going to see these things become so massive that it doesn't really matter. The challenge is going to be like how do you create enough liquidity in these really nuanced markets to, to, to make the signal balance? And, and like, and, and particularly the other thing is they're very, those signals can be easily manipulated. To your point with the guy with the hair, the, the hair dryer in, in France, like you know, these things will, and now people be, should be held accountable for that. But, but for these, these light markets, these, it's hard to do. But if you have. Yeah, to the extent they fragment, yeah, that signal could be super valuable. But if it's, if there's not a lot of liquidity, it's not going to be tough. So I think the challenge for these guys is to say where do we find liquidity? Is it financial markets? Okay, let's list all the rates and get after it. Or is it, you know, we know there's liquidity in gaming, know there's liquidity in elections, what's next? And how do you make sure you know, because they, they get, they make money through liquidity.
- [49:18]
C
I agree. I don't think they need that many contracts. I'm curious to see what contracts are you looking at? Policy. Big events like straight up hormuz interest rates, is the market going to go up or down 100 points? Those things matter. You don't need a thousand subcontracts. I expect we'll get the thousand subcontracts anyway, but I don't think we need that. The unlock is in a few categories. Create liquidity around those categories.
- [49:45]
A
So that's the value for the exchanges because that's where they're going to make all their money. Their ticket fees. By the way, they're going to be having their own stable coins. It's going to make. So it's actually a traditional exchange model where you make ticket fees, you make net interest income. It's called stablecoins. Now and then you're selling your data but for the user as you Start thinking about if you truly want to hedge unique markets. Maybe some of those thinner, bespoke markets get really interesting for you if you can trust them, if there's enough liquidity.
- [50:16]
C
Yeah. So it is super interesting. I mean, I agree. Like, I'm just, I'm on one of these sites right now and it is just fascinating. It's like, okay, how high will oil get by December 31, 2026? You know, that's informal. Will Americans receive tariff stimulus checks? I mean, it is, it adds color to what's happening with asset prices that you can't really get anywhere else. Sometimes you have to guess like, what is on the mind of Mr. Market. You can see, you can see what the market is discounting. So I think they're phenomenal. I just don't know that we need a thousand. I get your point. I got to make money on these other contracts.
- [51:00]
A
All right, so as we end the session, sir, you seem pretty constructive on Mr. Market. You're, you're looking forward to earnings coming up this week. Anything else on your mind as you're navigating the markets this week?
- [51:13]
C
Oh, I would just say this. Like, I think people might be feeling like they missed the bottom, they missed the rally. The S and P is at all time highs. There are so many incredible businesses on sale. There are many opportunities out there. They're not in the areas that you might have historically owned or maybe they have been. There's still a lot of names that are down 20 to 30% because of this AI apocalypse meme. But the businesses have strong fundamentals earnings and revenue growth. I don't mean even software names. Maybe you think software is dead. I think it's a nick story, the opportunities there. But there are many names out there that have a lot of value. Berkshire is an example of that. That's not going to be a fast mover per se, but that's an example. But there are many, many other names. It's not even like it's hard to find these opportunities. Like, you know, you know, Broadridge Financial, I'm sure, like, yeah, it's an institutional capital market service provider providing technology with 40% ROE and technology recurring revenue. Okay, that's, that's down double digit percentage because it's in an industry group that was associated with AI disruption. That's it. So there are opportunities there. Folks, you got to go do your homework, go find them. There are a plenty, there are a plenty opportunities out there.
- [52:41]
A
It's funny, the Broadridge team, they provide financial infrastructure like very robust enterprise financial Infrastructure throughout all of Wall street and beyond. They've been very pro blockchain as well. They've been really integrating, you know, across Canton and other, other chains pretty, pretty aggressively.
- [52:58]
C
Yeah, so I don't own but I'm looking at it. It's. That's an example. Go ahead. Yeah, yeah.
- [53:03]
A
But again companies that embrace technologies like a lot of these SaaS companies are going to embrace AI, they're going to embrace blockchain. Maybe they'll even get, you know, get their head around quantum at some point. These are opportunities. So. So which industry is anthropic going to disrupt this week?
- [53:22]
C
I know, right? Well, you know, it'll be interesting to see when they drop a new product and the markets in that category don't tank. That, that might have already happened. By the way, we are at all time highs now and even software is making higher lows now. You know the, the cost of renting a GPU is close to all time highs. They can't get enough gpu.
- [53:43]
A
Yeah.
- [53:44]
C
So Nvidia is going to be again they'll report next month. So I think it's, you gotta be constructive. You know I saw this article the New York Times this weekend. It said 40% of Americans believe the apocalypse is coming. I was like how do I buy here? It's like let's prediction market sunrises tomorrow. Like let me take the other side of that. I think the world might keep spinning here. You know, I think the world might actually go on. That's how despondent people feel. Like the University of Michigan consumer sentiment survey is still plumbing the lows. It's bad.
- [54:22]
A
It is bad. It is awful. But that tends to be amazing setup.
- [54:28]
C
I agree. We had a three to four week extraordinarily powerful rally. Something of which you see in 0.6% of market history. And yet the bull bear sentiment surveys haven't changed, they haven't moved. I'm waiting to clock into those and just say, oh, it ticked up. Nope, not at all. No change. People have post market depression syndrome and they have fear and I think people are offsides and markets aren't going to give them a chance to re enter the fact that the market only dropped 9% the S& P despite the blocking of the Strait of Hormuz. Probably one of the most significant geopolitical events one could imagine because it actually does cause real economic damage. And you could get a regional conflict. All this. Right? That's telling, that's powerful.
- [55:25]
A
Yeah. So underlying resilient economy. It's a resilient global economy and there's a lot of investment. The other thing is that, like this decoupling that we're seeing this global decoupling and we can argue if that's really the case, like, as I've said, stable coins are going to actually prevent that. But you are seeing decoupling. And what does decoupling require? You got to be resilient, man, and you're going to have to invest materially in your own stack, whether you're Europe or anything else. And so there's a lot that has to be done. I think that's going to be very. That'll result in a lot of stimulus across economies as people focus on securing their own economies. Maybe long term that's not so great. Then we'll come back together again and be sovereign.
- [56:10]
C
Spending is going up all around the world now. Europe's going to spend more. The US Is going to spend more. We were at wartime deficits. Now we're really ramping it up. Long term, not healthy, but it's bullish. It's bullish.
- [56:25]
A
Short for earnings.
- [56:29]
C
Bullish for a lot of things.
- [56:30]
A
That's right.
- [56:31]
C
Bullish for a lot of things. The issue now is trading off. What horse do you want to own? See, a lot of horses are going to go up. It's like, which horse do you want to get on?
- [56:42]
A
That's right. Cool, man. Well, let's see. Got anything else? Let's leave it there.
- [56:46]
C
Let's leave it there. Perfect.
- [56:48]
A
All right. Good to see you, brother. All right, everyone, we'll see you back next week on Bits and Bits. And maybe we'll have the good professor back. Thanks for joining us.
- [56:56]
C
Good. Thank you for watching and hope you enjoyed this episode of Bits and Bips. Just remember, nothing we say here is investment advice. And please check unchained crypto.com bitsandbips for more disclosures.
- [57:21]
A
It.